SharpSpring Reports First Quarter 2021 Results
Path to Second Half Revenue Ramp Remains on Track Driven by Increased Sales and Marketing Programs Initiated at the Start of 2021
Existing Agency Cohort Performance Supports Clear Path to $100 Million in High-Margin Recurring Revenue
GAINESVILLE, FL / ACCESSWIRE / May 13, 2021 / SharpSpring, Inc. (NASDAQ:SHSP), a leading cloud-based revenue growth platform, reported financial results for the first quarter ended March 31, 2021.
Recent Operational Highlights
- Appointed marketing technology leader Suaad Sait as President. Sait brings an extensive background leading product, engineering, and marketing at high-growth SaaS companies. In this newly created role, he will oversee the Company's sales marketing, and customer success functions in addition to being involved in other senior leadership aspects of the business.
- Appointed senior finance executive and capital markets veteran Jason Costi to Board of Directors; he has also been named a member of the Company's Audit, Nominating and Corporate Governance Committees. Costi brings a nearly 20-year background in investments, capital markets and finance, with a consistent track record of building businesses as an on-the-ground operator and private equity investor.
- Earned TrustRadius awards for Best Usability, Best Feature Set Award and Best Customer Support based directly on feedback from SharpSpring's customers. These accolades mark the fourth year in a row that SharpSpring has been honored as a top choice for customers through TrustRadius.
Management Commentary
"In the first quarter we took measurable steps forward along the roadmap we laid out at the end of last year and are paving the way for a meaningful revenue ramp beginning in the second half," said SharpSpring CEO Rick Carlson. "While the results of our increased spending program will take time to translate into impactful new sales, we are seeing encouraging results within our current customer base, notably through adoption of our new annual license pricing option as well as improved attrition metrics. Overall cohort performance continues to track according to plan, and with the key investments we've made and will continue to make in product, sales and marketing, our business remains on the path to achieving our long-term $100 million ARR target we introduced in November.
"Operationally, we've made progress on several key initiatives designed to enhance user experience and optimize revenue profiles for both direct and agency customers. We instituted Free Trials this quarter, which has begun feeding in a greater pool of potential customers to the platform. Additionally, our Freemium and Multi-Tiered pricing options, both slated to launch later in the year, should enable us to expand our addressable market by selling to smaller customers on one end while capturing more value from larger customers on the other. Our new SharpSpring Ads offering is also showing early, but measurable success in generating incremental revenues and increasing cross-platform user engagement. Going forward, we expect to see incremental progress in the second quarter and are well positioned to meet our revenue growth goals for the year."
First Quarter 2021 Key Performance Indicators (KPIs)
- Total monthly recurring revenue (MRR) from new customers in the first quarter of 2021 was approximately $100,000 compared to $180,000 in the first quarter of 2020 and $132,000 in the fourth quarter of 2020. The decrease in MRR was largely due to a delayed benefit in new customer adoption as a result of new sales and marketing spend beginning in the first quarter. The Company expects sales and marketing spend to increase meaningfully throughout 2021, which will begin to have a material positive impact on new sales in the second half of the year.
- New customer additions are expected to generate approximately $1.2 million in annual recurring revenue (ARR).
- Finished the quarter with approximately 1,900 agency customers, approximately 500 direct customers, and more than 10,000 total businesses across all SharpSpring sales and marketing platforms including SharpSpring Ads and legacy products.
- On a year-over-year basis, Q1 2021 net revenue retention was 94.4%, an improvement over 91.7% in Q4 2020.
First Quarter 2021 Financial Results
- Total revenue increased 13% to a record $8.0 million from $7.1 million in the same year-ago period.
- Gross profit increased 30% to a record $ 6.1 million (76% of total revenue) from $4.7 million (66% of total revenue) in the same year-ago period.
- Net loss was $2.6 million, or $0.20 per share, compared to net loss of $988,000, or $0.09 per share, in the same year-ago period.
- Adjusted EBITDA loss (a non-GAAP metric reconciled below) totaled $1.8 million, compared to an adjusted EBITDA loss of $1.8 million in the same year-ago period.
- Core net loss (a non-GAAP metric reconciled below) totaled $1.9 million, or $0.14 per share, compared to core net loss of $785,000, or $0.07 per share, in the same year-ago period.
- At year-end, the Company had $26.9 million in cash, compared to $28.3 million at December 31, 2020.
2021 Financial Outlook
For the fiscal year ending December 31, 2021, SharpSpring expects total revenue to range between $34 million and $36 million. The Company's guidance is based on recurring revenue from its current customer base and performance results tracked through April of this year. These expectations include the impact of increased sales and marketing spend that began in January 2021, which will support a related revenue ramp in the second half of the year.
Conference Call
SharpSpring management will hold a conference call today, May 13, 2021 at 4:30 p.m. Eastern time (1:30 p.m. Pacific time) to discuss these results.
Company CEO Rick Carlson and CFO Aaron Jackson will host the call, followed by a question and answer period.
U.S. dial-in number: 844-602-0380
International number: 862-298-0970
Please call the conference telephone number 5-10 minutes prior to the start time. An operator will register your name and organization. If you have any difficulty connecting with the conference call, please contact Gateway Investor Relations at 949-574-3860.
The conference call will be broadcast live and available for replay here and via the investor relations section of the company's website at investors.sharpspring.com.
A replay of the conference call will be available after 7:30 p.m. Eastern time today through May 27, 2021.
Toll-free replay number: 877-481-4010
International replay number: 919-882-2331
Replay ID: 40820
About SharpSpring, Inc.
SharpSpring, Inc. (NASDAQ:SHSP) is a rapidly growing, highly-rated, global and affordable revenue growth platform delivered via a cloud-based Software-as-a-Service (SaaS) solution. More than 10,000 businesses around the world rely on SharpSpring platforms to generate leads, improve conversions to sales, and drive higher returns on marketing investments. Known for its innovation, open architecture and free customer support, SharpSpring offers flexible contracts at a fraction of the price of competitors making it an easy choice for growing businesses and digital marketing agencies. Learn more at sharpspring.com.
Non-GAAP Financial Measures
Adjusted EBITDA, core net loss and core net loss per share are "non-GAAP financial measures" presented as supplemental measures of the Company's performance. These metrics are not presented in accordance with United States generally accepted accounting principles, or GAAP. The Company believes these measures provide additional meaningful information in evaluating its performance over time. However, the measures have limitations as analytical tools, and you should not consider them in isolation or as a substitute for analysis of the Company's results as reported under GAAP. A reconciliation of net loss to these measures is included for your reference in the financial section of this earnings press release.
Important Cautions Regarding Forward-Looking Statements
The information posted in this release may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. You can identify these statements by use of the words "may," "will," "should," "plans," "explores," "expects," "anticipates," "continues," "estimates," "projects," "intends," and similar expressions. Forward-looking statements are neither historical facts nor assurances of future performance. Instead, they are based only on our current beliefs, expectations and assumptions regarding the future of our business, future plans and strategies, projections, anticipated events and trends, the economy and other future conditions. Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict and many of which are outside of our control. Our actual results and financial condition may differ materially from those indicated in the forward-looking statements. Therefore, you should not rely on any of these forward-looking statements. Important factors that could cause our actual results and financial condition to differ materially from those indicated in the forward-looking statements include, but are not limited to, general economic and business conditions, effects of continued geopolitical unrest and regional conflicts, competition, changes in technology and methods of marketing, delays in completing new customer offerings, changes in customer order patterns, changes in customer offering mix, continued success in technological advances and delivering technological innovations, our ability to successfully utilize our cash to develop current and future products, delays due to issues with outsourced service providers, those events and factors described by us in Item 1. A "Risk Factors" in our most recent Form 10-K and under Part II, Item 1A. and "Risk Factors" contained in our most recent Form 10-Q, and other risks to which our Company is subject, and various other factors beyond the Company's control. Any forward-looking statement made by us in this press release is based only on information currently available to us and speaks only as of the date on which it is made. We undertake no obligation to publicly update any forward-looking statement, whether written or oral, that may be made from time to time, whether as a result of new information, future developments or otherwise.
Company Contact:
Aaron Jackson
Chief Financial Officer
Phone: 352-448-0967
Email: [email protected]
Investor Relations:
Gateway Investor Relations
Matt Glover or Tom Colton
Phone: 949-574-3860
Email: [email protected]
SharpSpring, Inc. | |||
CONSOLIDATED STATEMENTS OF OPERATIONS | |||
(Unaudited) | |||
Three Months Ended | ||||||||
March 31, | ||||||||
2021 | 2020 | |||||||
Revenue | $ | 7,989,231 | $ | 7,052,729 | ||||
Cost of services | 1,890,013 | 2,367,642 | ||||||
Gross profit | 6,099,218 | 4,685,087 | ||||||
Operating expenses: | ||||||||
Sales and marketing | 3,791,382 | 3,034,121 | ||||||
Research and development | 2,115,740 | 1,578,139 | ||||||
General and administrative | 2,771,638 | 2,413,842 | ||||||
Intangible asset amortization | 171,549 | 152,801 | ||||||
Total operating expenses | 8,850,309 | 7,178,903 | ||||||
Operating loss | (2,751,091 | ) | (2,493,816 | ) | ||||
Other income (expense), net | 173,809 | (56,778 | ) | |||||
Loss before income taxes | (2,577,282 | ) | (2,550,594 | ) | ||||
Provision (benefit) for income taxes | 6,573 | (1,562,517 | ) | |||||
Net loss | $ | (2,583,855 | ) | $ | (988,077 | ) | ||
Net loss per share, basic and diluted | $ | (0.20 | ) | $ | (0.09 | ) | ||
Weighted average common shares outstanding, basic and diluted | 12,814,164 | 11,521,192 | ||||||
SharpSpring, Inc. | |||
CONSOLIDATED BALANCE SHEETS | |||
(Unaudited) | |||
March 31, | December 31, | |||||||
2021 | 2020 | |||||||
Assets | ||||||||
Cash and cash equivalents | $ | 26,859,935 | $ | 28,267,792 | ||||
Accounts receivable | 365,993 | 323,130 | ||||||
Unbilled receivables | 1,264,921 | 1,248,060 | ||||||
Income taxes receivable | 54,449 | 54,449 | ||||||
Other current assets | 1,442,949 | 1,433,543 | ||||||
Total current assets | 29,988,247 | 31,326,974 | ||||||
Property and equipment, net | 2,012,335 | 2,188,948 | ||||||
Goodwill | 10,221,440 | 10,250,088 | ||||||
Intangibles, net | 3,844,302 | 4,015,851 | ||||||
Right-of-use assets | 8,145,050 | 8,352,028 | ||||||
Other long-term assets | 591,043 | 611,857 | ||||||
Total assets | $ | 54,802,417 | $ | 56,745,746 | ||||
Liabilities and Shareholders' Equity | ||||||||
Accounts payable | $ | 879,027 | $ | 1,074,594 | ||||
Accrued expenses and other current liabilities | 1,646,501 | 1,259,836 | ||||||
Line of credit | 1,900,000 | 1,900,000 | ||||||
Deferred revenue | 950,997 | 845,265 | ||||||
Income taxes payable | 83,098 | 81,221 | ||||||
Lease liability, current portion | 736,466 | 724,627 | ||||||
Notes payable, current portion | 3,045,884 | 2,630,962 | ||||||
Total current liabilities | 9,241,973 | 8,516,505 | ||||||
Lease liability, net of current portion | 7,566,684 | 7,771,898 | ||||||
Notes payable, net of current portion | 188,116 | 768,538 | ||||||
Total liabilities | 16,996,773 | 17,056,941 | ||||||
Shareholders' equity: | ||||||||
Preferred stock, $0.001 par value | - | - | ||||||
Common stock, $0.001 par value | 12,854 | 12,819 | ||||||
Additional paid in capital | 76,255,585 | 75,544,966 | ||||||
Accumulated other comprehensive loss | (225,229 | ) | (215,269 | ) | ||||
Accumulated deficit | (38,153,566 | ) | (35,569,711 | ) | ||||
Treasury stock | (84,000 | ) | (84,000 | ) | ||||
Total shareholders' equity | 37,805,644 | 39,688,805 | ||||||
Total liabilities and shareholders' equity | $ | 54,802,417 | $ | 56,745,746 | ||||
SharpSpring, Inc. | |||
CONSOLIDATED STATEMENTS OF CASH FLOWS | |||
(Unaudited) | |||
Three Months Ended | ||||||||
March 31, | ||||||||
2021 | 2020 | |||||||
Net loss | $ | (2,583,855 | ) | $ | (988,077 | ) | ||
Adjustments to reconcile loss from operations: | ||||||||
Depreciation and amortization | 444,081 | 356,579 | ||||||
Gain on extinguishment of debt | (166,975 | ) | - | |||||
Amortization of costs to acquire contracts | 204,273 | 202,439 | ||||||
Non-cash stock compensation | 555,586 | 370,632 | ||||||
Loss on disposal of property and equipment | 1,526 | - | ||||||
Unrealized foreign currency (gain) loss | (46,908 | ) | 80,727 | |||||
Changes in assets and liabilities: | ||||||||
Accounts receivable | (47,120 | ) | (85,272 | ) | ||||
Unbilled receivables | (31,785 | ) | (92,496 | ) | ||||
Right-of-use assets | 206,978 | (405,719 | ) | |||||
Other assets | (193,429 | ) | (342,872 | ) | ||||
Income taxes, net | 6,573 | (1,562,944 | ) | |||||
Accounts payable | (194,939 | ) | 890,013 | |||||
Lease liabilities | (193,375 | ) | 421,089 | |||||
Accrued expenses and other current liabilities | 553,640 | (394,239 | ) | |||||
Deferred revenue | 111,439 | (94,289 | ) | |||||
Net cash provided by (used in) operating activities | (1,374,290 | ) | (1,644,429 | ) | ||||
Cash flows from investing activities | ||||||||
Purchases of property and equipment | (29,871 | ) | (140,930 | ) | ||||
Capitalization of software development costs | (67,574 | ) | (272,282 | ) | ||||
Net cash used in investing activities | (97,445 | ) | (413,212 | ) | ||||
Cash flows used in financing activities: | ||||||||
Proceeds from line of credit | - | 1,900,000 | ||||||
Proceeds from exercise of stock options, net | 180,087 | 11,174 | ||||||
Payments for taxes related to net share settlement of equity awards | (25,018 | ) | (26,533 | ) | ||||
Net cash provided by financing activities | 155,069 | 1,884,641 | ||||||
Effect of exchange rate on cash | (91,191 | ) | (83,900 | ) | ||||
Change in cash and cash equivalents | (1,407,857 | ) | (256,900 | ) | ||||
Cash and cash equivalents, beginning of period | 28,267,792 | 11,881,949 | ||||||
Cash and cash equivalents, end of period | $ | 26,859,935 | $ | 11,625,049 | ||||
SharpSpring, Inc. | |||
RECONCILIATION TO ADJUSTED EBITDA | |||
(Unaudited, in Thousands) | |||
Three Months Ended | ||||||||
March 31, | ||||||||
2021 | 2020 | |||||||
Net loss | $ | (2,584 | ) | $ | (988 | ) | ||
Provision (benefit) for income taxes | 7 | (1,563 | ) | |||||
Other (income) expense, net | (7 | ) | 57 | |||||
Gain on extinguishment of debt | (167 | ) | - | |||||
Depreciation & amortization | 444 | 357 | ||||||
Non-cash stock compensation | 556 | 371 | ||||||
Adjusted EBITDA | $ | (1,751 | ) | $ | (1,766 | ) | ||
SharpSpring, Inc. | |||
RECONCILIATION TO CORE NET LOSS AND CORE NET LOSS PER SHARE | |||
(Unaudited, in Thousands) | |||
Three Months Ended | ||||||||
March 31, | ||||||||
2021 | 2020 | |||||||
Net loss | $ | (2,584 | ) | $ | (988 | ) | ||
Amortization of intangible assets | 172 | 153 | ||||||
Non-cash stock compensation | 556 | 371 | ||||||
Tax adjustment | 2 | (321 | ) | |||||
Core net loss | (1,854 | ) | (785 | ) | ||||
Core net loss per share | $ | (0.14 | ) | $ | (0.07 | ) | ||
Weighted average common shares outstanding | 12,814 | 11,521 | ||||||
SOURCE: SharpSpring, Inc.
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