SharpSpring Reports Fourth Quarter and Full Year 2020 Results
03/16/2021 - 04:05 PM
Strong Finish Amidst Challenging Conditions Led by Improvements to Net Revenue Retention and Net Agency Client Expansion Early Investments in Sales and Marketing in 2021 Setting the Table for Accelerated Sales Growth as the Year Progresses GAINESVILLE, FL / ACCESSWIRE / March 16, 2021 / SharpSpring, Inc. (NASDAQ:SHSP), a leading cloud-based revenue growth platform, reported financial results for the fourth quarter and full year ended December 31, 2020.
Recent Operational Highlights
Company CEO Rick Carlson provided a Letter to Investors on SharpSpring's long-term business outlook, outlining the Company's ability and plan to achieve long-term, sustainable, high-margin growth. The assumptions in the Company's long-term projections are supported by over six years of individual cohort data and historical Company performance to-date. Further solidified Company balance sheet through underwritten public offering of common stock, adding $13.9 million in net proceeds, to support current health of the business, expand future sales and marketing initiatives and pursue additional growth opportunities. Appointed Aaron Jackson as Chief Financial Officer. Prior to his appointment, Jackson had been acting as interim CFO and has spent four years at SharpSpring in various finance and accounting leadership roles. Jackson brings a comprehensive understanding of SharpSpring Company culture, goals and objectives and has expert knowledge of the Company's core business model and growth strategy. 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 what was an eventful and trying year, both for SharpSpring and the rest of the world, we were able to consistently grow our business, expand our platform and position ourselves effectively for long-term success," said Company CEO Rick Carlson. "Financially, we achieved our fifteenth consecutive record revenue performance and are now at the precipice of a $30 million run rate. During the fourth quarter, we also recorded a number of positive, incremental data points that support our belief that business is slowly, but surely, returning to normalized conditions. Within our customer base, we logged diminished attrition and also saw net revenue retention return to pre-COVID levels with a second straight period of net client expansion, all positive indicators for the future. Our Perfect Audience business also showed encouraging growth in Q4, aided mainly from larger customer campaigns. As we complete PA's integration into our marketing automation platform, we should begin to further realize benefits of cross-selling into our current user base as SharpSpring Ads."
"With the effects of the pandemic appearing to be moving to the rearview in 2021, we expect the coming year will be a period of major investment in our business, which will put us on the path to accelerated growth. After our successful capital raise in December, we have additional resources to drive new sales, marketing and product initiatives that are designed to have a long-term positive impact on the business. In Q1 we began the process of ramping spend, which should translate to new customer growth as the year progresses. As we introduce new go-to market strategies and pricing options, including free trials, annual client licenses and freemium offerings, we believe the universe of potential SharpSpring customers will expand. As a leading provider of revenue growth tools for small to medium businesses and digital marketing agencies, we are reducing the barriers to entry for all businesses to participate in ongoing digital transformation."
Fourth Quarter 2020 Key Performance Indicators (KPIs)
Total monthly recurring revenue (MRR) from new customers in the fourth quarter of 2020 was $132,000 compared to $165,000 in the fourth quarter of 2019 and $176,000 in the third quarter of 2020. The decrease in MRR was largely due to delayed new customer adoption resulting from the ongoing COVID-19 pandemic as well as reduced sales and marketing spend during the quarter. The Company expects sales and marketing spend to increase meaningfully in 2021, which should have a material positive impact on new sales beginning in the second quarter of the year. New customer additions are expected to generate approximately $1.6 million in annual recurring revenue (ARR). Finished the quarter with approximately 2,000 agency customers, over 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, Q4 2020 net revenue retention was 91.7% , an improvement over 90.1% in Q3 2020. Fourth Quarter 2020 Financial Results
Total revenue increased 25% to a record $7.7 million from $6.1 million in the same year-ago period. Gross profit increased 42% to a record $5.7 million (75% of total revenue) from $4.0 million (65% of total revenue) in the same year-ago period. Net loss, including non-cash impairment charges, was $2.3 million , or $0.20 per share, compared to net loss of $2.7 million , or $0.24 per share, in the same year-ago period. Adjusted EBITDA loss (a non-GAAP metric reconciled below) totaled $869,000 , compared to an adjusted EBITDA loss of $1.9 million in the same year-ago period. Core net loss (a non-GAAP metric reconciled below) totaled $1.1 million , or $0.09 per share, compared to core net loss of $2.1 million , or $0.19 per share, in the same year-ago period. At year-end, the Company had $28.3 million in cash, compared to $11.9 million at December 31, 2019. Full Year 2020 Financial Results
Total revenue increased 29% to a record $29.3 million from $22.7 million in 2019. Gross profit increased 36% to a record $21.2 million (72% of total revenue) from $15.6 million (69% of total revenue) in 2019. Net loss, including non-cash impairment charges, was $5.8 million , or $0.50 per share, compared to net loss of $12.4 million , or $1.20 per share, in 2019. Adjusted EBITDA loss (a non-GAAP metric reconciled below) totaled $3.2 million , compared to an adjusted EBITDA loss of $7.4 million in 2019. Core net loss (a non-GAAP metric reconciled below) totaled $4.2 million , or $0.36 per share, compared to core net loss of $8.2 million , or $0.79 per share, in 2019. 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 February 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 as the year progresses.
Conference Call SharpSpring management will hold a conference call today, March 16, 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: 877-545-0320
International number: 973-528-0016
Entry Code: 441277
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 March 30, 2021.
Toll-free replay number: 877-481-4010
International replay number: 919-882-2331
Replay ID: 40092
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 1A. "Risk Factors" in our most recent Form 10-K and under Part II, Item 1A. "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: IR@sharpspring.com
Investor Relations: Gateway Investor Relations Matt Glover or Tom Colton Phone: 949-574-3860 Email: SHSP@gatewayir.com
SharpSpring, Inc. CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
Three Months Ended Year Ended
December 31, December 31,
2020 2019 2020 2019 Revenue
$ 7,657,416 $ 6,131,690 $ 29,287,882 $ 22,699,386
Cost of services
1,952,615 2,127,453 8,062,564 7,142,416 Gross profit
5,704,801 4,004,237 21,225,318 15,556,970
Operating expenses:
Sales and marketing
2,754,581 2,808,761 10,888,944 11,785,227 Research and development
1,628,147 1,352,299 6,072,103 5,036,613 General and administrative
2,843,472 2,462,779 10,227,128 8,617,073 Intangible asset amortization
152,801 95,250 642,149 381,000 Impairment of goodwill
710,000 - 710,000 -
Total operating expenses
8,089,001 6,719,089 28,540,324 25,819,913
Operating loss
(2,384,200 ) (2,714,852 ) (7,315,006 ) (10,262,943 )
Other income (expense), net
53,642 14,537 (19,988 ) (147,338 ) Loss on induced conversion
- - - (2,162,696 ) Gain on embedded derivative
- - - 214,350
Loss before income taxes
(2,330,558 ) (2,700,315 ) (7,334,994 ) (12,358,627 ) (Benefit) provision for income taxes
(2,340 ) 28,514 (1,505,965 ) 29,349
Net loss
$ (2,328,218 ) $ (2,728,829 ) $ (5,829,029 ) $ (12,387,976 )
Net loss per share, basic and diluted
$ (0.20 ) $ (0.24 ) $ (0.50 ) $ (1.20 )
Weighted average common shares outstanding, basic and diluted
11,828,706 11,210,816 11,611,020 10,323,889
SharpSpring, Inc. CONSOLIDATED BALANCE SHEETS (Unaudited)
December 31, December 31,
2020 2019 Assets
Cash and cash equivalents
$ 28,267,792 $ 11,881,949 Accounts receivable, net
323,130 340,344 Unbilled receivables
1,248,060 998,048 Income taxes receivable
54,449 15,010 Other current assets
1,433,543 1,363,366 Total current assets
31,326,974 14,598,717
Property and equipment, net
2,188,948 1,996,722 Goodwill
10,250,088 10,922,814 Intangibles, net
4,015,851 4,658,000 Right-of-use assets
8,352,028 5,281,530 Other long-term assets
611,857 549,022 Total assets
$ 56,745,746 $ 38,006,805
Liabilities and Shareholders' Equity
Accounts payable
1,074,594 2,052,538 Accrued expenses and other current liabilities
1,259,836 919,089 Line of credit
1,900,000 - Deferred revenue
845,265 860,820 Income taxes payable
81,221 13,944 Lease liability, current portion
724,627 370,340 Notes payable, current portion
2,630,962 - Total current liabilities
8,516,505 4,216,731
Lease liability, net of current portion
7,771,898 4,976,727 Notes payable, net of current portion
768,538 - Total liabilities
$ 17,056,941 $ 9,193,458
Shareholders' equity:
Preferred stock, $0.00 1 par value
- - Common stock, $0.00 1 par value
12,819 11,537 Additional paid in capital
75,544,966 58,851,285 Accumulated other comprehensive loss
(215,269 ) (224,793 ) Accumulated deficit
(35,569,711 ) (29,740,682 ) Treasury stock
(84,000 ) (84,000 ) Total shareholders' equity
39,688,805 28,813,347
Total liabilities and shareholders' equity
56,745,746 $ 38,006,805
SharpSpring, Inc. CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
Three Months Ended Year Ended
December 31, December 31,
2020 2019 2020 2019 Net loss
$ (2,328,218 ) $ (2,728,829 ) $ (5,829,029 ) $ (12,387,976 )
Adjustments to reconcile loss from operations:
Depreciation and amortization
416,984 282,250 1,596,146 1,010,123 Impairment of goodwill
710,000 - 710,000 - Amortization of costs to acquire contracts
204,328 200,173 816,100 804,780 Non-cash stock compensation
388,172 354,313 1,526,693 1,204,213 Deferred income taxes
4,157 - 359 - Loss (gain) on disposal of property and equipment
262 - 262 (617 ) Non-cash interest
- - - 139,372 Amortization of debt issuance costs and embedded derivative
- - - 2,903 Gain on embedded derivative
- - - (214,350 ) Loss on induced conversion
- - - 2,162,696 Unrealized foreign currency (gain) loss
(72,733 ) (18,045 ) 48,069 25,425 Changes in assets and liabilities:
Accounts receivable, net
(42,980 ) (189,203 ) 21,989 (204,217 ) Unbilled receivables
(93,377 ) (65,979 ) (230,895 ) (254,987 ) Right-of-use assets
203,891 110,800 (3,070,498 ) 433,980 Other assets
(209,195 ) (116,516 ) (949,881 ) (837,082 ) Income taxes, net
(10,698 ) 28,759 22,941 (2,094 ) Accounts payable
(1,208,626 ) 435,137 (978,825 ) 439,028 Lease liabilities
(186,325 ) (96,621 ) 3,149,459 (377,264 ) Other liabilities
313,037 (355,841 ) 340,808 (392,480 ) Deferred revenue
276,336 162,414 (21,048 ) 421,405 Net cash provided by (used in) operating activities
(1,634,985 ) (1,997,188 ) (2,847,350 ) (8,027,142 )
Cash flows from investing activities
Acquisition of business
- (4,566,402 ) - (4,566,402 ) Purchases of property and equipment
- 249,712 (401,831 ) (529,001 ) Proceeds from the sale of property and equipment
- - - 617 Capitalization of software development costs
(181,732 ) (552,508 ) (744,654 ) (836,047 ) Net cash used in investing activities
(181,732 ) (4,869,198 ) (1,146,485 ) (5,930,833 )
Cash flows used in financing activities:
Proceeds from line of credit
- - 1,900,000 - Proceeds from note payable
- - 3,399,500 - Proceeds from exercise of stock options, net
1,075,816 42,636 1,266,695 968,986 Proceeds from issuance of common stock, net
13,942,446 4,938,985 13,942,446 15,587,990 Payments for taxes related to net share settlement of equity awards
(7,050 ) - (40,872 ) - Net cash provided by financing activities
15,011,212 4,981,621 20,467,769 16,556,976
Effect of exchange rate on cash
54,690 12,772 (88,091 ) (37,918 )
Change in cash and cash equivalents
$ 13,249,185 $ (1,871,993 ) $ 16,385,843 $ 2,561,083
Cash and cash equivalents, beginning of period
$ 15,018,607 $ 13,753,942 $ 11,881,949 $ 9,320,866
Cash and cash equivalents, end of period
$ 28,267,792 $ 11,881,949 $ 28,267,792 $ 11,881,949
SharpSpring, Inc. RECONCILIATION TO ADJUSTED EBITDA (Unaudited, in Thousands)
Three Months Ended Year Ended
December 31, December 31,
2020 2019 2020 2019 Net loss
$ (2,328 ) $ (2,729 ) $ (5,829 ) $ (12,388 ) (Benefit) provision for income taxes
(2 ) 29 (1,506 ) 29 Other (income) expense , net
(54 ) (15 ) 20 147 Non-cash gain on embedded derivative
- - - (214 ) Non-cash loss on induced conversion
- - - 2,163 Depreciation & amortization
417 282 1,596 1,010 Non-cash stock compensation
388 354 1,527 1,204 Restructuring
- 176 - 309 Sales Tax Contingent Liability
- - 256 - Franchise tax settlement
- - - 318 Impairment of goodwill
710 - 710 - Adjusted EBITDA
$ (869) $ (1,903) $ (3,226) $ (7,422)
SharpSpring, Inc. RECONCILIATION TO CORE NET LOSS AND CORE NET LOSS PER SHARE (Unaudited, in Thousands)
Three Months Ended Year Ended
December 31, December 31,
2020 2019 2020 2019 Net loss
$ (2,328 ) $ (2,729 ) $ (5,829 ) $ (12,388 ) Amortization of intangible assets
153 95 642 381 Non-cash stock compensation
388 354 1,527 1,204 Non-cash gain on embedded derivative
- - - (214 ) Non-cash loss on induced conversion
- - - 2,163 Restructuring
- 176 - 309 Sales Tax Contingent Liability
- - 256 - Franchise tax settlement
- - - 318 Impairment of goodwill
710 - 710 - Tax adjustment
(2 ) 29 (1,506 ) 32 Core net loss
$ (1,079) $ (2,075) $ (4,200) $ (8,195)
Core net loss per share
$ (0.09) $ (0.19) $ (0.36) $ (0.79) Weighted average common shares outstanding
11,829 11,211 11,611 10,324
SOURCE: SharpSpring, Inc.
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