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SharpSpring Reports Third Quarter 2019 Results

November 7, 2019 GMT
Tenth Consecutive Record Topline Performance Highlighted by Steady New Customer Additions, Improving Retention Efforts and Agency Customer Expansion GAINESVILLE, FL / ACCESSWIRE / November 7, 2019 / SharpSpring, Inc. (NASDAQ:SHSP), a leading ...
Tenth Consecutive Record Topline Performance Highlighted by Steady New Customer Additions, Improving Retention Efforts and Agency Customer Expansion GAINESVILLE, FL / ACCESSWIRE / November 7, 2019 / SharpSpring, Inc. (NASDAQ:SHSP), a leading ...

Tenth Consecutive Record Topline Performance Highlighted by Steady New Customer Additions, Improving Retention Efforts and Agency Customer Expansion

GAINESVILLE, FL / ACCESSWIRE / November 7, 2019 / SharpSpring, Inc. (NASDAQ:SHSP), a leading cloud-based marketing automation platform, reported financial results for the third quarter ended September 30, 2019.

Third Quarter 2019 and Recent Operational Highlights

Third Quarter 2019 Financial Results

2019 Financial Outlook

For the fiscal year ending December 31, 2019, SharpSpring expects total revenue to range between $22.4 million and $22.5 million, which would represent an approximate increase of 20% to 21%, respectively, compared to the prior year. The company’s guidance is based on recurring revenue from our current customer base and year-to-date performance continuing in Q4.

Going forward, the Company plans to continue providing revenue guidance on an annual basis. At this time, SharpSpring intends to release a preliminary 2020 financial outlook early in the coming fiscal year.

Management Commentary

“In the third quarter, we continued to make considerable progress against a number of our long-term company initiatives while generating consistent financial results in all of our key operating segments,” said SharpSpring CEO Rick Carlson. “Q3 marked our tenth consecutive quarter of record revenue at $5.7 million, which was driven by steady growth in new agency customer wins as well as expansions within existing customers. Year-to-date, we’ve generated 23% topline growth and currently have over 1,900 agency customers and nearly 8,500 businesses on our platform, which speaks to the ability of our team to continue generating long-term returns.

“Operationally, we made encouraging progress in one of our major ongoing initiatives, which is to reduce customer attrition and increase expansion revenue opportunities, as evidenced by the improvement in our net revenue attrition, which fell to a monthly average of 1.2% for comparable cohorts during the third quarter. We are also pleased with the initial traction we’re seeing from our Account Management efforts, where Q3 represented the first quarter with both our agency and direct teams fully staffed. In addition to increasing the lifetime value of our customers, which is always a top priority, we’re also continually looking at ways to drive new customer acquisition efficiency at all stages of the funnel. Heading into the end of the year, we’re making all the right moves to keep our company headed decisively in the right direction. With our inaugural annual guidance introduced at $22.4 million to $22.5 million, as well as our expectation for higher growth in the new year, we feel strongly that our best results lie ahead of us.”

Conference Call

SharpSpring management will hold a conference call today, November 7, 2019 at 4:30 p.m. Eastern time (1:30 p.m. Pacific time) to discuss these results.

Company CEO Rick Carlson and CFO Brad Stanczak will host the call, followed by a question and answer period.

U.S. dial-in number: 888-567-1602

International number: 862-298-0701

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 on the same day through November 21, 2019.

Toll-free replay number: 877-481-4010

International replay number: 919-882-2331

Replay ID: 54489

About SharpSpring, Inc.

SharpSpring, Inc. (NASDAQ:SHSP) is a rapidly growing, highly-rated global provider of affordable marketing automation delivered via a cloud-based Software-as-a Service (SaaS) platform. Thousands of businesses around the world rely on SharpSpring 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 monthly contracts at a fraction of the price of competitors making it an easy choice for growing businesses and digital marketing agencies. Learn more at www.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 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:

Brad Stanczak

Chief Financial Officer

Phone: 352-448-0967

Email:

Investor Relations:

Gateway Investor Relations

Matt Glover or Tom Colton

Phone: 949-574-3860

Email:

SharpSpring, Inc. CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)

Three Months EndedNine Months Ended
September 30,September 30,
2019201820192018

Revenue

$5,723,978$4,873,329$16,567,696$13,500,281

Cost of services

1,840,7641,472,4105,014,9644,380,069

Gross profit

3,883,2143,400,91911,552,7329,120,212

Operating expenses:

Sales and marketing

3,102,6532,640,6978,976,4667,368,128

Research and development

1,207,6051,106,9953,684,3143,065,689

General and administrative

1,991,3291,518,1066,154,2954,368,744

Non-employee stock issuance expense

-508,561-508,561

Intangible asset amortization

95,250115,000285,750345,000

Total operating expenses

6,396,8375,889,35919,100,82515,656,122

Operating loss

(2,513,623)(2,488,440)(7,548,093)(6,535,910)

Other expense, net

(15,781)(243,956)(161,873)(513,759)

Loss on induced conversion

--(2,162,696)-

Gain (loss) on embedded derivative

-27,295214,350(426,154)

Loss before income taxes

(2,529,404)(2,705,101)(9,658,312)(7,475,823)

Provision (benefit) for income taxes

(2,291)5,130835(247,415)

Net loss

$(2,527,113)$(2,710,231)$(9,659,147)$(7,228,408)

Basic net loss per share

$(0.23)$(0.32)$(0.96)$(0.85)

Diluted net loss per share

$(0.23)$(0.32)$(0.96)$(0.85)

Weighted average common shares outstanding

Basic

10,948,4168,530,85810,028,2468,482,976

Diluted

10,948,4168,530,85810,028,2468,482,976

SharpSpring, Inc. CONSOLIDATED BALANCE SHEETS (Unaudited)

September 30,December 31,
20192018

Assets

Cash and cash equivalents

$13,753,942$9,320,866

Accounts receivable

95,49880,521

Unbilled receivables

927,952740,425

Income taxes receivable

43,81322,913

Other current assets

1,414,3961,184,217

Total current assets

16,235,60111,348,942

Property and equipment, net

1,880,9261,260,798

Goodwill

8,860,9808,866,413

Intangibles, net

1,580,2501,866,000

Right-of-use assets

5,392,330-

Other long-term assets

559,186665,123

Total assets

$34,509,273$24,007,276

Liabilities and Shareholders' Equity

Accounts payable

$1,617,034$1,613,477

Accrued expenses and other current liabilities

729,476774,944

Deferred revenue

508,804250,656

Income taxes payable

13,34023,705

Lease liability

362,065-

Total current liabilities

3,230,7192,662,782

Convertible notes, including accrued interest

-8,342,426

Convertible notes embedded derivative

-214,350

Lease liability, net of current portion

5,081,623-

Total liabilities

8,312,34211,219,558

Shareholders' equity:

Preferred stock, $0.001 par value

--

Common stock, $0.001 par value

10,9728,639

Additional paid in capital

53,515,91530,446,838

Accumulated other comprehensive loss

(234,103)(231,053)

Accumulated deficit

(27,011,853)(17,352,706)

Treasury stock

(84,000)(84,000)

Total shareholders' equity

26,196,93112,787,718

Total liabilities and shareholders' equity

$34,509,273$24,007,276

SharpSpring, Inc. CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

Three Months EndedNine Months Ended
September 30,September 30,
2019201820192018

Net loss

$(2,527,113)$(2,710,231)$(9,659,147)$(7,228,408)

Adjustments to reconcile loss from operations:

Depreciation and amortization

256,355240,416727,873632,132

Amortization of costs to acquire contracts

228,812194,479431,757758,014

Non-cash stock compensation

284,308234,659849,900710,879

Non-employee stock issuance expense

-508,561-508,561

Deferred income taxes

-(45,625)-(153,890)

(Gain)/Loss on disposal of property and equipment

--(617)-

Non-cash interest

-100,000139,372204,301

Amortization of debt issuance costs and embedded derivative

-6,3592,90312,991

(Gain)/loss on embedded derivative

-(27,295)(214,350)426,154

Loss on induced conversion

--2,162,696-

Unrealized foreign currency gain/loss

26,344122,47543,470290,386

Changes in assets and liabilities:

Accounts receivable

10,280(1,251)(15,014)40,253

Unbilled receivables

(50,188)(49,419)(189,008)(143,716)

Right-of-use assets

109,247-323,180-

Other assets

(360,253)(321,026)(547,716)(973,904)

Income taxes, net

(2,291)211,913(30,853)2,050,292

Accounts payable

82,722104,7743,891669,474

Lease liabilities

(95,068)59,370(280,643)27,784

Other liabilities

50,661-(36,639)-

Deferred revenue

193,37919,063258,99159,972

Net cash used in operating activities

(1,792,805)(1,352,778)(6,029,954)(2,108,725)

Cash flows from investing activities

Purchases of property and equipment

(450,149)(208,035)(1,062,252)(396,153)

Proceeds from the sale of property and equipment

--617-

Net cash used in investing activities

(450,149)(208,035)(1,061,635)(396,153)

Cash flows used in financing activities:

Proceeds from issuance of convertible note

---8,000,000

Debt issuance costs

---(141,657)

Proceeds from exercise of stock options

19,733207,455926,350449,259

Proceeds (cost) from issuance of common stock, net

--10,649,005-

Net cash provided by financing activities

19,733207,45511,575,3558,307,602

Effect of exchange rate on cash

(20,504)635(50,690)(18,687)

Change in cash and cash equivalents

$(2,243,725)$(1,352,723)$4,433,076$5,784,037

Cash and cash equivalents, beginning of period

$15,997,667$12,536,507$9,320,866$5,399,747

Cash and cash equivalents, end of period

$13,753,942$11,183,784$13,753,942$11,183,784

SharpSpring, Inc. RECONCILIATION TO ADJUSTED EBITDA (Unaudited, in Thousands)

Three Months EndedNine Months Ended
September 30,September 30,
2019201820192018

Net loss

$(2,527)$(2,710)$(9,659)$(7,228)

Provision (benefit) for income taxes

(2)51(247)

Other expense, net

16244162514

Non-cash gain on embedded derivative

-(27)(214)426

Non-cash loss on induced conversion

--2,163-

Depreciation & amortization

256240728632

Non-cash stock compensation

284235850711

Non-employee stock issuance expense

-509-509

Franchise tax settlement

--318-

Restructuring

--133-

Adjusted EBITDA

(1,973)(1,504)(5,518)(4,683)

SharpSpring, Inc. RECONCILIATION TO CORE NET LOSS AND CORE NET LOSS PER SHARE

(Unaudited, in Thousands)

Three Months EndedNine Months Ended
September 30,September 30,
2019201820192018

Net loss

$(2,527)$(2,710)$(9,659)$(7,228)

Amortization of intangible assets

95115286345

Non-cash stock compensation

284235850711

Non-employee stock issuance expense

-509-509

Non-cash gain on embedded derivative

-(27)(214)426

Non-cash loss on induced conversion

--2,163-

Franchise tax settlement

--318-

Restructuring

--133-

Tax adjustment

324(77)

Core net loss

$(2,145)$(1,876)$(6,119)$(5,314)

Core net loss per share

$(0.20)$(0.22)$(0.61)$(0.63)

Weighted average common shares outstanding

10,9488,53110,0288,483

SOURCE: SharpSpring, Inc.

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