SharpSpring Reports Record Third Quarter 2016 Results

GAINESVILLE, Fla., Nov. 08, 2016 (GLOBE NEWSWIRE) -- SharpSpring, Inc. (NASDAQ:SHSP), a global provider of cloud-based marketing technologies, reported financial results for the third quarter ended September 30, 2016. 

Third Quarter 2016 Operational Highlights
  • Secured 244 new SharpSpring customers, up 30% year-over-year, and finished the quarter with 1,050 agency customers and over 4,750 businesses using the flagship platform.
  • Announced an integration with PieSync, which extends the SharpSpring platform by providing users with two-way contact syncing with dozens of cloud-based apps.
  • Hired Andrew Dod as Chief Marketing Officer to increase growth by focusing on lead generation and deployment of new marketing initiatives.
  • Added dynamic content functionality, which allows users to build pages and emails that adapt to visitors' profiles, to the growing list of features available in SharpSpring.
  • Expanded into a new headquarters in Gainesville, FL and executed a plan to close the Company's South African office to further align and unify the organization.

Third Quarter 2016 Financial Results from Continuing Operations
  • Revenue increased 26% to $3.0 million from $2.4 million in the same year-ago period, driven by strong growth from our flagship marketing automation solution which increased 101% to $2.5 million during the third quarter of 2016.
  • Gross profit increased 6% to $1.7 million from $1.6 million in the third quarter of 2015. 
  • Net loss from continuing operations totaled $1.2 million or $(0.15) per share compared to a net loss of $1.6 million or $(0.24) per share in the third quarter of 2015.
  • Adjusted EBITDA loss (a non-GAAP metric reconciled below) totaled $1.0 million, compared to adjusted EBITDA loss of $0.8 million in the same year-ago period.
  • Core net loss (a non-GAAP metric reconciled below) totaled $0.7 million or ($0.08) per share, which compared to core net loss of $0.7 million or ($0.10) per share, in the same year-ago period.
  • At quarter-end, cash totaled $11.6 million, compared to $15.3 million at the end of the prior quarter, reflecting $2.6 million of cash paid for taxes during Q3 related to the gain on the sale of the SMTP email relay business during Q2.

Management Commentary"I am pleased with our performance in the quarter and excited about the future for SharpSpring," said company CEO Rick Carlson. "We are happy to report record revenues for our core SharpSpring product which grew 101% from last year.  New customer wins for our flagship product nearly eclipsed our record set last quarter, even with several transformational corporate events going on during Q3's sales cycle. 

"On the operational side, Q3 was a continuation of the work we started in Q2 to refocus our operations and strategic direction on our high growth marketing automation platform.  After the sale of our SMTP email relay product and the completion of the migration of our GraphicMail customers to SharpSpring Mail+ in late Q2, we closed our 50-person office in Cape Town, South Africa which had previously been GraphicMail's principal office.  The Cape Town office closure allows us to increase the continuity of our operations by centralizing the hiring of new employees at our Gainesville, Florida headquarters. That hiring has begun, and will be ongoing through Q4 as we meet the staffing demands of our rapidly growing business.  Once complete, these final transformational activities will allow us to execute our growth strategies for SharpSpring with our teams' 100% focus and effort in 2017.

"Through all this, the fundamentals of our business have remained constant - we continue to offer a leading marketing automation platform to agencies and small or mid-sized businesses at a fraction of the price of HubSpot and our other major competitors.  We are well positioned to benefit from the increasing adoption of marketing automation solutions and the increase in use of agencies to solve their clients' complex digital marketing needs.  We remain confident in the long-term growth and success of our platform and achieving our goals to more than double the revenue of our flagship product in 2016."

Conference CallSharpSpring management will hold a conference call today (November 8, 2016) at 4:30 p.m. Eastern time (1:30 p.m. Pacific time) to discuss these results.

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

Date: Tuesday, November 8, 2016 Time: 4:30 p.m. Eastern time (1:30 p.m. Pacific time) U.S. dial-in number: 877-407-4018International number: 201-689-8471

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 Liolios Group 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 29, 2016.

Toll-free replay number: 844-512-2921   International replay number: 412-317-6671Replay ID: 13648383

About SharpSpring, Inc. SharpSpring, Inc. ( SHSP) is a rapidly growing, global provider of cloud-based marketing automation solutions that enable businesses to improve lead generation and engagement to drive more sales.  The company's product lines, which include SharpSpring and SharpSpring Mail+, are known for their innovation, flexible architecture, ease of use, and cost-effectiveness — all backed by high-quality, multilingual customer support. Learn more at www.sharpspring.com and www.sharpspringmail.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 StatementsThe 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 involve risks and uncertainties that could cause actual results to differ materially from those projected or anticipated. These risks and uncertainties 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 Form 10-Q and other risks to which our Company is subject, and various other factors beyond the Company's control.
SharpSpring, Inc.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
  Three Months Ended   Nine Months Ended
  September 30,   September 30,
    2016       2015       2016       2015  
Revenue $ 3,010,307     $ 2,388,650     $ 8,688,723     $ 6,581,750  
               
Cost of services   1,269,473       745,420       3,350,996       1,849,981  
Gross profit   1,740,834       1,643,230       5,337,727       4,731,769  
               
Operating expenses:              
Sales and marketing   1,445,152       1,325,815       4,084,446       3,469,959  
Research and development   612,117       424,995       1,651,809       1,236,408  
General and administrative   1,232,996       1,386,210       3,171,052       3,153,323  
Change in earn out liability   -       270,065       219,473       2,641,397  
Intangible asset amortization   298,823       379,053       1,068,839       1,140,627  
               
Total operating expenses   3,589,088       3,786,138       10,195,619       11,641,714  
               
Operating loss   (1,848,254 )     (2,142,908 )     (4,857,892 )     (6,909,945 )
Other income (expense), net   105,104       (64,681 )     474,983       (130,328 )
               
Loss before income taxes   (1,743,150 )     (2,207,589 )     (4,382,909 )     (7,040,273 )
Benefit for income tax   (519,293 )     (580,598 )     (1,334,800 )     (1,785,414 )
Net loss from continuing operations   (1,223,857 )     (1,626,991 )     (3,048,109 )     (5,254,859 )
Net income from discontinued operations, net of tax   -       337,954       10,187,451       929,143  
Net income (loss) $ (1,223,857 )   $ (1,289,037 )   $ 7,139,342     $ (4,325,716 )
               
Net loss per share from continuing operations              
Basic net loss per share $ (0.15 )   $ (0.24 )   $ (0.39 )   $ (0.87 )
Diluted net loss per share $ (0.15 )   $ (0.24 )   $ (0.39 )   $ (0.87 )
               
Net income per share from discontinued operations              
Basic net income per share $ -     $ 0.05     $ 1.32     $ 0.15  
Diluted net income per share $ -     $ 0.05     $ 1.32     $ 0.15  
               
Net income (loss) per share              
Basic net income (loss) per share $ (0.15 )   $ (0.19 )   $ 0.92     $ (0.71 )
Diluted net income (loss) per share $ (0.15 )   $ (0.19 )   $ 0.92     $ (0.71 )
               
               
Shares used in computing basic net income (loss) per share   8,345,750       6,858,407       7,741,351       6,062,196  
Shares used in computing diluted net income (loss) per share   8,345,750       6,858,407       7,741,351       6,062,196  
               
               
               
SharpSpring, Inc.        
CONSOLIDATED BALANCE SHEETS        
  September 30,   December 31,        
    2016       2015          
  (unaudited)            
Assets              
Cash and cash equivalents $ 11,616,174     $ 4,158,646          
Restricted cash   -       -          
Accounts receivable, net   1,089,965       794,123          
Deferred income taxes   91,954       16,645          
Income taxes receivable   562,230       793,189          
Other current assets   1,515,327       205,143          
Assets held for sale   -       45,697          
Total current assets   14,875,650       6,013,443          
               
Property and equipment, net   888,676       565,481          
Goodwill   8,864,660       8,881,933          
Other intangible assets, net   4,699,337       5,518,305          
Deposits and other   42,479       11,280          
Assets held for sale   -       251,565          
Total assets $ 29,370,802     $ 21,242,007          
               
Liabilities and Shareholders' Equity              
Accounts payable $ 882,645     $ 609,454          
Accrued expenses and other current liabilities   1,109,741       1,098,790          
Deferred revenue   308,367       525,217          
Current portion of earn out liabilities   -       5,191,116          
Income taxes payable   2,032,320       36,469          
Deferred income taxes   -       7,598          
Liabilities held for sale   -       369,941          
Total current liabilities   4,333,073       7,838,585          
               
Shareholders' equity:              
                       
Preferred stock, $0.001 par value, 5,000,000 shares authorized, no shares issued or outstanding at September 30, 2016 and December 31, 2015   -       -          
Common stock, $0.001 par value,  Authorized shares-50,000,000; issued shares-8,368,030 at September 30, 2016 and 7,233,035 at December 31, 2015; outstanding shares-8,348,030 at September 30, 2016 and 7,233,035 at December 31, 2015   8,368       7,233          
Additional paid in capital   27,339,854       22,607,290          
Accumulated other comprehensive income (loss)   (297,348 )     (142,613 )        
Accumulated deficit   (1,929,145 )     (9,068,488 )        
Treasury stock   (84,000 )     -          
Total shareholders' equity   25,037,729       13,403,422          
               
Total liabilities and shareholders' equity $ 29,370,802     $ 21,242,007          
               
               
               
SharpSpring, Inc.        
CONSOLIDATED STATEMENTS OF CASH FLOWS        
(Unaudited)        
  Nine Months Ended        
  September 30,        
    2016       2015          
Cash flows from operating activities:              
Net income (loss) $ 7,139,342     $ (4,325,716 )        
Deduct: Income from discontinued operations, net of income taxes   10,187,451       929,143          
Net loss from continuing operations   (3,048,109 )     (5,254,859 )        
Adjustments to reconcile net income to net cash provided by operating activities:                      
Depreciation and amortization   1,169,043       1,201,727          
Non-cash stock compensation   499,763       638,542          
Deferred income taxes   (82,974 )     5,655          
Loss on disposal of property and equipment   128,978       2,491          
Non-cash change in value of earn out liability   219,473       2,641,957          
Non-cash gain from escrow claim   (84,000 )     -          
Unearned foreign currency (gain) loss   (159,089 )     43,069          
Changes in operating assets and liabilities:              
Accounts receivable   (301,602 )     (240,717 )        
Other assets   (334,641 )     (61,591 )        
Income taxes, net   (3,369,621 )     (1,299,703 )        
Accounts payable   120,660       82,381          
Accrued expenses and other current liabilities   379,324       14,901          
Deferred revenue   (228,472 )     (121,794 )        
Net cash provided by (used in) operating activities - Continuing operations   (5,091,267 )     (2,347,941 )        
Net cash provided by (used in) operating activities - Discontinued operations   785,830       967,342          
Net cash used in operating activities   (4,305,437 )     (1,380,599 )        
               
Cash flows from investing activities:              
Purchases of property and equipment   (442,231 )     (273,064 )        
Acquisitions of customer assets from resellers   (548,278 )     -          
Net cash provided by (used in) investing activities - Continuing operations   (990,509 )     (273,064 )        
Net cash provided by (used in) investing activities - Discontinued operations   13,945,548       (158,945 )        
Net cash provided by (used in) investing activities   12,955,039       (432,009 )        
               
Cash flows from financing activities:              
Payment to reduce earn out liabilities   (1,207,929 )     (2,000,000 )        
Proceeds from exercise of stock options   1,125       141,441          
Proceeds from issuance of common stock   -       5,332,023          
Net cash provided by (used in) financing activities - Continuing operations   (1,206,804 )     3,473,464          
Net cash provided by (used in) financing activities - Discontinued operations   -       -          
Net cash provided by (used in) financing activities   (1,206,804 )     3,473,464          
               
Effect of exchange rate on cash   14,730       (6,290 )        
               
Change in cash and cash equivalents   7,457,528       1,654,566          
               
Cash and cash equivalents, beginning of period   4,158,646       2,825,520          
               
Cash and cash equivalents, end of period $ 11,616,174     $ 4,480,086          
               
               
               
SharpSpring, Inc.
RECONCILIATION TO ADJUSTED EBITDA
(Unaudited, in Thousands)
               
  Three Months Ended   Nine Months Ended
  September 30,   September 30,
    2016       2015       2016       2015  
Net income (loss) from continuing operations $ (1,224 )   $ (1,627 )   $ (3,048 )   $ (5,255 )
Provision (benefit) for income tax   (519 )     (581 )     (1,335 )     (1,785 )
Other (income) expense, net   (105 )     65       (475 )     130  
Depreciation & amortization   355       399       1,169       1,202  
Non-cash stock compensation   164       205       500       639  
Acquisition related charges   -       270       219       2,689  
Restructuring charges   294       456       394       469  
Adjusted EBITDA     (1,035 )       (813 )       (2,576 )       (1,911 )
               
               
SharpSpring, Inc.
RECONCILIATION TO CORE NET INCOME (LOSS) AND CORE EARNINGS (LOSS) PER SHARE
(Unaudited, in Thousands)
               
  Three Months Ended   Nine Months Ended
  September 30,   September 30,
    2016       2015       2016       2015  
Net income (loss) from continuing operations $ (1,224 )   $ (1,627 )   $ (3,048 )   $ (5,255 )
Amortization of intangible assets   299       379       1,069       1,141  
Non-cash stock compensation   164       205       500       639  
Acquisition related charges   -       270       219       2,689  
Restructuring charges   294       456       394       469  
Gain from escrow claim   -       -       (260 )     -  
Tax adjustment   (226 )     (345 )     (585 )     (1,252 )
Core net income (loss) $     (693 )   $     (662 )   $     (1,711 )   $     (1,569 )
               
Core net income (loss) per share $     (0.08 )   $     (0.10 )   $     (0.22 )   $     (0.26 )
Weighted average common shares outstanding   8,346       6,858       7,741       6,062  
                               
Company Contact:Edward LawtonChief Financial Officer617-500-0122ir@sharpspring.comInvestor Relations:Liolios Group, Inc.Matt Glover or Najim Mostamand949-574-3860SHSP@liolios.com

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