SharpSpring Reports Fourth Quarter and Full Year 2016 Results

 

GAINESVILLE, FL — March 15, 2017 –

SharpSpring, Inc. (NASDAQ: SHSP), a global provider of cloud-based marketing technologies, reported financial results for the fourth quarter and fiscal year ended December 31, 2016.

 

Fourth Quarter 2016 Operational Highlights

 

  Added 213 new SharpSpring customers and finished the year with 1,139 agency customers and more than 5,250 businesses using the flagship platform.
     
  Ranked 391 on Deloitte’s Technology Fast 500™, a ranking of the 500 fastest growing companies in North America.
     
  Finalized the closure of the South African office to improve efficiencies and organizational alignment.
     
  Elected technology executive Steven Huey to the board of directors and approved a plan to increase the size of the board to seven directors, five of which would be independent.

 

Fourth Quarter 2016 Financial Results from Continuing Operations

 

    Revenue increased 10% to $2.9 million from $2.6 million in the same year-ago period. The improvement was driven by strong growth from the company’s flagship marketing automation solution, which increased 87% to $2.7 million during the fourth quarter of 2016.
     
  Gross profit remained consistent at $1.7 million in the fourth quarter of 2016, compared to the same year-ago period.
     
  Including non-cash impairment charges, net loss from continuing operations totaled $2.2 million or ($0.26) per share, compared to a net loss of $4.4 million or ($0.60) per share in the fourth quarter of 2015.
     
  Adjusted EBITDA loss (a non-GAAP metric reconciled below) totaled $1.2 million, compared to an adjusted EBITDA loss of $1.0 million in the same year-ago period.
     
  Core net loss from continuing operations (a non-GAAP metric reconciled below) totaled $851,000 or ($0.10) per share, compared to core net loss of $1.1 million or ($0.16) per share in the same year-ago period.
     
  At quarter-end, cash totaled $8.7 million, compared to $11.6 million at the end of the prior quarter, reflecting $1.1 million of cash tax payments related to the gain on the sale of the SMTP email relay business, which was divested in June 2016.

 

Full Year 2016 Financial Results from Continuing Operations

 

  Revenue increased 26% to $11.5 million from $9.2 million in 2015, driven by strong growth from the flagship SharpSpring marketing automation solution, which increased 109% to $9.1 million.
     
  Gross profit was $7.0 million, an increase of 10% from $6.4 million in 2015.
     
  Including non-cash impairment charges, net loss from continuing operations totaled $5.2 million or ($0.66) per share, compared to a net loss from continuing operations of $9.6 million or ($1.51) per share in 2015.
     
  Adjusted EBITDA loss totaled $3.8 million, compared to adjusted EBITDA loss of $2.9 million in 2015.
     
  Core net loss totaled $2.5 million or ($0.31) core net loss per share, compared to core net loss of $2.5 million or ($0.40) core net loss per share in 2015.

 

   
 

 

Management Commentary

 

“2016 was a pivotal year for SharpSpring,” said company CEO, Rick Carlson. “We entered the period as essentially three distinct businesses, but emerged as a leaner, more focused, and stronger organization. We grew our flagship product revenues by 109% during 2016 and finished the year with more than 1,100 agency partners and over 5,250 businesses using our platform. Although we succeeded in migrating a portion the GraphicMail customer base to a new product, SharpSpring Mail+, we were ultimately unable to retain customers at the rates that we originally hoped.

 

“Over the past few months, we have taken some dramatic steps to transform our business. These measures included closing the South African office, adding sales and marketing resources, enhancing our R&D team, and securing partnerships with adjacent solution providers, such as Shutterstock, to strengthen the value of our offering and enable us to become more entrenched within our growing customer base.

 

“With the corporate restructuring now fully behind us, we are in a stronger position to capitalize on the rapidly expanding marketing automation industry. Although there is still work to be done, we believe we entered 2017 with a completely clean slate, looking leaner and more focused than ever. We expect to leverage this focus over the coming months in the form of accelerated sales starting in Q2 and through the rest of 2017.”

 

Conference Call

 

SharpSpring management will hold a conference call today (March 15, 2017) 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.

 

U.S. dial-in number: 877-407-4018

International 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 April 5, 2017.

 

Toll-free replay number: 844-512-2921

International replay number: 412-317-6671

Replay ID: 13654839

 

   
 

 

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 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. Except to the extent required by law, the Company undertakes no obligation to update or revise (publicly or otherwise) any forward-looking statements to reflect subsequent events, new information or future circumstances.

 

Company Contact:

Edward Lawton

Chief Financial Officer

617-500-0122

ir@sharpspring.com

 

Investor Relations:

Liolios Group, Inc.

Matt Glover or Najim Mostamand

949-574-3860

SHSP@liolios.com

 

   
 

 

SharpSpring, Inc.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)

 

   Three Months Ended   Year Ended 
   December 31,   December 31, 
   2016   2015   2016   2015 
Revenue  $2,852,979   $2,602,558   $11,541,702   $9,184,307 
                     
Cost of services   1,156,102    931,710    4,507,098    2,781,691 
Gross profit   1,696,877    1,670,848    7,034,604    6,402,616 
                     
Operating expenses:                    
Sales and marketing   1,269,855    1,569,436    5,354,301    5,039,395 
Research and development   656,841    497,544    2,308,650    1,733,951 
General and administrative   1,261,890    851,921    4,432,942    4,005,244 
Change in earn out liability   -    (85,748)   219,473    2,555,649 
Intangible asset amortization   291,266    367,989    1,360,105    1,508,616 
Impairment of intangible assets   1,459,541    1,310,386    1,459,541    1,310,386 
                     
Total operating expenses   4,939,393    4,511,528    15,135,012    16,153,241 
                     
Operating loss   (3,242,516)   (2,840,680)   (8,100,408)   (9,750,625)
Other income (expense), net   40,262    (101,391)   515,245    (231,718)
                     
Loss before income taxes   (3,202,254)   (2,942,071)   (7,585,163)   (9,982,343)
Provision (benefit) for income tax   (1,013,922)   1,425,005    (2,348,722)   (360,409)
Net loss from continuing operations   (2,188,332)   (4,367,076)   (5,236,441)   (9,621,934)
Net income from discontinued operations, net of tax   -    448,489    10,187,451    1,377,632 
Net income (loss)  $(2,188,332)  $(3,918,587)  $4,951,010   $(8,244,302)
                     
Net loss per share from continuing operations                    
Basic net loss per share  $(0.26)  $(0.60)  $(0.66)  $(1.51)
Diluted net loss per share  $(0.26)  $(0.60)  $(0.66)  $(1.51)
                     
Net income per share from discontinued operations                    
Basic net income per share  $-   $0.06   $1.29   $0.22 
Diluted net income per share  $-   $0.06   $1.29   $0.22 
                     
Net income (loss) per share                    
Basic net income (loss) per share  $(0.26)  $(0.54)  $0.63   $(1.30)
Diluted net income (loss) per share  $(0.26)  $(0.54)  $0.63   $(1.30)
                     
Shares used in computing basic net income (loss) per share   8,356,735    7,229,950    7,895,197    6,354,134 
Shares used in computing diluted net income (loss) per share   8,356,735    7,229,950    7,895,197    6,354,134 

 

   
 

 

SharpSpring, Inc.
CONSOLIDATED BALANCE SHEETS
         
   December 31, 2016   December 31, 2015 
   (unaudited)     
Assets          
Cash and cash equivalents  $8,651,374   $4,158,646 
Accounts receivable, net   1,261,923    794,123 
Deferred income taxes   -    16,645 
Income taxes receivable   1,355,180    793,189 
Other current assets   1,396,642    205,143 
Assets held for sale   -    45,697 
Total current assets   12,665,119    6,013,443 
           
Property and equipment, net   905,345    565,481 
Goodwill   8,845,394    8,881,933 
Other intangible assets, net   2,850,635    5,518,305 
Deposits and other   30,464    11,280 
Assets held for sale   -    251,565 
Total assets  $25,296,957   $21,242,007 
           
Liabilities and Shareholders' Equity          
Accounts payable  $498,534   $609,454 
Accrued expenses and other current liabilities   953,171    1,098,790 
Deferred revenue   280,159    525,217 
Current portion of earn out liabilities   -    5,191,116 
Income taxes payable   418,357    36,469 
Deferred income taxes   -    7,598 
Liabilities held for sale   -    369,941 
Total current liabilities   2,150,221    7,838,585 
           
Deferred income taxes   228,491    - 
Total liabilities   2,378,712    7,838,585 
           
Shareholders' equity:          
Preferred stock, $0.001 par value, 5,000,000 shares authorized, no shares issued or outstanding at December 31, 2016 and December 31, 2015   -    - 
Common stock, $0.001 par value,  Authorized shares-50,000,000; issued shares-8,380,663 at December 31, 2016 and 7,233,035 at December 31, 2015; outstanding shares-8,360,663 at December 31, 2016 and 7,233,035 at December 31, 2015   8,381    7,233 
Additional paid in capital   27,556,398    22,607,290 
Accumulated other comprehensive income (loss)   (445,055)   (142,613)
Accumulated deficit   (4,117,479)   (9,068,488)
Treasury stock   (84,000)   - 
Total shareholders' equity   22,918,245    13,403,422 
           
Total liabilities and shareholders' equity  $25,296,957   $21,242,007 

 

   
 

 

SharpSpring, Inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
 
   Year Ended 
   December 31, 
   2016   2015 
Cash flows from operating activities:          
Net income (loss)  $4,951,010   $(8,244,302)
Deduct: Income from discontinued operations, net of income taxes   10,187,451    1,377,632 
Net loss from continuing operations   (5,236,441)   (9,621,934)
Adjustments to reconcile net income to net cash provided by operating activities:          
Depreciation and amortization   1,519,257    1,598,032 
Impairment of intangibles   1,459,541    1,310,386 
Excess tax benefits from share-based payments   -    (1,247)
Non-cash stock compensation   705,649    842,863 
Deferred income taxes   233,719    842,688 
Loss on disposal of property and equipment   128,978    2,491 
Non-cash change in value of earn out liability   219,473    2,556,209 
Non-cash gain from escrow claim   (84,000)   - 
Unearned foreign currency (gain) loss   (185,414)   152,211 
Changes in operating assets and liabilities:          
Accounts receivable   (499,516)   (428,764)
Other assets   (210,715)   (18,734)
Income taxes, net   (5,772,621)   (445,145)
Accounts payable   (156,081)   238,957 
Accrued expenses and other current liabilities   271,058    71,487 
Deferred revenue   (246,721)   (91,703)
Net cash provided by (used in) operating activities - Continuing operations   (7,853,834)   (2,992,203)
Net cash provided by (used in) operating activities - Discontinued operations   785,830    1,493,756 
Net cash used in operating activities   (7,068,004)   (1,498,447)
           
Cash flows from investing activities:          
Purchases of property and equipment   (455,506)   (456,512)
Acquisitions of customer assets from resellers   (724,678)   - 
Net cash provided by (used in) investing activities - Continuing operations   (1,180,184)   (456,512)
Net cash provided by (used in) investing activities - Discontinued operations   13,945,548    (169,219)
Net cash provided by (used in) investing activities   12,765,364    (625,731)
           
Cash flows from financing activities:          
Payment to reduce earn out liabilities   (1,207,929)   (2,000,000)
Proceeds from exercise of stock options   12,217    141,441 
Proceeds from issuance of common stock   -    5,332,023 
Excess tax benefits from share-based payments   (422)   1,247 
Net cash provided by (used in) financing activities - Continuing operations   (1,196,134)   3,474,711 
Net cash provided by (used in) financing activities - Discontinued operations   -    - 
Net cash provided by (used in) financing activities   (1,196,134)   3,474,711 
           
Effect of exchange rate on cash   (8,498)   (17,407)
           
Change in cash and cash equivalents   4,492,728    1,333,126 
           
Cash and cash equivalents, beginning of period   4,158,646    2,825,520 
           
Cash and cash equivalents, end of period  $8,651,374   $4,158,646 

 

   
 

 

SharpSpring, Inc.
RECONCILIATION TO ADJUSTED EBITDA
(Unaudited, in Thousands)
                 
   Three Months Ended   Year Ended 
   December 31,   December 31, 
   2016   2015   2016   2015 
Net loss from continuing operations  $(2,188)  $(4,367)  $(5,236)  $(9,622)
Provision (benefit) for income tax   (1,014)   1,425    (2,349)   (360)
Other (income) expense, net   (40)   101    (515)   232 
Depreciation & amortization   350    394    1,519    1,598 
Non-cash stock compensation   206    204    706    843 
Acquisition related charges   -    (86)   219    2,604 
Restructuring charges   -    24    394    493 
Impairment of intangible assets   1,460    1,310    1,460    1,310 
Adjusted EBITDA   (1,226)   (995)   (3,802)   (2,902)

 

SharpSpring, Inc.
RECONCILIATION TO CORE NET INCOME (LOSS) AND CORE EARNINGS (LOSS) PER SHARE
(Unaudited, in Thousands)
                 
   Three Months Ended   Year Ended 
   December 31,   December 31, 
   2016   2015   2016   2015 
Net loss from continuing operations  $(2,188)  $(4,367)  $(5,236)  $(9,622)
Amortization of intangible assets   291    368    1,360    1,509 
Non-cash stock compensation   206    204    706    843 
Acquisition related charges   -    (86)   219    2,604 
Restructuring charges   -    24    394    493 
Impairment of intangible assets   1,460    1,310    1,460    1,310 
Gain from escrow claim   -    -    (260)   - 
Tax adjustment   (620)   1,418    (1,114)   339 
Core net loss from continuing operations  $(851)  $(1,129)  $(2,471)  $(2,524)
                     
Core net loss per share  $(0.10)  $(0.16)  $(0.31)  $(0.40)
Weighted average common shares outstanding   8,357    7,230    7,895    6,354 

 

###

 

   
 

 

 


The following information was filed by Sharpspring, Inc. (SHSP) on Wednesday, March 15, 2017 as an 8K 2.02 statement, which is an earnings press release pertaining to results of operations and financial condition. It may be helpful to assess the quality of management by comparing the information in the press release to the information in the accompanying 10-K Annual Report statement of earnings and operation as management may choose to highlight particular information in the press release.

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