SharpSpring Reports Second Quarter 2021 Results

Strategic Acquisition by Clearlake Capital and Siris-Backed Constant Contact to Maximize Growth and Audience Engagement for Small Businesses

GAINESVILLE, FL / ACCESSWIRE / August 12, 2021 / SharpSpring, Inc. (NASDAQ:SHSP), a leading cloud-based revenue growth platform, reported financial results for the second quarter ended June 30, 2021.

Recent Operational Highlights

Signed definitive agreement to be acquired by Clearlake Capital and Siris-backed Constant Contact, an established leader in online marketing. Under the terms of the agreement, Constant Contact will acquire all the outstanding common stock of SharpSpring for $17.10 per share in cash. The transaction is expected to close in the third quarter of 2021 subject to customary closing conditions including a SharpSpring stockholder approval.
Appointed marketing technology leader Suaad Sait as President. Sait brings an extensive background leading product, engineering, and marketing at high-growth SaaS companies.
Appointed senior finance executive and capital markets veteran Jason Costi to Board of Directors, who has also been named a member of the Company’s Audit, Nominating and Corporate Governance Committees.

Second Quarter 2021 Key Performance Indicators (KPIs)

Total monthly recurring revenue (MRR) from new customers in the second quarter of 2021 was approximately $100,000 compared to $159,000 in the second quarter of 2020 and $100,000 in the first quarter of 2021.
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, over 500 direct customers, and more than 10,000 total businesses across all SharpSpring sales and marketing platforms including SharpSpring Ads and legacy products.
Average monthly logo attrition in the second quarter of 2021 improved to 2.4% compared to 4.31% in the second quarter of 2020.
On a year-over-year basis, Q2 2021 net revenue retention was 92.5%, a decrease from 94.4% in Q1 2021.

Second Quarter 2021 Financial Results

Total revenue increased 11% to a record $8.1 million from $7.3 million in the same year-ago period.
Gross profit increased 13% to a record $ 6.1 million (76% of total revenue) from $5.4 million (74% of total revenue) in the same year-ago period.
Net loss was $354,000, or $0.03 per share, compared to net loss of $970,000, or $0.08 per share, in the same year-ago period.
Adjusted EBITDA loss (a non-GAAP metric reconciled below) totaled $2.1 million, compared to an adjusted EBITDA loss of $122,000 in the same year-ago period.
Core net loss (a non-GAAP metric reconciled below) totaled $2.6 million or $0.20 per share, compared to core net loss of $381,000, or $0.03 per share, in the same year-ago period.
At quarter-end, the Company had $25.2 million in cash, compared to $28.3 million at December 31, 2020.

Conference Call
Due to the Company’s entry into the agreement and plan of merger previously announced on June 22, 2021, SharpSpring will only be issuing a press release and will not be conducting a conference call.

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 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						Six Months Ended
	June 30,						June 30,
	2021			2020			2021			2020
Revenue		8,106,243		$	7,270,905		$	16,095,473		$	14,323,634

Cost of services		1,984,662		$	1,873,029			3,874,675		$	4,240,671
Gross profit		6,121,581			5,397,876			12,220,798			10,082,963

Operating expenses:
Sales and marketing		3,915,096			2,395,100			7,706,478			5,429,222
Research and development		2,111,540			1,484,890			4,227,280			3,063,029
General and administrative		3,522,971			2,244,560			6,294,610			4,658,401
Intangible asset amortization		171,549			183,746			343,098			336,547

Total operating expenses		9,721,156			6,308,296			18,571,466			13,487,199
											–
Operating loss		(3,599,575	)		(910,420	)		(6,350,668	)		(3,404,236	)

Other income (expense), net		(21,354	)		(2,777	)		(14,519	)		(59,556	)
Gain on extinguishment of debt		3,271,101			–			3,438,077			–

Loss before income taxes		(349,828	)		(913,197	)		(2,927,110	)		(3,463,792	)
Provision (benefit) for income taxes		3,947			57,187			10,520			(1,505,331	)
											–
Net loss		(353,775	)		(970,384	)		(2,937,630	)		(1,958,461	)

Net loss per share, basic and diluted	$	(0.03	)	$	(0.08	)	$	(0.23	)	$	(0.17	)

Weighted average common shares outstanding, basic and diluted		12,852,131			11,529,324			12,833,148			11,525,258

SharpSpring, Inc.
CONSOLIDATED BALANCE SHEETS
(Unaudited)

	June 30,			December 31,
	2021			2020
Assets
Cash and cash equivalents		25,157,240		$	28,267,792
Accounts receivable		300,149			323,130
Unbilled receivables		1,265,527			1,248,060
Income taxes receivable		143,498			54,449
Other current assets		1,293,952			1,433,543
Total current assets		28,160,366			31,326,974

Property and equipment, net		1,861,067			2,188,948
Goodwill		10,230,917			10,250,088
Intangibles, net		3,672,753			4,015,851
Right-of-use assets		7,934,913			8,352,028
Other long-term assets		584,435			611,857
Total assets		52,444,451		$	56,745,746

Liabilities and Shareholders’ Equity
Accounts payable		964,933		$	1,074,594
Accrued expenses and other current liabilities		2,242,981			1,259,836
Line of credit		1,900,000			1,900,000
Deferred revenue		862,767			845,265
Income taxes payable		23,755			81,221
Lease liability, current portion		748,499			724,627
Notes payable, current portion		–			2,630,962
Total current liabilities		6,742,935			8,516,505

Lease liability, net of current portion		7,358,118			7,771,898
Notes payable, net of current portion		–			768,538
Total liabilities		14,101,053			17,056,941

Shareholders’ equity:
Preferred stock, $0.001 par value		–			–
Common stock, $0.001 par value		12,902			12,819
Additional paid in capital		77,141,573			75,544,966
Accumulated other comprehensive loss		(219,736	)		(215,269	)
Accumulated deficit		(38,507,341	)		(35,569,711	)
Treasury stock		(84,000	)		(84,000	)
Total shareholders’ equity		38,343,398			39,688,805

Total liabilities and shareholders’ equity		52,444,451		$	56,745,746

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

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2021			2020			2021			2020
Net loss		(353,775	)	$	(970,384	)	$	(2,937,630	)	$	(1,958,461	)

Adjustments to reconcile loss from operations:
Depreciation and amortization		597,230			417,560			1,041,311			774,140
Gain on extinguishment of debt		(3,271,101	)		–			(3,438,077	)		–
Amortization of costs to acquire contracts		203,009			202,329			407,282			404,767
Non-cash stock compensation		582,820			370,418			1,138,405			741,051
Loss on disposal of property and equipment		1,773			–			3,299			–
Unrealized foreign currency (gain) loss		1,704			29,201			(45,204	)		109,928
Changes in assets and liabilities:											–
Accounts receivable		67,482			(20,988	)		20,362			(106,260	)
Unbilled receivables		4,081			(40,819	)		(27,704	)		(133,315	)
Right-of-use assets		210,137			(3,069,671	)		417,115			(3,475,390	)
Other assets		(46,303	)		63,772			(239,733	)		(279,099	)
Income taxes, net		(151,437	)		1,596,583			(144,864	)		33,639
Accounts payable		86,004			(1,010,945	)		(108,933	)		(120,934	)
Lease liabilities		(196,534	)		3,090,202			(389,909	)		3,511,291
Accrued expenses and other current liabilities		588,966			106,198			975,631			(288,041	)
Deferred revenue		(91,145	)		(107,604	)		20,294			(201,893	)
Net cash provided by (used in) operating activities		(1,767,089	)		650,348			(3,308,355	)		(994,081	)

Cash flows from investing activities
Purchases of property and equipment		(139,457	)		(211,970	)		(169,328	)		(352,900	)
Capitalization of software development costs		(136,728	)		(151,842	)		(204,302	)		(424,124	)
Net cash used in investing activities		(276,185	)		(363,812	)		(373,630	)		(777,024	)

Cash flows used in financing activities:
Proceeds from line of credit		–						–			1,900,000
Proceeds from note payable		–			3,399,500			–			3,399,500
Proceeds from exercise of stock options, net		321,950			12,288			502,037			23,462
Payments for taxes related to net share settlement of equity awards		(11,234	)		(1,869	)		(36,252	)		(28,402	)
Net cash provided by financing activities		310,716			3,409,919			465,785			5,294,560

Effect of exchange rate on cash		29,863			(34,609	)		105,648			(118,509	)

Change in cash and cash equivalents		(1,702,695	)		3,661,846			(3,110,552	)		3,404,946

Cash and cash equivalents, beginning of period		26,859,935			11,625,049			28,267,792			11,881,949

Cash and cash equivalents, end of period		25,157,240			15,286,895			25,157,240			15,286,895

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

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2021			2020			2021			2020
Net loss		(354	)	$	(970	)	$	(2,938	)	$	(1,958	)
Provision (benefit) for income taxes		4			57			11			(1,505	)
Other (income) expense, net		21			3			15			60
Gain on extinguishment of debt		(3,271	)		–			(3,438	)		–
Depreciation & amortization		597			418			1,041			774
Non-cash stock compensation		583			370			1,138			741
Restructuring		273			–			273			–
Adjusted EBITDA		(2,147	)		(122	)		(3,898	)		(1,888	)

SharpSpring, Inc.
RECONCILIATION TO CORE NET LOSS AND CORE NET LOSS PER SHARE
(Unaudited, in Thousands)

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2021			2020			2021			2020
Net loss		(354	)	$	(970	)	$	(2,938	)	$	(1,958	)
Amortization of intangible assets		172			184			343			337
Non-cash stock compensation		583			370			1,138			741
Gain on extinguishment of debt		(3,271	)		–			(3,438	)		–
Restructuring		273			–			273			–
Tax adjustment		(4	)		35			(6	)		(112	)
Core net income		(2,601	)		(381	)	$	(4,628	)	$	(992	)

Core net loss per share	$	(0.20	)	$	(0.03	)	$	(0.36	)	$	(0.09	)
Weighted average common shares outstanding		12,852			11,529			12,833			11,525