Updated: Jun 8, 2021
SharpSpring had a relatively good report with nothing too surprising to me.
Operational Highlights as noted in their Press Release:
Appointed marketing tech leader Suaad Sait as President. He will bring a strong foundational background to product, engineering, and marketing growth SaaS companies.
Appointed a seasoned financial executive and capital markets veteran Jason Costi to the board of directors. 20 years of experience in investments, capital markets, and finance, and has a track record of building businesses (this seems like the sweet sauce here to me, build SharpSpring up more)
Management Commentary on the Q:
Increased spending and will take time to translate to impactful sales, mostly in the 2H of the year. SharpSpring is seeing encouraging results with their current customer based. They are focused on the adoption of the new annual license pricing and improved attrition metrics. They are still attacking their goal of the long-term target of $100m in ARR (Annual Recurring Revenue). Guidance for this year sits at a midpoint of $35m, on a $198 market cap company.
Free trials are feeding into a larger pool of potential customers to the SharpSpring platform, the Multi-Tiered pricing are going to launch later in the year and expand their total addressable market.
I want to note the decrease in MRR, which had to do with delayed benefit in new customer adoption and marketing spend. I hope to see this improve over the next few quarters and years.
NRR is increasing steadily, from 91.7% last year to 94.4% this year. This is a nice KPI to see.
Their growth is being driven by the demand for marketing automation solutions by small and medium sized businesses. The core SharpSpring Marketing Automation platform is a SaaS model, the ads platform is usage-based. COVID did initially hurt SHSP's growth as small businesses shut down, yet still posted very solid growth in the previous fiscal year. The company took cost saving measures by cutting 10% of the salaries across the Company, and paused quarterly bonuses in 2Q2020, as well as pausing the 401k matching program through march of 2021. While SharpSpring only added 175 new customers in the three months ended March 31, 2021 vs last year of 314, I believe this is COVID related and NOT management execution related. Time will tell on that.
The company notes that the ad business had downward pressure, since the retargeting industry experienced customers spending less on advertisements.
Cost of Sales decreasing YoY because of the cost saving measures. A business has to be financially savvy in times like that, especially considering they are a micro cap business...
I dont have much to write on the name, I thought the quarter was good and I am not selling, if anything I would buy more here in my LT account, but I went with more ITI instead. Portfolio update below! I think SharpSpring truly is a longer-term play and we sit back and let management execute, I think they are doing all the right things. I like my position. I still plan on shaving more Cloudflare if they get to $95-100, and reallocate elsewhere. Who knows, maybe I will source new names for research :)