SharpSpring, Part I

Updated: May 30, 2021

I will be doing a light once a month write up on an idea, this idea I entered 800 shares at average price of $20.30 in my trading account which is not really public, but do own some stock in there as a compliment to my trading in that account.


I am very interested in SharpSpring, as technology improves we are seeing an increase in digital ad marketing. It is everywhere! Facebook, Instagram, Twitter, Youtube, and other random places. SharpSpring is a cloud-based marketing technology company with a focus on small to medium sized businesses built on a platform for improve how a business communicates with their prospective clients, as well as their current clients to increase sales. I love investing in businesses that are there for the little guy, I have been in Square, Cloudflare helps tons of small business and medium, as well as large, Anaplan, etc... I think you get the point.


SharpSpring has three product segments, we have SharpSpring (flagship), SharpSpring Mail+ (subset of full suite...small portion of customers), and then Perfect Audience (display retargeting). SharpSpring is the focus on marketing automation, interacting with a lead from early stage and slowly bring the potential customer using advanced features so they become a qualified sales lead OR customer. SharpSpring+ is a subset of the full suite solutions, this is focused on traditional marketing emails while including some of the advanced functionality offerings, only a small portion of their customers use this offering (1/5 of marketing automation customers. These are usually direct customers and pay a monthly subscription fee for the platform as well as up-front onboarding fee. Product was launched in 2016 to replace the GraphicMail product SharpSpring had acquired in 2014, bottom line is to provide more advanced email marketing and automation .Perfect Audience is used for display retargeting and rapid deployment, giving the customer easy to use interface for them to implement + optimize campaigns. Perfect Audience was acquired in November of 2019, allowing multi-channel retargeting to known leads, and target advertising toward new prospects by using a look alike audience functionality. Here, marketers can create/manage/optimize their ad campaign across dozens of websites within one (ease of use).


Competitors in this business include HubSpot, Act-on, Pardot (part of Salesforce), ActiveCampaign, and Infusionsoft. What is the differentiation? First, pricing, and second, the integrated of specific tools for the digital marketing agencies, platform flexibility, ease of use (big for a lot of people), and their advanced features. The specific target market is digital marketing agencies that specialize in helping clients (small to medium sized businesses) with initiatives that include:

  • Websites

  • Email Marketing

  • Search Engine Optimization

  • Social campaigns

  • Pay-per-Click Advertising

  • Digital Lead Generation Ideas


SharpSpring key features include web tracking, customer relationship management, lead scoring and nurturing, landing pages, email tech, rule-based triggers and notifications as well as deep analytics to measure marketing ROI (return on investment). Their platform is hosted in third party data centers on a virtual cloud based infrastructure, Google Compute and Amazon Web Services.

 

According to Koyfin (a website I use for financial data, the 3YR revenue CAGR is 25.29%, and the 5YR revenue CAGR is 24.79%, this is pretty stable and optimistic in my opinion and management feels confident they can continue to deliver and deliver profitability. In a world of things seemingly overvalued, I feel their valuation is relatively okay to pay for. Trading at roughly 8x NTM EV/Sales seems okay growing roughly 25-30%, on the way towards profitability as well as noted in the earnings calls and management. EV/EBITDA NTM is also 64.6x, which also proves the importance of the market believing in profitability soon.

(Source: Koyfin)


You can tell by the improvement in ROA, ROC, and ROE, and the heavy improvement n Gross Margins, that the company is focused on becoming financially profitable. There is nothing wrong in my opinion, paying more for potential growth opportunities.


This is a very short report that I wanted to get the idea out there with for people for long-term horizons who want a new idea to look into, after all, that is what everyone will be paying for! Ideas!


Fiducia


Time to focus on NET and BL!



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