SHSP - Earnings call transcript Q4 2017

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Good afternoon. Welcome to SharpSpring’s Fourth Quarter and Full Year 2017 Earnings Conference Call.

Joining us for today’s call are SharpSpring’s CEO, Rick Carlson; and CFO, Ed Lawton.

Following their remarks, we will open up the call for your questions. Then, before we conclude today’s call, I’ll provide the necessary cautions regarding the forward-looking statements made by management during this call. section to made that a available in Investor like be call link now Web the and Company’s recorded for Relations would remind investors.sharpspring.com. this everyone will available site I at the of replay via

to Now, proceed. over to Sir, the SharpSpring’s I turn call Rick CEO, would Carlson. like please

Rick Carlson

businesses available quarter. section QX record growth sales is accelerated the the of XX%, Web site. ending in while consecutive improving specifically, our XXXX, more issued by our both X,XXX A fourth full platform over and in using a flagship year grew grew highlighted you investment in of consecutive announcing our resulting release positive second of of represented thank quarter and today. topline quarter everyone, year, marketing our during our driven over the had release our for the solution. of than we revenues the press whose full joining and Investor business X,XXX us XXXX. After to increased for a by by new the December the Relations the customers The customer press Welcome, the for quarter all culmination These strong our XX% more market copy new In and year continued agency margins leading than automation and results were now strength for close, our XX, we our results fourth fourth wins.

year. continue Going forward, growth are our into significant new to looking we the

that, before improve overall on into Ed go turn to not Lawton, worked any over I’m I customers. the to execution, R&D new experience have call But targeted sales for further, I our all topics on and dive XXXX. collectively provide results the initiatives, and a more and our who I’ll also to our enhance of campaigns, bolstered turn year. shortly. financial these the more of CFO, as detail give developments our the marketing look Our jump back of Ed? but only going quarter recap for of more to with After the color it to you business a some and development plan for all rest over that, with on outlook into well I’ll And present quarter detailed provide to will finish Ed. current our as XXXX

Ed Lawton

Rick. you, Think

Turning to XXXX. for our fourth results ended quarter financial full December and the year XX,

the million in fourth revenue overall million to of $X.X in Our XX% from QX increased $X.X last year. quarter

solution product revenue compared grew to rate last run in to XX% year. period consolidated from million XX% results, With now ago. revenue same $XX revenues, have of we this million million quarter’s an Our annualized flagship surpassed XX% by marketing a basis. improvement $X.X the automation year $X.X Flagship SharpSpring on revenues a were total

For the our XXXX. XXXX, in increased to overall from full million XX% year revenue $XX.X $XX.X million

flagship last automation $XX.X XX% marketing to million to year. compared a Our solution million by $X.X grew record

a year in our XX% compared XXXX percentage total flagship was of to product XX% full for As XXXX. revenue, the

increased XXXX $X.X to from of QX in dollar and profit million last to In margin XX% XX% year. quarter. XX% the of from gross million for last gross increased quarter $X.X last XX% Our fourth year terms,

XX% $X.X increased year million full of XXXX, gross total to the revenue XX% For or revenue profit total XX% $X.X million or from XXXX. of in

we support of organization hosting infrastructure growth have reinforce , in years current our the and few past and invested to the Over future our product.

leverage are continue seeing onto the as to some platform, add gross we model more Now and through improved operating our more margins. in revenues we

XX% margins sequentially. Over the XX%, past XX%, four and quarters, our been have gross XX%

the end we as in by reach near XXXX. which QX short-term, saw in the the to expect and will suppress in in things to gradually new to have and and expand GDPR continue the related XX% consulting such margins QX we COO, of of the QX we Although, compliance, the future progress our expenses planned margins some hiring

Turning to our operating expenses.

fourth million in of the year. operating For quarter QX of $X.X million to from XXXX, last XX% expenses our decreased $X.X

asset increased last XX% expenses and QX year. intangible marketing in QX of primarily last sales impairment due increased year, an year initiatives in Excluding operating of investments this to from

Our improvement XXXX. in loss a GAAP $X.X of $XXX,XXX or the $X.XX $X.XX from loss net from net GAAP per was continuing This for operations from totaled per QX share or operations of continuing fourth quarter million share. an

of $X.XX net full operations totaled million the loss net in per GAAP improvement million from XXXX, or year $X loss GAAP share from or per operations For continuing an from $X.X continuing $X.XX share, XXXX.

we On the the compared million cash quarter. at prior to the end the of $X.X of $X.X have quarter million in end at sheet, balance the

Additionally, the based the assessment, cash current we on use are tax of in of million refund during middle a to the carrybacks $X.X of relating our expecting amount NOL XXXX.

at our Looking measures. non-GAAP

interest, before million stock-based adjusted amortization, This loss same year charges, intangible Our for non-cash totaled the quarter, EBITDA loss acquisition-related we period. in expenses, restructuring to taxes, define impairments $X.X which million. ago EBITDA $X.X compensation, of compares as and adjusted depreciation, earnings an the

adjusted million. For the loss totaled full year $X.X EBITDA XXXX, our

are drive our performed. increase in some additional somewhat in period QX to in additional related growth audit. Those loss QX continue in to the our in EBITDA XXXX invest expenses we of new the sales expect services marketing expensed programs which expenses and types and We as to to incur are

improvement quarter loss expenses stock taxes net loss, net while or core amortization, in share $X.XX expenses for loss related $XXX,XXX restructuring of net adjusting $XXX,XXX and which year. fourth a core or the per $X.XX share, loss compensation QX core Our core XXXX, of excludes last totaled for net costs, of acquisition an from per

$X.XX core core $X.X share net full For in totaled million XXXX. net per compared core $X.XX loss per of net year, core $X or loss the loss to million or loss share net

acquisition per consistent prior customer. with very During at our customer QX, costs periods were $X,XXX

better customer by acquisition prior the QX wins estimate QX. new experienced. a As from account the Using for divided a all-in our reminder, to and marketing sales cost sales is costs and of provides cost we the this average our from timeline marketing quarter

one spending impacts we quarters. imperfect in is in because this deals measure, future quarter However, many still marketing the an win

Our to on all-in $XX,XXX the continued acquire approximately attractive rates we that value agency value support a cost to approximately on significant platform. argument extremely business ratio blended faster. these deliver on continue to continues be be grow our raise Based to in customers Based basis. value acquisition all reflect lifetime cost after new future. expected These basis company shows acquisition discounted historical customer the that margin reducing will gross figures, the can CAC consistently on low we customers customers an of customers to exceptional. customer $XX,XXX per our for customer customers LTV to to lifetime for to on and serve the as lifetime values the to a benefit at capital a costs and These the compelling dataset, expect for ratios these

For these move continue capital value effort we forward long and will an assess we reasons, best shareholders. growth to the term markets opportunities in monitor to the our as for

call progress is the shelf For supplementary this corporate to registration more I of should prior the Rick. included like a to will expeditiously that Rick? opportunities past completes release. note good over back I'd for to and one file to for on more all insights last earnings us shelf in allow in registration our summary. reconciliation future expired adjusted an operational turn shelf of arise. hand January. net now the believe to as Rick of and tables example filed additional We We and before well financial see replaces outlook metrics, income please This the core practice, final And details having into today's as in the a statement XXXX. GAAP call terms statement our XXXX, act EBITDA the month, on certain QX my over back our which

Rick Carlson

Thanks, Ed.

core remarks, increased we the our year. XXXX. After path opening started talked corporate exactly XXXX company business we As focus for were at particular I achieving began through our calls of solid two organization. accelerate in accomplished as a yielding getting start some this we we the to XXXX, and growth on of the activities unified, investment the a the the set a in do; from We’ve ourselves We very marketing year what the with in enough automation initiatives to past said out sales major in our shifts XXXX with on goals we in XXXX new XXX% did for said and business. and align XXXX and more in us and set was in our quarters distractions going focus last about results marketing leaner goals but my

possible the the in foundation was what drive half spend and we money with consistent our customer year we that combined in the The of year ways. know of to acquisition So accelerated in on another when laid way, Put growth forward. the that on activities can our the leads half the because we initial we of in the marketing year the was dollars really spend latter predictability consistency first generate those business going saw process. focus we of

leads incented to know company. consistently since process to know or rate is the inception high that demos. we portion sales demo also and highly of of we after has those And close the prospects that that consistent and can close our We convert team the those remained the

of predictability to process All deployment automation us provide and allow and decision our increased our our and confidence believe recent funds most our the brand and our Returning on in sales align marketing. of these to focus quarter. in SharpSpring marketing factors to of

as and the consecutive flagship us the new to features performance driven In seeing continue improved effectiveness This customer integrations customer increased strong QX. introduce of pipeline, our further sales Visual In our results SharpSpring, we PieSync year, sales have an advanced execution course in our contributed based. we to our began outreach, and QX reinforce the addition for Workflow Builder, growth product product From and marketing a on the well record building another being our XXXX. and been offering to offering. strengthening sales has powerful to of and all with of by last our perspective, improving and Shutterstock robust have even as positive increasingly to integrations over entrenched the

exciting new operating our spend to these current some more never recently it on features competitive social that centered introduced media we result, has additional been Building like is now. I’d today. around on time than management strengths, a As

might launched integrated features, our new digital are two product comprehensive in to manage Even officially release press December, solutions users have centrally significant strategy. an As we from marketing SharpSpring SharpSpring and calendar. social you seen their entire content

calendar by adjusting Customers media other can social turn ROI social social management that social and can hot with measure sales Put businesses their tools their SharpSpring and of lead that marketing allows create comprehensive a of to from publish Social Twitter customer Users SharpSpring content Incorporating also and an strategic content around that last features it's our marketing customers this and gap closing but our closing users interface for they of social represents to published media scores the automation generate from activity opportunities the social as content able more. in solutions. right hashtags, social another brand about and blogpost content. social social will expand such think clients. new We're to popular competitive huge prospect post platform schedule the marketers marketing the identify based extremely our tools emails, give and our their and generate also SharpSpring prospects social also social boost by to engagement these On based profiles agency be excited powerful opportunity forward. in social the by conversations level, competing offers scheduled directly end-to-end increased SharpSpring's needs only major view capabilities, tools to on automation e-mails SharpSpring all interactions opinion, publishing engagement, in other to and partners Calendar integrated features, to notifications, conversion interactive cannot. the empowers digital SharpSpring and and moving listening. Content listening going sales. on to with trigger marketing keywords, when be compared Facebook social and social including last them additional management gap strategies. provide grow and social and services fully With a ways standalone calendar, to into not awareness, follow offers allows social customers way, giving integrating to and

more as to us we remain will before, and for believe brand's in the continue expensive. be agencies. our we said an I've very strategies digital not refining build it affordable. it the and And LTV our software need us What we CAC we is that clear SMB invest and that our ability to SharpSpring's marketing room efficiently improving talked quality As ratio. that means what another customers make at underlies gives On on best opportunity in for is and to means to to so important new industry lot our a prohibitively an customers does It's reputation growth. profitably. focused attract upon and also further win for of the looking choice that it And metric to note, our way, solution value will that

January a caused experience, increased you've we us particular grandfather take as period slower more to our sales. advantage more This like great the sign invest opportunity customers. that advantage business. been mild by even we're of opportunity. price ability pricing. has gears to historically to pat with process efficiency in this from seasonality. with ourselves a is multi-billion some remains in typical of we take have characterized increased that which January, we QX recent Shifting inclined a that instituted to customers December of typically As remind the Ed, look also our to This is for to listeners month and solid number XXXX, And SharpSpring that to heard dollar in for put from up we automation of increase acquire spending. is to a a we'd Marketing ratios, in sales front and in position consider of gained

be this to reason, the XXX in For expect -- range. sales we

Officer. gas during We’ll As resources support the for and trajectory Along and sales come. added have look operations Jeff growth in fluctuation as other to term rear solid wealth impact join Jeff growth company. company, on long sales in build as will to Jeff business. leadership and the our continue this we to our summary, motivated and that team of occurred well to the we our to always, In our we many a our decisiveness new two are that set business, have our normal hard foot a we're our the on at choice that ourselves that share as through our top-line year year, expertise keep the grow to Operating to of significantly of XXXX in invest dollar successful of focused At customer on companies. and pedal. both we the That to and the as rewarded expand Chief work on our ever XXXX he’ll people ourselves, February, we excited of the not the in product out line, forward than to experience made the as [indiscernible] SaaS seasonal and We're increase for in foundation achieved years the our of team XXXX beginning marketing more marketing automation to by within with a appointment bet view operations during been our of brings been solid a our and conscious the honed multi-billion with cadence in people our up, our industry. decades goals for beginning to and operations. base market

sales appropriate open And questions. we’re your instructions. our will and at to believe with Operator, call priced function shareholders. the the please long-term dedicated remaining this a more provide competitors. while value to use our or making ongoing to better, with that, marketing, We’re towards resources to the costs easier ready SharpSpring of initiatives allocate our We ultimately growth combined to lead of and fraction judiciously commitment, for for

Operator

Instructions]. will this conducting Thank a you. [Operator question-and-answer time, we be At session

Our Martinuzzi first from of your the question comes proceed Eric Please Lake question. with line from Street Capital.

Eric Martinuzzi

XXX Congratulations successful strong really on the adds. year finish It’s customer to see. exciting good to new

that ago Rick? on give to right it year Am new did color around at little a XXX customers, You I ads, QX XXX. a compare be new the customer will to

Rick Carlson

this we’ve seasonal so. consistent back month Yes, days the just it’s in the typically That’s four right. identify only the But people for of one that -- of whatever from effects forth, so getting we’ve years. I January it’s think and for been people a and reason January able We where just are been matter about holidays doing active.

and a now have partners agency new between seem for did because we price $XXX, have the into we a starting probably in three -- somewhere forward forward up and that’s to this always price more compounding that, licenses two a dozen for brought so three -- us. at brought slow might were And are joining be January licenses, And of that agency dozen that December. out to $XXX We in have closed January effect January, increase. we for a $XXX a for little of deals new were of gates and from year naturally

So of we wanted make your just that to as you all doing projections. aware are people

Eric Martinuzzi

just is into billings, I So far guys $X.X expect up but that, in number as printed the a the think as as you and but definitely some wise? QX opposed be revenue that consensus quarter next million with revenue, quarter, $X.X the to ads, translating a you the for sequentially revenue number, in would know customer as as flat distance sequentially there is to between I far new million,

Ed Lawton

that from slight are have the bit definitely to headwind side. but around QX, quarter-over-quarter. customers on that group. customers QX full got quarter in grow expect the customers the new would of little And we headwind, down in still the quarter see up to go signed a sign-up plus that SharpSpring impact We’ve aside in we that expecting new QX, partial those here I XXX we Mail+ we’ll XXX,XXX, do to new of we that for

Eric Martinuzzi

it on between did on also into Where answer addition I’m it retention know bit, those product side, to little the helping a kind the it’s is helping is one of helping dive addition you customer And the of calendar. the two most I’m social, -- it’s the that, but Rick, sure acquisition. the side, new the customer curious buckets? then

Ed Lawton

don't sounding it's really in the it's everybody. for -- platform power us to terms extending the of and of a I how evasive, game out just without for even know automation changer answer filling marketing that really

sub-features because puts and the on of new on or and should the customers new so competitors, it app, long term. even think For of looking SharpSpring, the I it us us at our over yes’s of side that us ahead of puts more actually, give some section prospects footing certainly the sales within

As we it in touched and opportunity huge results for for deliver revenue extends really new the gives on that. in current allows to value them clients, partners, whole our so them for It remarks say agency hard it's a better to and excited really choose between items, both and across current two just but that. it, new and wins really really customers, our pick about so It I'll customers. existing board the helps we're those their

Eric Martinuzzi

have you still it's price base the you February, did of as see out installed new there? point, new days -- between in Do but ordinary any anything early and you of the and retention for at the least change them product January the here,

Ed Lawton

QX. those Well, changes price we announced in

surprise So our we agency not we try actually to partners.

days table. And SharpSpring, large to gave really our that we as integrated as by brought agencies to features and notice SharpSpring a going and it's solution. excited Certainly, so these to importantly, into another just that amounts or solution no to an belongs really it's impact. provider because social, the saw XX who solution as rolled I understood price maybe go of think about agency automation new those lot marketing payments not can customers using increases, power another be their SharpSpring the now value got partners and more it can it, the same on but that's part though were a what is to into built time, the them for at the not nobody we And features were

the gotten are So social rollout partners the We're and positive rollout. with and really nothing we’ve feedback from but our short answer agency -- very happy very, is no. not of large by the

Operator

Our comes your from Malouf next Mike Craig-Hallum line of with from question Please the proceed question. Capital.

Mike Malouf

price little for for we if know that XXX So just to bit increase a was could you a raised talk an existing on more the pricing, pricing What new XXX client? agency. from the I

Rick Carlson

I of of users. agency for roughly existing increased $XX about And the Ed features one if nickel model solution a the price We've XX% making platform. that wrong, social the the as agency model. for pricing to platform should the believe, say, clients type me diming affected with rolled pricing utilizing license correct and utilizing the entire rather where out our businesses, I We committed the a and partners having of confusing part of pricing than I'm

So it’s we $XX. roll that about out,

agency to the there So respectful first we At and those be joined in adopters were depending XXXX point us agencies who with an way, on of like when the ’XX. along joined each and us, pricing. always different slightly

we a so amount we that of what $XX bump a amounts of social. modest And month included to up when

Mike Malouf

Right if the then you and now, rewind the same about line accelerating -- last XX% adds growth. what revenue. about XXXX they your about I’m SGM comments marketing. And and XXX%, actually you spending XXXX and you’re on and size and in at quarter, sales in look your you the pretty last of XXX% growing And at were But quarter. they almost in of to spend also as similar was revenues the their if HubSpot was with that’s right a think SG&A while grew about I quarter HubSpot were first also but about you, you they marketing curious

will just how go wondering much think? you you I’m So

Rick Carlson

constantly we’re evaluating it. So

I think the us, dollar a so believe we we’re underlying that for principals market. multi-billion that in

be attractive space. can to we to in movers in recognize the and metrics continue committed the manner not important We acquiring ratios CAC very as customers like customers SaaS efficient It’s feel maintain to we at similar really an as and we’re overall. to acquire efficiency, that. long LTV as us so And efficient an first company

factor out governance customers market -- us knowing acquiring us, our limited really confidence the the in as for rates. that it’s long at for efficient there is by very as so And is

test through think up that’s And waters, we’ll And to then repeat we’ll continue continuing take so pursue that sure be the we’ll continue I several for we’re company, the -- of process. us strategy. history efficient well to the the months, to we’ll and that served a make step -- and and

Mike Malouf

And then at look that marching as with or a you years, over us, Ed next I you XX% by can ’XX XX% margins you the gross two years? end of of up. said them clarify ’XX margins job the think great but the as gross for maybe think you you to HubSpot’s And up done look those can out few -- next at go again to scale looking at do Where over XX%. you’ve

Ed Lawton

XX% Just end either to by believe, said I this year. clarify, the of I

So QX I up be up number level and dip would of then slight target know back in get a to to XXXX. us QX with don’t QX gradual increase back it here for that to in

we acquiring we're and think customers. margin today, Every the XX% now done right time for customers be gross think new higher a we new analysis could around even or some I new little put that. a incremental than those is we’ve customer,

us we're we seeing a that as still platform, for within an target up into years on I to let's we'll is say more five so margin tick do four XX% grow or and think but the gross small And and realistic future. And start add the basis. we overall up customers

Operator

questions. of Fisher Capital. Please line Hunter [Operator Bynum from your Instructions] Our Park with comes the question from proceed next

Bynum Hunter

about I the question shelf. have a

that shares. to are correct? Is yourselves not looking You sale

Rick Carlson

to on our referring listed of XXXX. can't has of SharpSpring SharpSpring Travis. sale Inc. any don't were CTO. -- is obligations is SMTP a he probably listing result immediate shares to SX plans and the what fulfillment with believe either we agreement can Inc. started don't the then based to filed LLC myself plans for to you're is I significant sale Travis No, that in and that and I have the was now really that we shelf Whitton speak on the fulfilling sale to significant was the the now from I contract tell as of of company the back I contractual That sale those shares. of what SharpSpring And you a

So I hope that answers question. your

Bynum Hunter

looking the question when acquired back or the Did SMTP And structured? to cash how deal my it next or bunch was stock guys take you just of exactly a company.

Rick Carlson

It was and some we an correct took we It’s a me if ancient wrong. I some believe of up and Ed, actually But extra I little in little converting the both. $X bit to million ended stock history we bit had were of cash Travis we million. believe take here that I'm but I and converted stock in and that $X to an today. belief going Hopefully extra the cash. that to as speaks both the continue have company

So am I right down that Ed?

Ed Lawton

in day, in we conversion company into was being It through that cash right. million $X of cash shares the a million that's Yes, stock. payment. ended up process earn-out midway the $X $X converted it and million payment an equity of At end the

Bynum Hunter

what your plan targets plan, under incentive incentive stands and then And as goals are it current for today? your

Rick Carlson

to stock Well, I grow well options. are revenue we’re but we the of believe incentivized and on those as based in X-K, of well. we’re owners business, as the listed targets as we've with recent but got business highly certainly incentivized course And EBITDA

I looking answering reflect goals your the am bonus I grow our hopefully than if efficiently, question, not I’m So mean to business the to more for sure, our business and are you’re that’s that. that. grow something specific But plans

Bynum Hunter

as simplify individual to current to specific is the just more the agencies. a you through all customers talk businesses. about just complexity product you as would with acquiring product, that of businesses? adoption and And Is for opposed And potential among I was deck businesses of the a business opportunity then is just standalone for the barrier any say your just there that there any at looking standalone question.

Rick Carlson

and You there that question for parts good. asked multi-part all were

that say is agency focused the and believe market to for us is We want to on The we’re first I thing in large sufficiently agencies. compute win.

just the automation is us We for XX perfect entire eight are and on. we closing focused and the being start our land than agencies. had But like feel platform And great that terms of up understand choice businesses The digital mouth to position, that’s platforms We and have There a find way segue there. your in guys from us the these markets. most suffers the all are to be it out use platforms really like into HubSpot the probably SharpSpring of industry enterprise. years on future word two marketing being in of power today view that The number of the is our business inherent a think the I moved nice are we’re is for entire is. or the out year industry, be that limitation and and of part something platform four there. are no on into utilization we to what of in as in just seem They’re entire second that to tools, powerful of to under on of simpler those around those are what question. company businesses head

to make use uses that the hard for We And for that businesses strive but do work better make want do to at so always can our easiest to easy. that platform we for platform very everybody agencies. We to it. our and just we not

market very always terms platform while very we But that’s utilize are that opportunity agency want still we’re is do of our journey in excited I win have of easier the compete think about well adopt we there decide right who to and think market. that use marketing tens going that that and well making as and there, well. be feel has the us trying to in now. they’re to better on we’re to on to the agency clear yet so major And to market and fairly focus for We like thousands positioned agencies to do we automation of

Rick Carlson

Well, thank for on you today’s all call. us joining

updating As always, Operator? to and forward continued our partners for our to We I especially on your want employees, thank you investors next call. our look support.

Operator

call. Safe call, this like forward-looking I conclude cautions would Harbor includes statement today's Before we during important made statements regarding provide that SharpSpring's to

we A any and reflect reference not circumstances. responsibility revise events EBITDA, to or Also or which statements core income conference share, during call, any make or does net the note net undertake Company views current performance. elsewhere risks, that factors, to with the During future income Company's any forward-looking to non-GAAP core of forward-looking those loss as These loss be and Form in reference were may adjusted respect and are that future is reconciliation to net forward-looking may release Form to section or income The today's on site. non-GAAP different per results, made the earnings performance. achievements or future implied Web of statements. including your by for the included heading loss measures and known the discussed on the events. performances financial cause available involve statements financial supplemental presented the reflect measures Company's future press measures these future other on call, reports uncertainties the Factors there These report statements annual and or results, including Company's materially in unknown SharpSpring's statements performance financial XX-K or to under and Risk of events, latest anticipated from made XX-Q Company's achievements regarding quarterly forward-looking actual

the conference a XXXX like Web section via available earnings today that Finally, for of everyone the call. to I link today's remind and replay site. for fourth be Company's full Thank for you joining recording SharpSpring's in call Investors available of quarter us would will a year

disconnect. now may You

SharpSpring (SHSP) 6 Mar 182017 Q4 Earnings call transcript