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| EX-99.2 - PRESS RELEASE APRIL 22, 2020 - SharpSpring, Inc. | shsp_ex99-2.htm |
| 8-K - CURRENT REPORT - SharpSpring, Inc. | shsp_8k.htm |
Exhibit
99.1
Dear Fellow Shareholder,
As I
write to you today, we are in the midst of an unusual and even
unprecedented time. The COVID-19 pandemic has severely impacted our
global community and taken over our collective consciousness. While
we cannot claim to know the ultimate extent, duration, or resulting
economic effect of this pandemic, I am reaching out to share what
information we do have as it relates to SharpSpring. Now more than
ever, we believe it's increasingly
important to be direct and transparent about what
we’re seeing and how we’re responding to this
challenge.
Employee Safety
Our
first actions in response to COVID-19 were with the health and
well-being of our employees in mind. In March we acted quickly and
were one of the earliest in restricting all non-essential travel
indefinitely and instituting a company-wide work-from-home policy.
Since that time, we’ve continued to maintain an open dialogue
with our workforce to ensure that everyone is remaining healthy and
safe. Because of the fact that our teams have mostly worked in a
distributed manner and the tools we use as an organization are all
cloud-based, our transition has gone quite smoothly.
Business Update
-
Reduced Cost Structure by $6 Million per
year: Given the uncertainty of the business environment, we
have instituted a 10% reduction in
salary across the bulk of our organization, which will remain in
effect until further notice. Additionally, we’ve made a
number of other major decisions designed to cut down on spending,
including small workforce reductions in non-revenue roles,
deferring new hiring, pausing director cash compensation as well as
company bonuses, removing certain benefits stipends, eliminating
our events budget, and lowering professional fees. In total,
we’ve effectively reduced our expense base by more than 20%,
and we expect these measures will result in over $6 million in cost savings for the remainder of
2020.
-
Increased Available Cash by $7 Million:
To maximize the resources available to retain our employees, we
were able to further increase our cash reserves through a series of
recent transactions including accessing a $1.9 million line of
credit, receiving a $1.6 million accelerated tax refund, and
receiving approval for a $3.4 million loan through the Paycheck
Protection Program (PPP) within the CARES Act being administered by
the U.S. Small Business Administration (SBA). These actions
supplement the $9.7 million we had at the end of the first quarter,
bringing an estimated total cash to balance sheet when all are
settled to ~$16.6 million.
-
Sales Update: I am proud of how well our
employees have adapted to working in a distributed manner. We are
still bringing in new leads, hosting demos and driving sales at
2019 levels, which is encouraging given the significant reduction
in our marketing spend. We have also seen an uptick in our demo
schedule and attendance rates through mid-April. Additionally, our
Perfect Audience business has continued to run according to plan,
and we remain very optimistic about the long-term cross-selling
opportunities and expanded market available to us through
retargeting.
-
Guidance Reflecting COVID-19: When we
gave our initial revenue projections for the year in March, we had
already factored in a meaningful COVID-19 impact. As of today, our
guidance is unchanged, and we expect full year revenue to range
between $30 and 31 million with our cash usage to be in the range
of less than $4.5 million.
Essential Technology
For customers that use many or most of our features, we are deeply
embedded in their sales and marketing processes. Customers build
our forms, landing pages, dynamic content, workflows, and chatbots
into their websites. Further still, they are building all their
email marketing and social communication within our platform. At
the bottom of the funnel, these customers are also using our
integrated CRM, SmartMail, and Sales Optimizer features, or our
shopping cart integrations to maintain and maximize their sales
processes. Finally, they measure the effectiveness of all of these
activities using our embedded analytics, custom reporting, and
cloud dashboarding. Put simply, we are deeply embedded in within
our customers’ go-to-market strategies and are the core
component of their technology stack.
More importantly, our technology is critical to the success of our
customers. Put another way, SharpSpring is a must-have rather than
a nice-to-have software platform. On a general level, we allow
businesses to operate sales and marketing functions more
efficiently and effectively, which has become even more essential
as companies face difficult economic times. When leads are
fewer and further between, and deals are harder to come by,
marketing automation is the tool that helps businesses maximize
every opportunity. For this reason, SharpSpring’s sales and
marketing platform is one of the last things a business considers
when pursuing a cost cutting strategy.
In the
last few weeks we’ve seen encouraging numbers that support
this belief strongly and indicate that customers are using
SharpSpring much more, not less, in the new work environment. Most
notably, email usage on our platform in March was up 46% over
February. Forms, tasks, and other automated functions are all
running through our platform at the same or increased levels as
well. Our recently launched Chatbot has now become one of the most
quickly adopted features in SharpSpring history. In fact, more than
1,000 chatbots were configured within the first few weeks after
launch in early March.
Another
essential product we’re now providing to our customers is
integrated Video Calls. It is a solution built to help marketing
agencies and businesses connect with leads, contacts and clients,
and we’ve included it onto our platform free of charge. We
build this solution specifically in response to COVID-19, and our
agency partners and their customers have both expressed their
appreciation and adopted this feature in large
numbers.
Zoom,
Slack, Skype, and other services have been incredible resources to
help people stay connected. SharpSpring Video Calls serves a
different and very important purpose. We designed this tool
specifically to help companies land more deals, provide outstanding
support, and help maintain and save customer relationships by
making face-to-face communication as convenient as a phone call. In
one-click, requiring no software to download, you can communicate
with people outside your company without having to worry about what
platform they may or may not be using. In short, it is a game
changer in terms of enabling our users’ ability to
communicate with their leads and customers.
In
summary, when leads and sales are harder to come by, we are finding
ways to be more critical to our customers’ success than ever
before. We are embedded within their technology stack and are the
core piece of technology that lets them run their sales and
marketing processes, making us both difficult to replace and an
essential technology during these challenging times.
Competitively Positioned
Another
important factor working in our favor right now is that SharpSpring
is currently the low-cost provider within the marketing automation
landscape. We expect that customers
looking to save costs associated with far more expensive solutions
will continue to turn to SharpSpring. In many cases, we can
be as little at 1/10th the cost of our
major competitors, and we are actively pursuing their customers
with this value proposition.
Providing
real value is a core part of our mission that’s built right
into our pricing. To that end, and in response to the economic
crisis, we’ve put in place an opt-in program that allows our
agency partners to access certain short-term discounts which are
tied directly to greater usage of our platform. In addition to
providing some financial support for businesses that are finding
themselves in increasingly difficult times, we feel that
we’re also incentivizing increased adoption, which adds up to
a win for both parties in the long run. This program is opt-in, and
today we have only seen a handful of requests for these discounts
across our customer base, which we feel is a testament to our
already-low price point.
Reliable Customer Base
We talk
a lot about how our customer base is mostly geared toward small and
medium-sized businesses, or SMBs, and that we obtain most of these
customers via our agency partners. Given the current economic
climate, and the clear impact already being felt by many small
businesses over the country, I think it’s important we more
fully explain what a typical SharpSpring agency customer looks
like.
The
most important distinction for this customer base is that most are
typically business-to-business, or B2B, organizations. Why that
detail is important relates to the company makeup as well as their
sales process. On the first point, we generally do not service
micro or hyperlocal businesses, like a mom and pop pizza place or
your neighborhood florist. In fact, the vast majority of our
customers do not even have a brick and mortar retail location. On
the second point, for many B2B companies, the average transaction
size within their sales process is much larger than in a micro or
consumer-focused business, usually north of $5-10,000 in annual
recurring revenue, or ARR, per sale. With these B2B-oriented
businesses, conducting larger transactions via an internal sales
team, and having the wherewithal to hire a digital marketing agency
to grow their sales, it makes sense that SharpSpring is relatively
well-insulated from the current economic impacts hitting smallest
businesses the hardest. Of course, this dynamic could change, but
we have yet to see a major shift moving in that
direction.
Finally, our customer base is highly diversified. We have more than
2,000 agency customers, and none represent more than a single
percentage of our revenues – most only fractions of a
percentage point. Further to that, each of these agencies has their
own customers using SharpSpring underneath them, adding a second
layer of revenue diversification for us. An agency may lose a
client, but that does not actually mean that we will lose the
agency, or indeed any revenue at all if that client was using one
of the agency’s initial “pack”
licenses.
In
closing, like the vast majority of other businesses, we are not
immune to the effects of a macroeconomic slowdown. However, we are
confident that we have taken the necessary cost saving steps (over
$6 million), secured an additional $7 million of additional cash
reserves, and have a number of factors within our business model
working in our favor that will allow us to continue to operate and
grow effectively both during and after this unprecedented period.
We’ve taken proactive and aggressive measures to guarantee
our business continuity and the long-term health of our
organization and are well positioned moving forward.
We hope
you and your families remain safe and healthy during this
challenging time.
Sincerely,
Rick
Carlson
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.