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SharpSpring, Inc. revenue growth accelerated from 21.7% in FY2019 to 29.0% in FY2020

03/16/2021 • About SharpSpring, Inc. ($SHSP) • By InTwits

SharpSpring, Inc. reported FY2020 financial results today. Here are the key drivers of the company's long term financial model:
  • SharpSpring, Inc. is a fast growth stock: FY2020 revenue growth was 29.0%, 5 year revenue CAGR was 26.1% at FY2020 ROIC -16.7%
  • The company operates at negative EBITDA Margin: -19.5%
  • SharpSpring, Inc. motivates its personel by high Stock Based Compensation (SBC): average SBC/Revenue for FY2016-FY2020 was 0.0% while average EBITDA Margin was -37.3% for the sames years
  • SharpSpring, Inc. has low CAPEX intensity: 5 year average CAPEX/Revenue was 4.0%. At the same time it's a lot of higher than industry average of 3.0%.
  • CAPEX is quite volatile: $1m in FY2020, $1m in FY2019, $1m in FY2018, $0m in FY2017, $0m in FY2016
  • The company has unprofitable business model: ROIC is -16.7%
Below you can find a comprehensive analysis of the key data driving the company's performance and the stock price.

Revenue and profitability


SharpSpring, Inc.'s Revenue surged on 29.0%. Revenue growth showed slowdown in FY20Q4 - it was 24.9% YoY. Despite revenue decline the EBITDA margin expanded. EBITDA Margin increased on 7.3 pp from 0.38% to 7.6% in FY2020. EBITDA Margin grew at 7.9 pp per annum in the last 5 years.

Gross Margin increased on 3.9 pp from 68.5% to 72.5% in FY2020. Gross Margin stuck to a growing trend at 2.8 pp per annum in the last 5 years. SG&A as a % of Revenue dropped on 17.8 pp from 89.9% to 72.1% in FY2020.

Net Income margin jumped on 34.7 pp from -54.6% to -19.9% in FY2020. During FY2016-FY2020 Net Income margin bottomed in FY2019 at -54.6%.

Investments (CAPEX, working capital and M&A)


In FY2020 the company had CAPEX/Revenue of 3.9%. SharpSpring, Inc.'s CAPEX/Revenue increased on 2.6 pp from 1.3% in FY2017 to 3.9% in FY2020. Average CAPEX/Revenue for the last three years was 4.9%.

Return on investment


The company operates at negative ROIC (-16.7%) and ROE (-17.0%). ROIC jumped on 20.3 pp from -37.0% to -16.7% in FY2020. ROE jumped on 42.5 pp from -59.6% to -17.0% in FY2020. During FY2016-FY2020 ROE bottomed in FY2019 at -59.6%.

Leverage (Debt)


Debt level is -2.4x Net Debt / EBITDA and Debt / EBITDA. Debt surged on 158% while cash jumped on 138%.

SharpSpring, Inc. has no short term refinancing risk: cash is higher than short term debt (537.9%).

Financial and operational results


SharpSpring, Inc. ($SHSP) key annual financial indicators

mln. $201620172018201920202020/2019
P&L
Revenue11.54213.44918.65222.69929.28829.0%
Gross Profit7.0798.45212.85315.55721.22536.4%
SG&A9.75912.02416.45120.40221.1163.5%
EBITDA-6.508-6.176-7.972-9.253-5.719
Net Income4.951-4.670-9.479-12.388-5.829
Balance Sheet
Cash8.6515.4009.32111.88228.268137.9%
Short Term Debt0.0000.0000.0000.3705.2561,319.1%
Long Term Debt0.0000.0008.3424.9778.54071.6%
Cash flow
Capex0.4560.1770.8941.3651.146-16.0%
Ratios
Revenue growth25.7%16.5%38.7%21.7%29.0%
EBITDA growth-19.1%-5.1%29.1%16.1%-38.2%

Gross Margin61.3%62.8%68.9%68.5%72.5%3.9%
EBITDA Margin-56.4%-45.9%-42.7%-40.8%-19.5%21.2%
SG&A, % of revenue84.6%89.4%88.2%89.9%72.1%-17.8%
Net Income Margin42.9%-34.7%-50.8%-54.6%-19.9%34.7%
CAPEX, % of revenue3.9%1.3%4.8%6.0%3.9%-2.1%

ROIC-42.8%-31.1%-42.1%-37.0%-16.7%20.3%
ROE27.3%-21.8%-57.9%-59.6%-17.0%42.5%

SharpSpring, Inc. ($SHSP) key quoterly financial indicators

mln. $FY20Q1FY20Q2FY20Q3FY20Q4 YoY change
P&L
Revenue7778 32.4%31.8%27.7%24.9%
EBITDA-2-0-1-2 ----
Net Income-1-1-2-2 ----
Balance Sheet
Cash12151528 -34.5%-4.4%9.2%137.9%
Short Term Debt2455 562.2%1,045.0%1,189.9%1,319.1%
Long Term Debt51099 -61.0%94.5%83.2%71.6%
Ratios
Gross Margin66.4%74.2%74.4%74.5% -4.5%3.7%6.6%9.2%
EBITDA Margin -30.3% -6.8% -15.3% -25.7% 18.2%29.1%24.1%14.0%
Net Income Margin -14.0% -13.3% -21.1% -30.4% 40.3%63.5%23.0%14.1%

Peers in Application Software


Below you can find SharpSpring, Inc. benchmarking vs. other companies in Application Software industry. It's shown for the period of 5 years for the key financial metrics. Each table has median value for all the companies in the industry together with individual financial data of the top-5 companies in the industry by particular financial metric.

Top companies by Revenue growth, %

Top 5 FY2016 FY2017 FY2018 FY2019 FY2020
VirnetX Holding Corp ($VHC)--0.2%-95.9%34.9%355,942.4%
AudioEye, Inc. ($AEYE)-175.5%106.6%90.2%90.2%
Cloudera, Inc. ($CLDR)-57.2%42.6%28.9%65.5%
Integrated Ventures Inc ($INTV)----8.9%62.7%
Smartsheet Inc. ($SMAR)-64.3%66.1%59.7%52.4%
 
Median (92 companies)12.0%14.8%15.1%19.4%14.5%
SharpSpring, Inc. ($SHSP)-16.5%38.7%21.7%29.0%


Top companies by Gross margin, %

Top 5 FY2016 FY2017 FY2018 FY2019 FY2020
Aware, Inc. ($AWRE)90.3%94.6%92.3%89.7%92.8%
Alteryx, Inc. ($AYX)81.3%83.4%91.0%90.6%91.1%
Autodesk, Inc. ($ADSK)85.2%83.2%85.2%88.9%90.1%
Smith Micro Software, Inc. ($SMSI)73.2%77.9%83.5%90.9%89.9%
Cadence Design Systems, Inc. ($CDNS)85.9%87.8%87.9%88.6%88.6%
 
Median (89 companies)64.2%64.6%65.3%67.9%69.4%
SharpSpring, Inc. ($SHSP)61.3%62.8%68.9%68.5%72.5%


Top companies by EBITDA margin, %

Top 5 FY2016 FY2017 FY2018 FY2019 FY2020
VirnetX Holding Corp ($VHC)-1,837.2%-1,118.0%-40,379.4%-23,127.1%52.2%
j2 Global, Inc. ($JCOM)41.7%36.5%35.7%38.6%40.5%
Intelligent Systems Corporation ($INS)-5.4%-12.8%33.6%43.6%40.4%
Adobe Inc. ($ADBE)31.2%34.2%35.3%35.8%39.7%
SS&C Technologies Holdings, Inc. ($SSNC)34.9%37.9%27.7%38.2%38.3%
 
Median (89 companies)-4.7%-3.3%-3.3%4.5%7.7%
SharpSpring, Inc. ($SHSP)-56.4%-45.9%-42.7%-40.8%-19.5%


Top companies by CAPEX/Revenue, %

Top 5 FY2016 FY2017 FY2018 FY2019 FY2020
MicroStrategy Incorporated ($MSTR)0.5%0.8%1.4%2.1%234.8%
Integrated Ventures Inc ($INTV)--199.9%15.2%27.2%
Intelligent Systems Corporation ($INS)3.8%9.7%4.3%4.9%19.2%
LivePerson, Inc. ($LPSN)5.5%7.9%8.8%16.3%11.4%
PROS Holdings, Inc. ($PRO)4.7%0.8%0.7%2.1%11.3%
 
Median (87 companies)2.9%2.3%2.4%2.9%2.5%
SharpSpring, Inc. ($SHSP)3.9%1.3%4.8%6.0%3.9%


Top companies by ROIC, %

Top 5 FY2016 FY2017 FY2018 FY2019 FY2020
VirnetX Holding Corp ($VHC)-210.9%-256.8%-416.3%-247.2%137.3%
Manhattan Associates, Inc. ($MANH)99.3%102.5%80.9%71.7%53.4%
Citrix Systems, Inc. ($CTXS)16.1%16.7%25.2%29.8%33.5%
Sonic Foundry, Inc. ($SOFO)-18.1%-50.6%-786.4%-31.3%
Paycom Software, Inc. ($PAYC)75.4%51.1%47.5%47.5%28.7%
 
Median (92 companies)-9.2%-10.2%-9.8%-4.2%-1.8%
SharpSpring, Inc. ($SHSP)-42.8%-31.1%-42.1%-37.0%-16.7%


Top companies by Net Debt / EBITDA

Top 5 FY2016 FY2017 FY2018 FY2019 FY2020
Dropbox, Inc. ($DBX)--3.8x-2.4x1,341.0x
Avaya Holdings Corp. ($AVYA)--7.4x-77.9x
Alteryx, Inc. ($AYX)--2.5x6.1x32.2x
Five9, Inc. ($FIVN)-6.7x-8.6x7.3x5.3x17.6x
Synchronoss Technologies, Inc. ($SNCR)----11.6x
 
Median (54 companies)-0.9x-0.8x-0.7x0.4x0.2x