(SHSP) SharpSpring

I am a long time follower and first time poster. I have been following a growing SaaS company that has not been discussed on this board.

SharpSpring is a microcap version of HubSpot. SharpSpring has a market cap of $115 million. SHSP is a low cost provider of marketing automation software. Essentially, their mission is to bring marketing automation software to small and medium sized businesses. They work closely with smaller advertising agencies to sell their product. They target agencies with 5-20 employees. SHSP 's product has 1/7 the cost of HubSpot. SHSP has not built out all of the capabilities of HubSpot but they are adding new features each quarter. SHSP has 1,600 agency customers and over 7,000 businesses as customers.

SHSP had an interesting path to becoming a public company. The company was started in 2012 in Gainesville, Florida. It was purchased by a struggling public company, STMP, which appears to be a reverse merger to become public. SharpSpring’s CEO became the CEO of the public company and the legacy product of STMP was phased out. The marketing automation software is now the sole source of revenues.

Revenues for the SharpSpring Product (excluding the legacy product that has been phased out) (millions):

Q1 Q2 Q3 Q4
2016 1.8 2.1 2.5 2.7
2017 2.9 3.1 3.2 3.6
2016 4.1 4.3 4.8

SharpSpring Product Growth Rate (Q/Q)

Q1 Q2 Q3 Q4
2017 61% 47% 28% 33%
2016 41% 47% 50%

Gross Margin

Q1 Q2 Q3 Q4
2017 58% 60% 65% 68%
2016 67% 66% 70%

SHSP struggled in 2017 as you can see by the decrease in revenue growth rates. At the time, the CEO explained it as growing pains associated with becoming a public company and phasing out the legacy products. The CEO was very optimistic on the recent call regarding the sales funnel. They have released the customer additions for 2018 Q4. SHSP added 379 new customers up 42% from 2017 Q4.

SHSP is valued lower than many of the core SaaS companies discussed on this board. The EV/S is 6.9. For reference HubSpot has a EV/S of 11.7.
I would be interested in the board’s thoughts on this microcap.

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I am no expert but would run away.

Microcaps with tiny daily volume and tiny revs (5M a quarter) are an easy way to get into unnecessary trouble.

The product clearly isn’t setting its target market alight, as the growth has slowed from a tiny base. Hubspot would be more attractive despite being much larger.

BAND is smaller and cheaper than TWLO. It doesn’t make it a better investment in my eyes.

I wouldn’t invest in company like SHSP when I could invest in something with a strong CAP/a category crusher, or even a nice Saas business without red flags that provides GARP (growth at a reasonable price like MIME, or CBLK)

Just my thoughts. I’d advise caution.

Best wishes

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