SharpSpring, Inc.
Q1 2020 Earnings Call Transcript

Published: 15 May 2020

[Operator:]

Good afternoon. Welcome to SharpSpring’s First Quarter 2020 Earnings Conference Call. Joining us today are SharpSpring’s CEO, Rick Carlson; and CFO, Michael Power. Following their remarks, we will open the call for your questions. Then before we conclude, I’ll provide the necessary cautions regarding the forward-looking statements made by management during this call. I would like to remind everyone that this call will be recorded and made available for replay via a link available in the Investor Relations section of the company’s website at investors.sharpspring.com.Now I would like to turn the call over to SharpSpring’s CEO, Rick Carlson. Sir, please proceed.

[Rick Carlson:]

Welcome, everyone, and thank you for joining us today. After the market closed, we issued a press release announcing our results for the first quarter ended March 31, 2020. A copy of the press release is available in the Investor Relations section of our website.Before we begin, I would also like to note that a few weeks ago, we published a letter to our shareholders providing an update on our business and detailing our efforts in response to COVID-19. That letter is also available in the Investor Relations section of our website, and I would encourage all interested parties to read it. While some of the information discussed in the update will also be reiterated here, we do not plan on repeating everything mentioned in the investor letter, so reading it is likely worth your time. Finally, I would also like to take this time to publicly thank our frontline workers and essential service providers for keeping us safe and healthy through this trying time.Moving now to our results. In Q1, we delivered a strong start to the year in the face of both an uncertain economic environment as well as a major transition in how work is being conducted. Financially, we recorded our 12th straight period of record revenue, reflecting three years’ worth of consistent top line improvements and demonstrating our resilience against the initial onset of COVID-19. In total, we added another 321 accounts, representing an additional $2.3 million in first year annual recurring revenue.To date, SharpSpring now counts approximately 2,000 agency customers, 500 direct customers and over 8,500 total businesses using our marketing automation platform. While we recorded a temporary blip in a few areas as a result of the virus impact, on the whole, we remain well positioned to weather the current conditions. And we’ve taken steps to safeguard our operations against future potential headwinds. I’ll elaborate further on both of these points in a few minutes.Now before I go into any further details, I’m going to turn the call over to our CFO, Michael Power, who will walk us through our financial results for the quarter. Michael?

[Michael Power:]

Thank you, Rick, and good afternoon to everyone on the call. Turning to our financial results for the first quarter ended March 31, 2020. Our total revenue in the first quarter increased 32% to a record $7.1 million, from $5.3 million in Q1 of last year. Our gross margins for the first quarter of 2020, decreased to 66% from 71% last year. In dollar terms, gross profit increased 24% to $4.7 million from $3.8 million in Q1 of last year. In Q1, we experienced continued margin compression due to expected and temporary low contribution margins from Perfect Audience. In our core SharpSpring business, margins were 71% in Q1, which were in line with our gross margins in Q1 last year. Beginning in March and continuing since that time, Perfect Audience margins have increased meaningfully with the exploration of a shared service contract we had previously in place as we transitioned the business from Marin and integrated into our own operations. Long-term, we believe the overall SharpSpring gross margins have the capacity to expand above 80%.Turning to our operating expenses. For the first quarter of 2020, our operating expenses increased 9% to $7.2 million from $6.6 million in Q1 of last year. The increase was primarily due to increase in sales and marketing, research and development, general and administrative costs to support our future growth needs, along with this increase in intangible asset amortization. Our GAAP net loss for the first quarter totaled $988,000 or $0.09 per share compared to GAAP net loss of $2.9 million or $0.33 per share in Q1, 2019.On the balance sheet, we had $11.6 million in cash at the end of the quarter, compared to $11.9 million at the end of the prior quarter. Our Q1 2020 cash position reflects a $1.9 million draw down from our revolver credit facility. On a pro forma basis, including additional funds from the SBA payroll protection program as well as an accelerated tax refund, our current cash position is north of $16 million.Looking at our non-GAAP measures. Our adjusted EBITDA loss for the quarter, which reconciled in our earnings release, totaled $1.8 million. This is relatively unchanged from an adjusted EBITDA loss of $1.8 million in the same period a year ago. Our core net loss for the first quarter, which was also reconciled in our earnings release, totaled $785,000 or $0.07 core net loss per share, compared to a core net loss of $2.1 million or $0.23 core net loss per share in Q1 of last year. For more details on our adjusted EBITDA and core net income metrics, please see the reconciliation and GAAP terms included in the supplementary tables of today’s earnings release.Moving to some of our other metrics. During Q1 our cost to acquire customers approximately $8,750, which was a sequential decrease from $9,900 recorded during the fourth quarter of 2019. As a reminder, we calculate customer acquisition costs as the sum of our all-in sales and marketing costs from Q4 2019 divided by new wins from Q1 2020. It’s important to mention that this CAC calculation is imperfect because it does not take into account the marketing spend in one corner as long tail and continues to impact deals that we win in future quarters. So on a cohort basis, we see lower CAC than what is reported numbers reflect. Though we do experience fluctuations for these metrics quarter-to-quarter, we are confident that we continue to consistently acquire customers that are historically attractive all-in rates that will deliver significant lifetime value to our business in the future.Our lifetime value calculation, which are long-term include estimates for future performance, continue to indicate agency customers could be worth approximately $45,000 to $50,000 to the business on average. This average long-term value reflects benefits to the company on a fully discounted basis after reducing for gross margin cost to support the customers on the platform.Turning to our financial outlook. The financial year ending December 31, 2020, we are reaffirming our previously disclosed revenue forecast. We expect total revenue to range between $30 million and $31 million, which will represent an approximately increase of 32% to 37% respectively compared to the prior year. Our guidance is based on recurring revenue from our current customers based on performance results tracked through April this year. These expectations also include anticipated impact from COVID-19 global pandemic based on the information available as of date of this report.This completes my financial summary. I’d like to turn the call back to our – over to Rick for additional insights into our operational progress in Q1 as well as outlook for 2020. Rick?

[Rick Carlson:]

Thanks, Michael. Before I get into our updates for the quarter, I’d like to provide a general outline that explains why we think we’re well positioned and have reduced exposure in the face of the current economic environment. First, we are a deeply embedded technology. For customers that use many of our features, we are deeply ingrained in their businesses. Our platform is integrated into their websites in countless ways, including forms, landing pages, dynamic content and automated triggers and workflows. Our platform houses all of their e-mail lists and every e-mail template and e-mail they use to communicate with their customers.We are generally either integrated with a shopping cart, third-party CRM, an API or they’re using our built-in CRM capability. Oftentimes, they’re using more than one of these services. In short, we are integrated into their entire sales and marketing process. Second, we’re an essential technology. This is different than simply being embedded or deeply rooted, as I just covered. Stated plainly, we allow businesses to be vastly more effective at operating their sales and marketing functions, which needless to say, has become even more essential as companies face difficult economic times. Put another way, SharpSpring is a must-have rather than a nice-to-have software platform.Third is our competitive positioning. SharpSpring has always been and remains the best value in the sales and marketing automation space. As the highly – as a highly regarded and yet lowest cost provider, we expect that customers looking to save costs associated with far more expensive solutions will continue to turn to SharpSpring as economic conditions tighten. In many cases, we can be as little as 1/10 the cost of our major competitors, and we’re actively pursuing the market with this value proposition.Another differentiator is with our customer base. Our customer base is mostly geared towards small and medium-sized businesses or SMBs. Often, this is seen as a less stable segment of customers when compared to larger enterprises or Fortune 500 accounts. But there are several characteristics about our user base that we think speak to the relatively low attrition levels we’ve observed since the outbreak and that give us hope that this solid performance will continue into the coming months.First, the vast majority of our customers are B2B-focused organizations. That is they generally use a sales team to target other businesses with our products and services. In contrast, we generally do not service micro, hyper-local or consumer-oriented businesses. These are the kinds of businesses that often have a brick-and-mortar location and/or that sell directly to consumers and have been most affected by the coronavirus and associated changes in consumer behavior.In fact, we estimate that less than 2% of our user base would fall into this category. Instead, our B2B-oriented businesses generally conduct larger transactions via an internal sales team and had the wherewithal to hire a digital marketing agency to grow their sales. With this in mind, it makes sense that SharpSpring is relatively well insulated from the current economic impacts hitting the smallest businesses the hardest.Finally, we are extremely well diversified. I don’t need to tell the people on this call about the value of diversification when it comes to mitigating risk. In SharpSpring’s case, we effectively have two levels of diversification built into our business model. First, we have more than 2,000 agency customers and none represents more than a single percentage point of revenues, and most, only a fraction of a percentage point. Further to that, each of these agencies had their own customers using SharpSpring underneath them, adding a second layer of revenue diversification for us.While we consider it a loss whenever a business leaves our platform and we work hard to support each of our agency partners in every way that we can, when an agency loses a customer, it does not necessarily lead to a direct revenue impact for SharpSpring, so long as the agency remains a customer. This second order diversification is a powerful component of our business model and allows agencies to transition struggling clients out and new clients in without negatively impacting SharpSpring’s revenue in the meantime.Summarizing all these points, we are both a deeply embedded and must-have technology, and we serve a highly diversified and comparably stable B2B customer base by offering them a best-in-the-business value proposition that our competitors simply can’t match. For all of these reasons, we believe we can weather the storm and continue to grow even in the face of these strong economic headwinds. To be fair, though, there’s still a lot of uncertainty ahead, and no one really knows the ultimate impact of the coronavirus – that the coronavirus may have. This uncertainty is why we’ve acted aggressively and sought to protect our business in the event of a greater downside scenario.Financially, we’ve taken decisive action to ensure the long-term viability of our operations. Across the company, we’ve reduced our expense base by more than 20%, which should result in over $6 million in cost savings for the remainder of 2020 and should also allow us to meet our target cash usage for the year at under $4.5 million. Through a handful of other transactions, we’ve also increased our available funds by roughly $7 million, raising our pro forma balance to over $16 million. With these cash reserves, should any of the points in our growth thesis has come under duress, we have the financial infrastructure to respond.With that out of the way, I’d like to provide an update on our operations for the quarter. Let me begin with Perfect Audience. As a reminder, we acquired Perfect audience back in November from Marin Software. As a business focused entirely on retargeting and digital advertising, we believe Perfect Audience is a great complement to our core SharpSpring marketing automation solution. While the integration process remains ongoing, we’re already seeing benefits. In the first quarter, we recorded a 23% increase in the number of paid advertisers compared to the end of the year. Ad impressions are also increasing, and March was the single highest revenue month since the acquisition, which even includes a minor impact from COVID-19.Another benefit from Perfect Audience is that it experiences a much quicker cash turn than our core SharpSpring business. In processing higher volume, lower fee transactions, we’re able to recycle our marketing dollars much faster, expediting the learning curve as we continue to align our two businesses. The initial integration process has been successfully completed, and we’re now looking to complete a second phase in the middle of this year that will include automatic campaign attribution, CRM contact retargeting and seamless look-alike audience building.As of today, despite the headwinds of COVID-19 and because of the number of operational improvements we’ve made to the business, Perfect Audience is tracking according to plan for the second quarter. We’ve been able to realize meaningful contribution margin expansion through the automated procedures we’ve implemented as well as the official expiration of our shared services contract with Marin in March. In the past few months, we’ve significantly reduced customer acquisition costs and are seeing the LTV to CAC ratio trend upward. We believe retargeting represents some of the lowest hanging fruit on the Internet, and we’re making investments to capitalize on that opportunity. With a growing lead database of over 100,000 contacts, we’ve been holding webinars, posting timely content and providing other tools in a regular marketing cadence.Moving next to our newest feature releases. In the last few months, we’ve launched a number of tools, features and updates, but two have really stood out. We’re specifically, with our new spot and video calling features, we’re providing in demand and essential tools that are in direct response to the current environment. Our recently launched chatbot has now become one of the most quickly adopted features in SharpSpring history. In fact, more than 1,500 chatbots were configured within the first few weeks after launch in early March.Businesses that use chatbots often see a large percentage increase in both engagement and lead generation from their websites. We’ve included this powerful feature to the platform and given it to our customers without additional charge. For our customers, this is a huge value add. For SharpSpring, this is yet another way to become embedded into the customers’ sales and marketing operations. Another essential product we’re now providing to our customers is integrated video calling. And is a solution built to help marketing agencies and businesses connect with their leads, contacts, and clients directly from the CRM. We’ve included this first of its kind functionality into our platform free of charge. We built this solution specifically in response to COVID-19, and our agency partners and their customers have both expressed their appreciation and have adopted this feature in large numbers.Looking ahead on our product road map, we have a bevy of new features that we plan on rolling out over the next few quarters that should continue to make our platform more functional and further embed ourselves into our customers’ operations. In the coming quarters, for example, we’re looking forward to providing integrations with Facebook Lead Ads, VidYard and Slack.Moving now to some updates on our internal processes. Beginning in the second quarter, we’re now operating on a team-based account management concept. What this means is that our – in addition to still having a primary account manager, SharpSpring partners will now have access to a full team for support. The team-based structure ensures that customers will always have access to account management services even if the primary account manager is not available.Within our account management teams, we’ve also further specialized our approach by grouping customers into three buckets. We’ve identified as high expansion, stable or high-risk. Depending on the partner profile, we will be assigning teams that focus on meeting their unique needs, making sure we’re maximizing expansion and reducing attrition depending on the situation. As a general comment on attrition, when factoring in our price increase at the beginning of the year, coupled with the initial impact from COVID-19 beginning in March, we did see a temporary spike in this area. As is always the case, it’s worth noting that the vast majority of these lost accounts were from lesser contributors, meaning agencies that have not reached expansion revenue and therefore, have smaller than average MRR. Further, we’ve already seen a return to normal levels in April and through the first half of May as well.Another new initiative that we think will have a positive impact on our customer acquisition costs involves our lead gen practices. As Michael mentioned earlier, in Q1, our cost to acquire a customer sequentially decreased but we still think we can be doing a much better job using our sales and marketing spend more effectively. For context, historically, marketing has owned 100% of our lead generation activities as well as our budget. Our plan moving forward is to reduce a portion of our marketing budget and reallocate these funds to outbound business development rep pressure or BDRs. We’ve seen positive results with our BDR efforts and think this new approach will result in more efficient overall lead gen process.Over time, we believe it will have both a pronounced impact on our customer acquisition costs as well as our CAC payback period. As evidence of the effectiveness of this new approach and for some additional color on our pre and post-coronavirus performance, we did see a slowdown in sales in the back half of March as our prospective clients went into lockdown, but saw new client sales rebound and get stronger each week in April, such that our new client adds in April were flat year-over-year as compared to 2019.In summary, our sales team has done a great job of scheduling demos and converting them to sales by explaining the benefits of marketing automation software in this environment. And this execution was accomplished with reduced marketing spend and in part as a result of our new BDR-led lead generation activities.Looking ahead, we’re keeping a watchful eye on the latest updates from the CDC, the World Health Organization and other regulatory authorities to determine the best course of action for our employees and our business. 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, we’re able to support remote operations quite effectively.As I’ve said a few times, like other businesses, we’re not immune to the effects of a macroeconomic slowdown. However, we are confident that we’ve taken the necessary cost saving steps, secured 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 that guarantee our business continuity and the long-term health of our organization, and we’re well positioned moving forward. We hope you and your families remain safe and healthy during this challenging time.And with that, we’re ready to open the calls for questions. Operator, please provide the appropriate instructions.

[Operator:]

[Operator Instructions] We’ll take our first question today from Darren Aftahi with ROTH Capital Partners. Please go ahead, sir.

[Darren Aftahi:]

Hey, everybody. Thanks for taking questions. I hope you guys are well. If I may – Rick, you touched a little bit on some trends. I’m just kind of curious of curious overall on your business. I appreciate you guys giving guidance still. But can you maybe talk about the cadence of your business sort of March, April, and we’re about halfway through May, those kind of three months kind of juxtapose them, kind of client behavior, what’s kind of been encouraging, what’s kind of been discouraging? Second question, do you mind quantifying what the Perfect Audience revenue was in the quarter? And then on the $6 million in cost savings for the remainder of the year, do we think about that as $2 million per quarter or something different? And then where are those mostly kind of concentrated in? Thank you.

[Rick Carlson:]

You’re showing a lot of faith in me asking a three-part question, and so we’ll see how I do with that. Let me – yes, sure. I’m sort of excited to give you a little bit of color on – the first part of your question was really behavior over the, I think, pre and post-coronavirus time frame. So let me give you some rough numbers here. I think January and February, we did about 120 sales, new sales rounding in each of those two months, so very – what we think it was a very strong start to the year.March looked right on track and then sort of didn’t sell a thing for the rest of the month. And we ended up with March right around 80-or-so sales. And that’s how you get to your 321. April, we saw sort of bounce back. And I know we’re not in Q2, but I’ll let you know that April, we ended up in the high – or the – I’m going to say, the mid-90s in April. So what we really saw was a temporary, I think, blip. And then there are similar trends going on with the things that – the precursors to our sales, the lead flow that turns into demo, requested demos, and we’re seeing, I think, pretty good. We’re feeling good right now about what’s going on with our lead flow, the number of demos and how we’re feeling about Q2.So it really felt a lot like a – like the world paused in March, but got – but sort of quickly recovered. I think the same is true on the attrition side. We saw sort of our normal attrition rates on a logo basis. That’s hovering around 3%. In March, we saw that number go to 5%. That 5% was actually driven by our – mainly by our country partners who are up at like 8%, 9%. These are very small deals, but on a logo basis, they really shot through the roof there. And so – and then we saw that return back down to normal levels in April already, I mean, entirely normal level. So March was an anomaly in both the sales and the attrition side. We’re happy to see things sort of return to normal in April. Of course, I gave you the logo numbers. The net revenue attrition numbers were much lower than that because, again, we lose low-value clients when we lose clients, the clients that don’t hit expansion. With regard to the PA revenue, we were right around $620,000 or so, right in that range.And yes, I blew it. What was the third part of your question?

[Darren Aftahi:]

The third part was on the cost reduction, more around $6 million of savings. Is that linear across, let’s say, the last three quarters?

[Rick Carlson:]

I would think it would be real close to linear. It’s a – yes, it is a function of us doing a 10% reduction in base salary across the company. We reduced bonuses, so managers are sort of leading the way here in terms of the reduction in compensation. And we – and I alluded to this in my comments, we think we’ve gotten – luckily, we think we got a little bit smarter in terms of our customer acquisition strategy right around the same time all of this was happening. And so we feel like the marketing spend in our new processes, that may be a permanent efficiency change on our side as well. And this is – to be specific, I’m talking about our move to a sort of a sales-driven organization in terms of lead gen and not entirely dependent on marketing to generate leads. And so yes, all of those factors, that should be linear over the last three quarters.

[Darren Aftahi:]

Great. Thank you.

[Operator:]

Our next question comes from David Hynes with Canaccord. Please go ahead, sir.

[David Hynes:]

Thanks a lot, Rick. Yes, thanks. Yes. So first question, what percent of your 2,000 agencies are paying you subscription fees above the minimum threshold? I guess I’m trying to assess the risk of partial churn, if an agency loses end user clients.

[Rick Carlson:]

Yes, good question. This is – I don’t know this number off the top of my head, but I am – I would that it’s 25%, give or take, 5%, maybe a little bit higher than that. But in that range.

[David Hynes:]

Okay. That’s helpful. And then second question, just help me – the philosophy of new features being paid-for additions versus bundled in for free, right? It seems like you’ve rolled out some pretty interesting stuff that’s been pretty widely adopted, granted it’s on the heels of a significant price increase, so clients feel like they’re getting value for paying more. But just on a go-forward basis, as you continue to innovate, how do you think about what’s going to be paid for and what’s going to be bundled in as part of a base subscription?

[Rick Carlson:]

Yes. It’s a – it’s not a clear answer. So we’re looking at the features, and we really look at the features. Whether or not the added stickiness of the platform, for example, this chatbot feature is yet another thing that’s built and configured, it takes some time to configure it, you might wire it into various parts of your process and so forth. And so to the extent that we have somebody using the chatbot, that’s a really good thing for us from a churn perspective. And so we sort of weighed selling that as an extra feature. And yes, there’s revenue that shows right up on the – on the books, versus the anticipated impact of it reducing churn.I’ll tell you, we – even after our price increase, we remain one of the best and values out there, and we’re going to continue to do that. So we’re sort of looking at the opportunity to – what a sales and adoption curve might look like in the revenue there and weighing it against what we think that the offset would be in terms of its ability to lower attrition and fend off competitors, et cetera, et cetera. So that’s roughly what we’re doing when we think about these features. We think there’s plenty of opportunity to add paid-for features, but – and those would be the kind of features we might add that we look at it and we say this isn’t going to save anybody from leaving us, it’s not a sticky feature, if you will, but it adds a lot of value. That would be the type of decision we might make to, say, charge for that feature.

[David Hynes:]

Sure. Yes, okay. That all make sense. I’ll hop back in the queue. Thanks, guys.

[Operator:]

Our next question comes from Eric Martinuzzi with Lake Street Capital. Please go ahead, sir.

[Eric Martinuzzi:]

Question about the competitive landscape. I know some of your agencies are SharpSpring, TrueBlue, but some of your agencies actually work with more than one marketing and automation provider. Have you seen any increase maybe in accounts looking to step away from a higher-priced marketing automation solution and moving over to you guys? Or is that really just kind of noise level in the prospect pipeline?

[Rick Carlson:]

So there’s certainly a lot of anecdotal evidence of that. We hear that happening all the time. I don’t know that it raises above – I don’t know that it’s – there’s some strong signal I can report here. The switching costs on these platforms, as we spend some time talking about it, is fairly high. And we think that there’s the potential for that to start happening to the extent that the economic situation problems deepen and people are really looking to cut costs over the long term. I mean we are the solution for that. And so that would only move in our direction 100% of the time. People would never leave SharpSpring to go elsewhere, but they would come to SharpSpring. And so this – it feels like forever, I’m sure for everybody on the call, but what have – we’ve been doing this now eight weeks or so. And so we’ve not seen a mass exodus or toward us. But certainly, that happens, and we’ve heard of it happening, and we clearly encourage it and remind our agencies what value we are. So hopefully, that’s a thorough answer to the question.

[Eric Martinuzzi:]

Okay. Yes, because I saw you guys had an incentive program out there, and it sounds like it would be just kind of on the margin potential positive. Okay.

[Rick Carlson:]

Yes. Go ahead. I was just going to say the – we did that thing. All right. No, you go ahead, Eric. I’m quiet now.

[Eric Martinuzzi:]

I’ll finish this, and I’m shifting gears. All right. Well, let me dive in with the – a layer deeper then on the revenue forecast here. You’ve got a $30 million to $31 million for the year. We do have – historically, if Perfect Audience is going in the right direction, historically, we’d see about $200,000, $300,000 sequential increase. Any reason to believe that would not be the case here in Q2 versus Q1?

[Rick Carlson:]

I don’t think so, no.

[Eric Martinuzzi:]

Okay. And then on the operating expense, we kind of – we’ve been hearing Perfect Audience for a full quarter now, but you did the cost cuts. I understand the $6 million of savings, but just kind of take me to a number. Do you have an OpEx number, a good OpEx number to use for Q2?

[Rick Carlson:]

I’m going to – I think I’m going to defer to Michael on that question.

[Michael Power:]

For in general, the core group or for Perfect Audience?

[Eric Martinuzzi:]

Total all-in.

[Michael Power:]

For Q2, probably around $5 million.

[Eric Martinuzzi:]

Okay. So that’s the cash OpEx number that you’re talking about there.

[Michael Power:]

Yes.

[Eric Martinuzzi:]

Got you. Okay, that covers my questions. Thanks, guys.

[Operator:]

Our next question comes from Chad Bennett with Craig-Hallum. Please go ahead, sir.

[Chad Bennett:]

Great. Thanks for taking my questions. Rick, so nice job executing in a tough environment. It’s great to see the guide reiterated, so kudos. So a couple of things, kind of piggybacking on some previous questions. So I guess, on the guide for the year, you indicated Perfect Audience is on track for the second quarter. I guess have you changed your view on the annual number for Perfect Audience embedded in that overall revenue guide?

[Rick Carlson:]

No. No, we haven’t. I mean I think we’re expecting – so far, the numbers for Perfect Audience we’re sort of making improvements to the business as the economy is doing its thing. And that is maintaining that’s getting us to the – our budget numbers. We’re keeping up with our internal expectations around Perfect Audience. So pretty excited about that.

[Chad Bennett:]

Good. Good to hear. And then just circling back on the attrition you pointed out. It’s great color on the logo versus dollars, which is good color for us. But I assume none of this attrition or any attrition you have seen to date has – you believe, has come from the price increase. Is that fair?

[Rick Carlson:]

That’s correct. The price increase was done in January. We saw no noticeable – and actually, as I honestly, as I read it, I realized I would have tweaked one of the sentences that we prepped. But no, the logo attrition that we saw was not tied to the price increase. We provided so much value with that price increase. I mean nobody’s sending me flowers when we do a price increase, but by and large, every one of our partners recognizes what a value there is in SharpSpring. And so we did not see any material attrition due to the price increase.

[Chad Bennett:]

Got it. And so this kind of goes hand-in-hand, but net revenue retention improved again pretty decently, actually, which is good in this environment or remarkable in this environment. So I know you’ve been targeting getting that over 100%. Has anything changed in your mind of getting to that 100% bogey and can we get there maybe even this quarter?

[Rick Carlson:]

Potentially, yes. The – I think the coronavirus stole it from me here with our extra blip of attrition in March, or we would have been able to report on that number being north of 100%, which would have been a lot of fun. But we’ll take 99.6% for right now. We see that trend continuing. I talked a lot about our user base. With each passing year in our business, we get a larger percentage of our user base that we would count as mature customers. I think it was DJ, who asked the question about how many of our agencies have actually hit expansion and I gave a number that was less than 50%. As those customers expand on the platform and grow, that’s where we see incremental steps towards north of 100% revenue retention. So I would expect it this coming quarter, for sure. And I think that’s right. And then over the long term, I would think we could work to stay there.

[Chad Bennett:]

Great. Thanks for taking my questions. Nice job, guys.

[Operator:]

At this time, this concludes our question-and-answer session. I’d now like to turn the call back over to Mr. Carlson for his closing remarks.

[Rick Carlson:]

Yes. Needless to say, in these times, especially, I want to thank our employees who have been fantastic. We’ve switched to a work-from-home environment. They have been executing like the team that they are. I want to thank our partners and investors for their continued support and we wish everybody on this call, you and your families and friends all the health and happiness that you can master. So thank you so much for spending some time with us. Take care. Operator?

[Operator:]

Before we conclude today’s call, I would like to provide SharpSpring’s safe harbor statement that includes important cautions regarding forward-looking statements made during this call.During today’s call, there were forward-looking statements made regarding future events, including SharpSpring’s future financial performance. These statements reflect the company’s current views with no respect to future events. These forward-looking statements involve known and unknown risks, uncertainties and other factors, including those discussed under the heading Risk Factors and elsewhere in the company’s latest annual report on Form 10-K and quarterly reports on Form 10-Q. That may cause actual results, performance or achievements to be materially different from any future results, performances or achievements anticipated or implied by these forward-looking statements. The company does not undertake any responsibility to revise any forward-looking statements to reflect future events or circumstances.Also note that during this conference call, we may have referenced to adjusted EBITDA, core net income or loss, or core net income or loss per share, which are non-GAAP financial measures presented as supplemental measures of the company’s performance. A reconciliation of net income or loss of non-GAAP measures is included for your reference in the financial section of the earnings press release and made available on the company’s website.Finally, I would like to remind everyone that the recording of today’s call will be available for replay via a link available in the Investor section of the company’s website.Thank you for joining us today for SharpSpring’s first quarter 2020 earnings conference call. You may disconnect.