Investor Presentation

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1 Investor Presentation June 2016 SharpSpring, Inc. investors.sharpspring.com NASDAQ: SHSP

2 Safe Harbor Statement The information provided in this presentation may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 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 involve risks and uncertainties that could cause actual results to differ materially from those projected or anticipated. These risks and uncertainties 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, delays due to issues with outsourced service providers, and various other factors beyond the control of SharpSpring, Inc. (the Company ). This presentation includes statistical and other industry and market data that the Company obtained from industry publications and research, surveys and studies conducted by third parties. Industry publications and third-party research, surveys and studies generally indicate that their information has been obtained from sources believed to be reliable, although they do not guarantee the accuracy or completeness of such information. While the Company believes that these industry publications and third-party research, surveys and studies are reliable, the Company has not independently verified such data and the Company does not make any representation as to the accuracy of the information. 2

3 Global provider of SaaS marketing technologies Marketing automation platform that caters to the needs of digital marketing agencies and SMB customers Robust sending platform increases effectiveness of inbox delivery Thousands of customers worldwide 3

4 Overview Corporate Overview Founded 1998 (formerly SMTP, Inc.) Ticker NASDAQ: SHSP Market Cap (6/3/16) $33 M Shares Outstanding 8.3 M 2015 Revenue $14.6 M Q Revenue $4.2 M Annualized Growth Rate 51% (1) 2015 Gross Margin % 73% 2015 Adj. EBITDA ($0.5 M) Q Adj. EBITDA ($0.1 M) Debt (3/31/16) $0 Cash (3/31/16) $3.5 M Products Revenue Profile $16,000 $14,589 $14,000 $12,000 $10,000 $8,000 $7,499 $6,000 $5,354 $5,754 $4,279 $4,000 $2,736 $2,000 $805 $1,549 $ Customer Mix Sophisticated, affordable marketing automation Powerful marketing with next generation features (2) Growth engine for future Marketing Automation Marketing (2) Robust, scalable SMTP delivery platform Solid, profitable business (1) Represents CAGR for (2) Represents SharpSpring Mail+ brand, previously sold as GraphicMail No customer represents more than 2% of total revenues 4

5 Company Timeline Delivering on Stated Goals Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 1/2014 SMTP raises $11.5M to pursue acquisitions for scale and technology Up-listing to NASDAQ Reviewed potential targets (analyzed over 180 companies) 8/2014 SharpSpring Acquisition 10/2014 GraphicMail acquisition Company cuts dividend to focus on growth Company announces record revenues with $3.6M in Q2 15 8/2015: SharpSpring raises $3.8M to accelerate sales and marketing spending initiatives for SharpSpring 12/2015: Company names Rick Carlson CEO and changes name to SharpSpring to align behind marketing automation brand Record of success against growth plan Raised $11.5M in early 2014 to pursue acquisitions for scale and technology Acquired SharpSpring (August 2014) and GraphicMail (October 2014) Successfully doubled revenues and quintupled rate of adding new recurring revenues Held Adj. EBITDA near breakeven Concurrently improved liquidity and gained the attention of key analysts Announced migration of GraphicMail Customers to SharpSpring 5

6 Marketing Automation Overview What Marketing Automation Does: 1) Drives leads to your business 2) Helps convert leads to sales 3) Measures the ROI on marketing campaigns Key Marketing Automation Functionality: Behavior-based triggers Automated individualized responses Deep analytics on customer interactions Lead nurturing and scoring Marketing campaign management 63% of companies that are outgrowing their competitors use marketing automation software (1) Marketing automation is becoming critical for growth (1) Position2 Digital Marketing Trends & Predictions for 2014 (2) Raab Associates 2014 VEST 6

7 A Rapidly Growing Market A $1.8B market growing 60% annually (1) Nearly 11 times more B2B Organizations are using marketing automation today compared to early 2011 (2) Strong M&A activity $2,000 B2B Marketing Automation Systems (Revenue in US$ millions) $1,800 $1,500 $1,200 $1,000 $500 $0 $750 $500 $325 $225 $ (1) Raab Associates 2015 VEST (2) SiriusDecisions -- B-to-B Marketing Automation Study (2014) 7

8 Marketing...is clearly the most important battleground for technology providers over the next decade. Notable recent acquisitions: Forrester Research Over $4.5B in marketing automation M&A activity in the last five years. Source: Marketing Automation Insider and company research 8

9 SharpSpring Target Market True Enterprise Marketing Automation Small and Mid-Market for Marketing Automation Small Business Marketing Requires Enterprise Sales Force Lack full feature set Raab estimates the SMB at approximately 1.3M entities domestically, with penetration of 3 to 10% SharpSpring s low pricing and competitive features allow it to directly and successfully target existing HubSpot and Act-On customers SharpSpring s broad functionality can attract interest from Marketo users, and its low price point makes it more attractive to small businesses Domestic Market Segments and Penetration Segment Annual Revenue Clients % Clients Companies Penetration Micro <$5 million 31,000 57% 1,000,000 3% Small $5 - $20 million 12,000 22% 220,000 5% Mid-size $20 - $500 million 9,000 16% 90,000 10% Large $500+ million 3,000 5% 5,000 60% Source: Raab Associates 2014 Vest SharpSpring ranks as a leader in the small business segment based on both product and vendor strength. Raab Associates 9

10 SharpSpring Addresses Key Customer Pain Points Source: 2014 B2B Marketing Automation Report Price/ Cost of Ownership Product Integration (CRM, social, mobile, etc) Ease of use/learning curve Analytics & reporting features 56.0% 53.0% 50.0% 44.6% The vision for SharpSpring was to make powerful, affordable technology that was easier for businesses to adopt and utilize quickly. Ability to customize Technical support & customer service Scalability Vendor size & longevity 22.8% 20.9% 19.9% 12.5% We make it easy to switch to SharpSpring Works with all web platforms and content management systems (CMS platforms) Customers can utilize any form creation tool We offer tools for migrating CRM data Not sure On-premise deployment vs SaaS/Cloud delivery Supported list size Other 7.4% 4.2% 11.6% 10.4% 0% 20% 40% 60% Seamlessly integrated solutions or integrate with external apps Fully integrated CRM and call tracking functionality put it ahead of all incumbent technologies in providing 360 degree view of customer interactions Customers have option to utilize existing CRM system, to use SharpSpring s built-in CRM, or to mirror data across both Seamless integration with a host of external applications SharpSpring s Ease-Of-Use a Key Advantage We address the biggest objectives with our product integration & unified technology at a disruptive price 10

11 Price Comparison $40,000 $35,000 $30,000 $25,000 $20,000 $15,000 1/10 th the price of major competitors with similar functionality $10,000 $5,000 $0 HubSpot Act-On Pardot Up Front Annual Fees Source: company websites as of January 2016 and internal pricing program for agencies. 11

12 SharpSpring Economic Model Low Customer Acquisition Costs with Unique Agency Model Q1-16 CAC = $4,042 (1) for $20,000 lifetime value 3.8x ROI CAC = $14,289 (2) CAC = $100,024 (2) Our investments in sales & marketing are expected to be recovered in under 12 months. Accelerating Revenue Growth We are accelerating the rate at which we are adding new annual recurring revenues (ARR) $10 $8 $6 $4 $2 $0 New Annual Recurring Revenue Added Each Quarter Adds the Base of Recurring Revenues the Next Quarter $0.5 M $0.7 M $1.0 M $1.3 M $1.3 M $1.4 M $1.8 M Q Q Q Q Q Q Q ARR Added ARR Under Contract (1) Actual Q1-16 customer acquisition costs (CAC) as reported by the Company (2) Based on company reported customer counts and uses estimated customer churn of 2% per month to estimate customers acquired in the period 12

13 Digital Marketing Agency Characteristics o Typically 5-20 employees o Managing numerous clients simultaneously (usually between ) o Combination of retainer and projectbased clients, with strong preference for retainer-based relationships o Responsible for generating leads and helping move leads through the sales funnel o Provide creative services and deliver campaigns including PPC, SEO, and social o Need to show the impact of their services in the form of calculated ROI Agencies are regarded as the thought leaders in the digital industry More than 300,000 businesses turn to digital agencies to address complex needs 13

14 Already #2 in the Agency Vertical 1, ,144 Agency Customers as of March 31, HubSpot Act-On Pardot Marketo Eloqua Strategic value: As technology complexity increases, more firms turn to agencies We estimate there are 50,000 digital marketing agencies in the USA alone Agencies provide a costeffective path to end-users of various products & services Our best prospect is an agency already using a competitor: Our pricing allows them to reach customers they can t with other solutions Our features are comparable and our flexibility speeds implementations We treat agencies as our customers, whereas competitors treat them as product resellers An agency may have 20 customers with 2 on a competitor; we want to win the other 18 accounts Data represents internal data for SharpSpring and select provider information sourced from Datanyze. 14

15 Long-Term Defensible Position High $2k-$5k+/mo Competitors are not profitable today Can t lower pricing because of large install base We compete with premium functionality, so competitors can t offer lite products Pricing $99-$800/mo Protected from both above and below due to pricing and strength of product, in a market with high barriers to entry Low High technical barriers to entry for new entrants to market Tracking Security Integrations Scalability 15

16 SharpSpring Mail+ o Migrating thousands of GraphicMail customers to SharpSpring Mail+ o Former GraphicMail customers will now have access to basic marketing automation functionality including: o Visitor ID contact tracking Dynamic content Contact manager with social integration Dynamic form builder Advanced segmentation Dynamic list builder Migration in final stages Benefits include: Alignment and focus on SharpSpring platform Clear upgrade path for marketers to marketing automation Cost synergies Dramatic expansion of direct customer count 16

17 Financial Overview SharpSpring, Inc. investors.sharpspring.com NASDAQ: SHSP

18 Summary Financials Strong revenue growth Consistent historical earnings growth $16,000 $14,000 $12,000 $10,000 $8,000 $6,000 Investing in sales & marketing to $4,000 accelerate future growth $2,000 $805 History of Revenue Growth $14,589 $7,499 $5,354 $5,754 $4,279 $2,736 $1,549 $ Select Results Q Revenue $5,754 $7,499 $14,589 $4,194 Gross Profit (GAAP) $4,705 $5,784 $10,638 $2,816 Gross Margin 82% 77% 73% 67% Adjusted EBITDA $2,620 $1,327 ($511) ($129) Adjusted EBITDA Margin 46% 18% (4%) (3%) All figures in $000 s Please refer to the Company s website for a reconciliation to Adjusted EBITDA. 18

19 Balance Sheet and Capital Structure BALANCE SHEET SHARES OUTSTANDING As of March 31, 2016 As of June 3, 2016 Cash & Restricted Cash $3.5M Basic shares outstanding 8,336,989 Total Assets $20.3M Options (weighted avg exercise price of $5.37) 1,159,412 Total Liabilities $7.3M Warrants (weighted avg exercise price of $6.26) 170,973 Shareholders Equity $13.0M Fully diluted shares outstanding 9,667,374 No debt, no preferred equity 100% owned by common shareholders with recent reinvestment by key executives and shareholders 19

20 Investment Highlights Global provider of SaaS marketing technologies, with 51% annual CAGR since 2008 (1) Transformative acquisition of SharpSpring product in 2014 serving the fast growing marketing automation space Winning customers from HubSpot, Marketo & Act-On today Unified technology at disruptive pricing Customer acquisition costs significantly below peers Rapidly achieved meaningful penetration in agency market Aligning products & strategy under the SharpSpring brand Global reach, technology, agency presence, and underlying cost structure are all strategically important in a sector with significant M&A activity (1) Represents CAGR for

21 Thank you 21

22 Appendix SharpSpring, Inc. investors.sharpspring.com NASDAQ: SHSP

23 Experienced Leadership Team Rick Carlson Chief Executive Officer & President Ed Lawton Chief Financial Officer Appointed to CEO on October 1, 2015 after becoming President in August 2015 Proven executive and entrepreneur; founder of SharpSpring Over 15 years of executive management experience in the technology sector, holding president, CEO, general manager, and board positions at several successful internet security companies. Prior to founding SharpSpring, Carlson was President of Panda Security US, an internet security company, and was Managing Director of North America Operations at AVG Technologies, leading the expansion of consumer, SMB and OEM channels in the United States and Canada Extensive experience in finance, accounting and acquisitions for publicly traded technology companies Former Sr. Director of Finance for Bottomline Technologies (NASDAQ: EPAY) helping to complete over 20 acquisitions globally Previously held senior roles with publiclytraded Trico Marine and Cabot Corporation Travis Whitton Chief Technology Officer As a co-founder of SharpSpring, Travis was responsible for the technical design and growth strategy of SharpSpring Prior to SharpSpring, Whitton was the primary data storage architect at Grooveshark.com where he implemented solutions to scale the online music streaming service for millions of visitors per day Our leadership team focuses on accountability and efficiency. Each of us has long-term equity incentives that are well-aligned with our shareholders. 23

24 Reconciliation to Adjusted EBITDA Quarter Ended: 3/31/15 6/30/15 9/30/15 12/31/15 3/31/16 Net income (loss) $ (1,170) $ (1,867) $ (1,289) $ (3,919) $ (710) Provision (benefit) for income tax (396) (456) (379) 1, Other (income) expense, net (331) Depreciation & amortization Non-cash stock compensation Acquisition related charges 752 1, (86) 120 Restructuring charges Impairment of intangible assets ,310 - Adjusted EBITDA $ (106) $ 36 $ (223) $ (218) $ (129) 24