Group 1 - Crexendo (NASDAQ: CXDO) is gaining a significant position in the unified communications sector due to a well-valued product and the exit of a strong competitor, Microsoft [1] - The company is focused on quality-growth investments, aiming for a ~15% return over the next five years with conservative assumptions [1] - Key attributes of a quality company include sustained top-line growth, a profitable bottom line, a healthy balance sheet, free cash flow generation, high ROCE, and an attractive potential market [1]

Core Viewpoint - Crexendo (CXDO) has received an upgrade to a Zacks Rank 2 (Buy) due to an upward trend in earnings estimates, which is a significant factor influencing stock prices [1][3]. Earnings Estimates and Stock Price Impact - The Zacks rating system is primarily driven by changes in a company's earnings outlook, which is reflected in earnings estimate revisions [2][4]. - An increase in earnings estimates is strongly correlated with near-term stock price movements, as institutional investors adjust their valuations based on these estimates [4][6]. Crexendo's Earnings Outlook - For the fiscal year ending December 2024, Crexendo is expected to earn $0.24 per share, which remains unchanged from the previous year [8]. - Over the past three months, the Zacks Consensus Estimate for Crexendo has increased by 3.7%, indicating a positive trend in earnings expectations [8]. Zacks Rank System - The Zacks Rank system classifies stocks into five groups based on earnings estimates, with Zacks Rank 1 (Strong Buy) stocks historically generating an average annual return of +25% since 1988 [7]. - The upgrade of Crexendo to a Zacks Rank 2 places it in the top 20% of Zacks-covered stocks, suggesting potential for market-beating returns in the near term [10].

Financial Data and Key Metrics Changes - Consolidated revenue grew 13% year-over-year to $15.6 million compared to $13.9 million in Q3 of the prior year [21] - GAAP profitability was reported at $1.2 million, marking the fifth consecutive quarter of GAAP profitability [8][9] - Non-GAAP net income for the quarter was $1.7 million, down from $3.3 million in the same quarter last year [26] - Operating expenses increased 15% to $15.5 million due to investments in headcount and Oracle Cloud Infrastructure [24] Business Line Data and Key Metrics Changes - Software solutions revenue increased 25% year-over-year to $5.9 million, while service revenue grew 6% to $8 million [21] - Telecom Services segment gross margins remained consistent at 55% year-over-year [23] - Product revenues increased 9% to $1.8 million compared to $1.7 million in the prior year [21] Market Data and Key Metrics Changes - The telecom backlog grew 22% year-over-year to $77.4 million, indicating strong future revenue potential [40] - The company surpassed 5 million users on its platform, with expectations to reach 6 million by early 2025 [45] Company Strategy and Development Direction - The company is focused on organic growth, with expectations for double-digit growth continuing into 2025 [20] - Significant investments are being made in Oracle Cloud Infrastructure to enhance competitive advantages, particularly in Europe [9][10] - The company is also looking to make strategic acquisitions to further drive growth [12][85] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to attract customers from competitors like Cisco and Microsoft, particularly due to recent instability in those companies [17][18] - The management highlighted the importance of customer service as a key differentiator in a competitive market [8][19] - There is optimism regarding the ongoing industry shift towards cloud communications, which is expected to drive substantial growth [18] Other Important Information - The company has maintained a strong focus on customer satisfaction, ranking number one in 18 categories on G2.com [8][39] - The migration of legacy customers to the new VIP system is expected to yield cost savings and operational efficiencies [11][63] Q&A Session Summary Question: How many expansions did you have in the quarter? - The company had eight new logos and five expansions from existing licensees, indicating strong growth [47] Question: Can you provide a status on tools for managed service providers? - Progress continues with new partners helping to automate migrations from Microsoft and BroadSoft [49] Question: What is the impact of the macro environment on services revenue? - There was a slight increase in churn from one national account, but overall sales channels remain strong [56] Question: How do you view the competitive landscape? - The company is seeing increased interest from customers dissatisfied with competitors, creating opportunities for growth [70] Question: What are the biggest investments planned for the next year? - Key investments will focus on Oracle Cloud Infrastructure, the Oracle accounting system, and potential acquisitions [85]

Core Insights - Crexendo (CXDO) reported revenue of $15.63 million for the quarter ended September 2024, reflecting a year-over-year increase of 12.7% and a surprise of +3.70% over the Zacks Consensus Estimate of $15.07 million [1] - The company's EPS for the quarter was $0.06, down from $0.12 in the same quarter last year, but exceeded the consensus estimate of $0.05 by +20.00% [1] Revenue Breakdown - Service revenue was reported at $7.95 million, which is lower than the estimated $8.21 million, representing a year-over-year increase of +5.8% [3] - Product revenue reached $1.81 million, surpassing the average estimate of $1.46 million, with a year-over-year change of +8.9% [3] - Software solutions revenue was $5.86 million, exceeding the average estimate of $5.40 million, showing a significant year-over-year increase of +24.9% [3] Stock Performance - Over the past month, Crexendo's shares have returned +13.9%, outperforming the Zacks S&P 500 composite, which saw a change of +0.7% [4] - The stock currently holds a Zacks Rank 3 (Hold), indicating expected performance in line with the broader market in the near term [4]

Core Viewpoint - Crexendo (CXDO) reported quarterly earnings of $0.06 per share, exceeding the Zacks Consensus Estimate of $0.05 per share, but down from $0.12 per share a year ago, indicating a 20% earnings surprise [1] Group 1: Earnings Performance - The company has surpassed consensus EPS estimates three times over the last four quarters [2] - The quarterly revenue for Crexendo was $15.63 million, which is 3.70% above the Zacks Consensus Estimate and an increase from $13.87 million year-over-year [2] - The company has exceeded consensus revenue estimates four times in the last four quarters [2] Group 2: Stock Performance and Outlook - Crexendo shares have increased approximately 20% year-to-date, compared to the S&P 500's gain of 21.2% [3] - The stock's immediate price movement will depend on management's commentary during the earnings call [3] - The current consensus EPS estimate for the upcoming quarter is $0.05 on revenues of $15.37 million, and for the current fiscal year, it is $0.24 on revenues of $59.41 million [7] Group 3: Industry Context - The Internet - Services industry, to which Crexendo belongs, is currently ranked in the top 27% of over 250 Zacks industries, indicating a favorable outlook [8] - Empirical research shows a strong correlation between near-term stock movements and trends in earnings estimate revisions, which can impact Crexendo's stock performance [5][6]

Revenue Performance - Total revenue for the three months ended September 30, 2024, was $15,627,000, representing a 13% increase from $13,874,000 in the same period of 2023[149] - Total revenue for the nine months ended September 30, 2024, was $44,598,000, a 14% increase from $39,035,000 in the same period of 2023[152] - Service revenue increased by $436,000, software solutions revenue increased by $1,169,000, and product revenue increased by $148,000 for the three months ended September 30, 2024[149] - Software solutions revenue for the three months ended September 30, 2024, was $5,860,000, compared to $4,691,000 in the same period of 2023[149] - Cloud telecommunications service revenue for the three months ended September 30, 2024, was $7,953, an increase of 6% from $7,517 in 2023[165] - Product revenue for the three months ended September 30, 2024, was $1,814, representing a 9% increase from $1,666 in 2023[166] - Service revenue for the nine months ended September 30, 2024, was $23,865, an increase of $1,882 or 9% from $21,983 in the same period of 2023[174] - Software solutions revenue for the nine months ended September 30, 2024, was $16,331,000, a 28% increase from $12,729,000 in the same period of 2023[195] Income and Expenses - The company reported a net income of $148,000 for the three months ended September 30, 2024, down from $1,704,000 in the same period of 2023[149] - Income/(loss) before income tax decreased by 89% to $194,000 for the three months ended September 30, 2024, compared to $1,737,000 in the same period of 2023[150] - The income tax provision for the three months ended September 30, 2024, was $(46,000), compared to $(33,000) in the same period of 2023, reflecting a 39% increase[151] - The income tax provision for the nine months ended September 30, 2024, was $(100), up from $(81) in 2023, reflecting a 23% increase[155] - Non-GAAP net income for the nine months ended September 30, 2024, was $5,736, compared to $5,067 in 2023, indicating a year-over-year increase of 13.2%[159] - Adjusted EBITDA for the nine months ended September 30, 2024, was $5,996, compared to $4,081 in 2023, reflecting a significant increase of 47%[161] Operating Expenses - The company experienced an increase in operating expenses of $1,982,000, primarily due to higher commission expenses and salaries[150] - Total operating expenses for the three months ended September 30, 2024, were $5,687,000, up from $4,400,000 in 2023, representing a 29% increase[190] - Selling and marketing expenses for the nine months ended September 30, 2024, totaled $8,580, an increase of $1,013 or 13% from $7,567 in 2023[181] - General and administrative expenses decreased by $521 or 7%, totaling $6,668 for the nine months ended September 30, 2024, compared to $7,189 in 2023[182] - Research and development expenses for the nine months ended September 30, 2024, were $661, a decrease of $246 or 27% from $907 in 2023[184] - Selling and marketing expenses for the three months ended September 30, 2024, were $2,976, an increase of $509 or 21% from $2,467 in 2023[170] - General and administrative expenses increased by 31% to $1,417,000 for the three months ended September 30, 2024, compared to $1,079,000 in 2023[192] - Research and development expenses rose by 40% to $1,339,000 for the three months ended September 30, 2024, compared to $959,000 in 2023[193] Cash Flow and Investments - As of September 30, 2024, the company had cash and cash equivalents of $15,451 million, up from $10,347 million as of December 31, 2023[203] - Net cash provided by operating activities for the nine months ended September 30, 2024, was $4,107 million, a significant increase of 363% compared to $887 million for the same period in 2023[204] - Net cash used in investing activities for the nine months ended September 30, 2024, was $0, compared to $3,792 million in proceeds from the sale of a corporate office building in the same period of 2023[207] - Net cash provided by financing activities for the nine months ended September 30, 2024, was $1,011 million, a turnaround from a net cash used of $2,324 million in the same period of 2023, representing a change of 144%[211] Strategic Initiatives - The company continues to invest in technology and CPaaS offerings to enhance competitiveness and profitability[145] - Crexendo's cloud telecommunication service was recognized as the fastest growing UCaaS platform in the United States[143] - The company completed the acquisition of Allegiant Networks, LLC, for a total consideration of $2.0 million in cash, a $1.1 million promissory note, and 2,461,538 shares of common stock[211] - The outstanding balance of the related party note payable as of September 30, 2024, was $570 million, down from $843 million as of December 31, 2023[211] - The company entered into a consulting agreement with Steven G. Mihaylo, providing him with $14 million monthly for his services, totaling $168 million annually[212] Market Conditions - The company does not believe inflation has had a material effect on its financial condition or results of operations[216] - The company has not experienced significant foreign currency risk as its sales and operating expenses are predominantly denominated in U.S. dollars[214] Backlog - Backlog increased by 23%, or $9,849, reaching $52,963 as of September 30, 2024, compared to $43,114 as of September 30, 2023[167] - The backlog increased by 20%, or $4,089, to $24,408,000 as of September 30, 2024, compared to $20,319,000 as of September 30, 2023[189]

EX-99.1 2 cxdo_ex991.htm PRESS RELEASE EXHIBIT 99.1 Crexendo Delivers Strong Third Quarter Results PHOENIX, AZ / ACCESSWIRE / November 6, 2024 / Crexendo, Inc. (NASDAQ: CXDO), an award-winning software technology company that is a premier provider of cloud communication platform and services, video collaboration and managed IT services tailored to businesses of all sizes, today announced financial results for the third quarter ended September 30, 2024. Financial highlights: · Revenue of $15.6 million, up 13 ...

Company Overview - Crexendo (CXDO) shares increased by 15.1% to $5.11 in the last trading session, with a higher-than-average trading volume, contrasting with a 0.5% loss over the past four weeks [1] - The company is experiencing strong demand for its Software Solutions and Telecom Services [1] Earnings Expectations - Crexendo is expected to report quarterly earnings of $0.05 per share, reflecting a year-over-year decline of 58.3% [2] - Revenue is anticipated to be $15.07 million, which is an increase of 8.7% compared to the same quarter last year [2] Stock Performance Insights - The consensus EPS estimate for Crexendo has remained unchanged over the last 30 days, indicating that stock price movements may not sustain without earnings estimate revisions [3] - The stock currently holds a Zacks Rank of 3 (Hold), suggesting a neutral outlook [3] Industry Comparison - Crexendo operates within the Zacks Internet - Services industry, where Lyft (LYFT) also belongs [3] - Lyft's consensus EPS estimate has increased by 16.7% over the past month to $0.19, although this still represents a year-over-year decline of 20.8% [4] - Lyft also holds a Zacks Rank of 3 (Hold) [4]

Crexendo (NASDAQ: CXDO ) stock was firing on all cylinders last year, gaining upwards of 104%. Over the past six months, though, the stock has hit a lull, but its fundamentals remain as strong as ever. Hence, the stock now Muslim Farooque is a leading financial journalist and market analyst with over five years of expertise in covering the stock and cryptocurrency markets. His work has been widely featured on platforms such as Seeking Alpha, InvestorPlace, GuruFocus, BarCharts, TipRanks, and Equities, reach ...

[Financial Highlights](index=1&type=section&id=Financial%20Highlights) Crexendo achieved significant financial growth in Q2 and H1 2024, marked by strong revenue increases, a turnaround to net income, and improved cash position [Financial Results for the Second Quarter of 2024](index=1&type=section&id=Financial%20Results%20for%20the%20Second%20quarter%20of%202024) Q2 2024 saw Crexendo's total revenue increase by 16% to $14.7 million, driven by 35% growth in Software Solutions, achieving a net income of $0.6 million Q2 2024 Key Financial Metrics (YoY) | Metric | Q2 2024 | Q2 2023 | Change | | :--- | :--- | :--- | :--- | | **Total Revenue** | **$14.7M** | **$12.7M** | **+16%** | | Service Revenue | $8.1M | $7.3M | +10% | | Software Solutions Revenue | $5.3M | $3.9M | +35% | | Product Revenue | $1.3M | $1.4M | -10% | | **Net Income/(Loss)** | **$0.6M** | **($0.5M)** | **+220%** | | **EPS (basic & diluted)** | **$0.02** | **($0.02)** | **+200%** | | Non-GAAP Net Income | $2.1M | $1.1M | +91% | | Adjusted EBITDA | $2.2M | $1.2M | +78% | [Financial Results for the Six Months Ended June 30, 2024](index=1&type=section&id=Financial%20Results%20for%20the%20six%20months%20ended%20June%2030%2C%202024) For H1 2024, total revenue grew 15% to $29.0 million, with Software Solutions up 30%, resulting in a net income of $1.0 million and increased cash balance Six Months 2024 Key Financial Metrics (YoY) | Metric | H1 2024 | H1 2023 | Change | | :--- | :--- | :--- | :--- | | **Total Revenue** | **$29.0M** | **$25.2M** | **+15%** | | Service Revenue | $15.9M | $14.5M | +10% | | Software Solutions Revenue | $10.5M | $8.0M | +30% | | **Net Income/(Loss)** | **$1.0M** | **($2.1M)** | **N/A** | | **EPS (basic)** | **$0.04** | **($0.08)** | **N/A** | | Non-GAAP Net Income | $4.0M | $1.7M | +135% | | Adjusted EBITDA | $4.2M | $2.0M | +110% | - Cash and cash equivalents increased to **$13.6 million** at June 30, 2024, from **$10.3 million** at December 31, 2023[6](index=6&type=chunk) - Cash provided by operating activities was **$2.5 million** for the first six months of 2024, compared to cash used of **$(0.7) million** in the prior-year period[7](index=7&type=chunk) [Management Commentary](index=2&type=section&id=Management%20Commentary) Management attributes strong Q2 2024 results, exceeding expectations, to robust software performance, effective cost management, and increased cash for future growth - Q2 2024 results exceeded analyst expectations, with consolidated revenue growing **16%** YoY[8](index=8&type=chunk) - The software division was a key performer, with **35% growth**, indicating strong market demand for its platforms[8](index=8&type=chunk) - A remarkable turnaround from a net loss of **$(0.5) million** in Q2 2023 to a net income of **$0.6 million** in Q2 2024 is attributed to effective cost management and operational efficiencies implemented in late 2023[9](index=9&type=chunk) - The company's cash balance increased to **$13.6 million**, providing flexibility for investment and strengthening its market position[9](index=9&type=chunk) [Consolidated Financial Statements](index=3&type=section&id=Consolidated%20Financial%20Statements) This section presents Crexendo's financial position, operational performance, and cash flows, highlighting key metrics from the balance sheet, income statement, and cash flow statement [Condensed Consolidated Balance Sheets](index=3&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) As of June 30, 2024, total assets reached $59.6 million, driven by increased cash, with total liabilities stable at $11.5 million and equity rising to $48.2 million Balance Sheet Highlights (in thousands) | Account | June 30, 2024 | Dec 31, 2023 | | :--- | :--- | :--- | | **Cash and cash equivalents** | **$13,611** | **$10,347** | | Total current assets | $21,885 | $16,949 | | **Total Assets** | **$59,639** | **$56,160** | | Total current liabilities | $10,441 | $10,261 | | **Total Liabilities** | **$11,451** | **$11,547** | | **Total stockholders' equity** | **$48,188** | **$44,613** | [Condensed Consolidated Statements of Operations](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) Q2 2024 total revenue increased 16% to $14.7 million, resulting in an operating income of $0.6 million and net income of $0.6 million, or $0.02 per share Statement of Operations Summary (in thousands, except per share data) | Metric | Q2 2024 | Q2 2023 | H1 2024 | H1 2023 | | :--- | :--- | :--- | :--- | :--- | | **Total revenue** | **$14,685** | **$12,670** | **$28,971** | **$25,161** | | Gain/(loss) from operations | $580 | $(517) | $1,063 | $(2,091) | | **Net income/(loss)** | **$588** | **$(545)** | **$1,022** | **$(2,127)** | | **EPS (Basic)** | **$0.02** | **$(0.02)** | **$0.04** | **$(0.08)** | | **EPS (Diluted)** | **$0.02** | **$(0.02)** | **$0.03** | **$(0.08)** | [Condensed Consolidated Statements of Cash Flows](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) For H1 2024, cash from operating activities was $2.5 million, leading to a net increase in cash of $3.3 million and an end-of-period balance of $13.6 million Cash Flow Summary for Six Months Ended June 30 (in thousands) | Activity | 2024 | 2023 | | :--- | :--- | :--- | | Net cash provided by/(used for) operating activities | $2,486 | $(673) | | Net cash used for investing activities | $0 | $(92) | | Net cash provided by/(used for) financing activities | $778 | $(486) | | **Net increase/(decrease) in cash** | **$3,264** | **$(1,275)** | | **Cash and cash equivalents at end of period** | **$13,611** | **$4,200** | [Supplemental and Non-GAAP Information](index=6&type=section&id=Supplemental%20and%20Non-GAAP%20Information) This section details segment performance and reconciles GAAP to Non-GAAP financial measures, including Non-GAAP net income and Adjusted EBITDA, for a comprehensive view of operational results [Supplemental Segment Financial Data](index=6&type=section&id=Supplemental%20Segment%20Financial%20Data) Q2 2024 segment performance shows Cloud Telecommunications Services with $9.4 million revenue and $0.1 million operating income, and Software Solutions with $5.3 million revenue and $0.5 million operating income Segment Performance for Q2 2024 vs Q2 2023 (in thousands) | Segment | Revenue (Q2'24) | Revenue (Q2'23) | Operating Income/(Loss) (Q2'24) | Operating Income/(Loss) (Q2'23) | | :--- | :--- | :--- | :--- | :--- | | Cloud telecommunications services | $9,360 | $8,740 | $120 | $(207) | | Software solutions | $5,325 | $3,930 | $460 | $(310) | [Reconciliation of Non-GAAP Financial Measures](index=6&type=section&id=Reconciliation%20of%20Non-GAAP%20Financial%20Measures) This section reconciles GAAP net income to Non-GAAP net income of $2.1 million and Adjusted EBITDA of $2.2 million for Q2 2024, adjusting for non-cash items - The company uses Non-GAAP measures like **Non-GAAP net income** and **Adjusted EBITDA** to evaluate business performance, excluding effects of share-based compensation, amortization, and acquisition-related expenses[20](index=20&type=chunk) Reconciliation of GAAP Net Income to Non-GAAP Net Income (Q2 2024, in thousands) | Metric | Amount | | :--- | :--- | | U.S. GAAP net income | $588 | | Share-based compensation | $784 | | Amortization of intangible assets | $758 | | **Non-GAAP net income** | **$2,130** | Reconciliation of GAAP Net Income to Adjusted EBITDA (Q2 2024, in thousands) | Metric | Amount | | :--- | :--- | | U.S. GAAP net income | $588 | | Depreciation and amortization | $836 | | Interest & other expense/(income) | $(35) | | Income tax provision | $27 | | **EBITDA** | **$1,416** | | Share-based compensation | $784 | | **Adjusted EBITDA** | **$2,200** |