Crexendo(CXDO)

Search documents
Crexendo(CXDO) - 2020 Q4 - Annual Report
2021-03-08 16:00
Part I [Business](index=4&type=section&id=ITEM%201.%20BUSINESS) Crexendo, Inc. provides cloud communications (UCaaS) and web services, primarily through its recurring revenue Cloud Telecommunications segment - The company operates through two segments: **Cloud Telecommunications**, the primary segment offering UCaaS, call center, and collaboration services, and Web Services[14](index=14&type=chunk) - Cloud telecommunications contracts typically span **36 to 60 months**, generating recurring service revenue, alongside product revenue from equipment sales and leases[16](index=16&type=chunk) Segment Revenue and Income | | Year Ended December 31, 2020 (in thousands) | Year Ended December 31, 2019 (in thousands) | | :--- | :--- | :--- | | **Revenue** | | | | Cloud telecommunications | $15,845 | $13,780 | | Web services | $542 | $656 | | **Consolidated revenue** | **$16,387** | **$14,436** | | **Income before income tax** | | | | Cloud telecommunications | $1,788 | $862 | | Web services | $111 | $283 | | **Consolidated income before tax** | **$1,899** | **$1,145** | - Research and development investment increased to **$1.189 million in 2020** from **$853,000 in 2019**, primarily for cloud telecommunications product enhancements[38](index=38&type=chunk) - As of December 31, 2020, the company employed **58 full-time individuals**[47](index=47&type=chunk) [Risk Factors](index=12&type=section&id=ITEM%201A.%20RISK%20FACTORS) The company faces significant risks from the COVID-19 pandemic, intense competition, technological disruptions, regulatory changes, and substantial CEO ownership - The **COVID-19 pandemic** poses significant risks, including decreased demand, supply chain disruptions, and negative impacts on productivity and financial results[56](index=56&type=chunk)[57](index=57&type=chunk) - The company faces intense competition from traditional telecom providers, hardware providers, and other cloud companies[39](index=39&type=chunk)[76](index=76&type=chunk) - The utilization of approximately **$20.5 million in net operating loss (NOL) carry-forwards** may be limited by an ownership change under Section 382 of the Internal Revenue Code[74](index=74&type=chunk) - The business is subject to extensive government regulation by the FCC and state public utility commissions, including obligations for E-911 services and Universal Service Fund contributions[52](index=52&type=chunk)[127](index=127&type=chunk) - The CEO, Steven G. Mihaylo, holds approximately **56% of outstanding common stock**, granting substantial control over corporate matters[181](index=181&type=chunk) [Properties](index=29&type=section&id=ITEM%202.%20PROPERTIES) The company's principal property is its 22,000 square foot corporate office in Tempe, Arizona, acquired from its CEO in January 2020 - The company's principal property is its corporate office, an approximately **22,000 square foot building** in Tempe, Arizona[185](index=185&type=chunk) - In January 2020, the company purchased its corporate office building from a company owned by its CEO[185](index=185&type=chunk) [Legal Proceedings](index=29&type=section&id=ITEM%203.%20LEGAL%20PROCEEDINGS) The company periodically receives government inquiries, primarily related to discontinued seminar operations, generally resolved without formal charges - The company receives inquiries from government officials regarding discontinued seminar operations' sales and marketing practices, generally resolved without formal complaints[186](index=186&type=chunk) [Mine Safety Disclosures](index=29&type=section&id=ITEM%204.%20MINE%20SAFETY%20DISCLOSURES) This section is not applicable to the company's operations - Disclosure required by this item is not applicable[187](index=187&type=chunk) Part II [Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=30&type=section&id=ITEM%205.%20MARKET%20FOR%20REGISTRANT'S%20COMMON%20EQUITY%2C%20RELATED%20STOCKHOLDER%20MATTERS%20AND%20ISSUER%20PURCHASES%20OF%20EQUITY%20SECURITIES) The company's common stock, ticker CXDO, uplisted to Nasdaq on July 8, 2020, with no dividends declared in 2019 or 2020 - On July 8, 2020, the company's stock uplisted from the OTCQX Marketplace to **The Nasdaq Stock Market** under ticker symbol **CXDO**[189](index=189&type=chunk) Quarterly Stock Price Range | Period | 2020 High | 2020 Low | 2019 High | 2019 Low | | :--- | :--- | :--- | :--- | :--- | | Q1 | $4.75 | $3.00 | $3.00 | $1.76 | | Q2 | $6.30 | $4.00 | $4.00 | $2.60 | | Q3 | $12.78 | $5.25 | $3.54 | $3.00 | | Q4 | $8.00 | $5.27 | $4.70 | $3.05 | - No dividends were declared for the years ended December 31, 2020 and 2019[192](index=192&type=chunk) [Selected Financial Data](index=30&type=section&id=ITEM%206.%20SELECTED%20FINANCIAL%20DATA) This section is not required for the company as a smaller reporting entity - This section is not required[193](index=193&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=30&type=section&id=ITEM%207.%20MANAGEMENT'S%20DISCUSSION%20AND%20ANALYSIS%20OF%20FINANCIAL%20CONDITION%20AND%20RESULTS%20OF%20OPERATIONS) Total revenue grew 13.5% to $16.4 million in 2020, driving a 66% increase in pre-tax income and a substantial improvement in liquidity to $17.6 million cash [Results of Consolidated Operations](index=31&type=section&id=Results%20of%20Consolidated%20Operations) Total revenue increased 13.5% to $16.39 million in 2020, leading to a 66% rise in pre-tax income and a net income of $7.94 million due to a significant tax benefit Consolidated Operations Summary | Metric | 2020 (in thousands) | 2019 (in thousands) | | :--- | :--- | :--- | | Total revenue | $16,387 | $14,436 | | Income before income taxes | $1,899 | $1,145 | | Income tax benefit/(provision) | $6,041 | $(6) | | Net income | $7,940 | $1,139 | | Diluted earnings per common share | $0.46 | $0.07 | - The increase in income before tax was primarily due to a **$1.95 million increase in revenue** and a **$1.01 million gain from PPP debt extinguishment**, partially offset by a **$2.10 million increase in operating expenses**[208](index=208&type=chunk) - The company recorded a significant income tax benefit of **$6.04 million in 2020**, primarily due to a **$7.49 million valuation allowance release**[209](index=209&type=chunk) [Use of Non-GAAP Financial Measures](index=33&type=section&id=Use%20of%20Non-GAAP%20Financial%20Measures) The company utilizes Non-GAAP net income and Adjusted EBITDA as supplemental performance measures, showing **Non-GAAP net income of $8.66 million** and **Adjusted EBITDA of $1.87 million** in 2020 Reconciliation of U.S. GAAP Net Income to Non-GAAP Net Income | | Year Ended Dec 31, 2020 (in thousands) | Year Ended Dec 31, 2019 (in thousands) | | :--- | :--- | :--- | | U.S. GAAP net income | $7,940 | $1,139 | | Share-based compensation | $623 | $399 | | Amortization of intangible assets | $92 | $53 | | **Non-GAAP net income** | **$8,655** | **$1,591** | Reconciliation of U.S. GAAP Net Income to Adjusted EBITDA | | Year Ended Dec 31, 2020 (in thousands) | Year Ended Dec 31, 2019 (in thousands) | | :--- | :--- | :--- | | U.S. GAAP net income | $7,940 | $1,139 | | Adjustments (Depreciation, Interest, Taxes) | $(5,807) | $12 | | **EBITDA** | **$1,249** | **$1,229** | | Share-based compensation | $623 | $399 | | **Adjusted EBITDA** | **$1,872** | **$1,628** | [Segment Operating Results](index=36&type=section&id=Segment%20Operating%20Results) Cloud Telecommunications revenue grew 15% to $15.8 million, with backlog increasing 9% to $28.6 million, while Web Services revenue declined 17% to $542,000 - Cloud Telecommunications service revenue increased **16% to $14.0 million in 2020**, driven by growth in contracted service revenue and usage charges[236](index=236&type=chunk) - The Cloud Telecommunications services backlog increased by **9% to $28.6 million** at the end of 2020 from **$26.1 million** in 2019[238](index=238&type=chunk) - Web Services revenue decreased **17% to $542,000 in 2020**, primarily due to a **$109,000 decrease in hosting revenue** as the company is not actively marketing these services[248](index=248&type=chunk)[95](index=95&type=chunk) [Liquidity and Capital Resources](index=42&type=section&id=Liquidity%20and%20Capital%20Resources) The company's financial position strengthened in 2020, with cash increasing to **$17.6 million** and working capital to **$17.2 million**, primarily due to a **$10.8 million public stock offering** Cash and Stockholders' Equity | Metric | Dec 31, 2020 (in thousands) | Dec 31, 2019 (in thousands) | | :--- | :--- | :--- | | Cash and cash equivalents | $17,579 | $4,180 | | Working Capital | $17,218 | $2,845 | | Total stockholders' equity | $25,764 | $4,387 | - Cash provided by financing activities totaled **$13.7 million**, primarily from a **$10.8 million public offering**, **$2.0 million from option exercises**, and a **$1.0 million PPP loan** (later forgiven)[257](index=257&type=chunk) - In January 2020, the company purchased its corporate office building from a CEO-owned company for **$2.5 million**, partially financed by a **$2.0 million note payable**[271](index=271&type=chunk)[263](index=263&type=chunk) [Quantitative and Qualitative Disclosures About Market Risks](index=45&type=section&id=ITEM%207A.%20QUANTITATIVE%20AND%20QUALITATIVE%20DISCLOSURES%20ABOUT%20MARKET%20RISKS) This section is not required for the company as a smaller reporting entity - This section is not required[273](index=273&type=chunk) [Financial Statements and Supplementary Data](index=46&type=section&id=ITEM%208.%20FINANCIAL%20STATEMENTS%20AND%20SUPPLEMENTARY%20DATA) Audited financial statements for 2020 and 2019 are presented, highlighting critical audit matters, key financial results, and subsequent acquisitions of Centric Telecom and NetSapiens Key Financial Statement Data | Metric | Dec 31, 2020 (in thousands) | Dec 31, 2019 (in thousands) | | :--- | :--- | :--- | | **Balance Sheet** | | | | Total Assets | $30,705 | $7,783 | | Total Liabilities | $4,941 | $3,396 | | Total Stockholders' Equity | $25,764 | $4,387 | | **Statement of Operations** | | | | Total Revenue | $16,387 | $14,436 | | Income from Operations | $991 | $1,135 | | Net Income | $7,940 | $1,139 | - The independent auditor identified **Revenue Recognition** and **Valuation Allowances on Deferred Tax Assets** as critical audit matters, due to significant judgment in performance obligations and future income estimation[282](index=282&type=chunk)[283](index=283&type=chunk)[288](index=288&type=chunk) - The company released **$7.487 million of its valuation allowance on deferred tax assets in 2020**, based on achieving three years of cumulative pretax income and projections of future profitability[407](index=407&type=chunk)[408](index=408&type=chunk) - Subsequent Event: On January 14, 2021, the company acquired Centric Telecom, Inc. for approximately **$2.2 million in cash** and **46,662 shares of common stock**, plus potential contingent consideration[439](index=439&type=chunk) - Subsequent Event: On March 5, 2021, the company entered into a merger agreement with NetSapiens, Inc. for approximately **$50 million** total consideration, comprising **$10 million in cash** and **$40 million in stock and stock options**[441](index=441&type=chunk) [Controls and Procedures](index=79&type=section&id=ITEM%209A.%20CONTROLS%20AND%20PROCEDURES) Management concluded that disclosure controls and internal control over financial reporting were effective as of December 31, 2020, with no material changes reported - Management concluded that as of December 31, 2020, the company's disclosure controls and procedures were effective at a reasonable assurance level[444](index=444&type=chunk) - Based on the COSO 2013 framework, management concluded that the company's internal control over financial reporting was effective as of December 31, 2020[447](index=447&type=chunk) - No material changes in internal control over financial reporting occurred during the year ended December 31, 2020[445](index=445&type=chunk) [Other Information](index=80&type=section&id=ITEM%209B.%20OTHER%20INFORMATION) No information is reported under this item - None[449](index=449&type=chunk) Part III Part III incorporates information from the 2021 Proxy Statement regarding directors, executive officers, compensation, security ownership, related transactions, and accountant fees [Directors, Executive Officers and Corporate Governance](index=81&type=section&id=ITEM%2010.%20DIRECTORS%2C%20EXECUTIVE%20OFFICERS%20AND%20CORPORATE%20GOVERNANCE) Information on directors, executive officers, and corporate governance is incorporated by reference from the 2021 Proxy Statement - Information for this item is incorporated by reference from the definitive proxy statement for the 2021 Annual Meeting of Stockholders[451](index=451&type=chunk) [Executive Compensation](index=81&type=section&id=ITEM%2011.%20EXECUTIVE%20COMPENSATION) Information regarding executive compensation is incorporated by reference from the 2021 Proxy Statement - Information for this item is incorporated by reference from the definitive proxy statement for the 2021 Annual Meeting of Stockholders[453](index=453&type=chunk) [Security Ownership of Certain Beneficial Owners and Management and Related Stockholders Matters](index=81&type=section&id=ITEM%2012.%20SECURITY%20OWNERSHIP%20OF%20CERTAIN%20BENEFICIAL%20OWNERS%20AND%20MANAGEMENT%20AND%20RELATED%20STOCKHOLDERS%20MATTERS) Information regarding security ownership of beneficial owners and management is incorporated by reference from the 2021 Proxy Statement - Information for this item is incorporated by reference from the definitive proxy statement for the 2021 Annual Meeting of Stockholders[454](index=454&type=chunk) [Certain Relationships and Related Transactions, and Director Independence](index=81&type=section&id=ITEM%2013.%20CERTAIN%20RELATIONSHIPS%20AND%20RELATED%20TRANSACTIONS%2C%20AND%20DIRECTOR%20INDEPENDENCE) Information regarding related party transactions and director independence is incorporated by reference from the 2021 Proxy Statement - Information for this item is incorporated by reference from the definitive proxy statement for the 2021 Annual Meeting of Stockholders[455](index=455&type=chunk) [Principal Accountant Fees and Services](index=81&type=section&id=ITEM%2014.%20PRINCIPAL%20ACCOUNTANT%20FEES%20AND%20SERVICES) Information regarding principal accountant fees and services is incorporated by reference from the 2021 Proxy Statement - Information for this item is incorporated by reference from the definitive proxy statement for the 2021 Annual Meeting of Stockholders[456](index=456&type=chunk) Part IV [Exhibits and Financial Statement Schedules](index=82&type=section&id=ITEM%2015.%20EXHIBITS%20AND%20FINANCIAL%20STATEMENT%20SCHEDULES) This section lists documents filed as part of the annual report, including financial statements, schedules, and an index of exhibits like the NetSapiens merger agreement - This section includes the financial statements from Item 8, the financial statement schedule, and an index of all exhibits filed with the report[459](index=459&type=chunk) - A key exhibit filed is the Agreement and Plan of Merger and Reorganization with NetSapiens, Inc., dated March 5, 2021[461](index=461&type=chunk)
Crexendo(CXDO) - 2020 Q3 - Earnings Call Transcript
2020-11-11 02:21
Financial Data and Key Metrics Changes - Consolidated revenue for Q3 2020 increased 15% to $4.1 million compared to $3.6 million in Q3 2019 [13] - Service revenue for Q3 2020 increased 12% to $3.7 million compared to $3.3 million in Q3 2019 [13] - Net income for Q3 2020 was $131,000 or $0.01 per share, down from $334,000 or $0.02 per share in Q3 2019 [15] - Gross margin for Q3 2020 decreased to 70% from 72% in Q3 2019 [15] - Consolidated operating expenses for Q3 2020 increased 22% to $4 million compared to $3.3 million in Q3 2019 [15] Business Line Data and Key Metrics Changes - Cloud Telecommunications segment service revenue for Q3 2020 increased 14% to $3.5 million compared to $3.1 million in Q3 2019 [14] - Web Service segment service revenue for Q3 2020 decreased 19% to $130,000 compared to $160,000 in Q3 2019 [14] - Product revenue for Q3 2020 increased 43% to $489,000 compared to $343,000 in Q3 2019 [14] Market Data and Key Metrics Changes - For the nine-month period, consolidated revenue increased 13% to $12.1 million compared to $10.7 million for the same period in 2019 [16] - Service revenue for the nine-month period increased 14% to $10.7 million compared to $9.4 million in the same period of 2019 [16] - Telecom backlog grew by $1 million to $28.3 million, indicating strong demand for cloud migration [24][45] Company Strategy and Development Direction - The company is focused on growth, both organic and through acquisitions, with a strong emphasis on increasing sales and marketing investments [12][26] - The successful uplisting to NASDAQ and capital raise have positioned the company to pursue accretive acquisitions [11][26] - The company aims to maintain profitability while expanding its footprint in the UCaaS industry [27] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the future, citing the ongoing digital transformation accelerated by the COVID-19 pandemic [22][26] - The company has seen a decrease in customer churn, returning to pre-COVID levels, which is a positive sign for future growth [34] - Management believes that businesses are now better prepared for potential future COVID waves, which may sustain sales momentum [41] Other Important Information - The company raised $11.7 million in cash through financing activities, enhancing its cash position to $15.5 million [19] - The company received the 2020 Internet Telephony Excellence Award, recognizing its remote work capabilities [25] Q&A Session Summary Question: How many companies did you end the quarter with and hiring plans for the next 12 months? - Management indicated that hiring is critical, with plans to add channel managers and salespeople to support growth [29] Question: Actions on the bar business and timeline for revenue growth? - Management noted that 70% of businesses have yet to migrate to the cloud, indicating significant growth potential [31] Question: Current churn levels and customer performance? - Churn rates have returned to pre-COVID levels, which is promising for future stability [34] Question: Current M&A environment and potential opportunities? - Management reported increased M&A discussions and opportunities, with hopes for announcements within six months [36] Question: Trends in gross margins and revenue linearity through the quarter? - Management noted that promotional offers impacted product gross margins but expect a return to normal levels soon [39] Question: Marketing initiatives to offset pandemic headwinds? - The company launched a new website and initiated paid search and social media campaigns to drive lead generation [42]
Crexendo(CXDO) - 2020 Q3 - Quarterly Report
2020-11-10 22:21
UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ——————— ——————— ——————— Emerging growth company ☐ FORM 10-Q ——————— (Mark One) ☑ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2020 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. For the transition period from ________ to ________. Commission file number 001-32277 Crexendo, Inc. (Exact name of registrant ...
Crexendo(CXDO) - 2020 Q2 - Earnings Call Transcript
2020-08-11 05:39
Crexendo Inc (NASDAQ:CXDO) Q2 2020 Results Conference Call August 10, 2020 4:30 PM ET Company Participants Steve Mihaylo - Chairman and Chief Executive Officer Doug Gaylor - President and Chief Operating Officer Ron Vincent - Chief Financial Officer Jeffrey Korn - Chief Legal Officer Conference Call Participants Andrew King - Dougherty & Company Joshua Nichols - B. Riley FBR, inc Kevin Dede - H.C. Wainwright & Co Arham Khan - Eden Capital Investment Group Edward Gilmore - Little Grapevine Michael Kaufman - ...
Crexendo(CXDO) - 2020 Q2 - Quarterly Report
2020-08-10 20:29
Revenue Performance - Cloud Telecommunications service revenue increased 16% or $487,000 to $3,469,000 for the three months ended June 30, 2020 compared to $2,982,000 for the same period in 2019[137]. - Total revenue for the three months ended June 30, 2020 was $4,054,000, an increase of 12% or $440,000 from $3,614,000 for the same period in 2019[147]. - Net income for the three months ended June 30, 2020 was $508,000, up 50% from $338,000 for the same period in 2019[147]. - For the six months ended June 30, 2020, service revenue increased 15% or $938,000 to $7,093,000 compared to $6,155,000 for the same period in 2019[152]. - Non-GAAP net income for Q2 2020 was $660,000, a 47% increase from $447,000 in Q2 2019[163]. - Total revenue for the Cloud Telecommunications segment was $3,918,000 in Q2 2020, up from $3,449,000 in Q2 2019, representing a 14% increase[168]. - Service revenue for Cloud Telecommunications increased 17% or $989,000, to $6,801,000 for the six months ended June 30, 2020 compared to $5,812,000 for the same period in 2019[179]. Product Revenue - Cloud Telecommunications product revenue decreased 4% or $18,000 to $449,000 for the three months ended June 30, 2020 compared to $467,000 for the same period in 2019[137]. - Product revenue for the six months ended June 30, 2020 decreased 13% or $123,000 to $828,000 compared to $951,000 for the same period in 2019[154]. - Product revenue decreased by 4% or $18,000 to $449,000 for Q2 2020, influenced by the timing of installations[170]. Backlog and Future Prospects - As of June 30, 2020, the backlog was $27,349,000, an increase from $24,772,000 as of June 30, 2019[137]. - Backlog increased by 10% or $2,577,000 to $27,349,000 as of June 30, 2020, compared to $24,772,000 as of June 30, 2019[172]. - Backlog increased 10% or $2,577,000 to $27,349,000 as of June 30, 2020 compared to $24,772,000 as of June 30, 2019[181]. Expenses - Research and development expenses rose by 26% or $49,000 to $236,000 for Q2 2020, driven by increased costs for customer interface maintenance and mobile application development[174]. - Selling and marketing expenses increased by 10% or $99,000 to $1,062,000 for Q2 2020, primarily due to higher salaries and commissions[175]. - General and administrative expenses increased 11% or $209,000, to $2,105,000 for the six months ended June 30, 2020 compared to $1,896,000 for the same period in 2019[187]. - Research and development expenses increased 27% or $105,000, to $498,000 for the six months ended June 30, 2020 compared to $393,000 for the same period in 2019[185]. - Selling and marketing expenses increased 13% or $238,000, to $2,100,000 for the six months ended June 30, 2020 compared to $1,862,000 for the same period in 2019[186]. Cost of Service Revenue - Cost of service revenue increased by 3% or $22,000 to $883,000 for Q2 2020, attributed to higher salaries and bandwidth costs[172]. - Cost of service revenue increased 7% or $124,000, to $1,828,000 for the six months ended June 30, 2020 compared to $1,704,000 for the same period in 2019[183]. - Cost of service revenue for Web Services increased 92% or $12,000, to $25,000 for the three months ended June 30, 2020 compared to $13,000 for the same period in 2019[192]. - Cost of service revenue increased by 6% or $3,000, to $50,000 for the six months ended June 30, 2020, primarily due to increased customer service salaries and benefits[199]. Financial Position - Working capital increased by 29% or $813,000, to $3,658,000 as of June 30, 2020, compared to $2,845,000 at December 31, 2019[205]. - Cash, cash equivalents, and restricted cash increased by 19% or $809,000, to $5,089,000 at June 30, 2020, compared to $4,280,000 at December 31, 2019[206]. - Total stockholders' equity increased by 32% or $1,387,000, to $5,774,000 as of June 30, 2020, compared to $4,387,000 at December 31, 2019[218]. - Notes payable increased to $2,979,000 at June 30, 2020, compared to $0 at December 31, 2019, due to financing for the corporate office building purchase and a Paycheck Protection Program loan[213]. - Inventories increased by 17% or $66,000, to $448,000 at June 30, 2020, compared to $382,000 at December 31, 2019[207]. - Prepaid expenses increased by 128% or $181,000, to $322,000 at June 30, 2020, compared to $141,000 at December 31, 2019[208]. Other Income and Expenses - Income before income taxes increased 49% or $169,000 to $511,000 for the three months ended June 30, 2020 compared to $342,000 for the same period in 2019[150]. - Net other expense increased 575% or $23,000, to $27,000 for the six months ended June 30, 2020 compared to $4,000 for the same period in 2019[189]. - Net other income decreased by 543% or $38,000, to $(31,000) for the six months ended June 30, 2020, due to increased foreign exchange losses[202]. Web Services Performance - Web Services revenue decreased 18% or $29,000 to $136,000 for the three months ended June 30, 2020 compared to $165,000 for the same period in 2019[138]. - Service revenue decreased by 15% or $51,000, to $292,000 for the six months ended June 30, 2020, compared to $343,000 for the same period in 2019[198].
Crexendo(CXDO) - 2020 Q1 - Earnings Call Transcript
2020-05-12 14:26
Financial Data and Key Metrics Changes - Consolidated revenue for Q1 2020 increased by 11% to $3.9 million compared to $3.5 million in Q1 2019 [11] - Service revenue for Q1 2020 increased by 16% to $3.5 million compared to $3 million in Q1 2019 [11] - Net income for Q1 2020 was $140,000 or $0.01 per share, down from $239,000 or $0.02 per share in Q1 2019 [11] - Non-GAAP net income for Q1 2020 was $275,000 or $0.02 per share, compared to $343,000 or $0.02 per share in the same period of the prior year [12] - EBITDA for Q1 2020 was $284,000, up from $263,000 in the same period of the prior year [12] Business Line Data and Key Metrics Changes - UCaaS service revenue increased by 18% to $3.3 million in Q1 2020 compared to $2.8 million in Q1 2019 [11] - Product revenue decreased by 22% to $379,000 in Q1 2020 compared to $484,000 in Q1 2019 [11] - Web Service Segment service revenue decreased by 12% or $22,000 in Q1 2020 [11] Market Data and Key Metrics Changes - The company reported a 172% increase in usage of collaboration tools in March 2020 [16] - Sales backlog increased to $26.6 million, a 10% increase year-over-year [20] Company Strategy and Development Direction - The company is focused on increasing investment in the business to support long-term growth [9] - Plans to list on NASDAQ as the company has met all organic requirements [10] - The company is looking for accretive acquisitions to accelerate growth while maintaining focus on sales and service [10] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the future, citing the essential nature of their services during the COVID-19 pandemic [5] - The pandemic is expected to accelerate the migration of businesses to cloud communications [16] - Management believes the company is well-positioned to capitalize on post-COVID-19 opportunities [8] Other Important Information - The company took the FCC's Keep America Connected Pledge, agreeing not to disconnect customers for nonpayment during the crisis [7] - The company purchased its office building for $2.5 million, which is expected to save over $100,000 annually on facility costs [22] Q&A Session Summary Question: Changes in customer phone usage during lockdown - Management noted an increase in talk time due to remote work, with significant spikes in calling traffic [26] Question: Uptick in small business churn due to economic shutdown - Management indicated it is too early to assess the full impact but noted low attrition rates of less than 1% per quarter [27][28] Question: Impact of COVID-19 on product segments - Management attributed the decline in product revenue primarily to COVID-19, with previous high product revenue in Q1 2019 due to a rush install [30] Question: Changes in sales cycle since the pandemic - Management observed a slowdown in decision-making during the initial lockdown but noted that this is starting to recover [32] Question: Feedback from new partners - Management reported positive feedback from partners, especially those in non-telecom sectors who are now offering Crexendo products [34] Question: Competitive environment changes - Management acknowledged a competitive market but emphasized their strong positioning and focus on smaller, accretive acquisitions [41][42] Question: Metrics for purchasing the office building - Management evaluated the decision based on current lease rates and expected savings on operating expenses [44][45]
Crexendo(CXDO) - 2020 Q1 - Quarterly Report
2020-05-05 21:27
PART I – FINANCIAL INFORMATION [Item 1. Financial Statements](index=4&type=section&id=Item%201.%20Financial%20Statements) Q1 2020 financial statements show revenue growth to $3.87 million, a net income decrease to $140,000, total assets of $9.8 million, and negative operating cash flow [Condensed Consolidated Balance Sheets](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) As of March 31, 2020, total assets increased to $9.81 million, primarily due to a new office building, with total liabilities rising to $5.10 million Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | March 31, 2020 | December 31, 2019 | | :--- | :--- | :--- | | **Total Current Assets** | $5,251 | $5,731 | | **Total Assets** | **$9,812** | **$7,783** | | **Total Current Liabilities** | $2,671 | $2,886 | | **Total Liabilities** | **$5,096** | **$3,396** | | **Total Stockholders' Equity** | **$4,716** | **$4,387** | [Condensed Consolidated Statements of Operations](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) For Q1 2020, total revenue increased 10.7% to $3.87 million, but net income declined 41.4% to $140,000 due to a 13.4% rise in operating expenses Statement of Operations Summary (in thousands) | Metric | Three Months Ended Mar 31, 2020 | Three Months Ended Mar 31, 2019 | | :--- | :--- | :--- | | **Total Revenue** | **$3,867** | **$3,492** | | Service Revenue | $3,488 | $3,008 | | Product Revenue | $379 | $484 | | **Total Operating Expenses** | **$3,686** | **$3,251** | | **Income from Operations** | **$181** | **$241** | | **Net Income** | **$140** | **$239** | | **Diluted EPS** | **$0.01** | **$0.02** | [Condensed Consolidated Statements of Cash Flows](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) In Q1 2020, net cash decreased by $745,000, primarily due to $288,000 used in operations and $528,000 for investing activities, including property purchases Cash Flow Summary (in thousands) | Cash Flow Activity | Three Months Ended Mar 31, 2020 | Three Months Ended Mar 31, 2019 | | :--- | :--- | :--- | | Net cash provided by/(used for) operating activities | $(288) | $294 | | Net cash used for investing activities | $(528) | $0 | | Net cash provided by/(used for) financing activities | $71 | $(49) | | **Net Increase/(Decrease) in Cash** | **$(745)** | **$245** | [Notes to Condensed Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) The notes detail accounting policies, segment reporting, and key events including the DoubleHorn acquisition, corporate office purchase, and a $1 million PPP loan - The company operates through two segments: Cloud Telecommunications and Web Services, with **over 90%** of total revenue generated from customers within North America[25](index=25&type=chunk)[62](index=62&type=chunk) - On December 31, 2019, the company acquired certain assets from DoubleHorn, LLC for approximately **$351,000**, accounted for as an asset acquisition[90](index=90&type=chunk) - In January 2020, the company entered into a **$2.0 million** term loan to finance the purchase of its corporate office building[97](index=97&type=chunk) - Subsequent to the quarter end, on April 21, 2020, the company received a **$1 million** loan pursuant to the Paycheck Protection Program (PPP) under the CARES Act[119](index=119&type=chunk) Revenue Disaggregation by Segment (Q1 2020 vs Q1 2019, in thousands) | Segment | Q1 2020 Revenue | Q1 2019 Revenue | YoY Change | | :--- | :--- | :--- | :--- | | Cloud Telecommunications | $3,711 | $3,314 | +12.0% | | Web Services | $156 | $178 | -12.4% | | **Total** | **$3,867** | **$3,492** | **+10.7%** | [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=29&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses 10.7% revenue growth, net income decline due to higher expenses, 10% growth in Cloud Telecommunications backlog to $26.6 million, and reduced liquidity [Results of Operations](index=30&type=section&id=Results%20of%20Operations) Q1 2020 consolidated revenue increased due to services, but higher operating expenses led to a 41% decrease in income before tax to $143,000 - Service revenue increased **16% YoY**, driven by an **18%** increase in Cloud Telecommunications service revenue[135](index=135&type=chunk) - Product revenue decreased **22% YoY**, with management noting that revenue fluctuates based on the timing of customer installations[136](index=136&type=chunk) - The decrease in income before tax was primarily due to increased operating expenses, including a **$51,000** write-off of leasehold improvements and **$85,000** in additional salary and benefits related to employee profit sharing plans[137](index=137&type=chunk) [Use of Non-GAAP Financial Measures](index=32&type=section&id=Use%20of%20Non-GAAP%20Financial%20Measures) The company uses Non-GAAP net income and Adjusted EBITDA, with Q1 2020 Non-GAAP net income at $275,000 and Adjusted EBITDA increasing to $389,000 Reconciliation of U.S. GAAP Net Income to Non-GAAP Measures (in thousands) | Metric | Q1 2020 | Q1 2019 | | :--- | :--- | :--- | | U.S. GAAP net income | $140 | $239 | | Share-based compensation | $105 | $91 | | Amortization of intangible assets | $30 | $13 | | **Non-GAAP net income** | **$275** | **$343** | | **EBITDA** | **$284** | **$263** | | **Adjusted EBITDA** | **$389** | **$354** | [Segment Operating Results](index=34&type=section&id=Segment%20Operating%20Results) Cloud Telecommunications revenue grew 12% to $3.7 million with backlog increasing 10% to $26.6 million, while Web Services revenue declined 12% to $156,000 - Cloud Telecommunications service revenue increased **18% YoY**, driven by growth in contracted services and usage charges[151](index=151&type=chunk) - The Cloud Telecommunications backlog increased **10%** to **$26.6 million** as of March 31, 2020, compared to **$24.2 million** a year prior[154](index=154&type=chunk) - Web Services revenue decreased **12% YoY** primarily due to a decline in hosting revenue[164](index=164&type=chunk) [Liquidity and Capital Resources](index=37&type=section&id=Liquidity%20and%20Capital%20Resources) Cash and equivalents decreased by $745,000 to $3.5 million due to cash used in operations and the corporate office building purchase - Cash and cash equivalents stood at **$3.5 million** as of March 31, 2020, down from **$4.3 million** at year-end 2019[169](index=169&type=chunk) - The company purchased its corporate office building from a related party (a company owned by the CEO) for **$2.5 million** in January 2020[187](index=187&type=chunk) - A new **$2.0 million** note payable was taken on to finance the building purchase[179](index=179&type=chunk) [Item 3. Quantitative and Qualitative Disclosures about Market Risk](index=40&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) This section is not required for smaller reporting companies - Disclosure is not required for this item[189](index=189&type=chunk) [Item 4. Controls and Procedures](index=40&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective, with no material changes to internal control over financial reporting - The CEO and CFO concluded that disclosure controls and procedures were effective as of March 31, 2020[189](index=189&type=chunk) - No material changes to internal control over financial reporting occurred during the quarter[190](index=190&type=chunk) PART II – OTHER INFORMATION [Item 1. Legal Proceedings](index=41&type=section&id=Item%201.%20Legal%20Proceedings) The company is not involved in any material pending or threatened legal proceedings - There are no material legal proceedings pending or threatened against the company[192](index=192&type=chunk) [Item 1A. Risk Factors](index=41&type=section&id=Item%201A.%20Risk%20Factors) The COVID-19 outbreak is identified as a new material risk factor, potentially impacting customer demand, collections, and the supply chain, with uncertain future effects - The novel coronavirus (COVID-19) outbreak is identified as a **significant risk factor** that could adversely affect business operations, customer demand, and supply chain[193](index=193&type=chunk) - Potential impacts include reduced customer spending, contract terminations, supply chain disruptions from China, and challenges for the sales team due to travel restrictions[194](index=194&type=chunk)[196](index=196&type=chunk) - As of the filing date, the outbreak had not yet had a material adverse impact on operations, but the future impact remains **highly uncertain**[195](index=195&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=41&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company reported no unregistered sales of equity securities during the period - None reported[198](index=198&type=chunk) [Item 6. Exhibits](index=42&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including CEO and CFO certifications and XBRL data - Lists required certifications from the CEO and CFO (pursuant to Rules 13a-14(a) and 18 U.S.C. Section 1350) and XBRL interactive data files as exhibits[199](index=199&type=chunk)
Crexendo(CXDO) - 2019 Q4 - Earnings Call Transcript
2020-03-04 02:53
Crexendo, Inc. (NASDAQ:CXDO) Q4 2019 Earnings Conference Call March 3, 2020 5:30 PM ET Company Participants Steve Mihaylo - Chairman and CEO Doug Gaylor - President and COO Ron Vincent - CFO Jeff Korn - General Counsel Conference Call Participants Andrew King - Dougherty & Company Allen Klee - National Securities Kevin Dede - H.C. Wainright Maj Soueidan - GeoInvesting Edward Gilmore - Little Grapevine Michael Kaufman - MK Investments Operator Good day, ladies and gentlemen, and welcome to your Crescendo Fou ...
Crexendo(CXDO) - 2019 Q4 - Annual Report
2020-03-03 22:27
UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ——————— Nevada 001-32277 87-0591719 (State or Other Jurisdiction of Incorporation or Organization) (Commission File Number) (I.R.S. Employer Identification No.) Title of each class Name of each exchange on which registered Common Stock, par value $0.001 per share OTCQX Marketplace FORM 10-K ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2019: Or ☐ TRANSITION ...
Crexendo(CXDO) - 2019 Q3 - Earnings Call Transcript
2019-11-10 15:54
Crexendo, Inc (NASDAQ:CXDO) Q3 2019 Earnings Conference Call November 5, 2019 5:30 PM ET Company Participants Jeffrey Korn - General Counsel, Secretary Steve Mihaylo - Chairman and CEO Ron Vincent - CFO Doug Gaylor - COO and President Conference Call Participants William Gibson - ROTH Capital Partners Kevin Dede - H.C. Wainwright & Co Michael Kaufman - MK Investments Operator Good day, ladies and gentlemen, and welcome to the Crexendo’s Third Quarter 2019 Earnings Call. [Operator Instructions] At this time, ...