Crexendo(CXDO) - 2023 Q4 - Annual Results

Press Release Overview Key Highlights Crexendo reported record-breaking results for Q4 and full-year 2023, achieving significant total revenue growth and GAAP profitability in the second half of the year - Total revenue for FY2023 increased by 42% to $53.2 million[3][6] - Total revenue for Q4 2023 increased by 24% to $14.2 million[3][59] Key Profitability Metrics for FY2023 and Q4 2023 | Metric | FY2023 (million USD) | Q4 2023 (million USD) | | :------------------ | :-------------------- | :----------------------- | | GAAP Net Loss/(Income) | $(0.4) | $0.1 | | Non-GAAP Net Income | $6.6 | $1.6 | Financial Results - Fourth Quarter 2023 Revenue Performance (Q4 2023) In Q4 2023, the company achieved double-digit growth across all revenue segments, with service revenue up 26%, software solutions revenue up 21%, and product revenue up 23% Q4 2023 Revenue Overview | Metric | Q4 2023 (million USD) | Q4 2022 (million USD) | YOY Change (%) | | :-------------------- | :----------------------- | :----------------------- | :------------- | | Total Revenue | $14.2 | $11.4 | 24% | | Service Revenue | $7.7 | $6.1 | 26% | | Software Solutions Revenue | $5.3 | $4.4 | 21% | | Product Revenue | $1.2 | $0.9 | 23% | Profitability (Q4 2023) The company achieved GAAP net income of $0.1 million in Q4 2023, a significant improvement from a substantial loss in the prior year, though non-GAAP net income decreased year-over-year Q4 2023 Profitability Metrics | Metric | Q4 2023 (million USD) | Q4 2022 (million USD) | | :-------------------- | :----------------------- | :----------------------- | | GAAP Net Income/(Loss) | $0.1 | $(32.6) | | Non-GAAP Net Income | $1.6 | $2.5 | | EBITDA | $0.9 | $(1.0) | | Adjusted EBITDA | $1.7 | $0.6 | Operating Expenses (Q4 2023) Consolidated operating expenses for Q4 2023 significantly decreased by 69%, primarily due to a $32.7 million goodwill and long-lived asset impairment charge recorded in the prior year Q4 2023 Operating Expenses | Metric | Q4 2023 (million USD) | Q4 2022 (million USD) | YOY Change (%) | | :-------------------- | :----------------------- | :----------------------- | :------------- | | Operating Expenses | $14.1 | $46.0 | (69%) | | Goodwill and Long-Lived Asset Impairment (2022) | - | $32.7 | - | Financial Results - Fiscal Year 2023 Revenue Performance (FY 2023) Total revenue for FY2023 grew by 42% to $53.2 million, with strong growth across all revenue segments, notably a 90% year-over-year increase in product revenue FY2023 Revenue Overview | Metric | FY2023 (million USD) | FY2022 (million USD) | YOY Change (%) | | :-------------------- | :-------------------- | :-------------------- | :------------- | | Total Revenue | $53.2 | $37.6 | 42% | | Service Revenue | $29.7 | $19.5 | 52% | | Software Solutions Revenue | $18.0 | $15.1 | 19% | | Product Revenue | $5.5 | $2.9 | 90% | Profitability (FY 2023) GAAP net loss for FY2023 significantly narrowed to $0.4 million, while non-GAAP net income increased by 63% to $6.7 million, reflecting substantial improvement in the company's profitability FY2023 Profitability Metrics | Metric | FY2023 (million USD) | FY2022 (million USD) | | :-------------------- | :-------------------- | :-------------------- | | GAAP Net Loss | $(0.4) | $(35.4) | | Non-GAAP Net Income | $6.7 | $4.1 | | Non-GAAP Basic EPS | $0.26 | $0.18 | | Non-GAAP Diluted EPS | $0.24 | $0.16 | | EBITDA | $1.9 | $(2.0) | | Adjusted EBITDA | $5.7 | $2.5 | Operating Expenses (FY 2023) Consolidated operating expenses for FY2023 decreased by 27% year-over-year, primarily due to the absence of the $32.7 million goodwill and long-lived asset impairment charge recorded in 2022 FY2023 Operating Expenses | Metric | FY2023 (million USD) | FY2022 (million USD) | YOY Change (%) | | :-------------------- | :-------------------- | :-------------------- | :------------- | | Operating Expenses | $54.9 | $74.9 | (27%) | | Goodwill and Long-Lived Asset Impairment (2022) | - | $32.7 | - | Cash and Cash Equivalents (FY 2023) As of December 31, 2023, cash and cash equivalents increased to $10.3 million, nearly doubling from $5.5 million at the end of 2022, indicating a significant improvement in liquidity Cash and Cash Equivalents | Metric | December 31, 2023 (million USD) | December 31, 2022 (million USD) | | :-------------------- | :-------------------------- | :-------------------------- | | Cash and Cash Equivalents | $10.3 | $5.5 | Cash Flow (FY 2023) In FY2023, the company generated positive cash flow from both operating and investing activities, a stark contrast to 2022's outflows, indicating a healthy financial position FY2023 Cash Flow Overview | Metric | FY2023 (million USD) | FY2022 (million USD) | | :-------------------- | :-------------------- | :-------------------- | | Cash Flow from Operating Activities | $3.5 | $(0.4) | | Cash Flow from Investing Activities | $3.7 | $(1.7) | | Cash Flow from Financing Activities | $(2.3) | $(0.1) | Operational Highlights and Strategic Initiatives Awards and Recognition Crexendo received multiple industry accolades in 2023, including Frost & Sullivan's Competitive Strategy Leadership Award, G2's Best Usability Award, and Remote Work Pioneer and Product of the Year awards - Awarded the Frost & Sullivan 2024 Competitive Strategy Leadership Award for Cloud Communications Excellence[9] - Its VIP™ platform ranked first in usability in G2's Fall 2023 VoIP, UCaaS, and CCaaS reports, earning the Best Usability Award for the third consecutive quarter[9] - Recognized by INTERNET TELEPHONY magazine with the Remote Work Pioneer Award and Product of the Year Award for its NetSapiens® SNAPsolution UCaaS platform[15] Platform and User Growth Crexendo's cloud communications platform surpassed 4 million global end-users in 2023, growing by 36% year-over-year, nearly double the industry average - The cloud communications platform's global end-user count exceeded 4 million, a significant increase from approximately 1.7 million since the acquisition of the NetSapiens platform in June 2021[38] - User growth rate reached 36% in 2023, nearly double the industry average[9][17] Technology and Product Development The company launched ChatGPT-powered generative AI features and released API 2.0, enhancing CPaaS capabilities to deliver smarter and more flexible communication solutions - Introduced ChatGPT-powered generative AI technology features in the company's contact center solutions, enabling natural and dynamic real-time conversations[39] - Released API 2.0 at the user conference, introducing new CPaaS (Communications Platform as a Service) capabilities[14] Partnerships and Market Expansion Jenne Cloud Services Brokerage joined Crexendo's Master Agent Program, further expanding the company's market reach in unified communications and collaboration - Jenne Cloud Services Brokerage became a new technology services brokerage for the VIP Business Communications Platform®, joining Crexendo's Master Agent Program[40] Management Commentary and Strategy Management is optimistic about continued growth, emphasizing a pause in acquisitions in 2023 to focus on operational efficiency, with plans for at least one acquisition this year, while committed to double-digit organic growth and excellent customer service - Paused acquisition strategy in 2023 to focus on improving operational efficiencies of past acquisitions, with plans for at least one acquisition this year[42] - Committed to maintaining double-digit organic growth rates, supplemented by strategic acquisitions[42] - Committed to expanding the Crexendo NetSapiens platform offerings to further accelerate growth trajectory and dedicated to providing unparalleled customer service[17][42][62] Leadership Changes Jeffrey G. Korn was appointed CEO and Executive Chairman, succeeding the retiring Steven G. Mihaylo, aligning with the company's long-term management transition plan - Jeffrey G. Korn was appointed Chief Executive Officer in March 2023 and Executive Chairman of the Board in January 2024[66] - Former CEO Steven G. Mihaylo retired as part of the company's long-term management transition plan[66] Company Information About Crexendo Crexendo is an award-winning provider of cloud communications platforms and services, video collaboration, and managed IT services, dedicated to offering enterprise-grade cloud solutions for businesses of all sizes - Crexendo, Inc. is an award-winning provider of cloud communications platforms and services, video collaboration, and managed IT services[44][64] - Aims to provide enterprise-grade cloud solutions for businesses of any size[44][64] Forward-Looking Statements and Risk Factors This press release contains forward-looking statements protected by the 'safe harbor' provisions of the Private Securities Litigation Reform Act of 1995, and investors are advised to consult the company's SEC filings for detailed risk factors - This press release contains forward-looking statements protected by the 'safe harbor' provisions of the Private Securities Litigation Reform Act of 1995[45] - For a detailed discussion of risk factors that could affect Crexendo's operations and performance, refer to the company's Form 10-K for FY2023 and quarterly Form 10-Q filings with the SEC[21] Company Contact Provides contact information for Doug Gaylor, President and Chief Operating Officer, for investor inquiries - Contact: Doug Gaylor, President and Chief Operating Officer, Email: dgaylor@crexendo.com, Phone: 602-732-7990[22] Conference Call Details Conference Call Information Crexendo management held a conference call on March 5, 2024, to discuss results, with replay information available until March 12, 2024 - Crexendo management held a conference call to discuss results on March 5, 2024, at 4:30 PM ET[18] - Dial-in numbers and access codes were provided for both domestic and international participants[19][43] - A conference replay was available via toll-free or international dial-in, valid until March 12, 2024[43] Financial Statements Consolidated Balance Sheets As of December 31, 2023, total assets slightly increased, cash and cash equivalents significantly rose, total liabilities decreased, and total stockholders' equity steadily improved Consolidated Balance Sheets Summary | Metric | December 31, 2023 (thousand USD) | December 31, 2022 (thousand USD) | | :-------------------- | :----------------------- | :----------------------- | | Total Assets | $56,160 | $55,634 | | Cash and Cash Equivalents | $10,347 | $5,475 | | Total Liabilities | $11,547 | $14,175 | | Total Stockholders' Equity | $44,613 | $41,459 | Consolidated Statements of Operations In FY2023, total revenue significantly increased, and both operating and net losses substantially narrowed, primarily due to effective control of operating expenses and the elimination of a large impairment charge from 2022 Consolidated Statements of Operations Summary | Metric | FY2023 (thousand USD) | FY2022 (thousand USD) | | :-------------------- | :------------------ | :------------------ | | Total Revenue | $53,199 | $37,554 | | Total Operating Expenses | $54,888 | $74,946 | | Operating Loss | $(1,689) | $(37,392) | | Net Loss | $(362) | $(35,413) | | Basic Earnings Per Share | $(0.01) | $(1.54) | | Diluted Earnings Per Share | $(0.01) | $(1.54) | Consolidated Statements of Cash Flows In FY2023, the company generated positive net cash flow from operating and investing activities, reversing the outflows of 2022, leading to a significant increase in cash and cash equivalents at year-end Consolidated Statements of Cash Flows Summary | Metric | FY2023 (thousand USD) | FY2022 (thousand USD) | | :-------------------- | :------------------ | :------------------ | | Net Cash from Operating Activities | $3,499 | $(411) | | Net Cash from Investing Activities | $3,700 | $(1,703) | | Net Cash from Financing Activities | $(2,306) | $(54) | | Net Increase/(Decrease) in Cash and Cash Equivalents | $4,872 | $(1,993) | | Cash and Cash Equivalents at Year-End | $10,347 | $5,475 | Supplemental Segment Financial Data This section aims to provide supplemental segment financial data, but the report content does not include specific data tables or detailed information - Specific supplemental segment financial data is not provided in the report content[50] Non-GAAP Financial Measures Reconciliation Definition and Use of Non-GAAP Measures This section defines Non-GAAP Net Income, EBITDA, and Adjusted EBITDA, explaining their use as supplementary measures to assess operational performance by excluding certain non-cash and non-recurring items - Non-GAAP Net Income and Adjusted EBITDA are used as supplementary operating performance measures, excluding the impact of stock-based compensation, acquisition-related expenses, changes in fair value of contingent consideration, intangible asset amortization, and goodwill and long-lived asset impairment[27] - EBITDA is defined as US GAAP net income/(loss) adjusted for interest expense, interest income and other expense/(income), gain or loss on disposal of assets, goodwill and long-lived asset impairment, provision/(benefit) for income taxes, and depreciation and amortization[27] - Adjusted EBITDA further adjusts EBITDA for acquisition-related expenses, changes in fair value of contingent consideration, and stock-based compensation[27] Limitations of Non-GAAP Measures This section outlines the limitations of non-GAAP financial measures, including their failure to reflect cash expenditures, capital expenditure needs, working capital changes, debt repayment, or income taxes, and potential inconsistencies in calculation across companies, limiting comparability - Non-GAAP measures do not reflect cash expenditures, future capital expenditure or contractual commitment requirements, working capital needs, cash requirements for interest or principal payments on debt, or cash requirements for income taxes or any taxes[28] - While depreciation and amortization are non-cash expenses, EBITDA and Adjusted EBITDA do not reflect the cash requirements for future asset replacements[28] - The methods of calculating EBITDA and Adjusted EBITDA may differ among companies, limiting their usefulness as comparative measures[28] Reconciliation Tables This section provides detailed reconciliation tables, adjusting US GAAP net income to Non-GAAP net income, and US GAAP net income to EBITDA and Adjusted EBITDA, covering Q4 and full-year 2023, as well as the corresponding periods in 2022 GAAP Net Income to Non-GAAP Net Income Reconciliation GAAP Net Income to Non-GAAP Net Income Reconciliation Table | Metric | Q4 2023 (thousand USD) | Q4 2022 (thousand USD) | FY2023 (thousand USD) | FY2022 (thousand USD) | | :-------------------------------- | :----------------------- | :----------------------- | :------------------ | :------------------ | | US GAAP Net Income/(Loss) | $61 | $(32,601) | $(362) | $(35,413) | | Stock-Based Compensation | $737 | $1,612 | $3,849 | $4,374 | | Acquisition-Related Expenses | - | $24 | $1 | $55 | | Goodwill and Long-Lived Asset Impairment | - | $32,678 | - | $32,678 | | Intangible Asset Amortization | $792 | $786 | $3,169 | $2,435 | | Non-GAAP Net Income | $1,590 | $2,499 | $6,657 | $4,129 | | Non-GAAP Basic EPS | $0.06 | $0.10 | $0.26 | $0.18 | | Non-GAAP Diluted EPS | $0.06 | $0.09 | $0.24 | $0.16 | GAAP Net Income to EBITDA and Adjusted EBITDA Reconciliation GAAP Net Income to EBITDA and Adjusted EBITDA Reconciliation Table | Metric | Q4 2023 (thousand USD) | Q4 2022 (thousand USD) | FY2023 (thousand USD) | FY2022 (thousand USD) | | :-------------------------------- | :----------------------- | :----------------------- | :------------------ | :------------------ | | US GAAP Net Income/(Loss) | $61 | $(32,601) | $(362) | $(35,413) | | Depreciation and Amortization | $878 | $885 | $3,573 | $2,747 | | Interest Expense | $4 | $21 | $115 | $78 | | Gain on Disposal of Property and Equipment | - | - | $(1,459) | - | | Other, Net | $(42) | $31,102 | $(79) | $31,383 | | Provision for Income Taxes | $17 | $(447) | $98 | $(762) | | EBITDA | $918 | $(1,040) | $1,886 | $(1,967) | | Acquisition-Related Expenses | - | $24 | $1 | $55 | | Stock-Based Compensation | $737 | $1,612 | $3,849 | $4,374 | | Adjusted EBITDA | $1,655 | $596 | $5,736 | $2,462 |