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Crexendo(CXDO) - 2020 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Consolidated revenue for Q4 2020 was $4.3 million, a 16% increase from $3.7 million in Q4 2019 [20] - Net income for Q4 2020 was $7.2 million, or $0.40 per basic share, compared to $228,000, or $0.02 per basic share, in Q4 2019 [22] - Non-GAAP net income for Q4 2020 was $7.4 million, or $0.42 per basic share, compared to $347,000, or $0.02 per basic share, in the same period of the prior year [23] - Consolidated revenue for the year 2020 was $16.4 million, a 14% increase from $14.4 million in 2019 [24] - Net income for the year 2020 was $7.9 million, or $0.50 per basic share, compared to $1.1 million, or $0.08 per basic share, in 2019 [27] Business Line Data and Key Metrics Changes - UCaaS service revenue for 2020 increased 16% compared to 2019 [19] - Cloud Telecommunications Segment service revenue for Q4 2020 increased 16% to $3.7 million, while Web Services Segment service revenue decreased 21% to $121,000 [21] - Product revenue for Q4 2020 increased 32% to $526,000 compared to $397,000 in Q4 2019 [21] - Cloud Telecommunications Segment generated revenue of $15.8 million for the year, a 15% increase from $13.8 million in 2019 [24] Market Data and Key Metrics Changes - The Telecommunications segment backlog increased 9% to $28.6 million at December 31, 2020, compared to $26.1 million at the end of 2019 [26] - Approximately 60% of businesses have not yet migrated to the cloud for their communication needs, indicating significant market opportunity [34] Company Strategy and Development Direction - The company announced a merger agreement with NetSapiens, which is expected to be accretive and provide multiple synergies [9][11] - The acquisition aims to enhance Crexendo's offerings and expand its market presence, particularly in the cloud communications sector [35][38] - The company plans to rationalize data centers and accounting to reduce costs post-acquisition [45] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to continue profitable growth despite pandemic-related challenges [30] - The merger with NetSapiens is seen as a strategic move to accelerate growth and enhance product offerings [36][38] - Management highlighted the importance of cloud communications and the ongoing demand for flexible solutions in the current market [34] Other Important Information - The company completed an equity offering in September 2020, which contributed to a cash position of $17.7 million at the end of 2020, up from $4.3 million at the end of 2019 [28][33] - The company has been consistently profitable, achieving both GAAP and non-GAAP profitability [16] Q&A Session Summary Question: Can you comment on the growth, profitability trajectory, and margin profile of NetSapiens? - Management indicated that detailed information will be available in the upcoming proxy statement, as they cannot disclose specifics until the merger is approved [41][42] Question: Can you discuss the integration timeline and potential cost synergies? - Management mentioned plans to rationalize data centers and accounting, which should lead to cost reductions [45] Question: What is the pricing model and economics for Crexendo given that NetSapiens does not charge per seat? - Management explained that NetSapiens operates on a different model, selling platform applications to resellers, which presents significant growth opportunities [49][52] Question: What type of customers make up the 1.7 million users on the NetSapiens platform? - The user base consists of small to mid-sized enterprises, similar to Crexendo's customer demographics [53] Question: Can you explain the income tax benefit provision of $6 million? - Management clarified that the tax benefit resulted from a reassessment of deferred tax assets due to profitability [66][67] Question: Will there be challenges in converting customers to the new platform? - Management assured that the transition would be seamless for customers, as both platforms will run concurrently [70]