Crexendo Announces First Quarter 2020 Results

PHOENIX, AZ / ACCESSWIRE / May 5, 2020 / Crexendo, Inc. (OTCQX:CXDO), an award-winning premier provider of cloud communications, UCaaS (Unified Communications as a Service), call center, collaboration services, and other cloud business services that are designed to provide enterprise-class cloud services to any size business at affordable monthly rates, today reported financial results for the first quarter ended March 31, 2020.

Financial highlights:

Total revenue increased 11% year-over-year to $3.9 million.
UCaaS service revenue increased 18% year-over-year to $3.3 million.
GAAP net income was $140,000.
Non-GAAP net income was $275,000.

Financial Results

Consolidated total revenue for the first quarter of 2020 increased 11% to $3.9 million compared to $3.5 million for the first quarter of 2019.

Consolidated service revenue for the first quarter of 2020 increased 16% to $3.5 million compared to $3.0 million for the first quarter of 2019.

Cloud Telecommunications Segment UCaaS service revenue for the first quarter of 2020 increased 18% to $3.3 million compared to $2.8 million for the first quarter of 2019.
Web Services Segment service revenue for the first quarter of 2020 decreased 12% to $156,000, compared to $178,000 for the first quarter of 2019.

Consolidated product revenue for the first quarter of 2020 decreased 22% to $379,000 compared to $484,000 for the first quarter of 2019.

Consolidated operating expenses for the first quarter of 2020 increased 13% to $3.7 million compared to $3.3 million for the first quarter of 2019.

The Company reported net income of $140,000 for the first quarter of 2020, or $0.01 per basic and diluted common share, compared to $239,000 or $0.02 per basic and diluted common share for the first quarter of 2019.

Non-GAAP net income was $275,000 for the first quarter of 2020, or $0.02 per basic and diluted common share, compared to a non-GAAP net income of $343,000 or $0.02 per basic and diluted common share for the first quarter of 2019.

EBITDA for the first quarter of 2020 was $284,000 compared to $263,000 for the first quarter of 2019. Adjusted EBITDA for the first quarter of 2020 was $389,000 compared to $354,000 for the first quarter of 2019.

Total cash, cash equivalents, and restricted cash at March 31, 2020 was $3.5 million compared to $4.3 million at December 31, 2019.

Cash used for operating activities for the first quarter of 2020 was ($288,000) compared to $294,000 provided by operating activities for the first quarter of 2019. Cash used for investing activities for the first quarter of 2020 was ($528,000) compared to no investing activities for the first quarter of 2019. Cash provided by financing activities for the first quarter of 2020 was $71,000 compared to cash used for financing activities of ($49,000) for the first quarter of 2019.

Steven G. Mihaylo, Chief Executive Officer commented, "I am incredibly pleased with our results and particularly pleased with our commitment to our customers. We at Crexendo take our responsibility as a regulated utility providing essential services very seriously. We realize that to most of our customers we are their communication lifeline, and that has never been more apparent than in this current COVID-19 time. When we started this year, we obviously did not know the world would literally be rocked and everything we planned for would change. As you know, we took the FCC's "Keep Americans Connected Pledge" and agreed not to disconnect any Crexendo customer's business or residential phone service for non-payment during, or until at least the middle of May. It is possible that some of our customers may have a hard time making payments, we also believe that some of our customers may reduce their operations or even cease operations entirely; some customers have deferred expenditures of new or additional systems. This is the situation we and many others are facing. The results we achieved are particularly impressive with these unprecedented headwinds. I think our results are a testament to our products, services and team. Our core business continues to grow. Of particular note is what is perhaps our most important metric, UCaaS service revenue for the first quarter of 2020 increased 18% to $3.3 million compared to $2.8 million for the first quarter of 2019. I am also extremely pleased that we continue to be profitable on both a GAAP and Non-GAAP basis. This continues our sequential profitability."

Mihaylo added, "We have had additional expenses in Q1 2020 as compared to Q1 2019 as we have increased investments in the business which we must do in order to accelerate future growth. We are however carefully reviewing our expenses every day to make sure we are strong fiduciaries of shareholder money. We believe our business is uniquely positioned to withstand the economic uncertainties in this period. We also believe that the effects of COVID-19 on our business will be short term and that as economic conditions start to improve, we will strongly capitalize on the new business order of people working remotely for the long term. Our products are designed and completely effective in allowing seamless transition from office to home and back. I continue to be extremely optimistic about our future and I am overly excited about our long-term growth and strong balance sheet."

Doug Gaylor, President and Chief Operating Officer, stated, "The Crexendo suite of services are what every business needs at this time. Our services allow people to quickly and seamlessly alter their communication patterns to meet their immediate needs. We have tremendous incentives for new customers to join us and Ride the Cloud® including Up to 4 free months of service for new customers, waiving activation fees for new customers, free collaboration licenses that include screen sharing and videoconferencing for new and existing customers and free mobile applications and softphone applications for new and existing customers. We are working hard every day to make sure our existing and new customers can continue to communicate to help them survive during this economic upheaval".

Conference Call The Company is hosting a conference call today, May 5, 2020 at 5:30 PM EST. The dial-in number for domestic participants is 844-369-8770 and 862-298-0840 for international participants. Please dial in five to ten minutes prior to the beginning of the call at 5:30 PM EST and reference Crexendo. A replay of the call will be available until May 12, 2020 by dialing toll-free at 877-481-4010 or 919-882-2331 for international callers. The replay passcode is 34306.

About Crexendo

Crexendo, Inc. is an award-winning premier provider of cloud communications, UCaaS (Unified Communications as a Service), call center, collaboration services, and other cloud business services that are designed to provide enterprise-class cloud services to any size business at affordable monthly rates.

Safe Harbor Statement

This press release contains forward-looking statements. The Private Securities Litigation Reform Act of 1995 provides a "safe harbor" for such forward-looking statements. The words "believe," "expect," "anticipate," "estimate," "will" and other similar statements of expectation identify forward-looking statements. Specific forward-looking statements in this press release include information about Crexendo (i) being incredibly pleased with the results and commitment to its customers;(ii) providing essential services that most of its customers use as their communication lifeline; (iii) when we starting this year not knowing everything planned for would change; (iv) finding that some of its customers are having a hard time making payments having some customers reduce their operations or cease operations entirely and having some customers defer expenditures of new or additional systems; (v) finding that its results are particularly impressive with the current economic and world headwinds; (vi) increased its investments in the business which must be done to accelerate future growth; (vii) carefully reviewing expenses every day to make sure it is a strong fiduciaries of shareholder money; (viii) being uniquely positioned to withstand the economic uncertainties and that the effects of COVID-19 on its business will be short term; (ix) will strongly capitalize on the new business order of people working remotely for the long term when economic conditions begin to improve; (x) products being designed and being completely effective in allowing seamless transition from office to home and back; (xi) being extremely optimistic about its future and its long-term growth and strong balance sheet; (xii) suite of services being what every business needs at this time; (xiii) having tremendous incentives for new customers; and (xiv) working hard every day to make sure its existing and new customers can continue to communicate with their customers and help them survive this economic upheaval.

For a more detailed discussion of risk factors that may affect Crexendo's operations and results, please refer to the company's Form 10-K for the year ended December 31, 2019, and quarterly Form 10-Qs as filed with the SEC. These forward-looking statements speak only as of the date on which such statements are made, and the company undertakes no obligation to update such forward-looking statements, except as required by law.

CREXENDO, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(In thousands, except par value and share data)

March 31,
2020

 
 
December 31, 2019
 

Assets

Current assets:

Cash and cash equivalents

 
$
3,435
 
 
$
4,180
 

Restricted cash

 
 
100
 
 
 
100
 

Trade receivables, net of allowance for doubtful accounts of $17

as of March 31, 2020 and $14 as of December 31, 2019

 
 
437
 
 
 
380
 

Contract assets

 
 
28
 
 
 
22
 

Inventories

 
 
229
 
 
 
382
 

Equipment financing receivables

 
 
171
 
 
 
143
 

Contract costs

 
 
386
 
 
 
379
 

Prepaid expenses

 
 
464
 
 
 
141
 

Income tax receivable

 
 
1
 
 
 
4
 

Total current assets

 
 
5,251
 
 
 
5,731
 

Long-term trade receivables, net of allowance for doubtful accounts

of $0 as of March 31, 2020 and December 31, 2019

 
 
3
 
 
 
6
 

Long-term equipment financing receivables, net

 
 
635
 
 
 
561
 

Property and equipment, net

 
 
2,610
 
 
 
155
 

Operating lease right-of-use assets

 
 
1
 
 
 
51
 

Intangible assets, net

 
 
435
 
 
 
465
 

Goodwill

 
 
272
 
 
 
272
 

Contract costs, net of current portion

 
 
449
 
 
 
436
 

Other long-term assets

 
 
156
 
 
 
106
 

Total Assets

 
$
9,812
 
 
$
7,783
 

Liabilities and Stockholders' Equity

Current liabilities:

Accounts payable

 
$
53
 
 
$
86
 

Accrued expenses

 
 
1,497
 
 
 
1,754
 

Finance leases

 
 
30
 
 
 
30
 

Notes payable

 
 
69
 
 
 
–
 

Operating lease liabilities

 
 
–
 
 
 
50
 

Contigent consideration

 
 
175
 
 
 
175
 

Contract liabilities

 
 
847
 
 
 
791
 

Total current liabilities

 
 
2,671
 
 
 
2,886
 

Contract liabilities, net of current portion

 
 
420
 
 
 
423
 

Finance leases, net of current portion

 
 
78
 
 
 
86
 

Notes payable, net of current portion

 
 
1,926
 
 
 
–
 

Operating lease liabilities, net of current portion

 
 
1
 
 
 
1
 

Total liabilities

 
 
5,096
 
 
 
3,396
 

Stockholders' equity:

Preferred stock, par value $0.001 per share – authorized 5,000,000 shares; none issued

 
 
–
 
 
 
–
 

Common stock, par value $0.001 per share – authorized 25,000,000 shares, 14,941,453

shares issued and outstanding as of March 31, 2020 and 14,884,755 shares issued

and outstanding as of December 31, 2019

 
 
15
 
 
 
15
 

Additional paid-in capital

 
 
62,589
 
 
 
62,400
 

Accumulated deficit

 
 
(57,888
)
 
 
(58,028
)

Total stockholders' equity

 
 
4,716
 
 
 
4,387
 

Total Liabilities and Stockholders' Equity

 
$
9,812
 
 
$
7,783
 

CREXENDO, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
(In thousands, except per share and share data)

 
Three Months Ended March 31,
 

 
2020
 
 
2019
 

Service revenue

 
$
3,488
 
 
$
3,008
 

Product revenue

 
 
379
 
 
 
484
 

Total revenue

 
 
3,867
 
 
 
3,492
 

Operating expenses:

Cost of service revenue

 
 
970
 
 
 
877
 

Cost of product revenue

 
 
220
 
 
 
249
 

Selling and marketing

 
 
1,038
 
 
 
899
 

General and administrative

 
 
1,188
 
 
 
1,014
 

Research and development

 
 
270
 
 
 
212
 

Total operating expenses

 
 
3,686
 
 
 
3,251
 

Income from operations

 
 
181
 
 
 
241
 

Other income/(expense):

Interest income

 
 
1
 
 
 
1
 

Interest expense

 
 
(9
)
 
 
(5
)

Other income/(expense), net

 
 
(30
)
 
 
5
 

Total other income/(expense), net

 
 
(38
)
 
 
1
 

Income before income tax

 
 
143
 
 
 
242
 

Income tax provision

 
 
(3
)
 
 
(3
)

Net income

 
$
140
 
 
$
239
 

Earnings per common share:

Basic

 
$
0.01
 
 
$
0.02
 

Diluted

 
$
0.01
 
 
$
0.02
 

Weighted-average common shares outstanding:

Basic

 
 
14,904,599
 
 
 
14,394,645
 

Diluted

 
 
16,262,886
 
 
 
15,139,858
 

CREXENDO, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(In thousands)

 
Three Months Ended March 31,
 

 
2020
 
 
2019
 

CASH FLOWS FROM OPERATING ACTIVITIES

Net income

 
$
140
 
 
$
239
 

Adjustments to reconcile net income to net cash provided by/(used for) operating activities:

Depreciation and amortization

 
 
103
 
 
 
22
 

Share-based compensation

 
 
105
 
 
 
91
 

Changes in assets and liabilities:

Trade receivables

 
 
(54
)
 
 
(165
)

Contract assets

 
 
(6
)
 
 
(4
)

Equipment financing receivables

 
 
(102
)
 
 
(94
)

Inventories

 
 
153
 
 
 
(70
)

Contract costs

 
 
(20
)
 
 
(43
)

Prepaid expenses

 
 
(323
)
 
 
61
 

Income tax receivable

 
 
3
 
 
 
1
 

Other assets

 
 
(50
)
 
 
15
 

Accounts payable and accrued expenses

 
 
(290
)
 
 
138
 

Income tax payable

 
 
–
 
 
 
2
 

Contract liabilities

 
 
53
 
 
 
101
 

Net cash provided by/(used for) operating activities

 
 
(288
)
 
 
294
 

CASH FLOWS FROM INVESTING ACTIVITIES

Purchase of property and equipment

 
 
(528
)
 
 
–
 

Net cash used for investing activities

 
 
(528
)
 
 
–
 

CASH FLOWS FROM FINANCING ACTIVITIES

Repayments made on finance leases

 
 
(8
)
 
 
(9
)

Repayments made on notes payable

 
 
(5
)
 
 
(40
)

Proceeds from exercise of options

 
 
84
 
 
 
–
 

Net cash provided by/(used for) financing activities

 
 
71
 
 
 
(49
)

NET INCREASE/(DECREASE) IN CASH, CASH EQUIVALENTS, AND RESTRICTED CASH

 
 
(745
)
 
 
245
 

CASH, CASH EQUIVALENTS, AND RESTRICTED CASH AT THE BEGINNING OF THE PERIOD

 
 
4,280
 
 
 
1,949
 

CASH, CASH EQUIVALENTS, AND RESTRICTED CASH AT THE END OF THE PERIOD

 
$
3,535
 
 
$
2,194
 

Cash used during the year for:

Interest expense

 
$
(9
)
 
$
(5
)

Supplemental disclosure of non-cash investing and financing information:

Purchase of property and equipment with a note payable

 
$
2,000
 
 
$
–
 

CREXENDO, INC. AND SUBSIDIARIES
Supplemental Segment Financial Data
(In thousands)

 
Three Months Ended March 31,
 

 
2020
 
 
2019
 

Revenue:

Cloud telecommunications

 
$
3,711
 
 
$
3,314
 

Web services

 
 
156
 
 
 
178
 

Consolidated revenue

 
 
3,867
 
 
 
3,492
 

Income from operations:

Cloud telecommunications

 
 
129
 
 
 
163
 

Web services

 
 
52
 
 
 
78
 

Total operating income

 
 
181
 
 
 
241
 

Other income/(expense), net:

Cloud telecommunications

 
 
(6
)
 
 
(3
)

Web services

 
 
(32
)
 
 
4
 

Total other income/(expense), net

 
 
(38
)
 
 
1
 

Income before income tax provision:

Cloud telecommunications

 
 
123
 
 
 
160
 

Web services

 
 
20
 
 
 
82
 

Income before income tax provision

 
$
143
 
 
$
242
 

Use of Non-GAAP Financial Measures

To evaluate our business, we consider and use non-generally accepted accounting principles (Non-GAAP) net income and Adjusted EBITDA as a supplemental measure of operating performance. These measures include the same adjustments that management takes into account when it reviews and assesses operating performance on a period-to-period basis. We consider Non-GAAP net income to be an important indicator of overall business performance because it allows us to evaluate results without the effects of share-based compensation and amortization of intangibles. We define EBITDA as U.S. GAAP net income before interest income, interest expense, other income and expense, provision for income taxes, and depreciation and amortization. We believe EBITDA provides a useful metric to investors to compare us with other companies within our industry and across industries. We define Adjusted EBITDA as EBITDA adjusted for share-based compensation. We use Adjusted EBITDA as a supplemental measure to review and assess operating performance. We also believe use of Adjusted EBITDA facilitates investors' use of operating performance comparisons from period to period, as well as across companies.

In our May 5, 2020 earnings press release, as furnished on Form 8-K, we included Non-GAAP net income, EBITDA and Adjusted EBITDA. The terms Non-GAAP net income, EBITDA, and Adjusted EBITDA are not defined under U.S. GAAP, and are not measures of operating income, operating performance or liquidity presented in analytical tools, and when assessing our operating performance, Non-GAAP net income, EBITDA, and Adjusted EBITDA should not be considered in isolation, or as a substitute for net income or other consolidated income statement data prepared in accordance with U.S. GAAP. Some of these limitations include, but are not limited to:

EBITDA and Adjusted EBITDA do not reflect our cash expenditures or future requirements for capital expenditures or contractual commitments;
they do not reflect changes in, or cash requirements for, our working capital needs;
they do not reflect the interest expense, or the cash requirements necessary to service interest or principal payments, on our debt that we may incur;
they do not reflect income taxes or the cash requirements for any tax payments;
although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will be replaced sometime in the future, and EBITDA and Adjusted EBITDA do not reflect any cash requirements for such replacements;
while share-based compensation is a component of operating expense, the impact on our financial statements compared to other companies can vary significantly due to such factors as the assumed life of the options and the assumed volatility of our common stock; and
other companies may calculate EBITDA and Adjusted EBITDA differently than we do, limiting their usefulness as comparative measures.

We compensate for these limitations by relying primarily on our U.S. GAAP results and using Non-GAAP net income, EBITDA, and Adjusted EBITDA only as supplemental support for management's analysis of business performance. Non-GAAP net income, EBITDA and Adjusted EBITDA are calculated as follows for the periods presented.

Reconciliation of Non-GAAP Financial Measures

In accordance with the requirements of Regulation G issued by the SEC, we are presenting the most directly comparable U.S. GAAP financial measures and reconciling the unaudited Non-GAAP financial metrics to the comparable U.S. GAAP measures.

Reconciliation of U.S. GAAP Net Income to Non-GAAP Net Income
(Unaudited)

 
Three Months Ended March 31,
 

 
2020
 
 
2019
 

 
(In thousands)
 
 
 
 

U.S. GAAP net income

 
$
140
 
 
$
239
 

Share-based compensation

 
 
105
 
 
 
91
 

Amortization of intangible assets

 
 
30
 
 
 
13
 

Non-GAAP net income

 
$
275
 
 
$
343
 

Non-GAAP earnings per common share:

Basic

 
$
0.02
 
 
$
0.02
 

Diluted

 
$
0.02
 
 
$
0.02
 

Weighted-average common shares outstanding:

Basic

 
 
14,904,599
 
 
 
14,394,645
 

Diluted

 
 
16,262,886
 
 
 
15,139,858
 

Reconciliation of U.S. GAAP Net Income to EBITDA to Adjusted EBITDA
(Unaudited)

 
Three Months Ended March 31,
 

 
2020
 
 
2019
 

 
(In thousands)
 

U.S. GAAP net income

 
$
140
 
 
$
239
 

Depreciation and amortization

 
 
103
 
 
 
22
 

Interest expense

 
 
9
 
 
 
5
 

Interest and other expense/(income)

 
 
29
 
 
 
(6
)

Income tax provision

 
 
3
 
 
 
3
 

EBITDA

 
 
284
 
 
 
263
 

Share-based compensation

 
 
105
 
 
 
91
 

Adjusted EBITDA

 
$
389
 
 
$
354
 

Contact:

Crexendo, Inc.
Steven G. Mihaylo
CEO
602-345-7777
Smihaylo@crexendo.com

SOURCE: Crexendo, Inc.

ReleaseID: 588421