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.

View source version on accesswire.com:
https://www.accesswire.com/588421/Crexendo-Announces-First-Quarter-2020-Results

error: Content is protected !!