EX-99.1 2 cxdo_ex991.htm PRESS RELEASE cxdopr.htm
 
Exhibit 99.1
 
Crexendo Reports Financial Results for the Third Quarter of 2016
 
PHOENIX, AZ—(Marketwired – November 11, 2016)
 
Crexendo, Inc. (OTCQX: CXDO), a hosted services company that provides hosted telecommunications services, broadband internet services and website hosting services for businesses, today reported financial results for its third quarter ended September 30, 2016.
 
Financial highlights for the three months ended September 30, 2016
 
Consolidated revenue for the third quarter of 2016 increased 18% to $2.3 million compared to $2.0 million for the third quarter of 2015.
 
Hosted Telecommunications Services Segment revenue for the third quarter of 2016 increased 31% to $2.0 million compared to $1.5 million for the third quarter of 2015.
 
Web Services Segment revenue for the second quarter of 2016 decreased 26% to $320,000, compared to $430,000 for the third quarter of 2015.
 
Consolidated operating expenses for the third quarter of 2016 decreased 3% to $2.9 million compared to $3.0 million for the third quarter of 2015.
 
On a GAAP basis, the Company reported a $(621,000) net loss for the third quarter of 2016, or $(0.05) loss per diluted common share, compared to net loss of $(1.0) million or $(0.08) loss per diluted common share for the third quarter of 2015.
 
Non-GAAP net loss was $(353,000) for the third quarter of 2016, or $(0.03) loss per diluted common share, compared to a non-GAAP net loss of $(742,000) or $(0.06) loss per diluted common share for the third quarter of 2015.
 
EBITDA for the third quarter of 2016 was $(574,000) compared to $(1.0) million for the third quarter of 2015.  Adjusted EBITDA for the third quarter of 2016 was $(364,000) compared to $(738,000) for the third quarter of 2015.
 
Financial highlights for the nine months ended September 30, 2016
 
Consolidated revenue for the nine months ended September 30, 2016 increased 19% to $6.8 million compared to $5.7 million for the nine months ended September 30, 2015.
 
Hosted Telecommunications Services Segment revenue for the nine months ended September 30, 2016 increased 33% to $5.7 million compared to $4.3 million for the nine months ended September 30, 2015.
 
 
 
 
Web Services Segment revenue for the nine months ended September 30, 2016 decreased 26% to $1.1 million compared to $1.4 million for the nine months ended September 30, 2015.
 
Consolidated operating expenses for the nine months ended September 30, 2016 decreased 2% to $9.0 million compared to $9.2 million for the nine months ended September 30, 2015.
 
On a GAAP basis, the Company reported a $(2.3) million net loss for the nine months ended September 30, 2016, or $(0.17) loss per diluted common share, compared to net loss of $(3.3) million or $(0.25) loss per diluted common share for the nine months ended September 30, 2015.
 
Non-GAAP net loss was $(1.4) million for the nine months ended September 30, 2016, or $(0.11) loss per diluted common share, compared to a non-GAAP net loss of $(2.2) million or $(0.17) loss per diluted common share for the nine months ended September 30, 2015.
 
EBITDA for the nine months ended September 30, 2016 was $(2.1) million compared to $(3.3) million for the nine months ended September 30, 2015.  Adjusted EBITDA for the nine months ended September 30, 2016 was $(1.5) million compared to $(2.3) million for the nine months ended September 30, 2015.
 
Total cash and cash equivalents, excluding restricted cash, at September 30, 2016 was $854,000 compared to $1.7 million at September 30, 2015.
 
Cash used for operating activities for the nine months ended September 30, 2016 was $(737,000) compared to $(2.0) million for the nine months ended September 30, 2015.  Cash provided by investing activities for the nine months ended September 30, 2016 was $11,000 compared to cash used for investing activities of $(20,000) for the nine months ended September 30, 2015. Cash provided by financing activities for the nine months ended September 30, 2016 was $83,000 compared to $678,000 for the nine months ended September 30, 2015.
 
Steven G. Mihaylo, Chief Executive Officer commented, “We continue to make progress. We have again increased our revenue on a quarterly basis 2016 over 2015. We also continue to increase our backlog and sequential quarterly revenue.  We have continued our cost reduction initiatives and have completed a thorough review of costs. We have targeted cost reductions for software programs that we can cancel and others that we can replace with significantly more cost-effective replacements. We have also implemented other cost reduction initiatives. We believe these actions will have a very positive impact in 2017. We are also deferring planned expenditures in accounting software while we continue to work toward reaching GAAP cash flow breakeven.
 
Mihaylo added, “Our number one priority is amplifying our marketing campaign while continuing to work to increase our Dealer Partner Channel and our Direct Sales Channel. Our products, services, solutions and support are second to none. I continue to be firmly convinced that Crexendo will be very successful so long as we continue to put our customers first with the best solutions available.”
 
 
 
 
Conference Call
 
The Company is hosting a conference call today, November 11, 2016 at 5:30 PM EST. The telephone dial-in number is 877-795-3604 for domestic participants and 719-325-4750 for international participants. The conference ID to join the call is 1971912.  Please dial in five to ten minutes prior to the beginning of the call at 5:30 PM EST.
 
About Crexendo
 
Crexendo, Inc. (CXDO) is a hosted services company that provides hosted telecommunications services, broadband internet services and website hosting services for businesses. Our services are designed to make enterprise-class hosting services available to any size businesses 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) continuing to make progress; (ii) continuing our cost reduction initiates with  having completed a thorough review of costs; (iii) having targeted cost reductions for software programs that can  be canceled and others that  can be  replaced with significantly more cost-effective software and having implemented other cost reduction initiatives: (iv) believing the enumerated  actions will have a very positive impact in 2017; (v) deferring planned expenditures in accounting software while continuing to work toward reaching GAAP cash flow breakeven; having its number one priority be amplifying marketing campaign; (vi) continuing to work to increase  Dealer Partner Channel and the Direct Sales Channel; products, services, solutions and support being second to none;  and believing that it will be very successful so long as it continues to put our customers first with the best solutions available.
 
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, 2015 as well as Forms 10Q for 2016. 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)
 
 
 
September 30, 2016
 
 
December 31, 2015
 
Assets
 
 
 
 
 
 
Current assets:
 
 
 
 
 
 
Cash and cash equivalents
 $854 
 $1,497 
Restricted cash
  100 
  112 
Trade receivables, net of allowance for doubtful accounts of $34
    
    
as of September 30, 2016 and $35 as of December 31, 2015
  303 
  364 
Inventories
  124 
  134 
Equipment financing receivables
  123 
  131 
Prepaid expenses
  862 
  1,046 
Other current assets
  8 
  15 
Total current assets
  2,374 
  3,299 
 
    
    
Certificate of deposit
  252 
  251 
Long-term trade receivables, net of allowance for doubtful accounts
    
    
of $17 as of September 30, 2016 and $24 as of December 31, 2015
  46 
  81 
Long-term equipment financing receivables
  208 
  319 
Property and equipment, net
  21 
  33 
Deferred income tax assets, net
  482 
  482 
Intangible assets, net
  368 
  466 
Goodwill
  272 
  272 
Long-term prepaid expenses
  250 
  288 
Other long-term assets
  138 
  169 
Total assets
 $4,411 
 $5,660 
 
    
    
Liabilities and Stockholders' Equity
    
    
 
    
    
Current liabilities:
    
    
Accounts payable
 $308 
 $76 
Accrued expenses
  941 
  812 
Notes payable, current portion
  98 
  57 
Income taxes payable
  4 
  - 
Contingent consideration
  - 
  99 
Deferred income tax liability
  482 
  482 
Deferred revenue, current portion
  827 
  775 
Total current liabilities
  2,660 
  2,301 
 
    
    
Deferred revenue, net of current portion
  46 
  81 
Notes payable, net of current portion
  973 
  965 
Other long-term liabilities
  39 
  109 
Total liabilities
  3,718 
  3,456 
 
    
    
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, 13,413,556
    
    
shares issued and outstanding as of September 30, 2016 and 13,227,489 shares issued and
    
    
outstanding as of December 31, 2015
  13 
  13 
Additional paid-in capital
  58,370 
  57,614 
Accumulated deficit
  (57,690)
  (55,423)
Total stockholders' equity
  693 
  2,204 
 
    
    
Total Liabilities and Stockholders' Equity
 $4,411 
 $5,660 
 
 
 
 
 
CREXENDO, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
(In thousands, except per share and share data)
 
 
 
Three Months Ended
September 30,
 
 
Nine Months Ended 
September 30,
 
 
 
2016
 
 
2015
 
 
2016
 
 
2015
 
Revenue
 $2,333 
 $1,972 
 $6,774 
 $5,714 
Operating expenses:
    
    
    
    
Cost of revenue
  932 
  882 
  2,762 
  2,598 
Selling and marketing
  681 
  624 
  1,927 
  1,807 
General and administrative
  1,140 
  1,309 
  3,705 
  4,244 
Research and development
  189 
  209 
  634 
  577 
Total operating expenses
  2,942 
  3,024 
  9,028 
  9,226 
 
    
    
    
    
Loss from operations
  (609)
  (1,052)
  (2,254)
  (3,512)
 
    
    
    
    
Other income/(expense):
    
    
    
    
Interest income
  4 
  6 
  12 
  19 
Interest expense
  (39)
  (3)
  (105)
  (16)
Other income, net
  27 
  16 
  91 
  264 
Total other income/(expense), net
  (8)
  19 
  (2)
  267 
 
    
    
    
    
Loss before income tax
  (617)
  (1,033)
  (2,256)
  (3,245)
 
    
    
    
    
Income tax provision
  (4)
  (10)
  (11)
  (28)
 
    
    
    
    
Net loss
 $(621)
 $(1,043)
 $(1,422)
 $(2,152)
 
    
    
    
    
Net loss per common share:
    
    
    
    
Basic
 $(0.05)
 $(0.08)
 $(0.11)
 $(0.17)
Diluted
 $(0.05)
 $(0.08)
 $(0.11)
 $(0.17)
 
    
    
    
    
Weighted-average common shares outstanding:
    
    
    
    
Basic
  13,411,569 
  13,207,041 
  13,316,277 
  12,870,728 
Diluted
  13,411,569 
  13,207,041 
  13,316,277 
  12,870,728 

 
 
 
CREXENDO, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(In thousands)
 
 
 
Nine Months Ended
September 30,
 
 
 
2016
 
 
2015
 
CASH FLOWS FROM OPERATING ACTIVITIES
 
 
 
 
 
 
Net loss
 $(2,267)
 $(3,273)
Adjustments to reconcile net loss to net cash used for operating activities:
    
    
Amortization of prepaid rent
  242 
  242 
Depreciation and amortization
  110 
  216 
Non-cash interest expesnse
  18 
  - 
Expense for stock options issued to employees
  504 
  784 
Amortization of deferred gain
  (70)
  (70)
Changes in assets and liabilities:
    
    
Trade receivables
  96 
  111 
Equipment financing receivables
  119 
  130 
Inventories
  10 
  (43)
Prepaid expenses
  81 
  (69)
Other assets
  38 
  (96)
Accounts payable and accrued expenses
  361 
  (40)
Income tax payable
  4 
  27 
Deferred revenue
  17 
  112 
Net cash used for operating activities
  (737)
  (1,969)
 
    
    
CASH FLOWS FROM INVESTING ACTIVITIES
    
    
Purchase of property and equipment
  - 
  (29)
Release of restricted cash
  12 
  9 
Purchase of long-term investment
  (1)
  - 
Net cash provided by/(used for) investing activities
  11 
  (20)
 
    
    
CASH FLOWS FROM FINANCING ACTIVITIES
    
    
Proceeds from notes payable
  150 
  - 
Repayments made on notes payable
  (119)
  - 
Proceeds from exercise of options
  9 
  49 
Proceeds from exercise of warrants
  102 
  690 
Payment of contingent consideration
  (59)
  (61)
Net cash provided by financing activities
  83 
  678 
 
    
    
NET DECREASE IN CASH AND CASH EQUIVALENTS
  (643)
  (1,311)
 
    
    
CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE PERIOD
  1,497 
  2,906 
 
    
    
CASH AND CASH EQUIVALENTS AT THE END OF THE PERIOD
 $854 
 $1,595 
 
    
    
Supplemental disclosure of cash flow information:
    
    
Cash used during the period for:
    
    
Income taxes, net
 $(2)
 $(1)
Supplemental disclosure of non-cash investing and financing information:
    
    
Issuance of common stock for prepayment of interest on related-party note payable
 $101 
 $- 
Issuance of common stock for contingent consideration related to business acquisition
 $40 
 $40 
 
 
 
 
CREXENDO, INC. AND SUBSIDIARIES
Supplemental Segment Financial Data
(In thousands)
 
 
 
Three Months Ended
September 30,
 
 
Nine Months Ended
September 30,
 
 
 
2016
 
 
2015
 
 
2016
 
 
2015
 
Revenue:
 
 
 
 
 
 
 
 
 
 
 
 
Hosted telecommunications services
 $2,013 
 $1,542 
 $5,711 
 $4,287 
Web services
  320 
  430 
  1,063 
  1,427 
Consolidated revenue
  2,333 
  1,972 
  6,774 
  5,714 
 
    
    
    
    
Income/(loss) from operations:
    
    
    
    
Hosted telecommunications services
  (716)
  (1,119)
  (2,551)
  (3,560)
Web services
  107 
  67 
  297 
  48 
Total operating loss
  (609)
  (1,052)
  (2,254)
  (3,512)
Other income/(expense), net:
    
    
    
    
Hosted telecommunications services
  (11)
  19 
  (21)
  58 
Web services
  3 
  - 
  19 
  209 
Total other income/(expense), net
  (8)
  19 
  (2)
  267 
Income/(loss) before income tax provision
    
    
    
    
Hosted telecommunications services
  (727)
  (1,100)
  (2,572)
  (3,502)
Web services
  110 
  67 
  316 
  257 
Loss before income tax provision
 $(617)
 $(1,033)
 $(2,256)
 $(3,245)

 
 
 
Use of Non-GAAP Financial Measures
 
 To evaluate our business, we consider and use non-generally accepted accounting principles (Non-GAAP) net income (loss) 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 (loss) to be an important indicator of overall business performance because it allows us to evaluate results without the effects of share-based compensation, rent expense paid with common stock, interest expense paid with common stock, and amortization of intangibles.  We define EBITDA as U.S. GAAP net income (loss) 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, and rent expense paid with stock.  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 November 11, 2016 earnings press release, as furnished on Form 8-K, we included Non-GAAP net loss, EBITDA and Adjusted EBITDA.  The terms Non-GAAP net loss, 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 loss, EBITDA, and Adjusted EBITDA should not be considered in isolation, or as a substitute for net loss 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 (loss), EBITDA, and Adjusted EBITDA only as supplemental support for management’s analysis of business performance. Non-GAAP net income (loss), 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 Loss to Non-GAAP Net Loss
 
 
(Unaudited)
 
 
 
 
 
 
Three Months Ended
September 30,
 
 
Nine Months Ended
September 30,
 
 
 
2016
 
 
2015
 
 
2016
 
 
2015
 
 
 
(In thousands)
 
 
(In thousands)
 
U.S. GAAP net loss
 $(621)
 $(1,043)
 $(2,267)
 $(3,273)
Share-based compensation
  153 
  201 
  504 
  784 
Amortization of rent expense paid in stock, net of deferred gain
  57 
  57 
  171 
  171 
Amortization of intangible assets
  33 
  43 
  99 
  166 
Amortization of interest expense paid in stock
  25 
  - 
  71 
  - 
Non-GAAP net loss
 $(353)
 $(742)
 $(1,422)
 $(2,152)

 
Reconciliation of U.S. GAAP Net Loss to EBITDA to Adjusted EBITDA
 
 
(Unaudited)
 
 
 
 
 
 
Three Months Ended
September 30,
 
 
Nine Months Ended
September 30,
 
 
 
2016
 
 
2015
 
 
2016
 
 
2015
 
 
 (In thousands)
 (In thousands) 
U.S. GAAP net loss
 $(621)
 $(1,043)
 $(2,267)
 $(3,273)
Depreciation and amortization
  35 
  56 
  110 
  216 
Interest expense
  39 
  3 
  105 
  16 
Interest and other income
  (31)
  (22)
  (103)
  (283)
Income tax provision
  4 
  10 
  11 
  28 
EBITDA
  (574)
  (996)
  (2,144)
  (3,296)
Share-based compensation
  153 
  201 
  504 
  784 
Amortization of rent expense paid in stock, net of deferred gain
  57 
  57 
  171 
  171 
Adjusted EBITDA
 $(364)
 $(738)
 $(1,469)
 $(2,341)