EX-99.1 2 cxdo_ex991.htm PRESS RELEASE DATED AUGUST 6, 2019 BY REGISTRANT, REPORTING ITS RESULTS OF OPERATIONS FOR QUARTER ENDED JUNE 30, 2019. Blueprint
 
 
Exhibit 99.1
 
 
 
 
 
Crexendo Announces Second Quarter 2019 Results
 
PHOENIX, AZ—(Marketwired – August 6, 2019)
 
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 second quarter of 2019.
 
Second Quarter Financial highlights:
 
●
Total revenue increased 21% year over year to $3.6 million.
●
UCaaS service revenue increased 28% year over year to $3.0 million.
●
GAAP net income was $338,000 or $0.02 per diluted share.
●
Non-GAAP net income was $447,000 or $0.03 per diluted share.
 
Financial Results for the Second Quarter 2019
 
Consolidated total revenue for the second quarter of 2019 increased 21% to $3.6 million compared to $3.0 million for the second quarter of 2018.
 
Consolidated service revenue for the second quarter of 2019 increased 24% to $3.1 million compared to $2.5 million for the second quarter of 2018.
 
●
Cloud Telecommunications Segment UCaaS service revenue for the second quarter of 2019 increased 28% to $3.0 million compared to $2.3 million for the second quarter of 2018.
 
●
Web Services Segment service revenue for the second quarter of 2019 decreased 21% to $165,000, compared to $208,000 for the second quarter of 2018.
 
Consolidated product revenue for the second quarter of 2019 increased 7% to $467,000 compared to $437,000 for the second quarter of 2018.
 
Consolidated operating expenses for the second quarter of 2019 increased 12% to $3.3 million compared to $2.9 million for the second quarter of 2018.
 
On a GAAP basis, the Company reported net income of $338,000 for the second quarter of 2019, or $0.02 per diluted common share, compared to $47,000 or breakeven per diluted common share for the second quarter of 2018.
 
Non-GAAP net income was $447,000 for the second quarter of 2019, or $0.03 per diluted common share, compared to $178,000 or $0.01 per diluted common share for the second quarter of 2018.
 
EBITDA for the second quarter of 2019 was $362,000 compared to $71,000 for the second quarter of 2018. Adjusted EBITDA for the second quarter of 2019 was $457,000 compared to $184,000 for the second quarter of 2018.
 
Financial Results for the six months ended June 30, 2019
 
Consolidated total revenue for the six months ended June 30, 2019 increased 23% to $7.1 million compared to $5.8 million for the six months ended June 30, 2018.
 
Consolidated service revenue for the six months ended June 30, 2019 increased 24% to $6.2 million compared to $5.0 million for the six months ended June 30, 2018.
 
●
Cloud Telecommunications Segment UCaaS service revenue for the six months ended June 30, 2019 increased 28% to $5.8 million compared to $4.5 million for the six months ended June 30, 2018.
 
●
Web Services Segment service revenue for the six months ended June 30, 2019 decreased 21% to $343,000, compared to $433,000 for the six months ended June 30, 2018.
 
Consolidated product revenue for the six months ended June 30, 2019 increased 18% to $951,000 compared to $803,000 for the six months ended June 30, 2018.
 
 
 
 
Consolidated operating expenses for the six months ended June 30, 2019 increased 13% to $6.5 million compared to $5.8 million for the six months ended June 30, 2018.
 
On a GAAP basis, the Company reported net income of $577,000 for the six months ended June 30, 2019, or $0.04 per diluted common share, compared to a net loss of $(16,000) or breakeven per diluted common share for the six months ended June 30, 2018.
 
Non-GAAP net income was $790,000 for the six months ended June 30, 2019, or $0.05 per diluted common share, compared to $195,000 or $0.01 per diluted common share for the six months ended June 30, 2018.
 
EBITDA for the six months ended June 30, 2019 was $625,000 compared to $27,000 for the six months ended June 30, 2018. Adjusted EBITDA for the six months ended June 30, 2019 was $811,000 compared to $202,000 for the six months ended June 30, 2018.
 
Total cash, cash equivalents, and restricted cash at June 30, 2019 was $2.6 million compared to $1.9 million at December 31, 2018.
 
Cash provided by operating activities for the six months ended June 30, 2019 was $495,000 compared to cash used for operating activities of $(32,000) for the six months ended June 30, 2018. Cash used for investing activities for the six months ended June 30, 2019 was $(42,000) compared to $(136,000) for the six months ended June 30, 2018. Cash provided by financing activities for the six months ended June 30, 2019 was $206,000 compared to $226,000 for the six months ended June 30, 2018.
 
Steven G. Mihaylo, Chief Executive Officer commented, “I am very pleased with the results we announced today. The improvements and hard work we have undertaken are continuing to positively impact our results. We have now reported back to back quarters of substantial GAAP profit. We reported net income of $338,000 for the second quarter of 2019, or $0.02 per diluted common share, compared to $47,000 or breakeven per diluted common share for the second quarter of 2018. Cloud Telecommunications Segment UCaaS service revenue increased 28% for the six months ended June 30, 2019 compared to the prior year. Additionally, our balance sheet continues to improve with a current ratio of 1.84 at the end of the quarter. These results are highly encouraging. However, we are not sitting back and congratulating ourselves, we are continuing to work to make improvements in our sales process, strengthen our infrastructure and making sure that we provide the best products, services and customer interface in the industry. ”
 
Mihaylo added, "I am particularly pleased with our cash management. Cash provided by operating activities for the six months ended June 30, 2019 was $495,000 compared to cash used for operating activities of $(32,000) for the six months ended June 30, 2018. Results were positive across the board. We will continue to work hard to grow the business and to increase shareholder value. I commend the hard work of our team, which is responsible for the results we announced today”
 
Doug Gaylor, President and Chief Operating Officer, stated, "I share Steve’s enthusiasm for our results, and I also want to thank our team for their tireless efforts to promote excellence. We continue to monitor our sales process and teams carefully. We are pleased with the results both from our direct sales channel and our channel partners, with that said however, we keep working on our process and working to improve sales. We will continue to work every day to improve the Company and shareholder value”
 
Conference Call
 
The Company is hosting a conference call today, August 6, 2019 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 August 13, 2019 by dialing toll-free at 877-481-4010 or 919-882-2331 for international callers. The replay passcode is 50016.
 
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 very pleased with the results announced today; (ii) believing the improvements and hard work undertaken are continuing to positively impact results; (iii) having highly encouraging results but continuing to work to make improvements in sales process, strengthen infrastructure and making sure that it provides the best products, services and customer interface in the industry; (iv) being particularly pleased with cash management; (v) believing that results were positive across the board; (vi) continuing to work hard to grow the business and to increase shareholder value; (vii) believing the hard work of its team is responsible for the results announced; (viii) having enthusiasm in the results and believing the team has made tireless efforts to promote excellence; (ix) continuing to monitor sales process and teams carefully and being pleased with the results both from the direct sales channel and the channel partners; (x) working on its process and working to improve sales and (xi) continuing to work every day to improve the Company and shareholder value.
 
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, 2018, 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
Condensed Consolidated Balance Sheets
(Unaudited, in thousands, except par value and share data)
 
 
 
 
June 30,
2019
 
 
December 31,
2018
 
Assets
 
 
 
 
 
 
Current assets:
 
 
 
 
 
 
    Cash and cash equivalents
 $2,508 
 $1,849 
    Restricted cash
  100 
  100 
    Trade receivables, net of allowance for doubtful accounts of $24
    
    
        as of June 30, 2019 and $14 as of December 31, 2018
  517 
  419 
    Contract assets
  18 
  12 
    Inventories
  286 
  270 
    Equipment financing receivables
  99 
  67 
    Contract costs
  380 
  371 
    Prepaid expenses
  321 
  244 
    Income tax receivable
  7 
  1 
        Total current assets
  4,236 
  3,333 
 
    
    
Long-term trade receivables, net of allowance for doubtful accounts
    
    
    of $0 as of June 30, 2019 and December 31, 2018
  7 
  10 
Long-term equipment financing receivables, net
  358 
  184 
Property and equipment, net
  149 
  124 
Operating lease right-of-use assets
  974 
  - 
Intangible assets, net
  140 
  167 
Goodwill
  272 
  272 
Contract costs, net of current portion
  379 
  342 
Other long-term assets
  103 
  117 
        Total Assets
 $6,618 
 $4,549 
 
    
    
Liabilities and Stockholders' Equity
    
    
Current liabilities:
    
    
    Accounts payable
 $80 
 $155 
    Accrued expenses
  1,216 
  1,131 
    Finance leases
  26 
  28 
    Notes payable
  7 
  56 
    Operating lease liabilities
  242 
  - 
    Income taxes payable
  - 
  - 
    Contract liabilities
  737 
  641 
        Total current liabilities
  2,308 
  2,011 
 
    
    
    Contract liabilities, net of current portion
  442 
  422 
    Finance leases, net of current portion
  101 
  116 
    Operating lease liabilities, net of current portion
  732 
  - 
        Total liabilities
  3,583 
  2,549 
 
    
    
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, 14,581,484
    
    
        shares issued and outstanding as of June 30, 2019 and 14,394,113 shares issued
    
    
        and outstanding as of December 31, 2018
  15 
  14 
    Additional paid-in capital
  61,610 
  61,153 
    Accumulated deficit
  (58,590)
  (59,167)
        Total stockholders' equity
  3,035 
  2,000 
 
    
    
        Total Liabilities and Stockholders' Equity
 $6,618 
 $4,549 
 
 
 
 
CREXENDO, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
(Unaudited, in thousands, except per share and share data)
 
 
 
Three Months Ended
June 30,
 
 
Six Months Ended
June 30,
 
 
 
2019
 
 
2018
 
 
2019
 
 
2018
 
Service revenue
 $3,147 
 $2,540 
 $6,155 
 $4,982 
Product revenue
  467 
  437 
  951 
  803 
    Total revenue
  3,614 
  2,977 
  7,106 
  5,785 
 
    
    
    
    
Operating expenses:
    
    
    
    
    Cost of service revenue
  874 
  731 
  1,751 
  1,460 
    Cost of product revenue
  243 
  201 
  492 
  388 
    Selling and marketing
  963 
  767 
  1,862 
  1,596 
    General and administrative
  997 
  1,034 
  2,011 
  1,979 
    Research and development
  197 
  194 
  409 
  375 
        Total operating expenses
  3,274 
  2,927 
  6,525 
  5,798 
 
    
    
    
    
Income/(loss) from operations
  340 
  50 
  581 
  (13)
 
    
    
    
    
Other income/(expense):
    
    
    
    
    Interest income
  2 
  2 
  3 
  4 
    Interest expense
  (3)
  (2)
  (8)
  (3)
    Other income, net
  3 
  - 
  8 
  3 
        Total other income, net
  2 
  - 
  3 
  4 
 
    
    
    
    
Income/(loss) before income tax
  342 
  50 
  584 
  (9)
 
    
    
    
    
Income tax provision
  (4)
  (3)
  (7)
  (7)
 
    
    
    
    
Net income/(loss)
 $338 
 $47 
 $577 
 $(16)
 
    
    
    
    
Earnings/(loss) per common share:
    
    
    
    
    Basic
 $0.02 
 $0.00 
 $0.04 
 $(0.00)
    Diluted
 $0.02 
 $0.00 
 $0.04 
 $(0.00)
 
    
    
    
    
 
Weighted-average common shares outstanding:
 
    
    
    
    Basic
  14,462,722 
  14,299,638 
  14,428,694 
  14,293,658 
    Diluted
  15,508,570 
  15,147,255 
  15,339,404 
  14,293,658 
 
 
 
 
CREXENDO, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(Unaudited, in thousands)
 
 
 
Six Months Ended
June 30,
 
 
 
2019
 
 
2018
 
CASH FLOWS FROM OPERATING ACTIVITIES
 
 
 
 
 
 
Net income/(loss)
 $577 
 $(16)
Adjustments to reconcile net income/(loss) to net cash provided by/(used for) operating activities:
    
    
    Depreciation and amortization
  44 
  40 
    Share-based compensation
  186 
  175 
Changes in assets and liabilities:
    
    
    Trade receivables
  (95)
  (8)
    Contract assets
  (6)
  (8)
    Equipment financing receivables
  (206)
  (4)
    Inventories
  (16)
  (263)
    Contract costs
  (46)
  7 
    Prepaid expenses
  (77)
  (58)
    Income tax receivable
  (6)
  (5)
    Other assets
  14 
  13 
    Accounts payable and accrued expenses
  10 
  76 
    Contract liabilities
  116 
  19 
        Net cash provided by/(used for) operating activities
  495 
  (32)
 
    
    
CASH FLOWS FROM INVESTING ACTIVITIES
    
    
    Purchase of property and equipment
  (42)
  (136)
        Net cash used for investing activities
  (42)
  (136)
 
    
    
CASH FLOWS FROM FINANCING ACTIVITIES
    
    
    Repayments made on finance leases
  (17)
  - 
    Proceeds from notes payable
  - 
  267 
    Repayments made on notes payable
  (49)
  (71)
    Proceeds from exercise of options
  272 
  30 
        Net cash provided by financing activities
  206 
  226 
 
    
    
NET INCREASE IN CASH, CASH EQUIVALENTS, AND RESTRICTED CASH
  659 
  58 
 
    
    
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH AT THE BEGINNING OF THE PERIOD
  1,949 
  1,382 
 
    
    
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH AT THE END OF THE PERIOD
 $2,608 
 $1,440 
 
    
    
Cash used during the year for:
    
    
    Income taxes, net
 $(12)
 $(12)
    Interest expense
  (8)
  (3)
Supplemental disclosure of non-cash inversting and financing information:
    
    
 
 
 
 
CREXENDO, INC. AND SUBSIDIARIES
Supplemental Segment Financial Data
(In thousands)
 
 
 
Three Months Ended
June 30,
 
 
Six Months Ended
June 30,
 
 
 
2019
 
 
2018
 
 
2019
 
 
2018
 
Revenue:
 
 
 
 
 
 
 
 
 
 
 
 
    Cloud telecommunications
 $3,449 
 $2,769 
 $6,763 
 $5,352 
    Web services
  165 
  208 
  343 
  433 
Consolidated revenue
  3,614 
  2,977 
  7,106 
  5,785 
 
    
    
    
    
Income/(loss) from operations:
    
    
    
    
    Cloud telecommunications
  253 
  (56)
  416 
  (244)
    Web services
  87 
  106 
  165 
  231 
        Total operating income/(loss)
  340 
  50 
  581 
  (13)
Other income/(expense), net:
    
    
    
    
    Cloud telecommunications
  (1)
  3 
  (4)
  7 
    Web services
  3 
  (3)
  7 
  (3)
        Total other income, net
  2 
  - 
  3 
  4 
Income/(loss) before income tax provision:
    
    
    
    
    Cloud telecommunications
  252 
  (53)
  412 
  (237)
    Web services
  90 
  103 
  172 
  228 
Income/(loss) before income tax provision
 $342 
 $50 
 $584 
 $(9)
 
 
 
 
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 August 6, 2019 earnings press release, as furnished on Form 8-K, we included Non-GAAP net income (loss), EBITDA and Adjusted EBITDA. The terms Non-GAAP net income (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 income (loss), EBITDA, and Adjusted EBITDA should not be considered in isolation, or as a substitute for net income (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 Income/(Loss) to Non-GAAP Net Income
(Unaudited)
 
 
 
Three Months Ended
June 30,
 
 
Six Months Ended
June 30,
 
 
 
2019
 
 
2018
 
 
2019
 
 
2018
 
 
 
(In thousands)
 
 
(In thousands)
 
U.S. GAAP net income/(loss)
 $338 
 $47 
 $577 
 $(16)
    Share-based compensation
  95 
  113 
  186 
  175 
    Amortization of intangible assets
  14 
  18 
  27 
  36 
Non-GAAP net income
 $447 
 $178 
 $790 
 $195 
 
    
    
    
    
Non-GAAP earnings per common share:
    
    
    
    
Basic
 $0.03 
 $0.01 
 $0.05 
 $0.01 
Diluted
 $0.03 
 $0.01 
 $0.05 
 $0.01 
 
    
    
    
    
Weighted-average common shares outstanding:
    
    
    
    
Basic
  14,462,722 
  14,299,638 
  14,428,694 
  14,293,658 
Diluted
  15,508,570 
  15,147,255 
  15,339,404 
  15,181,564 
 
 
Reconciliation of U.S. GAAP Net Income/(Loss) to EBITDA to Adjusted EBITDA
(Unaudited)
 
 
 
Three Months Ended
June 30,
 
 
Six Months Ended
June 30,
 
 
 
2019
 
 
2018
 
 
2019
 
 
2018
 
 
 
(In thousands)
 
 
(In thousands)
 
U.S. GAAP net income/(loss)
 $338 
 $47 
 $577 
 $(16)
    Depreciation and amortization
  22 
  21 
  44 
  40 
    Interest expense
  3 
  2 
  8 
  3 
    Interest and other income
  (5)
  (2)
  (11)
  (7)
    Income tax provision
  4 
  3 
  7 
  7 
EBITDA
  362 
  71 
  625 
  27 
    Share-based compensation
  95 
  113 
  186 
  175 
Adjusted EBITDA
 $457 
 $184 
 $811 
 $202