cxdo_ex991
Exhibit 99.1
Crexendo Announces First Quarter 2020 Results
PHOENIX,
AZ—(Marketwired – 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)
|
|
|
|
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,
|
|
|
|
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,
|
|
|
|
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,
|
|
|
|
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,
|
|
|
|
|
|
|
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,
|
|
|
|
|
(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
|
Crexendo,
Inc.
Steven
G. Mihaylo
CEO
602-345-7777
Smihaylo@crexendo.com