Crexendo Announces Second Quarter 2020 Results
Crexendo, Inc. (NASDAQ:CXDO) reported strong financial results for Q2 2020 with total revenue increasing 12% year-over-year to $4.1 million. UCaaS service revenue rose 16% to $3.5 million. GAAP net income reached $508,000, a 50% increase, while non-GAAP income was $660,000, up 48%. Operating expenses grew 8% to $3.5 million. Cash and equivalents increased to $5.1 million. Executives acknowledged the challenges posed by COVID-19 but expressed optimism regarding future growth and potential acquisitions. The company continues to adapt services to meet emerging market demands.
- Total revenue increased 12% year-over-year to $4.1 million.
- UCaaS service revenue rose 16% to $3.5 million.
- GAAP net income improved 50% to $508,000.
- Non-GAAP net income increased 48% to $660,000.
- Cash and cash equivalents increased to $5.1 million.
- Web Services Segment revenue decreased 18% to $136,000.
- Consolidated product revenue decreased 4% to $449,000.
- Operating expenses increased 8% to $3.5 million.
PHOENIX, AZ / ACCESSWIRE / August 10, 2020 / Crexendo, Inc. (NASDAQ: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 ended June 30, 2020.
Second Quarter Financial highlights:
- UCaaS service revenue increased
16% year-over-year to$3.5 million . - GAAP net income of
$508,000 improved50% year over year. - Non-GAAP net income of
$660,000 improved48% year over year.
Financial Results for the Second Quarter of 2020
Consolidated total revenue for the second quarter of 2020 increased
Consolidated service revenue for the second quarter of 2020 increased
- Cloud Telecommunications Segment UCaaS service revenue for the second quarter of 2020 increased
16% to$3.5 million compared to$3.0 million for the second quarter of 2019. - Web Services Segment service revenue for the second quarter of 2020 decreased
18% to$136,000 , compared to$165,000 for the second quarter of 2019.
Consolidated product revenue for the second quarter of 2020 decreased
Consolidated operating expenses for the second quarter of 2020 increased
The Company reported net income of
Non-GAAP net income of
EBITDA for the second quarter of 2020 increased to
Financial Results for the six months ended June 30, 2020
Consolidated total revenue for the six months ended June 30, 2020 increased
Consolidated service revenue for the six months ended June 30, 2020 increased
- Cloud Telecommunications Segment UCaaS service revenue for the six months ended June 30, 2020 increased
17% to$6.8 million compared to$5.8 million for the six months ended June 30, 2019. - Web Services Segment service revenue for the six months ended June 30, 2020 decreased
15% to$292,000 , compared to$343,000 for the six months ended June 30, 2019.
Consolidated product revenue for the six months ended June 30, 2020 decreased
Consolidated operating expenses for the six months ended June 30, 2020 increased
The Company reported net income of
Non-GAAP net income was
EBITDA for the six months ended June 30, 2020 was
Total cash, cash equivalents, and restricted cash at June 30, 2020 was
Cash provided by operating activities for the six months ended June 30, 2020 of
Steven G. Mihaylo, Chief Executive Officer commented, "These are very strong results, and I am extremely proud of our entire team who worked very hard to achieve this. I am particularly pleased that with the current uncertainty, we managed to increase UCaaS service revenue for the second quarter
Mihaylo added, "While we still face the headwinds of COVID-19, I believe they have been less of a factor this quarter than in the first quarter. We believe we have seen a decrease in Q2 from COVID related customer downgrades and business closures. Furthermore, we believe that the effect of our taking the "keep America Connected Pledge" is beginning to be less of a factor. We believe that most of our customers now have experience in swiftly relocating their service from an office to a remote location which has reduced customer service demand. While we are pleased with these results and metrics, we carefully monitor the COVID-19 situation and we are prepared to respond as necessary as well as adapt our offering to meet demands. I am convinced we will grow the business, and we have the ability to be on the forefront of the new digital transformation as customers adapt. We now believe that our stock is poised to enable us to add to our growth with accretive acquisitions. We will also continue to work to grow the business organically. Our entire team works every day to increase shareholder value."
Doug Gaylor, President and Chief Operating Officer, stated, "I agree with Steve that these results are a testament to our team and our process. We are continuing to upgrade our marketing efforts, sales processes, and sales teams. These investments we trust will continue to fuel our results. The COVID-19 situation has shown how important and necessary the Crexendo Ride the Cloud® services are, and how important it is for legacy phone systems to move to the Cloud. Our system is the perfect solution for today's world as shown by our recently being awarded the TMC Communications Solutions product of the year award. Our job is to capitalize on customer needs, and I am convinced we will continue to do that. We are running some very substantial promotions for new customers, and we can show you how moving to the Crexendo Cloud will improve your ability to communicate with your customers, add functionality and in most cases save a substantial amount of money."
Conference Call The Company is hosting a conference call today, August 10, 2020 at 4:30 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 4:30 PM EST and reference Crexendo. A replay of the call will be available until August 17, 2020 by dialing toll-free at 877-481-4010 or 919-882-2331 for international callers. The replay passcode is 35625.
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) having very strong results and being extremely proud of the entire team; (ii) GAAP net income and GAAP profit of
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)
| June 30, 2020 | December 31, 2019 | |||||||
Assets | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 4,989 | $ | 4,180 | ||||
Restricted cash | 100 | 100 | ||||||
Trade receivables, net of allowance for doubtful accounts of | ||||||||
as of June 30, 2020 and | 567 | 380 | ||||||
Contract assets | 46 | 22 | ||||||
Inventories | 448 | 382 | ||||||
Equipment financing receivables | 211 | 143 | ||||||
Contract costs | 397 | 379 | ||||||
Prepaid expenses | 322 | 141 | ||||||
Income tax receivable | - | 4 | ||||||
Total current assets | 7,080 | 5,731 | ||||||
Long-term trade receivables, net of allowance for doubtful accounts | ||||||||
of | 2 | 6 | ||||||
Long-term equipment financing receivables, net | 748 | 561 | ||||||
Property and equipment, net | 2,589 | 155 | ||||||
Operating lease right-of-use assets | 1 | 51 | ||||||
Intangible assets, net | 298 | 465 | ||||||
Goodwill | 272 | 272 | ||||||
Contract costs, net of current portion | 479 | 436 | ||||||
Other long-term assets | 157 | 106 | ||||||
Total Assets | $ | 11,626 | $ | 7,783 | ||||
Liabilities and Stockholders' Equity | ||||||||
Current liabilities: | ||||||||
Accounts payable | $ | 133 | $ | 86 | ||||
Accrued expenses | 1,387 | 1,754 | ||||||
Finance leases | 31 | 30 | ||||||
Notes payable | 1,070 | - | ||||||
Operating lease liabilities | - | 50 | ||||||
Income tax payable | 2 | - | ||||||
Contigent consideration | 13 | 175 | ||||||
Contract liabilities | 786 | 791 | ||||||
Total current liabilities | 3,422 | 2,886 | ||||||
Contract liabilities, net of current portion | 449 | 423 | ||||||
Finance leases, net of current portion | 71 | 86 | ||||||
Notes payable, net of current portion | 1,909 | - | ||||||
Operating lease liabilities, net of current portion | 1 | 1 | ||||||
Total liabilities | 5,852 | 3,396 | ||||||
Stockholders' equity: | ||||||||
Preferred stock, par value | - | - | ||||||
Common stock, par value | ||||||||
shares issued and outstanding as of June 30, 2020 and 14,884,755 shares issued | ||||||||
and outstanding as of December 31, 2019 | 15 | 15 | ||||||
Additional paid-in capital | 63,139 | 62,400 | ||||||
Accumulated deficit | (57,380 | ) | (58,028 | ) | ||||
Total stockholders' equity | 5,774 | 4,387 | ||||||
Total Liabilities and Stockholders' Equity | $ | 11,626 | $ | 7,783 | ||||
CREXENDO, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
(In thousands, except per share and share data)
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
| 2020 | 2019 | 2020 | 2019 | |||||||||||||
Service revenue | $ | 3,605 | $ | 3,147 | $ | 7,093 | $ | 6,155 | ||||||||
Product revenue | 449 | 467 | 828 | 951 | ||||||||||||
Total revenue | 4,054 | 3,614 | 7,921 | 7,106 | ||||||||||||
Operating expenses: | ||||||||||||||||
Cost of service revenue | 908 | 874 | 1,878 | 1,751 | ||||||||||||
Cost of product revenue | 263 | 243 | 483 | 492 | ||||||||||||
Selling and marketing | 1,062 | 963 | 2,100 | 1,862 | ||||||||||||
General and administrative | 1,046 | 997 | 2,234 | 2,011 | ||||||||||||
Research and development | 244 | 197 | 514 | 409 | ||||||||||||
Total operating expenses | 3,523 | 3,274 | 7,209 | 6,525 | ||||||||||||
Income from operations | 531 | 340 | 712 | 581 | ||||||||||||
Other income/(expense): | ||||||||||||||||
Interest income | 1 | 2 | 2 | 3 | ||||||||||||
Interest expense | (22 | ) | (3 | ) | (31 | ) | (8 | ) | ||||||||
Other income/(expense), net | 1 | 3 | (29 | ) | 8 | |||||||||||
Total other income/(expense), net | (20 | ) | 2 | (58 | ) | 3 | ||||||||||
Income before income tax | 511 | 342 | 654 | 584 | ||||||||||||
Income tax provision | (3 | ) | (4 | ) | (6 | ) | (7 | ) | ||||||||
Net income | $ | 508 | $ | 338 | $ | 648 | $ | 577 | ||||||||
Earnings per common share: | ||||||||||||||||
Basic | $ | 0.03 | $ | 0.02 | $ | 0.04 | $ | 0.04 | ||||||||
Diluted | $ | 0.03 | $ | 0.02 | $ | 0.04 | $ | 0.04 | ||||||||
Weighted-average common shares outstanding: | ||||||||||||||||
Basic | 15,023,929 | 14,462,722 | 14,964,138 | 14,428,694 | ||||||||||||
Diluted | 16,671,848 | 15,508,570 | 16,485,754 | 15,339,404 | ||||||||||||
CREXENDO, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(In thousands)
| Six Months Ended June 30, | ||||||||
| 2020 | 2019 | |||||||
CASH FLOWS FROM OPERATING ACTIVITIES | ||||||||
Net income | $ | 648 | $ | 577 | ||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
Depreciation and amortization | 140 | 44 | ||||||
Share-based compensation | 241 | 186 | ||||||
Changes in assets and liabilities: | ||||||||
Trade receivables | (183 | ) | (95 | ) | ||||
Contract assets | (24 | ) | (6 | ) | ||||
Equipment financing receivables | (255 | ) | (206 | ) | ||||
Inventories | (66 | ) | (16 | ) | ||||
Contract costs | (61 | ) | (46 | ) | ||||
Prepaid expenses | (181 | ) | (77 | ) | ||||
Income tax receivable | 4 | (6 | ) | |||||
Other assets | (51 | ) | 14 | |||||
Accounts payable and accrued expenses | (144 | ) | 10 | |||||
Income tax payable | 2 | - | ||||||
Contract liabilities | 21 | 116 | ||||||
Net cash provided by operating activities | 91 | 495 | ||||||
CASH FLOWS FROM INVESTING ACTIVITIES | ||||||||
Purchase of property and equipment | (528 | ) | (42 | ) | ||||
Acquisition of customer relationship assets | (176 | ) | - | |||||
Net cash used for investing activities | (704 | ) | (42 | ) | ||||
CASH FLOWS FROM FINANCING ACTIVITIES | ||||||||
Payment of contingent consideration | (41 | ) | - | |||||
Repayments made on finance leases | (14 | ) | (17 | ) | ||||
Proceeds from notes payable | 1,001 | - | ||||||
Repayments made on notes payable | (22 | ) | (49 | ) | ||||
Proceeds from exercise of options | 498 | 272 | ||||||
Net cash provided by financing activities | 1,422 | 206 | ||||||
NET INCREASE IN CASH, CASH EQUIVALENTS, AND RESTRICTED CASH | 809 | 659 | ||||||
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 | $ | 5,089 | $ | 2,608 | ||||
Cash used during the year for: | ||||||||
Income taxes, net | $ | - | $ | (12 | ) | |||
Interest expense | $ | (31 | ) | $ | (8 | ) | ||
Supplemental disclosure of non-cash investing and financing information: | ||||||||
Purchase of property and equipment with a note payable | $ | 2,000 | $ | - | ||||
Adjustment to intangible assets and contingent consideration of customer relationship asset acquisition | $ | (121 | ) | $ | - | |||
CREXENDO, INC. AND SUBSIDIARIES
Supplemental Segment Financial Data
(In thousands)
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
| 2020 | 2019 | 2020 | 2019 | |||||||||||||
Revenue: | ||||||||||||||||
Cloud telecommunications | $ | 3,918 | $ | 3,449 | $ | 7,629 | $ | 6,763 | ||||||||
Web services | 136 | 165 | 292 | 343 | ||||||||||||
Consolidated revenue | 4,054 | 3,614 | 7,921 | 7,106 | ||||||||||||
Income from operations: | ||||||||||||||||
Cloud telecommunications | 486 | 253 | 615 | 416 | ||||||||||||
Web services | 45 | 87 | 97 | 165 | ||||||||||||
Total operating income | 531 | 340 | 712 | 581 | ||||||||||||
Other income/(expense), net: | ||||||||||||||||
Cloud telecommunications | (21 | ) | (1 | ) | (27 | ) | (4 | ) | ||||||||
Web services | 1 | 3 | (31 | ) | 7 | |||||||||||
Total other income/(expense), net | (20 | ) | 2 | (58 | ) | 3 | ||||||||||
Income before income tax provision: | ||||||||||||||||
Cloud telecommunications | 465 | 252 | 588 | 412 | ||||||||||||
Web services | 46 | 90 | 66 | 172 | ||||||||||||
Income before income tax provision | $ | 511 | $ | 342 | $ | 654 | $ | 584 | ||||||||
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 August 10, 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 June 30, | Six Months Ended June 30, | |||||||||||||||
| 2020 | 2019 | 2020 | 2019 | |||||||||||||
| (In thousands) | (In thousands) | |||||||||||||||
U.S. GAAP net income | $ | 508 | $ | 648 | $ | 577 | ||||||||||
Share-based compensation | 136 | 95 | 241 | 186 | ||||||||||||
Amortization of intangible assets | 16 | 14 | 46 | 27 | ||||||||||||
Non-GAAP net income | $ | 660 | $ | 447 | $ | 935 | $ | 790 | ||||||||
Non-GAAP earnings per common share: | ||||||||||||||||
Basic | $ | 0.04 | $ | 0.03 | $ | 0.06 | $ | 0.05 | ||||||||
Diluted | $ | 0.04 | $ | 0.03 | $ | 0.06 | $ | 0.05 | ||||||||
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FAQ
What were Crexendo's Q2 2020 financial highlights?
In Q2 2020, Crexendo reported a 12% increase in total revenue to $4.1 million and a 16% rise in UCaaS service revenue to $3.5 million.
What was Crexendo's GAAP net income for Q2 2020?
Crexendo's GAAP net income for Q2 2020 was $508,000, which is a 50% increase compared to the previous year.
How did Crexendo's operating expenses change in Q2 2020?
Operating expenses for Q2 2020 increased by 8% to $3.5 million.
What challenges is Crexendo facing due to COVID-19?
Crexendo has noted customer downgrades and business closures linked to COVID-19, although they believe these effects have lessened in Q2 compared to Q1.
What is Crexendo's outlook for future growth?
Crexendo's executives are optimistic about growth, citing potential for accretive acquisitions and adapting services to meet market demands.
CREXENDO INC
NASDAQ:CXDOCXDO RankingsCXDO Latest NewsCXDO Stock Data
137.95M
27.10M
56.25%
20.16%
0.84%
Telecom Services
Telephone Communications (no Radiotelephone)
United States of America
TEMPE
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