Crexendo Announces Second Quarter 2021 Results
Crexendo, Inc. (NASDAQ:CXDO) reported a significant 43% year-over-year increase in total revenue for Q2 2021, reaching $5.8 million, with service revenue rising 20% to $4.3 million. The company incurred a GAAP net loss of $(1.0) million due to acquisition-related costs, while non-GAAP net income stood at $37,000. Operating expenses surged 99% to $7.0 million, driven by acquisitions. The company emphasizes future growth via the integration of Crexendo and NetSapiens, which they believe will yield substantial operational efficiencies and enhance their telecom offerings.
- Total revenue increased 43% year-over-year to $5.8 million.
- Service revenue rose 20% year-over-year to $4.3 million.
- Successful acquisition of NetSapiens, contributing $1.0 million in software solutions revenue.
- Awarded TMC 2021 Communications Solutions Product of the Year for VIP Cloud Communications Platform.
- GAAP net loss of $(1.0) million, compared to net income of $508,000 in Q2 2020.
- Operating expenses increased 99% to $7.0 million, primarily due to acquisition costs.
- EBITDA decreased to $(983,000) from $568,000 in Q2 2020.
PHOENIX, AZ / ACCESSWIRE / August 10, 2021 / Crexendo, Inc. (NASDAQ:CXDO) is an award-winning premier provider of Unified Communications as a Service (UCaaS), Call Center as a Service (CCaaS), communication platform software solutions, and collaboration services designed to provide enterprise-class cloud communication solutions to any size business through our business partners, agents, and direct channels. Our solutions currently support over 1.7M end users globally and was recently recognized as the fastest growing UCaaS platform in the United States. Today, the Company reported financial results for the second quarter ended June 30, 2021.
Second Quarter Financial highlights:
- Total revenue increased
43% year-over-year to$5.8 million . - Service revenue increased
20% year-over-year to$4.3 million . - Non-GAAP net income of
$37,000 and GAAP net loss of$(1.0) million
Financial Results for the Second Quarter of 2021
Consolidated total revenue for the second quarter of 2021 increased
Consolidated service revenue for the second quarter of 2021 increased
Consolidated software solutions revenue for the second quarter of 2021 of
Consolidated product revenue for the second quarter of 2021 decreased
Consolidated operating expenses for the second quarter of 2021 increased
The Company reported a net loss of
Non-GAAP net income of
EBITDA for the second quarter of 2021 decreased to
Financial Results for the six months ended June 30, 2021
Consolidated total revenue for the six months ended June 30, 2021 increased
Consolidated service revenue for the six months ended June 30, 2021 increased
Consolidated software solutions revenue for the six months ended June 30, 2021 of
Consolidated product revenue for the six months ended June 30, 2021 decreased
Consolidated operating expenses for the six months ended June 30, 2021 increased
The Company reported a net loss of
Non-GAAP net income of
EBITDA for the six months ended June 30, 2021 decreased to
Total cash, cash equivalents, and restricted cash at June 30, 2021 was
Cash used for operating activities for the six months ended June 30, 2021 of
Steven G. Mihaylo, Chief Executive Officer commented, "This was a transformational quarter for us. First, we were able to close a major accretive acquisition. Secondly, we were able to increase our quarterly revenue
Mihaylo added, "We expected a GAAP loss this quarter, particularly due to the acquisition related costs. We had substantial one-time acquisition costs, additional intangible asset amortization costs, and we also incurred costs related to the buildout and rollout of our VIP platform offering, scheduled upgrades to the Crexendo data center and additional employee costs particularly related to sales. For the foreseeable future GAAP earnings will not be the primary metric I use to measure the business, primarily due to the substantial intangible asset amortization expense from the recent acquisitions. We will be carefully monitoring cash flows from operations, non-GAAP income, EBITDA and adjusted EBITDA as our key performance indicators. I expect those numbers to improve substantially as we continue to grow the business. We are also confident we will see positive results based on the investments made in marketing and the sales processes. In addition, we will start to see cost savings that will be realized by moving the Crexendo customers to the NetSapiens platform enabling us to invest in just one platform. I know there will be operating efficiencies from the acquisition as we will have more cross functionality between the teams. I am very pleased with what we have accomplished so far, but this is only the beginning. I am very excited about our future. "
Doug Gaylor, President and Chief Operating Officer, stated, "I was very pleased with our results and I am thrilled about how well the two organizations are coming together. We are working every day to integrate the Crexendo and NetSapiens businesses and realize the synergies of this accretive acquisition. The senior management teams have been working very closely for some time, and the rest of the teams have been working diligently in finding operational efficiencies. We have already integrated accounting and legal, and we are working on integrating marketing and the teams will be actively finding ways to reduce costs and improve operations. We are very grateful to have added Anand, David and Jim to our senior executive team and we are working diligently together to show great improvements for Crexendo, our shareholders and the NetSapiens community. I share Steve's enthusiasm for our future growth and success."
Conference Call
The Company is hosting a conference call today, August 10, 2021 at 4:30 PM EST. The dial-in number for domestic participants is 844-602-0380 and 862-298-0970 for international participants. Please dial in five minutes prior to the beginning of the call at 4:30 PM EST and reference Crexendo earnings call. A replay of the call will be available until August 17, 2021 by dialing toll-free at 877-481-4010 or 919-882-2331 for international callers. The replay passcode is 42387.
About Crexendo
Crexendo, Inc. is an award-winning premier provider of Unified Communications as a Service (UCaaS), Call Center as a Service (CCaaS), communication platform software solutions, and collaboration services designed to provide enterprise-class cloud communication solutions to any size business through our business partners, agents, and direct channels. Our solutions currently support over 1.7M end users globally and was recently recognized as the fastest growing UCaaS platform in the United States.
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 this quarter be a transformational quarter; (ii) that revenue increases bode extremely well for the future; (iii) working every day to improve the business and prioritizing actively integrating the Crexendo and NetSapiens teams which will provide impressive dividends for shareholders; (iv) having the best telecom offering in the business which customers and the Crexendo team are excited about with being convinced our shareholders will also be excited by the results; (v) expecting a GAAP loss this quarter, particularly due to the acquisition related costs; (vi) believing that for the foreseeable future GAAP earnings will not be the primary metric used to measure the business, and monitoring cash flows from operations, non-GAAP income, EBITDA and adjusted EBITDA as key performance indicators; (vii) expect those numbers to improve substantially as the business continues to grow; (viii) being confident that it will see positive results based on the investments made in marketing and the sales processes as well as starting to see cost savings that will be realized by moving the Crexendo customers to the NetSapiens platform; (ix) having operating efficiencies from the acquisition and having more cross functionality between the teams; (x) being very pleased with what has been accomplished so far and being very excited about its future; (xi) being thrilled about how well the two organizations are coming together; (xii) working every day to integrate the Crexendo and NetSapiens businesses and realize the synergies of this accretive acquisition; and (xiii) the teams have been working diligently in finding operational efficiencies and finding ways to reduce costs and improve operations.
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, 2020, 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.
Contact
Crexendo, Inc.
Doug Gaylor
President and Chief Operating Officer
602-732-7990
dgaylor@crexendo.com
CREXENDO, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(Unaudited, in thousands, except par value and share data)
| June 30, 2021 | December 31, 2020 | |||||||
| Assets | ||||||||
| Current assets: | ||||||||
Cash and cash equivalents | $ | 7,876 | $ | 17,579 | ||||
Restricted cash | - | 100 | ||||||
Trade receivables, net of allowance for doubtful accounts of | ||||||||
as of June 30, 2021 and | 1,406 | 538 | ||||||
Contract assets | 199 | 159 | ||||||
Inventories | 311 | 504 | ||||||
Equipment financing receivables | 316 | 286 | ||||||
Contract costs | 445 | 421 | ||||||
Prepaid expenses | 834 | 190 | ||||||
Income tax receivable | 11 | 4 | ||||||
Other current assets | 319 | - | ||||||
Total current assets | 11,717 | 19,781 | ||||||
Long-term trade receivables, net of allowance for doubtful accounts | ||||||||
of | 45 | - | ||||||
Long-term equipment financing receivables, net | 782 | 906 | ||||||
Property and equipment, net | 3,072 | 2,734 | ||||||
Deferred income tax assets, net | 8,883 | 6,054 | ||||||
Operating lease right-of-use assets | 653 | 1 | ||||||
Intangible assets, net | 23,743 | 252 | ||||||
Goodwill | 28,129 | 272 | ||||||
Contract costs, net of current portion | 574 | 549 | ||||||
Income tax receivable, net of current portion | 393 | - | ||||||
Other long-term assets | 290 | 156 | ||||||
Total Assets | $ | 78,281 | $ | 30,705 | ||||
Liabilities and Stockholders' Equity | ||||||||
Current liabilities: | ||||||||
Accounts payable | $ | 651 | $ | 56 | ||||
Accrued expenses | 5,455 | 1,628 | ||||||
Finance leases | 148 | 29 | ||||||
Notes payable | 72 | 71 | ||||||
Operating lease liabilities | 419 | 1 | ||||||
Contigent consideration | 746 | - | ||||||
Contract liabilities | 2,273 | 778 | ||||||
Total current liabilities | 9,764 | 2,563 | ||||||
Contract liabilities, net of current portion | 936 | 450 | ||||||
Finance leases, net of current portion | 270 | 55 | ||||||
Notes payable, net of current portion | 1,836 | 1,873 | ||||||
Operating lease liabilities, net of current portion | 263 | - | ||||||
Total liabilities | 13,069 | 4,941 | ||||||
Stockholders' equity: | ||||||||
Preferred stock, par value | - | - | ||||||
Common stock, par value | ||||||||
shares issued and outstanding as of June 30, 2021 and 17,983,177 shares issued | ||||||||
and outstanding as of December 31, 2020 | 22 | 18 | ||||||
Additional paid-in capital | 116,994 | 75,834 | ||||||
Accumulated deficit | (51,805 | ) | (50,088 | ) | ||||
Accumulated other comprehensive income | 1 | - | ||||||
Total stockholders' equity | 65,212 | 25,764 | ||||||
Total Liabilities and Stockholders' Equity | $ | 78,281 | $ | 30,705 | ||||
CREXENDO, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
(Unaudited, in thousands, except per share and share data)
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
| 2021 | 2020 | 2021 | 2020 | |||||||||||||
Service revenue | $ | 4,327 | $ | 3,605 | $ | 8,466 | $ | 7,093 | ||||||||
Software solutions revenue | 1,012 | - | 1,012 | - | ||||||||||||
Product revenue | 440 | 449 | 808 | 828 | ||||||||||||
Total revenue | 5,779 | 4,054 | 10,286 | 7,921 | ||||||||||||
Operating expenses: | ||||||||||||||||
Cost of service revenue | 1,347 | 908 | 2,606 | 1,878 | ||||||||||||
Cost of software solutions revenue | 526 | - | 526 | - | ||||||||||||
Cost of product revenue | 286 | 263 | 511 | 483 | ||||||||||||
Selling and marketing | 1,795 | 1,062 | 3,036 | 2,100 | ||||||||||||
General and administrative | 2,681 | 1,046 | 4,935 | 2,234 | ||||||||||||
Research and development | 388 | 244 | 738 | 514 | ||||||||||||
Total operating expenses | 7,023 | 3,523 | 12,352 | 7,209 | ||||||||||||
Income/(loss) from operations | (1,244 | ) | 531 | (2,066 | ) | 712 | ||||||||||
Other income/(expense): | ||||||||||||||||
Interest income | 1 | 1 | 1 | 2 | ||||||||||||
Interest expense | (21 | ) | (22 | ) | (40 | ) | (31 | ) | ||||||||
Other income/(expense), net | 1 | 1 | 3 | (29 | ) | |||||||||||
Total other income/(expense), net | (19 | ) | (20 | ) | (36 | ) | (58 | ) | ||||||||
Income/(loss) before income tax | (1,263 | ) | 511 | (2,102 | ) | 654 | ||||||||||
Income tax benefit/(provision) | 260 | (3 | ) | 384 | (6 | ) | ||||||||||
Net income/(loss) | $ | (1,003 | ) | $ | 508 | $ | (1,718 | ) | $ | 648 | ||||||
Earnings per common share: | ||||||||||||||||
Basic | $ | (0.05 | ) | $ | 0.03 | $ | (0.09 | ) | $ | 0.04 | ||||||
Diluted | $ | (0.05 | ) | $ | 0.03 | $ | (0.09 | ) | $ | 0.04 | ||||||
Weighted-average common shares outstanding: | ||||||||||||||||
Basic | 19,443,777 | 15,023,929 | 18,818,085 | 14,964,138 | ||||||||||||
Diluted | 19,443,777 | 16,671,848 | 18,818,085 | 16,485,754 | ||||||||||||
CREXENDO, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(Unaudited, in thousands)
| Six Months Ended June 30, | ||||||||
| 2021 | 2020 | |||||||
CASH FLOWS FROM OPERATING ACTIVITIES | ||||||||
Net income/(loss) | $ | (1,718 | ) | $ | 648 | |||
Adjustments to reconcile net income/(loss) to net cash provided by operating activities: | ||||||||
Depreciation and amortization | 362 | 140 | ||||||
Share-based compensation | 735 | 241 | ||||||
Non-cash operating lease amortization | (2 | ) | - | |||||
Changes in assets and liabilities: | ||||||||
Trade receivables | 55 | (183 | ) | |||||
Contract assets | (40 | ) | (24 | ) | ||||
Equipment financing receivables | 94 | (255 | ) | |||||
Inventories | 205 | (66 | ) | |||||
Contract costs | (49 | ) | (61 | ) | ||||
Prepaid expenses | (568 | ) | (181 | ) | ||||
Income tax receivable | (400 | ) | 4 | |||||
Other assets | 13 | (51 | ) | |||||
Accounts payable and accrued expenses | 1,359 | (144 | ) | |||||
Income tax payable | - | 2 | ||||||
Contract liabilities | (270 | ) | 21 | |||||
Net cash provided by/(used for) operating activities | (224 | ) | 91 | |||||
CASH FLOWS FROM INVESTING ACTIVITIES | ||||||||
Purchase of property and equipment | (41 | ) | (528 | ) | ||||
Acquisitions of assets and businesses, net of cash received | (10,505 | ) | (176 | ) | ||||
Net cash used for investing activities | (10,546 | ) | (704 | ) | ||||
CASH FLOWS FROM FINANCING ACTIVITIES | ||||||||
Payment of contingent consideration | - | (41 | ) | |||||
Repayments made on finance leases | (20 | ) | (14 | ) | ||||
Proceeds from notes payable | - | 1,001 | ||||||
Repayments made on notes payable | (36 | ) | (22 | ) | ||||
Proceeds from exercise of options | 1,177 | 498 | ||||||
Taxes paid on the net settlement of stock options and RSUs | (155 | ) | - | |||||
Net cash provided by financing activities | 966 | 1,422 | ||||||
Effect of exchange rate changes on cash | 1 | - | ||||||
NET DECREASE IN CASH, CASH EQUIVALENTS, AND RESTRICTED CASH | (9,803 | ) | 809 | |||||
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH AT THE BEGINNING OF THE PERIOD | 17,679 | 4,280 | ||||||
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH AT THE END OF THE PERIOD | $ | 7,876 | $ | 5,089 | ||||
Cash used during the year for: | ||||||||
Income taxes, net | $ | (15 | ) | $ | - | |||
Interest expense | $ | (40 | ) | $ | (31 | ) | ||
Supplemental disclosure of non-cash investing and financing information: | ||||||||
Stock issued for the acquisition of Centric Telecom | $ | 346 | $ | - | ||||
Contingent consideration related to the acquisition of Centric Telecom | $ | 746 | $ | - | ||||
Stock issued in connection with the merger with NetSapiens | $ | 16,942 | $ | - | ||||
Stock options issued in connection with the merger with NetSapiens | $ | 22,120 | $ | - | ||||
Property and equipment financed through finance leases | $ | 273 | $ | - | ||||
Prepaid assets financed through finance leases | $ | 14 | $ | - | ||||
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
(Unaudited, in thousands)
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
| 2021 | 2020 | 2021 | 2020 | |||||||||||||
Revenue: | ||||||||||||||||
Cloud telecommunications services | $ | 4,767 | $ | 4,054 | $ | 9,274 | $ | 7,921 | ||||||||
Software solutions | 1,012 | - | 1,012 | - | ||||||||||||
Consolidated revenue | 5,779 | 4,054 | 10,286 | 7,921 | ||||||||||||
Income/(loss) from operations: | ||||||||||||||||
Cloud telecommunications services | (929 | ) | 531 | (1,751 | ) | 712 | ||||||||||
Software solutions | (315 | ) | - | (315 | ) | - | ||||||||||
Total operating income/(loss) | (1,244 | ) | 531 | (2,066 | ) | 712 | ||||||||||
Other income/(expense), net: | ||||||||||||||||
Cloud telecommunications services | (19 | ) | (20 | ) | (36 | ) | (58 | ) | ||||||||
Software solutions | - | - | - | - | ||||||||||||
Total other income/(expense), net | (19 | ) | (20 | ) | (36 | ) | (58 | ) | ||||||||
Income/(loss) before income tax provision: | ||||||||||||||||
Cloud telecommunications services | (948 | ) | 511 | (1,787 | ) | 654 | ||||||||||
Software solutions | (315 | ) | - | (315 | ) | - | ||||||||||
Income/(loss) before income tax provision | $ | (1,263 | ) | $ | 511 | $ | (2,102 | ) | $ | 654 | ||||||
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, acquisition related expenses 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 acquisition related expenses and 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, 2021 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/(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, 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/(Loss) to Non-GAAP Net Income (Unaudited, in thousands, except for per share and share data) | ||||||||||||||||
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
| 2021 | 2020 | 2021 | 2020 | |||||||||||||
U.S. GAAP net income/(loss) | $ | (1,003 | ) | $ | 508 | $ | (1,718 | ) | $ | 648 | ||||||
Share-based compensation | 453 | 136 | 735 | 241 | ||||||||||||
Acquisition related expenses | 377 | - | 1,061 | - | ||||||||||||
Amortization of intangible assets | 210 | 16 | 267 | 46 | ||||||||||||
Non-GAAP net income | $ | 37 | $ | 660 | $ | 345 | $ | 935 | ||||||||
Non-GAAP earnings per common share: | ||||||||||||||||
Basic | $ | 0.00 | $ | 0.04 | $ | 0.02 | $ | 0.06 | ||||||||
Diluted | $ | 0.00 | $ | 0.04 | $ | 0.02 | $ | 0.06 | ||||||||
Weighted-average common shares outstanding: | ||||||||||||||||
Basic | 19,443,777 | 15,023,929 | 18,818,085 | 14,964,138 | ||||||||||||
Diluted | 21,646,930 | 16,671,848 | 20,577,660 | 16,485,754 | ||||||||||||
| Reconciliation of U.S. GAAP Net Income/(Loss) to EBITDA to Adjusted EBITDA (Unaudited, in thousands) | ||||||||||||||||
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
| 2021 | 2020 | 2021 | 2020 | |||||||||||||
U.S. GAAP net income/(loss) | $ | (1,003 | ) | $ | 508 | $ | (1,718 | ) | $ | 648 | ||||||
Depreciation and amortization | 261 | 37 | 362 | 140 | ||||||||||||
Interest expense | 21 | 22 | 40 | 31 | ||||||||||||
Interest and other expense/(income) | (2 | ) | (2 | ) | (4 | ) | 27 | |||||||||
Income tax provision/(benefit) | (260 | ) | 3 | (384 | ) | 6 | ||||||||||
EBITDA | (983 | ) | 568 | (1,704 | ) | 852 | ||||||||||
Acquisition related expenses | 377 | - | 1,061 | - | ||||||||||||
Share-based compensation | 453 | 136 | 735 | 241 | ||||||||||||
Adjusted EBITDA | $ | (153 | ) | $ | 704 | $ | 92 | $ | 1,093 | |||||||
SOURCE: Crexendo, Inc.
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