Exhibit 99.1
Crexendo Announces Third Quarter 2020 Results
PHOENIX, AZ—(Marketwired – November 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 third quarter ended September 30, 2020.
Third Quarter Financial highlights:
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15% increase in total revenue year-over-year to $4.1 million.
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GAAP net income of $131,000 or $0.01 per basic and diluted common share.
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Non-GAAP net income of $290,000 or $0.02 per basic and diluted common share.
Financial Results for the Third Quarter of 2020
Consolidated total revenue for the third quarter of 2020 increased 15% to $4.1 million compared to $3.6 million for the third quarter of 2019.
Consolidated service revenue for the third quarter of 2020 increased 12% to $3.7 million compared to $3.3 million for the third quarter of 2019.
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Cloud Telecommunications Segment UCaaS service revenue for the third quarter of 2020 increased 14% to $3.5 million compared to $3.1 million for the third quarter of 2019. ●
Web Services Segment service revenue for the third quarter of 2020 decreased 19% to $129,000, compared to $159,000 for the third quarter of 2019.
Consolidated product revenue for the third quarter of 2020 increased 43% to $489,000 compared to $343,000 for the third quarter of 2019.
Consolidated operating expenses for the third quarter of 2020 increased 22% to $4.0 million compared to $3.3 million for the third quarter of 2019.
The Company reported net income of $131,000 for the third quarter of 2020, or $0.01 per basic and diluted common share, compared to $334,000 or $0.02 per basic and diluted common share for the third quarter of 2019.
Non-GAAP net income of $290,000 for the third quarter of 2020, or $0.02 per basic and diluted common share, compared to a non-GAAP net income of $454,000 or $0.03 per basic and diluted common share for the third quarter of 2019.
EBITDA for the third quarter of 2020 decreased to $212,000, compared to $361,000 for the third quarter of 2019. Adjusted EBITDA for the third quarter of 2020 decreased to $348,000, compared to $468,000 for the third quarter of 2019.
Financial Results for the nine months ended September 30, 2020
Consolidated total revenue for the nine months ended September 30, 2020 increased 13% to $12.1 million compared to $10.7 million for the nine months ended September 30, 2019.
Consolidated service revenue for the nine months ended September 30, 2020 increased 14% to $10.7 million compared to $9.4 million for the nine months ended September 30, 2019.
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Cloud Telecommunications Segment UCaaS service revenue for the nine months ended September 30, 2020 increased 16% to $10.3 million compared to $8.9 million for the nine months ended September 30, 2019.
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Web Services Segment service revenue for the nine months ended September 30, 2020 decreased 16% to $421,000, compared to $502,000 for the nine months ended September 30, 2019.
Consolidated product revenue for the nine months ended September 30, 2020 increased 2% to $1.32 million compared to $1.29 million for the nine months ended September 30, 2019.
Consolidated operating expenses for the nine months ended September 30, 2020 increased 14% to $11.2 million compared to $9.8 million for the nine months ended September 30, 2019.
The Company reported net income of $779,000 for the nine months ended September 30, 2020, or $0.05 per basic and diluted common share, compared to $911,000 or $0.06 per basic and diluted common share for the nine months ended September 30, 2019.
Non-GAAP net income was $1.23 million for the nine months ended September 30, 2020, or $0.08 per basic common share and $0.07 per diluted common share, compared to a non-GAAP net income of $1.24 million or $0.09 per basic common share and $0.08 per diluted common share for the nine months ended September 30, 2019.
EBITDA for the nine months ended September 30, 2020 was $1.1 million compared to $986,000 for the nine months ended September 30, 2019. Adjusted EBITDA for the nine months ended September 30, 2020 was $1.4 million compared to $1.3 million for the nine months ended September 30, 2019.
Total cash, cash equivalents, and restricted cash at September 30, 2020 was $15.5 million compared to $4.3 million at December 31, 2019.
Cash provided by operating activities for the nine months ended September 30, 2020 of $423,000 compared to $1.2 million for the nine months ended September 30, 2019. Cash used for investing activities for nine months ended September 30, 2020 of $921,000 compared to $72,000 used for the nine months ended September 30, 2019. Cash provided by financing activities for the nine months ended September 30, 2020 of $11.7 million compared to $374,000 for the nine months ended September 30, 2019.
Steven G. Mihaylo, Chief Executive Officer commented, “I am very pleased with the increase in revenue. UCaaS service revenue increased 14% for the third quarter of 2020 compared to the third quarter of 2019. As I have indicated previously, the increase in UCaaS revenue is the most important factor we use in monitoring the business. The results were impacted by the current pandemic as we believe we had some attrition of customers that did not remain operating or otherwise decreased their service level. We are however hopeful that we have seen the worst of COVID related attrition. I am also pleased that we were able to continue our streak of GAAP profitability. In addition, we had a substantial increase in expenses for this quarter, both in regard to investing in the business and initial listing fees associated with our up listing to the Nasdaq Capital Markets in July. These investments are however necessary and important for our future growth.”
Mihaylo added, “We are very pleased that we were able to close and have a fully subscribed public offering. As part of that process our team spoke to many investors who we believe are very excited with the Crexendo story. We have substantially increased our footprint with investors while increasing our investor base and our stock float. We have built this Company the right way, by methodically controlling expenses, followed by working toward Non-GAAP profitability which was followed by GAAP profitability which allowed us to then organically meet the stringent requirements for a Nasdaq listing. Now that we have successfully completed our public offering and raised the necessary capital, we can aggressively focus on organic growth and accretive acquisitions. We believe we have built the business to the point where we can now focus on growth.”
Doug Gaylor, President and Chief Operating Officer, stated, “Our team continues to do a remarkable job day after day providing industry leading products, services and support. We were recently honored to receive the prestigious 15th annual Internet Telephony excellence award. This as well as the numerous other awards we have received, confirm that when you use our Ride the Cloud Solutions® you get cutting edge solutions you can rely on while in most cases saving a substantial amount of money. We continue to focus and invest in sales and marketing so that we can grow the Company organically while at the same time, as Steve discussed, work aggressively to grow the Company through accretive acquisitions.”
Conference Call
The Company is hosting a conference call today, November 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 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 February 10, 2021 by dialing toll-free at 877-481-4010 or 919-882-2331 for international callers. The replay passcode is 38142.
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 pleased with the increase in revenue; (ii) believing that the increase in UCaaS revenue is the most important factor in monitoring the business; (iii) results being impacted by the current pandemic with attrition of customers that did not remain operating or otherwise decreased their service level; (iv) being are hopeful that the worst of COVID related attrition has occurred; (v) having a substantial increase in expenses for this quarter, both in regard to investing in the business and initial listing fees associated with up listing to the Nasdaq Capital Markets in July; (vi) the investments being necessary and important for future growth; (vii) being pleased that it closed a fully subscribed public offering; (viii) investors being very excited with the Crexendo story; (ix) having substantially increased its footprint with investors while increasing investor base and stock float; (x) having built this Company the right way; (xi) being able to aggressively focus on accretive acquisitions and engage in meaningful M&A activity; (xi) team continuing to do a remarkable job providing industry leading products, services and support; (xii) awards confirming that when you use the Ride the Cloud Solutions® you get cutting edge solutions which in most cases save a substantial amount of money; (xiii) continuing to focus and invest in sales and marketing so that it can organically while at the same time working aggressively to grow thru accretive acquisitions.
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.
Contact
Crexendo, Inc.
Doug Gaylor
President and Chief Operating Officer
602-732-7990
dgaylor@crexendo.com
CREXENDO, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(In thousands, except par value and share data)
| | | |
| Assets | | |
| Current assets: | | |
| Cash and cash equivalents | $15,353 | $4,180 |
| Restricted cash | 100 | 100 |
| Trade receivables, net of allowance for doubtful accounts of $50 | | |
| as of September 30, 2020 and $14 as of December 31, 2019 | 632 | 380 |
| Contract assets | 94 | 22 |
| Inventories | 263 | 382 |
| Equipment financing receivables | 253 | 143 |
| Contract costs | 403 | 379 |
| Prepaid expenses | 332 | 141 |
| Income tax receivable | - | 4 |
| Total current assets | 17,430 | 5,731 |
| | | |
| Long-term trade receivables, net of allowance for doubtful accounts | | |
| of $0 as of September 30, 2020 and December 31, 2019 | 2 | 6 |
| Long-term equipment financing receivables, net | 846 | 561 |
| Property and equipment, net | 2,772 | 155 |
| Operating lease right-of-use assets | 1 | 51 |
| Intangible assets, net | 275 | 465 |
| Goodwill | 272 | 272 |
| Contract costs, net of current portion | 512 | 436 |
| Other long-term assets | 152 | 106 |
| Total Assets | $22,262 | $7,783 |
| | | |
| Liabilities and Stockholders' Equity | | |
| Current liabilities: | | |
| Accounts payable | $214 | $86 |
| Accrued expenses | 1,570 | 1,754 |
| Finance leases | 31 | 30 |
| Notes payable | 1,071 | - |
| Operating lease liabilities | - | 50 |
| Income tax payable | 5 | - |
| Contigent consideration | - | 175 |
| Contract liabilities | 783 | 791 |
| Total current liabilities | 3,674 | 2,886 |
| | | |
| Contract liabilities, net of current portion | 450 | 423 |
| Finance leases, net of current portion | 63 | 86 |
| Notes payable, net of current portion | 1,891 | - |
| Operating lease liabilities, net of current portion | 1 | 1 |
| Total liabilities | 6,079 | 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, 17,536,891 | | |
| shares issued and outstanding as of September 30, 2020 and 14,884,755 shares issued | | |
| and outstanding as of December 31, 2019 | 18 | 15 |
| Additional paid-in capital | 73,414 | 62,400 |
| Accumulated deficit | (57,249) | (58,028) |
| Total stockholders' equity | 16,183 | 4,387 |
| | | |
| Total Liabilities and Stockholders' Equity | $22,262 | $7,783 |
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, |
| | | | | |
| Service revenue | $3,654 | $3,259 | $10,747 | $9,414 |
| Product revenue | 489 | 343 | 1,317 | 1,294 |
| Total revenue | 4,143 | 3,602 | 12,064 | 10,708 |
| | | | | |
| Operating expenses: | | | | |
| Cost of service revenue | 946 | 836 | 2,824 | 2,587 |
| Cost of product revenue | 314 | 172 | 797 | 664 |
| Selling and marketing | 1,051 | 1,003 | 3,151 | 2,865 |
| General and administrative | 1,351 | 1,040 | 3,585 | 3,051 |
| Research and development | 326 | 215 | 840 | 624 |
| Total operating expenses | 3,988 | 3,266 | 11,197 | 9,791 |
| | | | | |
| Income from operations | 155 | 336 | 867 | 917 |
| | | | | |
| Other income/(expense): | | | | |
| Interest income | 1 | 1 | 3 | 4 |
| Interest expense | (23) | (1) | (54) | (9) |
| Other income/(expense), net | 1 | (2) | (28) | 6 |
| Total other income/(expense), net | (21) | (2) | (79) | 1 |
| | | | | |
| Income before income tax | 134 | 334 | 788 | 918 |
| | | | | |
| Income tax provision | (3) | 0 | (9) | (7) |
| | | | | |
| Net income | $131 | $334 | $779 | $911 |
| | | | | |
| Earnings per common share: | | | | |
| Basic | $0.01 | $0.02 | $0.05 | $0.06 |
| Diluted | $0.01 | $0.02 | $0.05 | $0.06 |
| | | | | |
Weighted-average common shares outstanding: | | | |
| Basic | 15,244,804 | 14,663,151 | 15,058,192 | 14,507,696 |
| Diluted | 17,249,035 | 15,629,647 | 16,793,896 | 15,444,063 |
CREXENDO, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(In thousands)
| | Nine Months Ended September 30, |
| | | |
| CASH FLOWS FROM OPERATING ACTIVITIES | | |
| Net income | $779 | $911 |
| Adjustments to reconcile net income to net cash provided by operating activities: | | |
| Depreciation and amortization | 197 | 69 |
| Share-based compensation | 377 | 293 |
| Changes in assets and liabilities: | | |
| Trade receivables | (248) | (11) |
| Contract assets | (72) | (2) |
| Equipment financing receivables | (395) | (342) |
| Inventories | 119 | 108 |
| Contract costs | (100) | (68) |
| Prepaid expenses | (191) | (157) |
| Income tax receivable | 4 | (2) |
| Other assets | (46) | 14 |
| Accounts payable and accrued expenses | (25) | 224 |
| Income tax payable | 5 | - |
| Contract liabilities | 19 | 120 |
| Net cash provided by operating activities | 423 | 1,157 |
| | | |
| CASH FLOWS FROM INVESTING ACTIVITIES | | |
| Purchase of property and equipment | (745) | (72) |
| Acquisition of customer relationship assets | (176) | - |
| Net cash used for investing activities | (921) | (72) |
| | | |
| CASH FLOWS FROM FINANCING ACTIVITIES | | |
| Payment of contingent consideration | (54) | - |
| Repayments made on finance leases | (22) | (21) |
| Proceeds from notes payable | 1,001 | - |
| Repayments made on notes payable | (39) | (52) |
| Proceeds from exercise of options | 2,007 | 447 |
| Proceeds from issuance of common stock in connection with an offering | 8,778 | - |
| Net cash provided by financing activities | 11,671 | 374 |
| | | |
| NET INCREASE IN CASH, CASH EQUIVALENTS, AND RESTRICTED CASH | 11,173 | 1,459 |
| | | |
| 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 | $15,453 | $3,408 |
| | | |
| Cash used during the year for: | | |
| Income taxes, net | $- | $(9) |
| Interest expense | $(54) | $(9) |
| 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) | $- |
| Deferred offering costs, in accounts payable and accrued expenses but not yet paid | $(145) | $- |
CREXENDO, INC. AND SUBSIDIARIES
Supplemental Segment Financial Data
(In thousands)
| | Three Months Ended September 30, | Nine Months Ended September 30, |
| | | | | |
| Revenue: | | | | |
| Cloud telecommunications | $4,014 | $3,443 | $11,643 | $10,206 |
| Web services | 129 | 159 | 421 | 502 |
| Consolidated revenue | 4,143 | 3,602 | 12,064 | 10,708 |
| | | | | |
| Income from operations: | | | | |
| Cloud telecommunications | 124 | 276 | 739 | 692 |
| Web services | 31 | 60 | 128 | 225 |
| Total operating income | 155 | 336 | 867 | 917 |
| Other income/(expense), net: | | | | |
| Cloud telecommunications | (20) | 2 | (47) | (2) |
| Web services | (1) | (4) | (32) | 3 |
| Total other income/(expense), net | (21) | (2) | (79) | 1 |
| Income before income tax provision: | | | | |
| Cloud telecommunications | 104 | 278 | 692 | 690 |
| Web services | 30 | 56 | 96 | 228 |
| Income before income tax provision | $134 | $334 | $788 | $918 |
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 November 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:
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EBITDA and Adjusted EBITDA do not reflect our cash expenditures or future requirements for capital expenditures or contractual commitments;
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they do not reflect changes in, or cash requirements for, our working capital needs;
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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;
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they do not reflect income taxes or the cash requirements for any tax payments;
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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;
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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
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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 September 30, | Nine Months Ended September 30, |
| | | | | |
| | | | | |
| U.S. GAAP net income | $131 | $334 | $779 | $911 |
| Share-based compensation | 136 | 107 | 377 | 293 |
| Amortization of intangible assets | 23 | 13 | 69 | 40 |
| Non-GAAP net income | $290 | $454 | $1,225 | $1,244 |
| | | | | |
| Non-GAAP earnings per common share: | | | | |
| Basic | $0.02 | $0.03 | $0.08 | $0.09 |
| Diluted | $0.02 | $0.03 | $0.07 | $0.08 |
| | | | | |
| Weighted-average common shares outstanding: | | | | |
| Basic | 15,244,804 | 14,663,151 | 15,058,192 | 14,507,696 |
| Diluted | 17,249,035 | 15,629,647 | 16,793,896 | 15,444,063 |
Reconciliation of U.S. GAAP Net Income to EBITDA to Adjusted EBITDA
(Unaudited)
| | Three Months Ended September 30, | Nine Months Ended September 30, |
| | | | | |
| | | | | |
| U.S. GAAP net income | $131 | $334 | $779 | $911 |
| Depreciation and amortization | 57 | 25 | 197 | 69 |
| Interest expense | 23 | 1 | 54 | 9 |
| Interest and other expense/(income) | (2) | 1 | 25 | (10) |
| Income tax provision | 3 | - | 9 | 7 |
| EBITDA | 212 | 361 | 1,064 | 986 |
| Share-based compensation | 136 | 107 | 377 | 293 |
| Adjusted EBITDA | $348 | $468 | $1,441 | $1,279 |
