Crexendo (CXDO) 3 May 192019 Q1 Earnings call transcript

Company Profile

Participants

Douglas Gaylor	COO & President
Jeffrey Korn	Secretary
Ronald Vincent	CFO
Steven Mihaylo	Chairman of the Board & CEO
Michael Kaufman	MK Investments
Kevin Dede	H.C. Wainwright & Co

Call transcript

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Operator

Good day, ladies and gentlemen, and welcome to the Crexendo First Quarter 2019 Earnings Call. [Operator Instructions] At this time, it's my pleasure to hand the floor over to Mr. Steven G. Mihaylo, Chairman of the Board and CEO. Sir, the floor is yours.

Steven Mihaylo

Tom. you, Thank everyone. Good afternoon, Mihaylo, the of Steve and Chairman Crexendo. I'm CEO welcome I to all the to Crexendo Call. you Conference of want XXXX First Quarter Ron are President Jeff today Gaylor, our Vincent, COO; Korn, me and our Counsel. With General CFO; Doug and our update Jeff some numbers, business going give provide safe up harbor I general more then will Doug then comments a about and detail read statement, I'm to sales open the the after will will and provide the and questions. ask to that Ron on to brief will we the quarter, call harbor Jeff, would you please provide the safe statement.

Jeffrey Korn

of of Thank the Private a I call are statements made of opportunity will Securities sir. Exchange Securities Act meaning provides for forward-looking to other this to statements Act forward-looking take call, Securities historical within the statements Act Yes, conference this Reform Litigation you, than Steve. statements. XXXX contain of such The the that fact, in and All remind harbor XXXX listeners safe the want statements. XXXX. forward-looking this of

in whether based that back otherwise. are expect undertake cause information, forward-looking result XX, but here uncertainties to a XX-K actual statements. new include, I'd as and future update believe, materially XX-Qs the any fiscal to words company's those Investors The Steve? like the filings differ turn identifying other from estimate, be could Steve. now with of December not like will forward-looking limited of events discussed revise subject Exchange in to today. call any publicly Crexendo and should the Securities the the XXXX, obligation to does aware or statements to risks statements or filed. for including And factors are as and year ended Commission, Form Form similar are forward-looking that not statements detail statements explained Forward-looking on that anticipate, assumptions expectation any are and results to risk

Steven Mihaylo

Obviously, had Jeff. was look for if quarter you've press you, release. Thank Crexendo to chance our this a great a at

leading now UCaaS are industry. the We

what with engineering is, customer best have, services I products, top service. the UCaaS industry We and the believe in award-winning

very We right next are engineers sales working to our per marketing. substantial per Crexendo's GAAP shall year. first and or the We are share returned to UCaaS a profit the as of loss XXXX parties XXXX. to to $XX,XXX we favorably to early on mean or international results provide to of breakeven for compares share. continued net net We provider. that quarter diluted track. income be $.XX telephone have currently $XXX,XXX for of And reported our common result platform work quarter -- our companies the of and first improve partners That common able first diluted these

UCaaS Telecommunications service the segment, strong We Cloud in continued growth revenue.

first from The impressive. quarter the highly increased be first organic to XX% which XXXX, quarter of shows continues the by business

Our to carefully gone we strong when costs do compared we very that, managed that. and We with continue will do have up growth. particularly to continue costs slightly, our

our increase surgically make very the invest continue have and growth in certain industry. services the to and to will products the strategically and customers to business our in We continue to best

very watch As is and a that which has we carefully important, balance metric. to you very sheet important improve, our also know, very also continued is

provided operating by important cash activities. substantially is metric improving Another

try. the Crexendo's compared give of to listening of a to I it $XXX,XXX invite The loss quarter first the cloud quarter $XXX,XXX first for net XXXX. XXXX, a of service cash increased ride to everyone

team we many results believe products the announced we the times, you I have should amounts You I of have right find and best the having money that that we save provide. convinced but I substantial turn the misplaced, while quality and not that that believe mark. to Ron With right will business I'm we'll continue like service can and I'd services. we continue Ron... call today show was to value. provide grow confidence that, to my right shareholder -- over was the to the Vincent. on said

Ronald Vincent

Steve. Thanks,

Steven Mihaylo

-- Give us please. upgrade the on numbers some

Ronald Vincent

revenue XX% to to increased the XX% for $X of prior $X.X $X.X the XX the first quarter first quarter reported year. first revenue the year. to quarter million for million of first million quarter prior for consolidated the Service Well, for of XXXX -- compared the to million compared increased $X.X

$X.X increased XX% quarter Telecommunications first Cloud compared for for Our year. million service the revenue to million $X.X to or segment quarter the of the $XXX,XXX reported prior

to the compared $XXX,XXX quarter or reported decreased Web the XX% first segment prior for the of Our for $XX,XXX,XXX quarter revenue Services year.

first Our product the for to XXXX of the XX% prior year. first compared of revenue $XXX,XXX quarter quarter increased the $XXX,XXX for to

consolidated quarter for the $X.X first year. XXXX million first XX% to to expenses for Our compared the of increased the $X.X of operating quarter million prior

December million cash to March $XX,XXX reported activities Operating income XXXX the prior compared equivalents $XXX,XXX EBITDA to compared common On As same of year. net same net of was was Adjusted was loss and EBITDA first $XX,XXX net per period as $XXX,XXX cash first restricted $XX,XXX share of cash, quarter $XXX,XXX Steve at period mentioned, year. provided restricted $XX,XXX of to common cash the million share or for or share of for the for a diluted a the of the XX, period per the quarter Cash, a non-GAAP at prior quarter breakeven company the $X.X common loss the income year. equivalents of the for compared for the $XXX,XXX was per same to or compared to XX, the per XXXX. or breakeven $XXX,XXX a $X.X diluted of share prior $X.XX cash. the and $X.XX for year. basis, first prior common quarter for diluted compared diluted

our and operations. on has comments Gaylor, $XX,XXX it that, our used And COO, for activity to cash. over cash, financing turn equivalents of Our and I'll with cash restricted additional Doug President

Douglas Gaylor

to in business total sales results increases very substantial on revenue, We very telecom and well cash backlog, I'm and income highlight that plan. GAAP with executing we revenue, pleased which start delivered are our QX. Ron. the bookings, Thanks, had that balances, year we the of

continue to in bookings direct partner channels. and see sales We both strong our

have other transactions and or nice with a in K-plus of the sale TCD sale XXX,XXX multiple size a XXX,XXX XXX,XXX TCD contract total We TCD seen larger increase daily sales quarter. during

to converted existing Our fit solution and level sales descriptions is footprint contributions. over have continue perfect larger residual few quarters partners larger over and our that these for from partners last is the to The consistently strong to multi-location Crexendos' increase inroads they success their a are we increase platform. took seen their monthly excitement with customers good income and our to with making as them the helping organizations, their see

quarter-over-quarter backlog sales help Our strong the sales million. quarter well helped as to increase to increase as a million $XX.XX bookings for $X.X nice cash fuel our X% to balance

plan culmination income very With with managing Our able $XXX,XXX thus profitability. structure, to GAAP we budget grow fixed our to is a reaching recurring of of a in close our revenue to model, our and non-GAAP manage inflection points are consistently of recent and net strong GAAP profitably. a relatively cost the confidence

highlighting constant a and operating expenses XX% manage we to in quarter, management's on saw the posting X% focus our for increase the continue while improving for increase quarter, well our in efficiencies. revenue a We costs

traction making was the revenues XX% the large increases are a our telecom in on revenue market. the indicator Our efforts year-over-year driven increase sales we positive are and from in in our

providers to program as a to to branding excited the model. help as ability still We're their tremendous migrate to multiple own It label As revenue allows growth and opportunity it the platform with of XX% label in And sell a matter to approximately of partners fact front these platform while when cloud, Crexendo selling white previous solution, our businesses the program I've at as but our when. means with It's they're premise-based calls, that Crexendo as using not be their expanding is them ready, significantly the there's partners opposed -- the small times and model. highlighted SMB a branding our top allows also share amount us. of will about on list resale Crexendo of market that of a more will treat the the if wholesale they by more make model equipment. still that powered interested migration. enterprise The legacy the of older

plans in prospects on have partners in to be working additional this GAAP the added our I'm offering. team excited direction. proud future and and continuing these partners, we'll continue program, getting been beyond. harder Crexendo some our growth, now the our the even trends on to inflection in We momentum expenses. of in in points we We've successful and this focused very the confident and our through the managing that and entire of on growth extremely same have executing reached ability excited And now efforts about I'm to and XXXX we're profitability keep

to turn comments. it I'll for additional Now over back any Steve

Steven Mihaylo

Thanks, Doug. questions, we're there up to Tom, this if ready open any. are to

Operator

first Instructions] We'll from Kaufman Michael our MK take [Operator with Investments. question

Michael Kaufman

Kaufman. Steve, it's Mike

a has an with doing to we You the this I stock understand, growth bringing to this that animal get. within team talk what basically you're might people the XX% as greatly nobody isn't conferences of dollar open you're not if will the more a did there's market. market convey you rewarded and what think which that, in good of of can people big thing to Doug one is think incredible literature way job I be to the do you then the want yet, market after? The And but the going served and budget home that rates. penetrated how that and feel value is may value when

Steven Mihaylo

Michael here.

good afternoon. all, of First

trillion. Your doing one. close is market we're question the Actually, probably what is good for to very worldwide $X a

in lower market, the market, need It reluctant doing our little market, expect cost for, we we're the it, us probably charging us the about can areas where size think the program to time, get market bit a a a to would absolutely launch into we've We're next talk But Just the of that little a with than start some been investing us size to overambitious billion it's do for we'll but licensing several $XXX structure money of call into of is the other place without get things we it we the now. of software And about certain for the R&D. that will market than into the huge. bigger into year being fear that world. U.S., lot people gets gets have plus. it that also

many too to have So to each with not policy we're that good competing just or don't multiple some that to partners saturation can partners each multiple going say X partners a us. for so going have in will we a we kind And X. get opportunity amount that have market. against to other. That's We're of

The allow partner's and in we on available we label own do program, which channel the can with might is just put other we can our them name otherwise. than February, which it private the and is white thing conflict less or phone started sell brand, be even to under their January label

lot happening. a of there's things So good

Now about the with traction allow right we but Doug large. haven't I'm bigger turn really to really our he spoken going now we're will over getting get of to talk Crexendo about, so some this accounts. that to can

get routinely the believe In our million. getting his report, contract are we fact, are that $X.X some And getting will mentioned value total in bigger, we're gave range me, when get of accounts for accounts as $XXX,XXX some but he them he over bigger. that we're and

have ones. a And something in servicing might Doug, to cost accounts, end We those add you we smaller to like would lower as much that. of

Douglas Gaylor

X next of I in more from billion Sure, we're of of positioning, And opportunity. XX% just about comments, Michael, realized that organizations the our think the again, Steve, the today, to haven't right, the probably in opportunity and we the that migrated exactly And years, the growth the can smaller we within comments. the in one market, we're still tremendous X, with Steve's profitable industry. one is the about cloud it's say players If results the $XXX still businesses, our and estimates but still here it the U.S., tremendous. he's great to market

And bigger so pace the we're now opportunities right there. growing better and at recognizing growing right out this And we're it and thing profitably.

unique $X.XX and go our Steve diligence contract our our above platform, looking out our of because stand our making own we the of and As phones, own total a some competition are And of warranty, or service price support through second aspect are right opportunities our points of and none. to making and partner. by said, the million for $X.X value, that they lot far, these million

really to. direct we of we're can a have if people unique taking accelerate starting we out on competition candle of the the lot a advantages have partners sales So our to advantage because advantage really our competition there, and hold the and

Steven Mihaylo

things, And other Thank you, Doug. X Michael.

revenue. a don't forward First in want of words, million, to revenue all, we my year. And In have we're this realized have that's recurring $XX $XX going statement, get other to I so lawyer. I million

large excited or million. Whether anything to year. here. have very got rate we close a backlog but last, You're $XX we And not, sell not less we've X% or of per of an attrition least,

we're So I am hope your very answers locked I future. question. loaded. optimistic the and that about

Michael Kaufman

Xerox. does years a XX It And I way. with think, long I spent

base to drift new So too whole not much. put idea was the the have and current a product

the about contract creates the of customer. keeps the So ongoing an I in stream, rate basically this which that some stickiness that is your revenue residuals flowing. think And talk the you fact may or renewal high of presentations,

will that so a business. build profitable And nice

we positioning grow investor likely any $X so understand whatever sales would this would other of an opportunity elephant do to chunks, at very one scared because by resources the getting company. the we opportunity of And the go -- statements is to say, here's how can how little else benefit thing overwhelm the we're force we're bites be break trillion public after specific to it all see time, to thing submarkets small a and customer The well. this giant the putting do to take to and where that take market, without these bite-sized and and these okay, down our for

Steven Mihaylo

Yes.

they that and industry You're out Michael. we've features, and you've a on, few the customer, I of that doing attend most Vincent absolutely company, we we're become Gaylor so to functionality We're mentioned additional at. adds And right, push Doug for. only you our things everything some. in that Ron those that then can and the conferences and been assure I When think, charge very entire customers. we the

charge a up retain customers to by also do In some themselves. it's charge comment... we do want lot but most deal monthly less or for to make it. revenue. than we they you a for We in engineering nonrecurring even get recurring in it, the cases, a Do it We in order deal. And don't then, cases, do for to could it

Michael Kaufman

to barriers the Yes. sell.

Steven Mihaylo

why traction more our here to want and more to to forward you as and our Yes, we'll we add that's we're -- get that? as doing as go grow. force that Doug, continue continue we to and anything engineering and do sales force

Douglas Gaylor

Yes, just comment. maybe one

to on So platform our to with weeks come every we work software so or enhancements out one release an with which coming X means annually. out that that process, agile our opposed competition new we're enhancements may as software

means annually. to really coming jump want own customization own on upwards that from destiny make of fact are any our we're with we that X And in to our control We opportunities a out the that we we on average perspective. platform releases fact that X and of the can

got advantage developing we've our gives our and our is responsible engineering applications us it unique comes platform supporting designing, when fact solutions. own customizing to the and that So unique in-house for

So again, to and to that the positioned growth be we're well continued and very competition. have outbox able would outmaneuver

Operator

H.C. We'll from take Kevin Wainwright. Dede next with question our

Kevin Dede

the you if and the all revenue? for is Steve, label time, helping. that could white top things you wondering on assume versus to touched difference know, you. chat. and going couple I Long I'm no that's organic. I'm A I the wondering service was if explain product, growth line product help

Steven Mihaylo

good afternoon, Well, all, first Kevin. of

revenue the difference desktop. is the quite is telephone's and product the on service The simple. Secondly, signal revenue revenue product between

Kevin Dede

Steve. why revenue why I labels yes, just yes, understand greatly. And contributed there's product service private curious maybe missing. Or I your was that No, something that. was outpaced Oh, so if that? Steve, that's I wondering to

Steven Mihaylo

wants phone the conference private end an so to expensive on on and traction, starting just label, and varies or most a of product. whether it's phones label now depending It user From so lot white forth. get the the

only a going him. report to revenue component since And It's revenue. the XX%. XX% up So that's of that's to and to But most that down. of is revenue. and color to more to Doug let of be vary that's still sales service recurring, I'm about answer going the our people going it's for our all

Douglas Gaylor

calling for thanks in. Kevin,

quarter the more smaller end. low So of fluctuate product would bad product We're revenue news on we little higher product with perspective, based label. concentration equipment does bit number of moving retrenchments the where of as Obviously, a and frankly, seeing portion lot had is quite just so equipment. we're on we're of higher-end little not a lately. it, white phones a moving the instruments, moved bit great composition a much the the that be on side. those maybe a And of from installation our associated the we And a our the

label still white even its those because the said, Steve I recognize As changing in X in program white fairly percentages infancy. tranches. those the But anticipate label don't the with much different revenue we still new is

be that's just white size composition of quarter But of the QX a hardware was monthly have that we're amount a with little hardware have from again, on strong opportunities us we for the and we're the the label installing bit the really in So and fluctuate buying installed based during also revenue installing. us that been the the hardware service from and expenses. seen the partners the of quarter. makeup still But quarter-to-quarter the the

Kevin Dede

projections, seasonality would What but year? at to quarters you know larger you you quarter? mean, terms offering this some you're -- specifically guess would that not some that think of you as the offer out expect seasonality? effect look cyclicality, seemed be might what do your as or point, in -- the Do there think growth you shake you X fusion? there what there's out just I Just on of collapse I sort of next given could comfortable industry factors And the March positively I

Steven Mihaylo

Yes, good question.

our seasonality our look to I as business. So see of I don't think business, you a lot at

in I and kind think our system our and from business out the business need is a consistent. go. service, philosophy has them phone of most that's of fairly Every get there my

December, doesn't amount equipment, think whether there amount using out the when that of to need if So matter about it's they and equipment. businesses the it March still or that of new businesses as I that are are legacy January

really of most nice return were fact matter to a investment. we're it's that So people showing the a of talking on

So accretive they an right of after benefit out can solution our see that.

So when really, a of I seeing of at we're think look we're lot now, because there, I seeing really right in opportunities a key the we're lot a position out momentum, activity.

Our really now. full are right pipelines

so a pretty on robust opportunities continued challenges I competition, sales competition Especially And right having the lot for now. our at look there. the out when look of our is success

So an Fusion. filed if impulsion of just organization bankruptcy. you about think like Windstream the for

got and now Mitel just size and create joining of merge organization me. a and came helped of just You've out which try bankruptcy. talking that would for It with to my Avaya organization forces challenges lot uncertainty that about another

having these at and a our at have Crexendo becoming Avaya going So having "Hey, our look now with where and organizations. to at the of We there competition competitors is a what's like something lot put strongest out of to about about our in future. extremely I look partnerships the worried resellers go hitting GAAP don't Fusion my smile existing compared challenges. lot of weak great and are them and ever that's future And to their of out now Crexendo newcomer competition. our them face are to because our our a to guys out like right that real worry some and at allows that look now really the right and we and had, And say, And and I talk there the look a coming at quarter major position and happen quarter Mitel that the right their positioned profitable are I we've us Windstream there deal." on look landscape partners to and about resellers challenges. competitive having

Kevin Dede

Okay.

pre-existing just I layer deeper, just So are to grown insight trying you you okay, how -- from -- potential yes, engaged partners you have us or XX that can over their some to relationships mean take had shy or away in you some with Can on relationships? have us your give partnership have give partners conversations one months? on that, the insight past

Douglas Gaylor

Yes.

new add base. our to to continue We partners partner

we've partners we are that managed vendors to existing into that product different telecom really tranches. tranche which a partners which really telecom so a talk at We're tranche, MSPs partners that business of, services, portfolio. We've if organizations second existing We've really new bars our interconnect you're complementary And selling existing be don't at our or the third traditional and about type other offering fall adding selling our looking products. have beta got our their when consist their and and into adding are offerings telecom telecom what got platform. then X are got bars would offering. business-to-business beta that And is looking services

traditional of symbiotic Windstream for for And are Avaya lot partners, cases true the lot our lot stability. and been in relationships in I looking other plans so years, and of we lot our or And changes have talked in talked about Fusion. you A with of relationships. for I industry now. whenever about long-term we're periods long-term with talk they last partners, in there dozens relationships Windstream over telecom those those for one is vendors, of Mitel And cases years, go are the when challenges a change have are ShoreTel, think or or we of or we relationships few So these are it's But already Mitel focus. stability, relationship. many above, on vendors name and that And that There's whether with distracted when traditional some and They've of of them right competitors looking of shorter an growth bring you could Avaya a telecom and prior time. partners to Fusion the and the but distracted. out had tell organization, these that our once other the all of existing not there, our about we a partner had there have it. a folks

So it more is our helping. partner existing but in We account we there. increase great seeing marginally from lot did partners success contingency, are a and traction QX, our

and be pleased they that So mentioned with having bigger because services, bigger and keep monthly and them, channel partners checks have the won the I excitement where couldn't it's more that the telecom tightens our more catapult partner vendors, These bond these as of that that partner have done, contributions traditional commission with selling and lot so just that out we really they the a don't residual statements. of to in stream. residual getting is as starting make we're and I we're my

a with start Avaya that they poor commission and they from if it's month. anything, us. getting Even Kaufman anything. relationship may they they're making with have not making with after still Crexendo, they're about residual they commission that month, after they nice a not month that selling the monthly earlier Where their relationship when Mitel, check have asked are if So about month Mr. residual start relationship all when

Kevin Dede

Fair enough. Okay.

quick other Doug. two Just ones,

And calculate that? period recognize you it? of to guys First big. on wondering number, you over backlog, what then $XX expect how million time pretty I'm

Douglas Gaylor

question. great Yes,

it. -- may I'll little statement give add Ron have I'll the opening color So and a to

our of of backlog contracted obligations. So all our consist

to we account. revenue worth of on So XX-month on contract take if out time $XX,XXX a $X,XXX value bill that a we go sell a around total agreement. basis. -- only easy that use an sell we for just and at $X,XXX example, We That's month monthly

account April so take have we the revenue if worth for we of $X,XXX, for And and $XX,XXX month of we today sell that backlog.

grow continues taking more as number we we're revenues. that add contracted to for actually than value So

to from $X.X A over us. nice number QX over grown So consistently quarter that increase for over QX has of quarter quarter million.

Ron, to nice And number to that's to in hopefully, grow is, a any increase you add So continue to backlog. nicely. going want color that? that

Ronald Vincent

present in remaining Kevin, our we of obligations a actually allocation performance footnotes, our under the we our present backlog. --

And be in so of a see shows $X.X schedule on. of utilized, in XXXX, in $X million XXXX and million so backlog will XXXX that the $X.X there million

we sales. And so that gave new we to up Did means the then periods, backlog your of make what that answer with really and difference future question? a picture

Kevin Dede

very Last changed thinking picture And before how had stimulate that Yes, to the your spoken turn to just that M&A two-parts. perhaps just and particularly accelerate over, but and generation to, the you the might maybe wondering great. growth, thought about subset is about yes. if growth? regard one gentlemen know the financial No, changed shakiness I has conservative an with your considering I of pipeline. industry cash flow your you're One thinking floor granted you competitors -- guess, wise sort consider of options a of is, your I have managers, if I M&A? was curious, as to you that I'm

Steven Mihaylo

Well, this is Kevin. Steve,

were First and the we'll look. would continue there of out acquiring by at else's there a cases, out way -- go stimulate lot we and I headaches, can cheaper acquiring of we've of deals overpriced. looked may some XX% In say to organically the we're than opportunities all, We but somebody. can growth a be some just lot of somebody

As XX did company years. you about ran, I period of may over know, or XX acquisitions the a XX we previous

deal to that's year or then is this consolidating realistic the done. hold of to X industry firm and not people and quarter. suggesting a in and up I'm more X So have true a that another is or much X X but case, year going a how was this it'll take

a want and a designed they organization. contract have be However, their To to event. person label contract to acquisition for or generate a a successor with, this member they're candidates, our a higher begin going doesn't customer business ours is of is that anybody getting sales and liquidity that family in be sales than just white a white or label program would margins

amount than expenses normally little would cover cetera, have we what higher of than usually sales be lot an they contract little the revenue, higher get product. or of cost et much that organizations getting margin, an a getting that they're double. better person involved like double customer but have of are much, billing, a they profit average et other getting service fact the implementation, And than gross a those bit maybe all with cetera, offload average would to relatively much So they margin gross a even things, the

revenue that we're So we like we can Xx organization having pay for something X X.Xx not or to X when, acquire or stranger. even a know, for in that an afford complete to might revenue effect,

spend the care tires, anything foolish don't but at the the even that, looked opportunity keep not the I going anything. year. end will Well, in how to beginning on add we're not going of looks. I to Doug? that as overpay want or So probably money following to shareholder checking great We're to going to of keep kick we're for just in going Did next We're making looking. year something you that decisions. the in starting

Douglas Gaylor

for we're always talked some No, the And perfectly at said, of lot right but these looking Steve. for opportunities, a opportunities. we we're looking And conferences. Kevin,

we right doesn't if until opportunity And opportunities fit. right with find easily along, passing okay come on we're the the so

the for in us the for So organic and looking been few growth, we're same that's the then last working on that And opportunities. time, just over quarters. focus going keep well to right

And continue can in continue find right growth so and that growth that's we organization. opportunity there, on great. the to If that public you'll layers if not, see organic nice if we

Kevin Dede

of I in the too think the So seen given the prices. demanding mean do are that haven't larger Steve you've becomes people are the in from the think long just seen then that Doug, some space? just you much do what thinking more meltdowns you if And been? in What think commonsensical? before are things do implications yet, valuation, companies we how -- have you implications mentioned them

Douglas Gaylor

matter what a it's of think I Yes, leveraging. you're

the get look go. accretive targets you looking until looking right And profitable size in they're acquisition going smaller to be we're we're so yes, the from at, something and when for obviously at that's that

they off challenges players been the If facing in of you way some of have at industry, more look bite they chew. that some the the bigger can than

they're the that their so just amount balance of sheet is debt And overwhelming. on carrying

the challenge have the got world, the like Mitels so of we've -- the amount Fusions that's and Windstreams as Steve of And Avayas with the managed our And extremely well. and you it the of said, organizations debt. they is overwhelming just some that and books these an

us so manage being and to we're if today business. at you And free profitable, debt the look going

fall with not debt of a for go same acquisition, other going recipe do into. to That's organizations that not and out us that So we're trap. to out that's to there ton disaster fallen manage. We're put into it's to going about there hard an have these the

are already So put and finding really a if We're heck not That's we going focus is us impulsion. merged in organizations a to go have small of jeopardy our MO. our type look Fusion Xx in and leverage our size at the having and accretive already our that company that not out like the that's of somebody buy easily grow. and profitable, revenue stream acquisition, that organization an can be

Operator

[Operator go next investor. Walsh, Instructions] to We'll Kevin private

Conference Call Participant

on I answered. well one got I question. a have that seasonality was

Next which is typically for you've got, and happens The renew Typically, period question you again? on million month X backlog. to add another backlog I've the when ends? what is X contract $XX What do You a or go got years? month great. not

Steven Mihaylo

a I Every but typically renew. and to month. one, month customer lower that we to technically and a be a rate than this Doug to Is month, We we now Doug? correct, just can that a believe at on wants month then, get renew answer

Douglas Gaylor

Yes.

XX into that our on, agreement put of our So They We'll on month. if they for agreement month, the X- agreements before months auto go our X-year they everything we'll them of the auto backlog. of contact backlog. go If at months, into it and term then months. month If kind our term. with If most to anything, the at depends do renew then the but at end X-year X-, the don't the agreement, there put or backlog. XX they renews or end obviously X-, the And put we option agreement don't to are into extended what it it. renewal month a we'll of have try to renew X-, term, negotiate will XX do

Steven Mihaylo

to something which I taken meant revenue right one the that And usually equipment, they all product to our is worry, mention is earlier for of is paid not upfront.

So most to backlog of actually Is the on is get as goes on. correct, that the revenue recurring that revenue going times Ron? we're

Ronald Vincent

where a the do as we're recognize is short time, of to not X weeks mostly Yes, the maybe complete. install period we installing revenue until There X is correct.

we so short have frame. And pretty time a

X is majority to week, the Sometimes size the it's depending the majority backlog -- yes, weeks X revenue. on recurring but of sometimes the organization, a the revenue of it's of

Steven Mihaylo

quarterly nice XX% So a that service and this revenue, product calls reports is thing whereas we reporting revenue on like recurring were the have. our the or backlog of XX% mix and our quarterly opportunities about

but didn't that working on is makes to XX% it earlier margins. with nobody And asked to down So offer thing that me year us the told our us, P&L it's difference. a and cost margins asked small I'm about and it he up. Doug continually fact exit the other to going the you our we're XX% And a I to or but difference, get our get today know it, expects

falls you the or but every deal, big Now X% of to X% think bit but that's to And X%, line. that X% deal. want big is a it a it's only bottom might or

Conference Call Participant

commodity? pricing. are that that you All installations? you a inequivalent or maybe Is wonderful. your because are your have Or the able willing question value product competitors a right. to I both product sort features your and you to them priced help have That's as of tailor on

Steven Mihaylo

let to I'm going that, answer you to quick Doug give but I'm Look, a going also. answer

to value commodity We And is weeks. to it's that? one business of X X offer commodity that over going like X that or But X something every or competitors to where not price. you because the adding same want or X are with getting down thing, release we're other the single functionality somebody level boiling add start a and is there added. And to do broadband Doug, suppliers into

Douglas Gaylor

look offering, tend basic to out have competitive. where When we're of Yes, it's very We play, offering is a included our there, what Kevin. our we at competition truly extra. a functionality charges lot of a value-added as standard our a lot pricing

are ACD license than may an a that applications our where that standard many like So competitors call on standard fee. like charge offerings paging our center our as higher and feature, on application competitors and optional are of call platform, ours, where charge recording many of features

our we than competitive at price the when point very of in does. we competition competition. And where our So our look our more tend gates we're functionality is, out package basic have to compared to

So I a compared competitors. lot positioned well to think our extremely we're of

Conference Call Participant

and there's how capacity to about you question, or it, the fixed cost, quite need last not the ask whatever. investment how to, but sizable question, and sure double fixed there costs Last I'm Perfect. ask and let's sales a I'm curious will a of a make percentage is to it how costs, to a fixed long before based say,

that, about could I'd you help with if love So me it.

Steven Mihaylo

pretty that a the Yes. going lease, is so and it's we only well to [inaudible] I'm thing but leasing we're but defined. X-year our step depreciate building, that's just -- that's

Conference Call Participant

I the see. balance on And sheet,

Steven Mihaylo

Pardon me. have... Yes, we

Conference Call Participant

sheet I …the balance see.

Steven Mihaylo

our we We're because our thing infrastructure in only that the have add time. of is off, the but we're to And generating But least, whittling to center of but memory we're get has And balance of We that the the much interested went always the so from balance there that's at stuff spending And it's sheet, close went control the were to be most. pan, pronouncements And the for We're have to off more and is going next or be as growth. customers not away but a data money. XXX or going We there. going level I It's bottom free this but about to just X.X% going to X spend it's make servers that, our is that. like most to it's center. we is this state. is to organic get solid sheet of structure. the And it where XXX up on other know don't in level We're invest memory just to we time. or start coming the the we're cost from line. our to acquisitions because it. at terabytes add upgrading of state out some and $XX,XXX year, think a else. we lot all inch in center. surprise to XX have But I want to our in or servers it strategy and to then The if in feel point keep to We point maybe business last, on bigger, solid making add anything quarter, do more in going when is not thing Doug going the not memory accounting the to as don't at to falls role even folks. we're $XXX,XXX of servers. for Ron, not meaningful to. to surprised, years changed and all every Well, our be know only on they sense is to a you run. where I'd flash X through you're the the data being this going anything prices it's long lease upgraded cash growth to in all it added want down And money to payments go hopefully, in And I going and data not they stuff. if don't If to just very quarter, for

Douglas Gaylor

results. we we know be to comments about this deadly are going thing at right as tracking our out cost that we've to always today, require certain Yes. about talked that's know that certain we I infrastructure again, budgeted we I and at doesn't budget. and very Good growth It we my are it. mean, to Steve, with bookings stable we're a We strategy, structure. in And think we customers. why our add talk us cost, as color, as we very look much our have with for

quarter, the But that has added, customers to line. asked bottom now that give handy. question and percentage you high And if from so the Ron flowing what of our I can very a That of that actually calculations. pretty through it's bottom our customers we very Ron, don't we and with idea revenue ran last structure to stable. is we was you right the because have new cost a know line. add some can flows I good

Ronald Vincent

the revenue the of over approximately to Yes, XX% bottom increased QX dropped line.

Douglas Gaylor

fell good So to line. additional just QX much how idea QX that bottom that the a you from to revenue, gives

because that's that stable. cost very so is structure And

Conference Call Participant

great character got terrific Steve, leaving it's guy your a really when team a with and us. You there,

Steven Mihaylo

Thank in agree you, Kevin. Thanks for that comment XXX%, XXX%. and I fact

Operator

do We question with MK have Investments. Kaufman a Michael follow-up from

Michael Kaufman

where they all for companies would it to being internet suited these that. that for so lot with I you well community offices have turnkey quickly, hefty existing these cancel and telephone a -- charge community to but the that together putting outfit and all know formed, venture a be of the Just real is response they cancellation estate you want are the to the if want your companies, capability fee,

pave money this to leasing and of new Bank want a the these is your supported by to because that that who venture venture companies all like are or salespeople for it providing So are turnkey companies general of community lot spend being contact Valley in don't on people also greenfield who people might them some bank Silicon capital.

be there So charges. opportunity an deal, a don't since you -- stuff. it's you have new might new have This is any all here cancellation don't brand where

Steven Mihaylo

going to with handle but mobile app to say, you telephone, that? every our add get talking I'm about. with it's some CrexMo. will you're that's I Doug, to color have it. And mobile we a you to that offered exactly called do what Right. CrexMo Well, Doug It's want go app, desk one, let

Douglas Gaylor

heated. is well Yes, Michael your comment

similar large are had the not and some had we've I that base of We discussions do of organizations fairly are include tremendous But mentioning, working a offering discussions of their building have with with on our for the that we have they resulted organizations, organizations currently that are lot part customers. if [inaudible]. some in but know scale maybe haven't lease as initial type you large a services

So the phones and something they're service part moves the they're rent into for renting. the as that of the providing facility space

us. we is that many I Trust me stones a for great don't say opportunity when So there leave unturned.

a So if them and I as every is business most of the there, has system out opportunity business a mentioned call, phone our at beginning there the of need service.

So every we're for out looking opportunity. there

you've if opportunity. to to, Michael, a right glad, a in make know, the more in introductory any I'm it point direction past, you him we want got I than is and me So call see that the connections any to more talked or than people good partnership glad to if

Steven Mihaylo

that else has Anyone a question?

Operator

There is I comments. closing not, sir. you will the turn for to over any call back

Steven Mihaylo

on everyone, Thank next we very quarter. being the for you with quarter. to you And forward All call this look being much, right.

demonstrated and starting I'm how lifting off make if the very They the know happen. in make I'm that of pad very, not off lifted easy. wheel. they I'm to small the heavy already my we've we're and I this the the launching that people here. just to really lift job think convinced that do cog we proud build a business

add have the guys you anything quarter. going call we next fact you appreciated to have and the have Doug? on We And that, to that you're the look that you forward call. to been continue on Did to talking to

Douglas Gaylor

you No. to hopefully having the Thanks. thanks great results the great in Many us for for follow see and will confidence future. and questions, thanks Thanks.

Steven Mihaylo

for the results. talk quarter second to next probably you July in We'll everyone. Thanks, --

have good evening. So long, a and

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