Crexendo (CXDO) 11 Aug 202020 Q2 Earnings call transcript

Company Profile

Participants

Steve Mihaylo	Chairman and Chief Executive Officer
Doug Gaylor	President and Chief Operating Officer
Ron Vincent	Chief Financial Officer
Jeffrey Korn	Chief Legal Officer
Andrew King	Dougherty & Company
Joshua Nichols	B. Riley FBR, inc
Kevin Dede	H.C. Wainwright & Co
Arham Khan	Eden Capital Investment Group
Edward Gilmore	Little Grapevine
Michael Kaufman	MK Investments

Call transcript

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Operator

Good day, ladies and gentlemen and welcome to your Crexendo Second Quarter 2020 Earnings Call. All lines have been placed on a listen-only mode and the floor will be open for your questions and comment following the presentation. [Operator Instructions] At this time, it is my pleasure to turn the floor over to CEO and Chairman of the Board, Steve Mihaylo. Sir, the floor is yours.

Steve Mihaylo

Thank you, Karen. everyone. afternoon, Good Chairman Mihaylo, of Crexendo. I’m and Steve CEO you want quarter second welcome of to all to XXXX Crexendo’s I conference call. With and General Gaylor, Vincent, me our President and Doug today COO, our Jeff Counsel. CFO our Korn, are Ron The CDC’s following Crexendo guidelines. is call completely today as is virtual, to Jeff statement. ask going read the I’m Harbor Safe to some After give comments the brief that, I quarter. about general will Ron will then provide more detail on the numbers. call provide and then open the update, business we sales up and a questions. Doug will to will the Safe Harbor would Jeff, please you give statement.

Jeffrey Korn

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

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

Steve Mihaylo

telephones throughout gap] our digital the the a again. from This in the have healthy is to that [audio is Jeff. I the move everyone. to under and Crexendo, functionality right, move, hope gap] world. while clouds, doing seamless, remote business [audio everyone safe a place office our our have of the We able one core customers our been to adaptable, built lifesaver that and skipping this have now of about our apps, And taking transformation We is beat. a making and new and to the gap] company functionality their in not COVID-XX customers developed always talked has business. And second [audio continue been the the and the been normal adapting And back call Thank world, our parts functionality service. literally while conference phone moving location our of Welcome, business, the especially for environment. their

with to aimed process a COVID-XX need been of While, adaptability we new are systems survive have to the mind, to customers in to who has COVID-XX to was legacy knowing Business we work transformation service build this And going to business remote just did locations. built to this from cloud. digital on to it not the are the transitioning - has cloud that allow move the accelerated business. at world

perfect that all solution also Crexendo We the believe is for almost businesses.

core XXX,XXX that improved are growth - shares. work increased X.X for consolidated solutions we the basic and $X.XX It income best needs. XX% the the to our results Year million, steady we convinced our the awards award. award have diluted of service, in And including winning with receiving our to are of second customers specific GAAP in solutions recently addition XX% a many Service profit year-over-year of people TMC service, per and our service quarter. shows quarter the We products, solid GAAP and the industry. we I’m earned year-over-year Solutions very Communication pleased to and improved the revenue won year-over-year, our tailor to service for their net with second of

accomplished. results a accomplish, the followed control work earnings, testament. are had to impressive. accomplished available. these work the very by accomplished we We we we believe that we under GAAP believe non-GAAP we we After are services, we to that. these earnings, of cloud costs best sure then I achieve All And results built We make solution keep then to and which wanted that. also When

think I you picture. are the getting

growing gives the future, acquisitions. expect to organically -. due efforts and business the up business and organically acquisitions. the listing, grow did business. and to creative we both which quarter, we is In we Crexendo listening. we believe be to accomplished right, unique continue to NASDAQ us both terminations. NASDAQ obviously listing We capitalize and the appropriate now is quarter, to in on time the appears world. quarter through organically now believe manage the This downgrades We of the in by our our beginning to mitigated. connected currency take the we It started We COVID-XX the continue, a we second saw and grow to post-COVID-XX to creative business I of to are ability this both effort the believe to action. carefully continue the and also related pledge taking first COVID-XX The Trends business America position have be we a less believe but seeing the seems very the that keep very through

survive and aggressively demand of work world. cloud pandemic pandemic meet the will to need of flexibility who customers post the to Crexendo We the the

continue penny turn every Ron. still shareholder that, With work attempting and every value. of business, day We the watch I we to we the and to over will increase but Ron. invest - call to in

Ron Vincent

second year. of the Consolidated Thanks, compared revenue X.X quarter Steve. to to as XX% Financial increased X.X second highlights follows. the the million for the XXXX for quarter of second are million, quarter for prior

the increased X.X XX% to the reported quarter million second prior compared second year. million the X.X for revenue service to Our quarter for

the the for decrease by in offset revenue service XXX,XXX, or second XX% quarter million XX% year. for to second XX,XXX reported decrease to segment quarter or segment to web year, increased compared million X.X X quarter prior XXX,XXX prior quarter Cloud-telecommunications for to for XX,XXX the Our the the our of decreased quarter. the the XXX,XXX Product second service X% compared for revenue or revenue of

gross year. quarter Our XX% quarter increased to of second the the the to for margin second XX% compared X% prior for

X.X compared common XXX,XXX and operating to prior per expenses for common basic per million XXX,XXX the year. quarter increased second second X% for Our or to diluted for of income second $X.XX consolidated $X.XX quarter of second compared was basic the year,. the quarter the or to the million X.X for quarter share share and diluted Net prior the

XXX,XXX the per of Our prior compared second basic the quarter the to or year. non-GAAP and to same share XXX,XXX to share, XXX,XXX or the per the was XXX,XXX XXX,XXX $X.XX for common the Adjusted the as compared the of for EBITDA for period income common year. of the quarter diluted same same quarter compared second period net period diluted for year. for basic was for XXX,XXX, $X.XX second and EBITDA prior prior

revenue month same million increased period million compared the our X.X increased for period X.X the to follows. six period as year. as for to XX% same XX% million, for ended X.XX periods The the the six highlights of Service of to year. are the So, consolidated June XXth month X.X six compared revenue months prior to for

year, segment revenue Product Cloud-telecommunications by of XXX,XXX XX,XXX year. period the month decrease service in to period a the compared web XX% period month for period service revenue segment XXX,XXX service period. million, X.X decreased month for XXX,XXX same the XX% the million offset for Our for same for revenue six to the prior prior six the compared six of to increased for or the to XX% X.X reported

Our the diluted Non-GAAP six was diluted common and diluted is XXX,XXX, as the period the or month month same for for and prior the prior share, net per income basic the XXX,XXX XXX,XXX $X.XX for X.X the the period month for period of Adjusted same for expenses $X.XX X% the period to per million same month compared gross or Net $X.XX for diluted the common of per year. income period X.X million for year. period basic margin share basic the six to EBITDA XX% basic period for million, or the of year. prior as share to prior the six XXX,XXX XX% month XXX,XXX prior operating six compared month Consolidated period the to period compared period for year. the and for compared XX% the share same and $X.XX common six year. compared compared of year. for of for of the EBITDA increased six common same period to to X.X XXX,XXX same was the to increased or prior per the to XXX,XXX period

it purchase a June as of cash was XXXX, Our utilized cash, our provided and XXX,XXX cash X.X XXXX. million and I on and now COO equipment our of restricted for cash, Doug over and equivalents and and restricted activity cash. cash equivalents X.X equivalents XX,XXX and cash restricted comments of asset balance turn cash, at XX, Financing acquisitions. property cash to will restricted compared equivalents provided activities sales President and million million December investing operations. intangible cash, activities X.X Operating to at XX, cash, to additional cash Gaylor,

Doug Gaylor

that to also quickly to and management from sixth by and our our a to results in from GAAP our headwinds the free positive adapting prior started with saw June, expect our income pandemic. in how I or is their development in as as based in the give activation what trend, and And that the maintain to of share at our We swing orders competitors react and is about currently XX% for winning with consecutive of full along and net April the technology Crexendo businesses remote businesses sense service slowdown $X.XX led cloud of beginning payments tools customers no quick fees, rapid as rolled most much that new environment. perspective, the revenue momentum hasten stay our year-over-year, adapt or we changes transformation a in revenue on in UCaaS slowdown with to marketing the assist to remote of a the for urgency Since world workers. a technology themselves industry overall April, the to the on already all in and while pleased Thanks, to impact recap I’m equipment that to continuing able posting Ron. during of only COVID, profitability. brought for economy, new will I’m Unified our the Service immediately efforts premise that to a country. out was needing with from I initiated and increase Even success and and pandemic. future. rapidly to bookings we efforts so an a struggle May on platform in saw experiencing. GAAP to deferred XXX,XXX sales migration migration saw us the most quarter, worker income. the an The digital extremely sales the This we struggled higher quarter. the programs At rebound was collaboration reach normal QX the quickly the cost with quickly will are dramatic find of award update to per rebound dramatic Despite migrate our witnessed businesses or to sales As finish migrate quarter customers and that seeing provide the net assessment continue. by our very environment. transition in Crexendo allows with pleased I will Communications helped in COVID-XX we the research And well current we quarter our and businesses our increase home of in now

related considering to quarter was at sales revenue of slowdown growth Our XXX,XXX beginning the to This experienced healthy a the and COVID. million. increase the increase our by helped the initial for XX.X quarter sales backlog

was able at the intellectual of to margin stable sustain consistently strong cost Our the healthy own have is and we our gross telecom XX% that structure offering. very property sector foundation are since since our a quarter, gross we margin we for

profitability. the a organization us has This that Our continual helps maintain productivity within management is focused cost on and employee within every message on focus our core efficiency. organization

cash our of for the results million helped strong X.X the Our the increase quarter. at quarter position to end

to our and enhance our generate into incentives we additional Director shareholders. our discussed for April, to our our new calls, As we have more on of marketing reinvesting and hired new been our customers, creating including initiatives, In have offerings. previous hires, are and updating the as imaging back further messaging Marketing we prospects R&D sales partners, adding and busy a our new business

collateral, our updated our will and have of refined be all corporate website We we campaigns, new sales this month. our email launching we and marketing later have

be will will we we are presenting investor, partner, consistent. look, uniformed our across consistent prospect board, Our the to or and be clear message an whether

focused on efforts and positive had our also lead revised campaigns marketing immediate are We generation increasing an impact. our have

We are also and investing development QX our R&D increase in and an continuously saw spend. research in

new constantly enhancing features are we with and As capabilities. Crexendo the platform

to flawlessly. with may in have WiFi tremendous a capability perform home, new our and Our remote them proper environment bluetooth infrastructure their benefit where functionality cabling people been phones work the have and allows in WiFi not the

a to as by industry And also video, authority solution products Our communication texting, their recognized are capabilities for providing those XXXX. year tools last were benefit great month customers. TMT of the our our our collaboration the

agree shift quickly I and XXXX, and the how We first than months predicted that can world have we have business positioned quickly how I don’t could to well the business forever. stronger we ourselves this have economy think believe changed ever. all weather six transform. would emerge would storm the that think anyone extremely country’s our world of

ideally reliance in to And sheet very the And Crexendo the about to balance we needs. that with combined help Crexendo. second call new future are Steve. are half suited industry. back on businesses cloud. we to our make greater confident on one position and communication bright for businesses It strong is business, to of the the strong is a to have the UCaaS for and will will excited Our extremely their transition exist leaders are support plans now of opportunities normal remote I growth, the workforces. income we the over every infrastructure the year we to and as to that will the to that revenue I’m continue of deliver. that execute adapt in continue turn a

Steve Mihaylo

Karen, Thank this you, a questions. I open Doug. position think to are we in to up

Operator

go instructions] Andrew Please you. & our Company] We with (Ph). question Thank ahead. take [Dougherty King will first from [Operator

Andrew King

Hey guys, thanks quarter. taking for my question good

to how versus COVID the due into I driven you It an get quarter-over-quarter dig I quarter? that a idea have expenses as was a well. like to little want the Just operating follow-up and then declining serve had of bit. a looks to much operating [indiscernible] Thanks. expenses. by And want fundamental

Steve Mihaylo

Ron take Vincent is going to that.

Ron Vincent

Thanks Andrew for the question, I appreciate that.

with to We can business we as run have definitely our our continue smart as expenses. focus on laser possibly

some And so actually have this operating or to year. as QX quarter-over-quarter, we expenses in of less continue consecutive see increases year-over-year,

business expenses of is it just Some the continued, was first our and expenses. But in on to related overall, one-time some that our managing focus quarter.

Andrew King

would return? sales great. you be could see also bit start cycle or the little And into changes saw the then through great. That to quarter selling demand motion you as Alright, dig a that into the in Thanks.

Steve Mihaylo

you, Yes, Andrew. absolutely. Thank

perspective, at saw saw businesses and a rebound strong June. May slowdown in, the very kicking home a down we had sales shutting obviously from a but big stay very with and we April orders So in

that was is because and I was twofold, their realize think not environment. that for to They work looking conform alternatives. one infrastructure to were businesses the able remote weak

with And implementation. from a getting track promos ran. of inquiries had our of courting, were a been bit to we we we their fast So quite saw businesses that lot we that also success

businesses expenses. put with out and be able promotions efficiently of really out cloud very little to significant we the technology adapt So pocket some for to quickly

Andrew King

it. Thanks. Got

Operator

ahead. Please Josh take B. will We question from our with go Nichols Riley. next

Joshua Nichols

taking question. for thanks Yes, my

spend this revenue you talk give is profitability more? some continue this as And teens increase little marketing you little think would we UCaaS have noted what looking areas reinvest accelerate you a to specifically about that mid bit a like was have if you of I the best growth to company with Can think ROI? you you service assume it above marketing the company’s the before that potentially level can fair improving more trend. little bit to think potentially bit you a kind

Steve Mihaylo

Absolutely, the for Josh, thanks question.

do the return out return we obviously, us so, like And help of and teens help will and low XXs. get investing our efforts healthy into a in marketing the feel

And tend efforts, those we well through so seeing efforts going you more little those to spend take aware of marketing and bit are more anticipate marketing as of a begin. to time

with anticipate got our have in all of currently of email money time that structured but will with campaigns, new with spend, to spent, we the marketing. So messaging well campaigns, marketing bit bake digital messaging marketing with take front a be we is that little a that to director very and going

that our our see and consistent those will material website to will feel. You and look changes very with presentation a see changes to have

So in we positive will have yes, marketing return for very a spend us. increase that feel do like

Joshua Nichols

Great. start And client, per going any historically. then company over the same the mentioned Are half think the there had know the would you opportunities stations the of Or I to Are typically in of year? market? after in where type the has you you that you like think up? scale XX half second this back you opportunities company is for biggest what

Steve Mihaylo

remained for average stations Yes, consistent for number us the last of the quarters. has so of couple fairly

about revenue So per average stations about XX per $XXX still revenue roughly I of account think with today account.

that more working a of customer with again, are channel bases their But bit spike We out seeing partner sales. our our increase there. that push that. a a number actually So we and in bit sales that have QX coming from since are channel partner higher, an our XX% trying about obviously we we little to with partners our we saw anticipate of of little nice will start

on are nicer size some bigger starting And transaction. see customers so with board clientele, coming we to as we see bigger

there start size can encouraged we transactions, by see and that bigger that the hope So seeing up. out we funnel account push I’m for that average

Joshua Nichols

like, assume to far channel then sales And your are expand big that that disproportionate And one a distributed revenue. or two as I mentioned any partner partner that is larger are a Great. concentration account there for can percentage of question continue last that as there? maybe growth. opportunities to your you since sales well me, channel for you accelerate what it, seeing, the fairly

Steve Mihaylo

it we partners. quantity. quality to looking not me Obviously, about always But, more are Yes. always for is

continue have relationships? existing we their get sales And are minority, out obviously I do high with So most And a that challenge the think more that of we that? we organization on we tab of that their focused do build how with partner how on Crexendo. get our majority consistent is the to partners. sales they from

that occasional I partners consistent. we sale we an think have, some high of then And we a that lot performing get are So very very partners have from.

are are consistently obviously don’t the spending to trying see have that to continued continue success partners our those greater efforts bar and success little that on with them get the lot with time to with we of with to cadence. consistent them increase them. a more partners perform then a we And bit raise So

partners our of QX. in us for quarters Some had larger tremendous

Joshua Nichols

always is to see the to back company’s queue. in continue hear good hop I great the That to and will as execute. continued progress you Thanks.

Steve Mihaylo

Jeff. Thanks, Okay.

Ron Vincent

Thank you.

Operator

Kevin ahead. H.C. take We Dede our next Wainwright. Please question will go from with

Kevin Dede

happens it hard you me to year that second haven’t have given you Maybe posted bit saw that results you It some to too as chime you Steve. was but what fit Afternoon, on Doug. shouldn’t formally I to suggestions half. of hoping talk sort in guidance seasonality. revenue a be the the you little offer think for the growth. gentlemen the the consistency in offered seems in, consistency and you have for you of on Ron. could posted. I know

Steve Mihaylo

allow expects the know, for Well, to XXs Doug more in listing us also app acquisitions. from now a to organically. stock marketing do price you of release, because the as with get And our press us into to he low my NASDAQ, have is up dissertation the that that we shouldn’t mentioned already that

grow half accretive says from that history our should think see are selling at about increase organic if our capable we I platform, is approximately we them of it. XXX,XXX acquisitions companies the acquisitions. our about So, from the I in States and Furthermore, There that that come the are of channel. currently out think pointed anything come will of to Nichols United XXX Josh selling only all, sale

anything? space. So, have we Doug, head And would like lot a of add you to

Doug Gaylor

Yes. Steve.

obviously, seasonality. we look Kevin, as at, So,

industry lot of Our sees industry not seasonality. that really is an a

Now, them cloud anticipated COVID unable slowdown that years, with for to been the But platforms always perspective, and will threw more I few more to their everybody take the last and communications over that obviously continue, business as a next the perspective. from has our level. very realize rapid momentum from businesses to are curveball based a migration premise the

more allows I So, to is to work require And type anticipate these a remotely. technology the that, for that him perfectly are to that. going businesses platform we to UCaaS move situated that

Kevin Dede

I Okay, that. so Steve, caught too. the But it isn’t Josh to did I mean, M&A mention pipeline partnerships. And how. applies this really clear

environment offer talk mentioned could in well. that how you Doug about I haven’t changed. has unsuccessful. didn’t insight maybe It been that prepared his remarks that this And So, competitors some know. on as Right? really

profit partnerships struggling I So, maybe could you how M&A not in wondering being, the other in not as have? talk businesses driving a and you and of light environment guys was changed has to if

Steve Mihaylo

add the fill I’m to going to me in a and let this Well, then let bit little color. Doug

those acquisition need company, they that side, And the seeing that exposure. a companies getting substantial more we listed to a on analyst lot part we lot bigger be company. So, more are more are a realize of and

marketing We are our more exposure efforts. because of

bushes, so. do And regard, sell will to in be to that a for like part. you is once systems. for partners, in more a because bigger over, Doug bigger the adding said the is we beating activity So, would to are going and to anything that. position start we to more Obviously, right dealers see that probably add as Doug, are to partners folks travel it But COVID else starting safe we now, can’t lot

Doug Gaylor

Steve. Yes,

more be the merger moment. acquisition to at opportunities little bit are and the seem a plentiful So Kevin,

businesses this speed COVID has going are really smaller lot changed the looking of way definitely a is future. And as now. said, think their industry right at Steve I at full

combined of the company bode us. a And efforts so larger well of, obviously for

so is there message much a are much is with the take to by a is opportunity that, bigger that combining bigger forward. looking And going and hey, forward we Crexendo, that platform

M&A really opportunities I and that think so to of talking the opportunity going are we continue with is And to increase excited that we the some to. are

Kevin Dede

if can me quantifiable question really us to offering watching Doug, some sales to that other Last for able might on? I’m us wondering we you specifically, grow, is going marketing you to it efforts, your headcount your just monitor product, consider aside on maybe from be KPIs on how mean, measure monitor production or are progress I by give

Doug Gaylor

so Ron to employee, those customer that. for give in putting answer, into and metrics question, so productivity you per I can those short answer we about guidance but be have cost, We acquisition will that we presentations, don’t Yes, the have talked doing your today, yes, etcetera. metrics additional future

for will in we the those future. that So, are details have you

Kevin Dede

Alright, sounds congrats And good. nice job. gentlemen. Thank you the on very much,

Steve Mihaylo

Thank you.

Ron Vincent

you, Kevin. Thank

Operator

Please We Khan Investment Eden from will our ahead. Arham Capital next take with Group. question go

Arham Khan

always hear apart then Steve. and incredible. again, Rob, pretty Doug, years are is doing XX it you, you Good and its And to from

color people with some what into I COVID that churn nearly company. fact that the rates? through hoping over throw was management some the COVID XX% why list. think your NASDAQ is happened up I the that grasp and you guys before amid And people of could said owns

Steve Mihaylo

that you one? don’t why Doug, handle

Doug Gaylor

great Arham question. Yes Steve. thanks Okay,

have been historically we our rates. So, tracking churn

a will had of little bit see actually very And SMB low high etcetera. a our have stations, fact The the give a the are so doesn’t there. churn advertised is customers in do we color in and have QX very maybe hurt concentration our of more majority customer space, And have getting smaller in earlier, have the Ron vulnerable that. puts the a we industries in out that customers due account our that rates. on fact to hard, spike bit today are of mentioned a customer example, exposure as But little we historically for category part that COVID we I did is any that restaurants nice little really bit XX us and

will give bit have more and the I a little more a detail bit So there. you color Ron churn little on add

Ron Vincent

seat Yes, quarters, a so a we were [Technical prior somewhere count churn. averaging we to ranging for a Doug. X% Thanks basis were percent. difficulty] around on of monthly COVID around for, of COVID, And six-tenths historical four-tenths from

that So with that one on the our the basis, on month-over-month, small churn. quarter a the customer it what a anticipate is to we us. XX% had is two. going depending still and not increase not X% percent will then churn quarter our another or always we down around but in is from seat we churn businesses back increase struggling, and alarming that But very rate for as next, on settle are that that It COVID. low rate COVID, to that may but is material going into to happens of But sustain six-tenths

Arham Khan

because me, I late. that. is and might got question this okay, backlog now? Final does the Where I for Okay, came missed in stand have

Steve Mihaylo

$XXX,XXX of number quarter. the puts exact the Yes, that for at increase let me it million. backlog nice you give a And had $XX.X

Arham Khan

guys. be expect Okay, to good I hear like taking well, excellent. that. didn’t Thanks question. Always to from my for

Steve Mihaylo

Thanks Arham.

Ron Vincent

Thanks.

Operator

will We Please Little question Edward Gilmore take ahead. Grapevine. with from next our go

Edward Gilmore

margins long congrats a how promotions to wondering And Question are margin. then you. being Hey, how my and impacting the on that now? question. was incentives. continue you you Thank are think gross the going on Doug taking Ron. solid do order. to much for need offered are Steve, And I these gross Thanks offering

Doug Gaylor

margins don’t are going we are offering to and the deferred very The on stable we have many gross because our have promotions are payments. I dramatic that impact margins, that been very say a we gross offering would I our Yes, promotions of are consistent. think

customers at the later a payments actually allowing date. services to their use start just So and

on applications, gross on that items like our And given again, no margin. then have and dramatic doesn’t with effect mobile have free have incentives tools a the So effect a that, collaboration some doesn’t gross dramatic margin. additionally, we

I business, is anticipate So we well change the negatively. long we we having continue that keeping end it gross And incentives until positioned as any a far would of how that the those these might least messaging are I without continue margins long driving as year. affecting think as we bit, long as at the I promotions don’t the we anticipate very as can would little anticipate incentives,

Edward Gilmore

Doug. Thanks, Great.

Steve Mihaylo

And Edward to that. to would little add I bit a like

As our you And as above larger, that two gross gross know, improved expect would our - get quarter-over-quarter. we not margins increase, decrease. margins I will

as as a to probably, will going expenses more in of the are a fixed X% that the possible to larger, per we get line not known. quarter be percent - pretty form that increase bottom - increase but and is more margins. our much falls of And are they Now because or

Edward Gilmore

you Okay, great. Thank Steve.

Steve Mihaylo

bet. You

Operator

We from our investor. [Indiscernible] go ahead. private next will question Please take

Unidentified Analyst

these time little talk a just Thanks to the for taking do bit your more to I acquisitions. calls. about comments would about like

an at through you always these the kind the cash You because that have cash would calls had me And the past said currency company. in that accretive. acquisitions of you and the always at that aspirational has was tight consider was to very stance, consistently only seemed are that time

be I’m trading better. in that a some owner, Now they sudden, was the the that selling Because as there might a all more interested actually is business of better. liquidity business trading And daily of stock thought volume. I’m thinking the

more and infrastructure any not at able come companies can that? above Can accretiveness margins sure bit their what kind and is is of clients? significantly really terms? is their about going are what of a you margins the gross to plus need I’m you that size is, in the are you that you your that talk revenue acquisition out XX% you that competitors? and little I question my from buy your general make it small just onboard to basis going being landscape to to there taking come understand don’t in talking efficient? them gross the from So Is that Is of the creditors are what looking

Steve Mihaylo

we XX% over a XX% chime six about in smaller color. Yes. acquisition. step little and a going of period to anywhere a We bit two And over will a then for of Doug but amount that from the a front, XX give revenue do up then I’m to months. it Well, want to I’m of We process. to little Ron bit, in adjust sure and you pay

- and usually million little I that four and expect requires most the cash. Larger with or up allows would done it cash. time And - stock seller of a $X Ron, acquisitions do XX to a of that? of acquisitions to more generating cash, of help for to or million million lot and are less Doug you we with will and XX five would acquisitions. done we more allow cash to will acquisition or any with be maybe smaller it course, million add be up cash million financing, down some either adjust - and to So, And that us like bit. us

Doug Gaylor

the about is, that acquisitions, synergies think we accretive helps we if Steve, if cost that positioned. one synergies I so customers obviously there our migrate is we that is we platform, came of think are at well tremendous. No, that again there can platform to think with, look I again,

and when targets it So, there, we that at short with the acquisition our does in really out for Crexendo. goals acquisition fit how our look long-term is

range the we highlighted, revenue that it growing revenue to acquisition, here that and So, then that that out a mean, are a to got frogs, lot that think are critical good a try do is with figure opportunity, we going just I and around of do I continue the we kiss us to fitting and acquisition then us. to are but for what we is integration obviously, all very company acquisitions find we customer do, used are that customer that we But so type be when we to, the in how all Steve picture. talking acquisition, once forward. joke get we, going acquisition, we for seamless

see will are we opportunities we and lead that they are So, they of us. talking where where excited about the we some to

Unidentified Analyst

Let me just clarify something.

you wouldn’t into an get another on want will a platform business? that start So, you platform acquisition in wouldn’t you you didn’t your said to to new consider learning with move go

Doug Gaylor

there that technology be to obviously are learn lacking, for I that opportunity obviously, good that us. I But a business. want So a wouldn’t would we is new acquisition if

our more also benefit customer obviously, a a that we picture. product Because stream, talk very greatly a but allows enhancement about robust the market, talk platform even If we acquisition, that our us different a feel there when that onto is that we areas whole offering So, acquisition about technology is acquisition, like have the is technology we in customer got our platform. so. got could those customers to today for migrate are revenue a, even SMB

Steve Mihaylo

add, also they for to very if $XX have opportunity head range, with of in little more the with the our opportunity $XX to all opportunity to that would Yes. the they they have, and they is if are competitors, Crexendo. million them were million very, And there larger like got one go space

Unidentified Analyst

the at it feels margins that most XX. What of industry, average gross is average? for Is is or the above

Steve Mihaylo

of on actually side the are we average. No, low

our of Some get will get competitors larger. there eventually we we and - as XX% above

Unidentified Analyst

that. for your you So, you. waiting I’m Thank Thank for answers.

Steve Mihaylo

bet. You

Operator

[Operator Instructions] from with go will Please Kaufman MK Michael ahead. our next Investments. take We question

Michael Kaufman

your Steve. to what to It the grow you try have days, competitors. are at great refreshing looking to And and some and do Hi, company people of a quarter? get of Ron, was, bigger Doug you maintain customers? especially quarter. scale is in what added after headcount? the Question these and to going What is I kind specifically profitability see some current

Steve Mihaylo

being for Yes. on always question us. thanks, have Michael, And great Great line the question. for a

or headcount, couple during marketing think of the one engineering XX folks employees, add we current did the quarter the and So end sales and a at two quarter, the side. of and on

are organization, always help continue people as So we continue growth. looking that to at that we can good the us grow

was is the always for sales obviously So aspect And for us. marketing critical a constant us.

we So efforts. of second looking again, for And the help good those increase the always question sales are part Mike. to salespeople

Michael Kaufman

larger the are will rate? that account, the what larger I’m of a growth would you what Well, target account wondering, specifically, get just kind be attributes of to rev up your

Doug Gaylor

Yes.

So small is at to with of business so to a opportunities. get stations, midsize the fits larger our obviously, that those product XX epitome larger perfectly opportunities, and

a quite sold we few deals during figure contract quarter. total six pay fact, the In

of do we are that lot couple the a range. in deals hundred sell so phone And

account today previous is As about on I mentioned have I XXXX calls stations. our think largest

play in the larger size those is can to So opportunities. we getting It arena. easily

our mentioned in have efforts their I So find And marketing as that of focus our are previous partners focused the customer is on one base. to bigger on our bigger find customers questions, trying partners with to opportunities.

and going But customer in is and their partners on for brought or the size be service XX fact some in I partner we our So a with XXX target lot very bring to much if our from XX% XX% is partner their if and opportunities managed average or range employees, us. QX that business from base going XXX us a some are our into. have I we of new or about and to that have got they provider, bring of recent of XXemployees phone so or think that well that partners, months, a a our is if came a of customers market if VAR they that customers got phone are the as bode higher data out this

funnel some bringing opportunities And now, gate. bigger things right of so out seeing those the we to the table changing partners with our right in the newer are of

Michael Kaufman

can their you your applications equivalent system. to And key engineers of turn like system the gross Yes. more so stepping on your current high. margins if Because are the bring that transition in from gas,

are those quickly. costs going recover You very to

need may transition own customer. you the your to people make more seamless basically to on it So a

Doug Gaylor

us that Absolutely, for customer. do that very these we a a of of is sure in lot important diligence any the is is make it that for an and factor acquisitions, to smooth migration

Steve Mihaylo

you very that And performing I of productivity will make at get XXX,XXX very, is performing goal. I add acquisition might is would think back. Right look closely. retain their there engineers like but because all And don’t productivity salespeople about we if now per or our gains, XXX over our they we goal. quite head. and And an frankly ahead. that to XXX is will our Michael, now, productivity need to it want Obviously, we And have in

Michael Kaufman

and you Sounds incredible. wish stay healthy. luck the of and keep I the best good up work

Doug Gaylor

Thanks Michel.

Steve Mihaylo

you. Thank

You too.

Operator

take from will We [Indiscernible] Please next go private our ahead. question investment.

Unidentified Analyst

if Hey, the Ron. questions stock maybe Steve. I got on One, you stock to be have month. and And again. Are have given I the Nice. parabolic past price two we seen guess for you. be Nice say work would Doug $XX million to considering rise offering be to let’s that a to say sales a shares put that you be able million ever - that faster? cash cash drive million, had put would $XX stock would even you let’s offering?

Steve Mihaylo

obviously, sellers. only answer maybe team let that Well, me then me was and think, explanation I today by caused would Jeff this let for volatility in. like Korn And the the short to entire That one. is chime But -.

on are get little a having sell stock. very, So float. very to to have a bit float, you to larger order to I’m going we keen slightly need in need But And a larger anti-dilutive of outputs here.

and At that, it and have bigger they as they over in have upside, wouldn’t that the are more get have so more skin we with to far competitor. so going turn stock to a bigger cash to more acquisition a have and Ron. going to As goes, Jeff, cash have to game they which I’m Doug that

Unidentified Analyst

they more Okay, thanks, Steve. after one I answer. question have

Steve Mihaylo

Okay.

Jeffrey Korn

it be used the board team. work Yes, assured but rest as and discuss made being we if this decisions could at some to would some said NASDAQ, consider money time, discuss around as no suggested would grow have of our be things Jeff. Obviously, things But we we business. been everything to would on he have a the with management this is and Steve will we

Steve Mihaylo

anything Ron or to you want add that? Doug to

Doug Gaylor

you pointed out, mean, it to I as obviously, money Now, money. make takes

to go an and SG&A XX% that perspective, are have any that. in working towards that the been we not acquisition crazy to we well has will XX% the of back expenses range, to into perspective. in business for But we continue those you efforts. do us, so reinvesting anticipate going put but not I marketing at yes, some look capital competitors any for our can additional that from of when obviously, And only efforts, don’t

Steve Mihaylo

And another you had question.

Unidentified Analyst

was the earnings all well, commented And the o’clock. you one we at sub it least at more, release would short X the be That Steve selling cans surprised. to at given guess Yes. news I One that on sellers. of the into wasn’t

we for I like give It I big the, price boy stock huge maybe a one get is out So, was there will what tomorrow. them to call BOD is there that increase. looks spot recover But big curious, someone trying position are you familiar you And color have open new any and it to assuming are that you a you. a holder? do probably with on large with,

Steve Mihaylo

Board or of either a we want target company. our to of Board reserve thought obviously CEO the CEO a Directors Directors of Well, to

more. little probably to you that far basis to bit large my have are would now, determining on would on at is to on acquisition Every said than every at and grow, interested grow we And have are taking you should growing we the have get a more second acquisition liquidity able that watch much. shareholder, are in situation. who in But in more Bloomberg, and large it. unless shareholder and of this As the the is right a advantage are as be to XX% about stock, creative who goal frankly, watch a of day, isn’t. least by think we an to we But we going sellers business Doug earlier, organically, as I short or

add forward. is to So, run. is Maybe, Jeff, our like short we long in that. seller I but to stock several going to take But going years disappointed it to bigger a any lot going would be to are you the get going think on

Jeffrey Korn

discuss we wouldn’t lot to Actually, of stock. frankly, know than not Steve, aware did your on Other the that. to a who’s anyway. if the I we probably we question call And don’t acquiring are it add to have answer

Unidentified Analyst

Thank understand. you little I very stockholder. I’m a much. guy

lot dumb look up Thanks with you how questions. and I call. will might So a the can next understand on I come

Steve Mihaylo

Thanks [Steve] (Ph).

Operator

We from (Ph), investor. will next ahead. [Greg Hillman] our private take go a question Please

Unidentified Analyst

a and Crexendo what is the how I overtime? score questions Doug, for you. is changed Do promoter couple net have know it you for

Doug Gaylor

I not you not that will do Greg, for know reach have now. to I I out fact, got that. and information you handy have but can after the get do but your I I that contact information

Unidentified Analyst

terms Okay. does of compared conferencing, for meetings multiple with to And in of people doing, how zoom, your functionality the system also, people?

Doug Gaylor

our offering Crexendo platform. our had of we as Yes, great called is Crex-Connect. It have a part collaboration

the And so didn’t house, the actually to actually, that is our actually Crex-Connect person, that It zoom. we collaboration a very offering. quick that label founder build similar is of just a side tool, funny white story we in

that product person founder was the of the WebEx co founder that that represent the the other the of we so of WebEx, one And makes company is started co-founders of zoom. the

So the after when WebEx was non-competes, ago, sold off their to two both companies. co-founders, started Cisco collaboration a expired, few up years

zoom, that of with, partner and them One the we one is is of Moxtra. have associated which called

Moxtra with very so with is zoom. have similar we been our Moxtra, pleased the association very to And product

remotely customers to our video file their and of they their Crexendo most employees time. communicate are share our collaboration and conference customers and with share, all the tool and our screen and for use So Clients, collaborate that

robust So have that very offering with nicely competes a we got very there, zoom.

Unidentified Analyst

in me trained just Doug your great. you on changing? reps that of Cellular and how relationship of their right are now is the update also, many Sounds platform with in And can terms how U.S.

Doug Gaylor

but Yes. very don’t I the XXX also agent is We ever to been out think they on-board with grow channel us. have in their got numbers had there. have our in so got strongest come and quarter direct they And the have to has with then I their extremely with about U.S. relationship successful partner reps and a Cellular prosper. continues strong the quarter, QX, exact U.S. Cellular. XXX

with robust relationship have strongest And quarter tremendous and funnel of now with So a up and our got partnership them extremely have the again, the them we coming extremely, we right opportunity. that bookings tremendous since had is amount started.

Unidentified Analyst

of Where ones up or Doug the cockpit And like your are EBITDA costs or enterprise terms comps you to great. other any How That stuff like is ringtones with some and your competitors. now that? your to compare sales price stack right to value do other in like of relative that?

Doug Gaylor

day-by-day the street this tremendous If you think think their about week I disappointed losses RingCentral I’m as just losses. past and announced had with

growth but at again that to more expense had think RingCentral nice revenue revenue continues they money anticipated. I of nice the had than growth, they money. but, losing lose

I little like feel as growth much So, profitability. ship you at we know, our that, had a of the well, are than we competitors, percentage I but smaller extremely managing look bit think more we our competitors,

we grow, And to are always believed, going had so, profitably. the are going in grow we that have but we have we always fact to and

as but profitability so the XX%, ever into it and spending, And hard is of earlier, to in we is expenses, business, those it to hard reinvesting mentioned sales not back I we marketing the range XX% numbers. are get to, with kind are to

line, growing So, their their top to but granted, they are bottom the line. at detriment

compare are I have we lot a our one our that discussed, we probably in the probably think that rate churn that of and And So, the think I industry. one metrics I highest well, the of is have that lowest industry. in of the think the operating profits we today

Unidentified Analyst

That is great.

Steve Mihaylo

valuation to to And On basis, that. of half like probably than are Greg a valuation would we the I our competitors. larger add less

losing pointed of them Doug out, money. As are most

XX from cash And their their the we about a or are RingCentral, on flowing XX% take If at of valuation, value. a basis. bit, you GAAP of standpoint little but or are specifically, losing XX% they

Jeff would Doug. competitors. like not, lot than add you head know if Crexendo that, or space any but you don’t So to there more those with of is a to I and also

Doug Gaylor

summed think it up I you -.

Unidentified Analyst

then one cycle I overtime? XXX versus just the differ that And Doug for how XX does question. has final station how organization? a on Thank sales you. changed organization cycle, sales And, the Yes, station

Doug Gaylor

Greg, a opportunity XX always as just a I phone phone opportunity does sell takes as Yes, it that to versa. vice sometimes long it and XXX

So, similar both fairly in yes, the environments. process sales is

recommend the have process your points help and you needs ROI sales pain The and find business got fairly fully to quickly. solutions and really you hope forward changed. move them in good You then a hasn’t

it eventually. COVID needed the Because process at something think do, that was is if up the COVID, that looking anything cloud. to I because were I think to they up until businesses they realized migrating

up something brand is than I anticipated. need much to eventually COVID think that to I sped quicker do

lot is of we businesses, yes, is it work. businesses, it in for environment but doesn’t that talked to works solution So, the lacking, many a communication well COVID a

So been lacking phone though everybody’s did before of office, showing may day. still in functions the for even they still needed their their had employees capabilities. system at when day to It all have the up

our Now still that remotely. our XX% in office are in cases many of working employees

systems, using So and cell consistency personal phones businesses using are within employees based organization. premise phones home using have they not got having any their

I process think up little the sales sped has bit. a

make actually quicker realize keeping The to larger a tend because of wait are We the they to Smaller are seeing businesses that decisions running. control. can’t making they aspects quicker and business to harder have emotional businesses have their making got businesses decision larger smaller continue reinvest lot businesses decisions. that businesses to than tend to

size But ones. our that, in actually smaller to tend an funnel an move to through I about to get see quicker deals timeframe the funnel, average the for go we four us time start So typically weeks. process, say would than them the talking larger we we the time hopefully agreement to the transaction forward, in from a

Unidentified Analyst

weeks. Four

what think turn rate Okay, was and right you is your forgot the just I churn housekeeping, one said now? what I rate?

Ron Vincent

customer a rates, X%. on on averaging we monthly for churn is of a around a Yes, our on rate so basis, six-tenths it quarter seat were basis. a are And percent the

Unidentified Analyst

Okay, month X% churn. per

Ron Vincent

is Yes. in percent the prior from That a six-tenth about of quarters.

Unidentified Analyst

me. thanks lot bearing Okay, for a with

Ron Vincent

Thanks.

Steve Mihaylo

bet. You

Operator

Please [Renault question (Ph), ahead. our Paul] from We investor. next will private take go

Unidentified Analyst

with loan, took Yes. just What going quarter. Thank about we wondered you. this forward PPP I process the is that? the

Steve Mihaylo

to Jeff, want take you do that?

Jeffrey Korn

customers. we take provide up time various will Sure. We seriously. [indiscernible] as as let, the PPP some and loan you PPP canceling regulations stepped took precluded we just connected under understand what Obviously, the keep company we vital decision to made which take responsibility the a were that are would us We company, and we we have a and could anybody we And locations. to pledge how We to state visibility where going service, have and America a this we many or services. so we At OTCQX to are took money limited going office not we zero from require our communications were to going very to who loan customer at that, time that action many of the regulated from we disconnect are a needed add a we to on we review. and or the historically, determine telephone at slam remote as support We or to. we how were ability to their go their bunch customers of customers a business. moving not cancel, customers did agreed with are had raise out had any time, we we if all

we absolutely to when was the necessary necessary PPP it for us services So, absolutely continue took our loan, to customers. to provide

So, loan. are all relative and what to to we reviewing determine we of take will are we action the going PPP that,

Unidentified Analyst

you. Okay. Thank

Operator

at to And there appear questions be time. further no this

to turn Mr. will floor Mihaylo the We remarks. for closing back

Steve Mihaylo

here follow reported And our will for been they the a Okay. announced good quarter which quarter, we on the normal announce. expect to I’m back Thank which call. This announced the a Karen. time October. sure. early Obviously, - when we you, analysts in day we be of you of couple we competitors this third see they of has us. on had, And all to got because a have also wanted couple we

days At back at Be -the if see announce after rest to few safe. end pack. third will we the the rate, of of and talk or pack you our guidelines rest a Follow the we will we if we here. CDC announce quarter. any all will we of the So the you see

Doug Gaylor

Thanks everybody.

Operator

does participation. conclude this gentlemen, your and Ladies today’s you. for We teleconference. Thank you thank

time. this lines day. your a disconnect may You great at Have

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