CXDO - Earnings call transcript Q3 2021

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Operator

Good afternoon, ladies and gentlemen, and welcome to the Crexendo Third Quarter 2021 Earnings Call. At this time, all participants have been placed on a listen-only mode, and we will open the floor for your questions and comments after the presentation. It is now my pleasure to turn the floor over to your host, Steve Mihaylo. Sir, the floor is yours.

Steve Mihaylo

Thank you, Matthew. everyone. afternoon, Good Chairman Mihaylo, of Crexendo. I'm and Steve CEO you want third Crexendo welcome of to all to quarter the I XXXX conference call.

numbers. with detail Ron sales that, give Ron Anand to read call President I Counsel. I'm Jeff update. will Jeff, the me Safe move up instead to question on want and a ask Doug General call this provide Doug you to are will On Jeff to I'd And business Gaylor, you open then little the will Korn, and will the our COO; read please comments. is the to our like Harbor Vincent, some Buch, of CFO; statement? along our the brief going a we our us provide more call CSO; and Safe ask today do our would what statement. After person Harbor answer will the parsing specific questions. quicker. them And to which you out,

Jeff Korn

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

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

Steve Mihaylo

you, Thank Jeff.

We the First, since right served have and who Veterans company. has thank take the due want that take country. their and never as families. Day freedom as and to are We and is this grateful I your around for opportunity served a is It to corner, granted thank to our most of sacrifices have you the who individuals we dedication for everyone service.

This very quarter revenue and quarter Consolidated third was by quarter, excellent the remarkable. expectations. even for my XXX% which grew exceeded is an optimistic

are of the X.X revenue working. record we Our that quarter engaged million and proved are fully what we for is doing

of common hard income for non-GAAP and $X.XX a quarter the work. or basic XXX,XXX to our share Our is testament per diluted

an have working The senior well. We is NetSapiens office together NASDAQ. our work effective management were able -- teams are week, major game all NetSapiens offering. going is returning accretive uplisted changing organically continued efficiently. execute The the senior Tempe plans precision, week working the do teams to to here and more to merger with with the up And a the and is here ongoing This the of process this profitable. to the We back very minute. of the Crexendo closely more with exceptionally team. accomplished at have the We of the And acquisition. in an let's management important, on or company

the Crexendo and efficiencies, and will shareholders, be equally the from to constituencies. benefits NetSapiens The merger. and in increasing functionality realized and cross all reporting substantial by are We benefit managing as achieving important

We are the more merger. completing efficiencies the service the from of intend We work Crexendo between realize diligently operational shareholder more this and making rest NetSapiens better and continuing efficient. both to year, the effective and value and to teams

continuing by partners, and Crexendo benefits are systems share to merging accounting continue winning VIP to This the end-user the teams, to award having moving and customers. by our the by maximize our to We will resources. customers savings platform, value and team provide customers and shareholders, licensees

We will organically. the business grow continue to

resellers, the of indicating also in the accretive possibility they and acquisitions. might Increasingly, that companies, any be or are strategy will including exit an look appropriate partnership partners. of acquisition. this us our for also for CPaaS NetSapiens adds We UCaaS CCaaS, interested contacting And

I review And these will our will will I come growth substantial time Ron. only We accelerate very shareholders. for opportunities see and to to right highly growth. future. with expect carefully our which a and the and Crexendo our continue over that am in it I'll exciting optimistic closely, turn about I along that,

Ron Vincent

everyone. afternoon, you, Good Thank Steve.

quarter we quarter. million for and with are revenue results. quarter reporting full first million X.X X.X is or results third acquisition, pleased great reported the This compared operating Total XXX% NetSapiens we of our our to highlighted, to million had Steve as very consolidated from for a the As the prior months X.X I'm year. three increased

net XXX,XXX Product prior for the of compared to contributed XXX,XXX gross quarter margin compared per from income common to Consolidated as million. reported segment X XXX,XXX same The XX,XXX for quarter XX%. income revenue $X.XX the software of strong. contributed increased the the of for increased the for million income the XXX,XXX X.X quarter The or and basic the additional period as reported quarter was the diluted was for share third diluted of per prior of million common year. basic or and to of X.X to the services service EBITDA of prior NetSapiens X.X of the margin basic XX% third loss quarter $X.XX segment period year. common year. third for revenue increased or XX% expenses million the NetSapiens of and operating XXX,XXX product X.X the telecommunications reported solutions compared year. for and for share million or for loss XXX% diluted X.X software year. net prior the quarter to the XXX,XXX XXX,XXX and for third XXX,XXX for XXX,XXX Gross year. prior cloud was acquisition or or quarter was to for to quarter or gross the compared $X.XX the expenses. for per net share overall per quarter million common the and $X.XX XXX,XXX to XX%, share compared the the as Non-GAAP quarter $X.XX the XX%, solutions X.X gross margin for basic for to the the same compared margin operating quarter quarter diluted Telecommunication third million of Our XX% acquisition prior Pre-tax

was for EBITDA million to adjusted earnings of same quarter the the Our X compared for XXX,XXX as period.

For XX% to the to year. the increased for the period, million million our nine-month prior of same XX.X consolidated revenue period XX.X compared

million Our service cloud telecommunications increased XX.X nine-month X.X period segment XX% to for million. the or

compared XXX,XXX X.X the the NetSapiens from nine segment nine-month months XX% to compared operating the X.X Our NetSapiens of same for or million prior additional acquisition period X.X Consolidated the was year. same to expenses. contributed for XX.X for million period contributed the million revenue acquisition X.X in increased XX.X the Product for nine-month prior million the to million. The period for year. million expenses the the revenue to operating period software increased of solutions XX%

per was common for X.X Net general and XXX,XXX per prior prior Non-GAAP for the during or to million Additionally, was acquisition-related and diluted compared year. X.X $X.XX loss compared and and per basic diluted loss million period. we nine-month same the or or period nine-month million $X.XX nine-month nine-month share the $X.XX X.X basic X.X period in basic the year. million expenses X.X same $X.XX of a period year. earnings $X.XX X.X in prior incurred diluted the for million administrative million of net share per for to the X.X the the prior $X.XX compared period was period common as year. Adjusted common for to share. for for the period share income of and million compared the period same period or in of basic of million EBITDA nine-month common X.X the same diluted EBITDA for That's the to the per per

for cash operating nine-month cash, year-end comments additional activities financing and our for sales to equivalents September XXX,XXX and from stock I'll turn the and was XXXX. million cash, acquisitions, investing President primarily restricted equivalents million cash XX.X over X.X cash million of Our X.X restricted primarily XX that, to exercises. Gaylor, during business. cash XX.X that’s Doug and With used COO activities, We December million used option period, XX, at at and and for it provided business activities on compared

Doug Gaylor

results about strong these were we able what ecstatic our post of Ron. two Thanks, a I'm to the full has after highlighting organizations first quarter combination NetSapiens, acquisition become. the in

of of of from total acquisition complemented by side Our organic to in Classic revenue XXXX. compared on revenue the XXX% us our the propelled strong business Crexendo NetSapiens QX contributions growth the XX% of to increase

as which using during to we expansion our of and a businesses partner our income on solutions platform the Crexendo for Our rapid partners by and diligent quarter. from to from release. level continues NetSapiens as mid-size quarter. small, of us enhancing to pace, software X post The Version working Those our the at enterprise non-GAAP recently UCaaS continue is orders benefit the cloud, benefit users managing by next rapid to diligently our associated our services the our users evident release the our expenses, from end combined amount grow with community the X additional and anticipated from our that has number million and plus helped industry allowed over growth received with and XXX,XXX XX clearly are capabilities million need increase revenue, the impressive they large highly that and end NetSapiens effectively of business award-winning solutions on announced strong continue add-on to to migration we

NetSapiens Not differentiate highly platforms, continues business. we're significantly us industry businesses Microsoft's continue we amount Seats from Broadsoft to drive ourselves largest for to new and Our for Cisco's of their We competitors, and their and higher are from -- which based per platform to live excitement Metaswitch partners of interest and very looking our recently offerings solution Sessions, three seat our attended that on UCaaS to and allows priced cost pricing the unique platform, model pricing. receive a with pleased two conferences, MSP model

market the Crexendo our by platform Crexendo agents on has our grow VIP XXX% of year along the we a as spurred powered recently warranty introduced Our that program flourish to the with on our agent quarter lifetime and continues phones. offering we our and NetSapiens strong had to traditional by a guarantee uptime of Crexendo

and these continue new in agent opportunities the about to funnel and partners the agent add We new are the larger bringing are table. to program to the excited that partners

to only represents continues end factor and $XX.X term grow million partners. at the backlog the not and Crexendo now of number our Our in does north currently the This NetSapiens obligations customers is QX. from of direct

to In continue actively we our margins service addition, management. on UCaaS focused increased cost XX% as to be

work continue We and company. the synergies combined many together already to recognizing two to and started have integrate from operational diligently the benefits organizations

attendees turnout Our tremendous together from tremendous Diego marketing group teams from efforts marketing We've month of consolidating in our working our our over last team best both benefiting flawlessly are San NetSapiens practices. had synergies seen well and executed that immediate meeting XXX already on. most a recent user engineering on at talent and

maximize on the continue to experience table of and coming knowledge prosper. executing are go-forward and very systems and our complementing to operations very accounting teams and industry cost. I'm and together, We're productivity from and plans and each exceptional two process efficiencies, the customer both organizations sales our with to are departments organizations excited to grow are I'm pleased and in service how consolidating our our our all plans Our the other about personnel, bring extremely are of well. our benefiting

associated earnings with assets, of non-GAAP and strong per intangible costs non-GAAP acquisition primarily we and I'm concerned able we're amortization pleased were that our the share. to earnings very the $X.XX of With the merger with generate

every synergies will one the team from we acknowledge the continue hard and work effort and see our members. able great power opportunity of are not and that together. leverage succeed has quickly have to as continue results this efficiencies if grow we these been organizations. to Our be and believe we remiss organization grow We I I'd our quarter And strong the proof merge to and cost did combined to

As workforce UCaaS we and opportunity of combined sprint offerings, product disruptive Crexendo. We're and The XXXX, future committed our our and our more shareholders. a for tremendous perfectly demand solutions great phenomenal towards with the excited offering our the for for finish delivering future. I couldn't for customers combination us be the for the direction line pricing, talented and in for partners to the positions industry best the best returns about

We two continued organizations force will a for the the great are comments. us growth. fuel of industry any that major combining our I'll turn further confident in to now it over back Steve our synergies and make

Steve Mihaylo

comments want you and Thank open out person direct I especially very you up want as like you'd that as Controller, department answer our I people except towards hard, the it. you, questions? the our remember, point accounting. to all CFO, Doug. in our to of is would them, other Division Matthew, it And further it working to I have no to that, well and Controller With our accounting very,

Operator

now the questions. Ladies and Certainly. gentlemen, floor Instructions]. for [Operator open is

Your coming from is first from question Andrew Colliers Securities. King

line live. Your is

Andrew King

Hi, questions Doug for guys. quarter. and my Ron. great I this quarter taking Really Thanks couple just a question. have of for

Just wanted to idea. an get

which growth what give business, services Within see it by us dynamic with just bit how Can up really really revenue, was little flat you looks forward? significantly caused pretty this organic a going like propped quarter-over-quarter. you quarter And into up more that revenue really the that? color that product Crexendo is

Doug Gaylor

for We Andrew, see to we that for a quite call. some have an got joining the quarter. in question, great did Organically, continue increase growth. -- us organically lot strong revenue thanks see we've Obviously, with product of Yes, and customers the time. for been

rate low organization. As our you know, churn a very we've had within

when for of to with refresh lot the agreement technology our where phones we up to so term they term. their offering And existing move newer we're come call do customers, we a a longer of a forward what

technology one-time out And so that we've customers going for means those when up a some renewal. refresh got the that lot of door sales equipment come

combined for a equipment did So And Ron bumped sales upfront I'll that costs, the that, equipment that more increase add we that color. with quarter just some little any have a significant larger bit. up had

Ron Vincent

XX% Yes. growth I'll services Andrew, add, that have for we in our quarter. did the revenue

And so XX% been between back we've forth XX%. bouncing and and

was still And solid last so we but would XX% like is like performance. quarter, XX% to be it a in

Andrew King

chain And -- one or And are just Got any pressure then, you given it. that got Great. Ron, not mitigated so, about issues how I supply an you seeing quick for that? own question guys supply from can you you? really on if talk your you hardware, is that issue

Ron Vincent

not we've sure of had. there. issues on only have advance enough had than for That's products and demand. been water to couple we're we're much a -- really make out the other to We really the in hand challenges order we going And on seeing that the weeks getting the dock. Yes, delay of in haven't phones

Andrew King

and questions my on take you congrats quarter. appreciate I Great. a good

Ron Vincent

you. Thank

Doug Gaylor

Thanks, Andrew.

Operator

you. Thank

question from from Josh next Securities. coming B. Nichols Riley is Your

live. is line Your

Aman Gulani

jumping is Congratulations Steve in actually I be here. really guess here. Aman for a Doug good question probably for Josh. guys. on will first or quarter Hi, my This

that like the I here. takes the would think you Any to marketing clearly largely talked to acquisition? growth of while Was OpEx, some color puts on keeping able on the about synergies check due and sales accelerate we're in and from that and help.

Doug Gaylor

good you our question, Yes. look in that as from at allowed to realize Aman, between the When expenses able that Great us organizations, you and synergies hearing to the two control. we're well. keep

we're us following that from looking is quite management cost know time, some you for constantly As at. something

use for look overlaps the the when we the together, subscription working opportunities two are functionality. of and teams synergies services, organizations lots like When And management the in opportunities of synergies. well. both overlaps extremely for putting at at look we growth, And so costs and AWS we

consolidate. been a lot able so things we've the lot And can out to we've of we that a there, consolidate, had costs those of network

to more to continue we go there As better negotiate leverage agreements. and we've out grow, got

operating that helps And so our really expenses.

we to see continue happening. so And that

increase was look a XX%, the service And so on again, previous side, X% our if at that from you margins our quarter.

to we're margins. again, we those the making cost just and So sure grow continue can that managing

Steve Mihaylo

add. continue on new salesmen the the in of East other growth. two to that. here a direct people to of have And NetSapiens, our side, salesmen one the we've Aman, one lot we increase Jon side as to reasons thing Coast two Organically, from Brinton as we there's channel is organic I'd And hired we'll and like and added new sales the well grow new

our very, we're organic So interested growth. in very

Aman Gulani

question gross good that from then segments for were robust helpful. And we yes, solutions the next there. about XX%, like going a cadence that's segue sort two of Services software over -- very should those gross Got it. sort my That's forward? expect margin. XX%, margins of Is

Ron Vincent

through We're margins, quarter. this it software gross quarter, solutions. the Last XX% still working was XX% up to

the we're looking as the in that. So forecasting we're business, trends at

And at that's but time, going is to forward, the going in to this number going -- that say we somewhere consistent. can't be have don't so range be

Aman Gulani

helpful. talk VIP Crexendo How's been the reception of That's for -- you then that far? been so about can launch the And platform? platform

Doug Gaylor

crackling that getting Great. we're you would highlight just Aman, when your a I little on phone. talk,

all out be would look interruption all and RingCentral, afterwards of platform the meeting our a competitors outages; we the associated we'll guarantee, call you VIP the VIP uptime Nextiva, set extremely, a sales platform with extremely well. that XXX% has the so of service had the can received up quarter solution B. lot When at during there, XxX, opportunities had. previous Bandwidth.com a outages had kidding that for you been aside, Riley, opportunity. perfect But the for So

Geo-redundant And uptime redundant offer at VIP our because unique platform. on resilient we our guarantee in look and our for lifetime have that we we're that confident we a very Plus out our XXX% some setup Crexendo opportunities have and So phones. all warranty setup of there. we the

extremely I'll just Brinton, the color guy since our that add and CRO well So VIP Jon a have getting program out extremely, it. he has rollout been bit in was about the more excited rolling received. everybody little main

Jon Brinton

Hi.

real Crexendo we've Conference, what do that NetSapiens can I was an was as of you joint with differentiator a our migrating with to question, channel growth well. week great I employees product for the done tell are Channel understanding we moving in So team drove team, Crexendo what part VIP the earlier playing that saw employees, -- with tell last Partners platform, -- and that we it to the would our so you, would kind and customers with there our of at that And on a was have part interactions phone. off It’s video VIP embracing product what of sales the sales platform. and

had channel channel partners market of with And we'll to technology customers. driving we've continue independent drive community the platform came the that America theme great So and merger being acceptance in NetSapiens. largest us with to great a and the just through

Steve Mihaylo

And the and video that means all that's I'd like thing, we which access do and one to users VIP collaboration. that video, add, have Aman, to other end

Aman Gulani

channel? helpful. think the That's will growth maybe reseller talk in your channel Last experiencing question you versus for for your me, about be I direct Can likely it you're Jon.

Jon Brinton

Yes.

there sales two. granularity So transactions and those that But we are some customers don't more give are in our transactional. just area, great between direct

performance as group had direct off do sales good And we've team. the from so And well. cover we that with those

if those is channel-oriented months you've And done seen over we've announcements some that. last and partnerships. to few to mix the expand Our continue is be primarily

from performance. generally to model. direct it and And we're in mix for channel while we're within So targets our our might working month-to-month, fluctuate a

Aman Gulani

Thank it you. pass I'll on.

Doug Gaylor

Thanks, Aman. appreciate it. I

Operator

Instructions]. [Operator

is question Investments. MK Kaufman coming from from next Your Michael

Your line is live.

Michael Kaufman

growth a Doug. air incredible financial It's really fresh company. breath of and discipline and to in technology see Steve a Hi,

going pulling introducing off. a to So that expectations? long-term asked I of have I the but interested gross top? ratio these team little applaud for we the on is way to we very bit, solution margin future a revenue more seen, were I whole other now, are kept expense I'm now how it guess And some helpful. insight and calls, So thing revenue, would the get that grow I've questions doing the this the know much you is that what's the is, of kind in best introducing And in if financial there's some you company community? so can community that the but what have on don't the growth of to -- be this way that secret the

Doug Gaylor

Yes.

margins Let first of solution. the me part to on we in have the answer the where software Ron related see question growth the at

So the down we do into break different now. departments that

So the and UCaaS see you'll division division, solutions you'll product. software then the see

what then with getting And margins expand So you'll expect up out see to what wrap and Ron we see investor I'll us word community. there can from the it on our back there. with the

Ron Vincent

forward. to Michael, duly like information noted that you'd that see going

come tracking it we'll that changes software the the normalizes. one-time revenue business be the items solutions understand think the items from And the revenue I as from reoccurring and we that and segment.

we'll report and So some closely to able normalized. as not the we'll you to be normalcy to margin that watch is hope

Michael Kaufman

you. Thank

Doug Gaylor

there. investment Yes. XX to conferences. continue had to month out were do days requested We perspective, And a we presenting companies. have LD Micro-Cap the XXX Conference in out Los last were meetings actually from investors We most Angeles. the of two company over We with. did meet an We in investment

lined doing investor months. roadshows non-deal some over we're got virtual of conferences. So next up We've couple the

you, getting our agree out Michael. with we're I word So there.

we the I are the best think kept technology play. secret that in

that speak there out And these get on the message think excited investment the themselves for for I community. we're what us. to ahead earnings to opportunity is

Michael Kaufman

in? that Is least on do conferences, have have company that's most some investors do way these track busy for of a to because they're to there site and keep of interested anything you can Web at a companies your

Doug Gaylor

have posting doing that. we do haven't out usually page. event But that. we conference. release anytime a been put do We Yes, press we're We an can do a

well. sure that our Web site that about But getting we're diligent as we out do I'll press make So releases. onto put

or press have there going be out conferences to out you releases that doing Alerts see any when on Google any there. roadshows of got you've the if Crexendo, we're So we should

Michael Kaufman

very helpful, one would be in spot. because would all it be That

Doug Gaylor

Absolutely.

Michael Kaufman

go it, at somebody and your revise looking while Yahoo! And should in page.

people I showing XX in total company. still the You're think

Doug Gaylor

Okay, that. do will we

they think of I filings. pull out their our information

I the so pull God will takes know filings. we sometimes. off to anything, that our change act past the envelope. to and in get an typically push sometimes -- when But But of tried Yahoo! we And it they of try

is so off headcount pulled And our probably imagine. I XX-K the would

So sitting we'll interim. if in employees as But see XXX they we that we're can update about at the speak. total

Michael Kaufman

Thanks, good I think doing great a job. again, you're and luck. And

Doug Gaylor

Michael. Greatly appreciate Thanks, it.

Operator

you. Thank

Your [ph]. coming next from question Arham is Khan from Partners Arham Khan and

line Your live. is

Unidentified Analyst

everything Good afternoon, guys. Hope is good.

Just well. a I've very on really but got the I’ve quick pretty -- been question [indiscernible]

Just cash position to. Centric kinds about the acquisitions. smaller There that some alongside or generate, five with position in. can you four people certainly look question alongside of Obviously, with can a But acquisition capital we have you do? get came at of still different three, with about was on the ones, and small forward the these busy you breakeven I really quick the that that's cash else the flow regarding potential. anything and and look you deploying bringing in you're you cash recently can mergers something and cash do Centric a bolted you Telecoms Can that have larger you small Telecom that to going acquisitions? your sustain think NetSapiens are

Doug Gaylor

comments, his few the from acquisition. since hearing good and the the knocked there, NetSapiens quite that door Arham, absolutely, When a as well. has Absolutely. times been as opportunities mentioned you on you in at are look Yes, Steve out

scope. smaller scope, are larger some these of some these in so And in of are

cash So a given. those cash did be anticipate that absolutely, Centric Telecom. hand. could managed And again, size find positive, If now the we we flow post those was with easily merger deal opportunities, should we that cash be is flow on

opportunities And cash, so without do the acquisitions make larger acquisitions, as of having appealing to X.X small balance and when sheet obviously, lots And we've to go it additional find million to the in be going us and off got pull they those And well. any table happen is capital out those of as to raise. with with come then to kind where are can we very there well.

Ron Vincent

that, just of now fourth synergies. the add on laser quarter, focused I'll through to integration the right find we're NetSapiens

through our to the acquisition and current hand our want focus at have that operations. we of we so that company end integrated And year with getting the on

Steve Mihaylo

but last but to exceed underestimate forward-looking to do, we we're not a we promise. over can what we're And not least, make we do going always that what probably going think can and

to a good and Our looked at productivity. at at ratios. everything. look We idea job we is just expense do We We look at look everything.

Unidentified Analyst

it. Got

good it. Okay. position at I returned Perfect. soon. then I and how I'll of look you've the Yes, late talk you're in, you good feel as capital I at And my look very about taking Thank for question. Really to results. guys you

Doug Gaylor

I Arham. Thanks, it. appreciate

Operator

remarks. questions further back ahead. Please the Thank are no you. now There I queue. in will for closing hand the conference to go Mihaylo Steve

Steve Mihaylo

we our Holidays Thank of last you presenting And of early wish Veterans I all the again least, but Day, to all you. very a good December, once to celebrate of that, in and probably March. holidays you And those day. fourth you want quarter the thank for not I of look Happy want veterans. that forward with Happy all in to Thanksgiving. Well, and to good year-end And

Doug Gaylor

you, everybody. Thank

Operator

Thank today's you, ladies and event. concludes gentlemen. This

You may participation. disconnect at this time, for your a have wonderful Thank you and day.

Crexendo (CXDO) 14 Nov 212021 Q3 Earnings call transcript