EX-99.1 2 cxdo_ex991.htm PRESS RELEASE Blueprint
Exhibit 99.1
 
 
 
Crexendo Reports Financial Results for the Fourth Quarter and Year Ended December 31, 2018
  
PHOENIX, AZ—(Marketwired – March 5, 2019)
 
Crexendo, Inc. (OTCQX: CXDO), a next-generation CLEC and an award-winning leader and provider of UCaaS, Unified Communications as a Service, broadband internet services, and other cloud business services that are designed to provide enterprise-class cloud services to any size business at affordable monthly rates, today reported financial results for its fourth quarter and full year ended December 31, 2018.
  
Financial highlights for the fourth quarter of 2018
 
Consolidated total revenue for the fourth quarter of 2018 increased 10% to $3.1 million compared to $2.8 million for the fourth quarter of 2017.
  
Consolidated service revenue for the fourth quarter of 2018 increased 14% to $2.8 million compared to $2.4 million for the fourth quarter of 2017.
 
●
Cloud Telecommunications Segment UCaaS service revenue for the fourth quarter of 2018 increased 18% to $2.6 million compared to $2.2 million for the fourth quarter of 2017.
  
●
Web Services Segment service revenue for the fourth quarter of 2018 decreased 21% to $189,000, compared to $240,000 for the fourth quarter of 2017.
 
Consolidated product revenue for the fourth quarter of 2018 decreased 13% to $330,000 compared to $380,000 for the fourth quarter of 2017.
  
Consolidated operating expenses for the fourth quarter of 2018 increased 11% to $3.1 million compared to $2.8 million for the fourth quarter of 2017.
 
On a GAAP basis, the Company reported a $(8,000) net loss for the fourth quarter of 2018, or breakeven per diluted common share, compared to net income of $32,000 or breakeven per diluted common share for the fourth quarter of 2017.
  
Non-GAAP net income was $104,000 for the fourth quarter of 2018, or $0.01 per diluted common share, compared to $150,000 or $0.01 per diluted common share for the fourth quarter of 2017.
 
EBITDA for the fourth quarter of 2018 was $26,000 compared to $46,000 for the fourth quarter of 2017. Adjusted EBITDA for the fourth quarter of 2018 was $120,000 compared to $138,000 for the fourth quarter of 2017. 
 
 
1
 
 
Financial highlights for the year ended December, 2018
 
Consolidated total revenue for the year ended December 31, 2018 increased 17% to $11.9 million compared to $10.2 million for the year ended December 31, 2017.
 
Consolidated service revenue for the year ended December 31, 2018 increased 18% to $10.5 million compared to $8.8 million for the year ended December 31, 2017.
 
●
Cloud Telecommunications Segment UCaaS service revenue for the year ended December 31, 2018 increased 24% to $9.6 million compared to $7.8 million for the year ended December 31, 2017.
●
Web Services Segment service revenue for the year ended December 31, 2018 decreased 21% to $825,000, compared to $1.0 million for the year ended December 31, 2017.
 
Consolidated product revenue for the year ended December 31, 2018 increased 7% to $1.4 million compared to $1.3 million for the year ended December 31, 2017.
 
Consolidated operating expenses for the year ended December 31, 2018 increased 11% to $12.1 million compared to $10.9 million for the year ended December 31, 2017.
 
On a GAAP basis, the Company reported a $(223,000) net loss for the year ended December 31, 2018, or $(0.02) loss per diluted common share, compared to net loss of $(929,000) or $(0.07) loss per diluted common share for the year ended December 31, 2017.
 
Non-GAAP net income was $287,000 for the year ended December 31, 2018, or $0.02 per diluted common share, compared to a non-GAAP net loss of $(21,000) or breakeven per diluted common share for the year ended December 31, 2017.
 
EBITDA for the year ended December 31, 2018 was $(114,000) compared to $(628,000) for the year ended December 31, 2017. Adjusted EBITDA for the year ended December 31, 2018 was $324,000 compared to $(17,000) for the year ended December 31, 2017.
 
Total cash, cash equivalents, and restricted cash at December 31, 2018 was $1.9 million compared to $1.4 million at December 31, 2017.
 
Operating activities provided $452,000 cash for the year ending December 31, 2018 compared to $294,000 cash provided for the year ended December 31, 2017. We used $(7,000) cash for investing activities for the year ending December 31, 2018 compared to $252,000 cash provided by investing activities for the year ended December 31, 2017. Financing activities provided $122,000 cash for the year ending December 31, 2018 compared to $117,000 cash provided for the year ended December 31, 2017.
 
Steven G. Mihaylo, Chief Executive Officer, commented “2018 was a watershed year in our growth. We continued to drive excellence into the business and our results are showing the work, progress and processes we have undertaken. The results for 2018 were promising. I am particularly impressed with the growth in the Cloud Telecommunications Segment service revenue for the year ended December 31, 2018 which increased 24% compared to the year ended December 31, 2017. UCaaS service revenue is our “bread and butter” and the most important metric that should be used to measure our growth. I believe we can continue to show substantial year over year growth in the coming years. We had many other accomplishments, we reduced our year over year GAAP loss by over 70% in 2018 compared with 2017. On a Non-GAAP basis, the results were even more impressive as we achieved $0.02 earning per diluted common share for 2018. We increased our total cash, cash equivalents, and restricted cash by $567,000 in 2018.”
 
 
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Mihaylo added, “Our cash, current ratio and shareholder equity all showed nice improvements in 2018. We continue to manage the business in every respect. Even with the substantial increases in revenue, we managed to only increase expenses by 11% for the year ended December 31, 2018. We made some necessary investments in infrastructure, in technology and people. Every penny we spend is carefully reviewed and is only used to make certain that Crexendo is providing the top products, services and support in the industry. I am honored to work with such a committed group of men and women who show up every day with the mission to make Crexendo second to none in providing UCaaS services. Our world class Ride The Cloud ® UCaaS services will save our customers substantial amounts of money, while increasing their productivity. As more and more companies move to the cloud, we know we are in the right space at the right time. Our team is constantly working to improve for our customers and shareholders. We work every day to increase shareholder value and I am very excited about the future.”
 
Doug Gaylor, President and COO, stated, "These results are very encouraging, but we know it is only the beginning. Our sales team, and our sales partners work hard every day to get in front of customers and show them the benefits of our services. I work with our teams every day to improve our products, services and keep our costs in line. I share Steve’s enthusiasm and excitement for our future. “
 
Conference Call
 
The Company is hosting a conference call today, March 5, 2019 at 5:30 PM EST. The dial-in number for domestic participants is 866-682-6100 and 862-298-0702 for international participants. Please dial in five to ten minutes prior to the beginning of the call at 5:30 PM EST and reference Crexendo. A replay of the call will be available until March 12, 2019 by dialing toll-free at 877-481-4010 or 919-882-2331 for international callers. The replay passcode is 43429.
 
About Crexendo
 
Crexendo, Inc. (CXDO) is a next-generation CLEC and an award-winning leader and provider of UCaaS, Unified Communications as a Service, broadband internet services, and other cloud business services that are designed to provide enterprise-class cloud services to any size business at affordable monthly rates.

Safe Harbor Statement
 
This press release contains forward-looking statements. The Private Securities Litigation Reform Act of 1995 provides a "safe harbor" for such forward-looking statements. The words "believe," "expect," "anticipate," "estimate," "will" and other similar statements of expectation identify forward-looking statements. Specific forward-looking statements in this press release include information about Crexendo (i) having 2018 as a watershed year in its growth; (ii) continuing to drive excellence into the business with its results showing the work, progress and processes undertaken; (iii) results for 2018 being promising and being particularly impressed with the growth in the Cloud Telecommunications Segment service revenue; (iv) UCaaS service revenue being “bread and butter” and the most important metric that should be used to measure growth; (v) believing it can continue to show substantial year over year growth in the coming years: (vi) having many other accomplishments; (vii) cash, current ratio and shareholder equity showing nice improvements in 2018; (viii) continuing to manage the business in every respect; (ix) making some necessary investments in infrastructure, in technology and people; (x) carefully reviewing every penny spent with investments only being used to make certain that it is providing the top products, services and support in the industry; (xi) employees showing up every day with the mission to make it second to none in providing UCaaS services; (xii) world class Ride The Cloud ® UCaaS services saving its customers substantial amounts of money, while increasing their productivity; (xii) being in the right space at the right time; (xiii) team constantly working to improve for its customers and shareholders; (xiv) working every day to increase shareholder value; (xv) being very excited about the future; (xvi) results being very encouraging, but it being only the beginning; (xvii) sales team and its sales partners working hard every day to get in front of customers and show them the benefits of its services; (xvii) management working with teams every day to improve products, services and keep costs in line and (xviii) management sharing enthusiasm and excitement for the future.

For a more detailed discussion of risk factors that may affect Crexendo’s operations and results, please refer to the company's Form 10-K for the year ended December 31, 2018 when filed subsequent to this press release; and Form 10-K for the year ended December 31, 2017, as well as Form 10-Qs filed with the SEC during 2018. These forward-looking statements speak only as of the date on which such statements are made and the company undertakes no obligation to update such forward-looking statements, except as required by law.
 
Crexendo, Inc.
Steven G. Mihaylo
CEO
602-345-7777
Smihaylo@crexendo.com
 
 
3
 
 
CREXENDO, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(In thousands, except par value and share data)
 
 
 
2018
 
 
2017
 
Assets
 
 
 
 
 
 
Current assets:
 
 
 
 
 
 
Cash and cash equivalents
 $1,849 
 $1,282 
Restricted cash
  100 
  100 
Trade receivables, net of allowance for doubtful accounts of $14
    
    
as of December 31, 2018 and $19 as of December 31, 2017
  419 
  372 
Contract assets
  12 
  3 
Inventories
  270 
  131 
Equipment financing receivables
  67 
  116 
Contract costs
  371 
  379 
Prepaid expenses
  244 
  251 
Income tax receivable
  1 
  - 
Other current assets
  - 
  10 
Total current assets
  3,333 
  2,644 
 
    
    
Long-term trade receivables, net of allowance for doubtful accounts
    
    
of $0 as December 31, 2018 and $10 as of December 31, 2017
  10 
  31 
Long-term equipment financing receivables, net
  184 
  58 
Property and equipment, net
  124 
  8 
Intangible assets, net
  167 
  239 
Goodwill
  272 
  272 
Contract costs, net of current portion
  342 
  364 
Other long-term assets
  117 
  121 
Total Assets
 $4,549 
 $3,737 
 
    
    
Liabilities and Stockholders' Equity
    
    
Current liabilities:
    
    
Accounts payable
 $155 
 $79 
Accrued expenses
  1,131 
  961 
Capital lease obligations
  28 
  - 
Notes payable
  56 
  69 
Contract liabilities
  641 
  614 
Total current liabilities
  2,011 
  1,723 
 
    
    
Contract liabilities, net of current portion
  422 
  374 
Capital lease obligations, net of current portion
  116 
  - 
Notes payable, net of current portion
  - 
  10 
Total liabilities
  2,549 
  2,107 
 
    
    
Stockholders' equity:
    
    
Preferred stock, par value $0.001 per share - authorized 5,000,000 shares; none issued
  — 
  — 
Common stock, par value $0.001 per share - authorized 25,000,000 shares, 14,394,113
    
    
shares issued and outstanding as of December 31, 2018 and 14,287,556 shares issued
    
    
and outstanding as of December 31, 2017
  14 
  14 
Additional paid-in capital
  61,153 
  60,560 
Accumulated deficit
  ( 59,167)
  ( 58,944)
Total stockholders' equity
  2,000 
  1,630 
 
    
    
Total Liabilities and Stockholders' Equity
 $4,549 
 $3,737 
 
 
4
 
 
CREXENDO, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
(In thousands, except per share and share data)
 
 
 
Three Months Ended December 31,
 
 
Year Ended December 31,
 
 
 
2018
 
 
2017
 
 
2018
 
 
2017
 
Service revenue
 $2,767 
 $2,433 
 $10,461 
 $8,840 
Product revenue
  330 
  380 
  1,447 
  1,347 
Total revenue
  3,097 
  2,813 
  11,908 
  10,187 
Operating expenses:
    
    
    
    
Cost of service revenue
  799 
  755 
  3,092 
  2,717 
Cost of product revenue
  178 
  166 
  727 
  549 
Selling and marketing
  897 
  752 
  3,403 
  2,833 
General and administrative
  1,011 
  938 
  4,091 
  4,072 
Research and development
  212 
  181 
  801 
  750 
Total operating expenses
  3,097 
  2,792 
  12,114 
  10,921 
 
    
    
    
    
Income/(loss) from operations
  0 
  21 
  ( 206)
  ( 734)
 
    
    
    
    
Other income/(expense):
    
    
    
    
Interest income
  2 
  2 
  7 
  10 
Interest expense
  (4)
  (4)
  ( 12)
  (209)
Other income/(expense), net
  ( 6)
  4 
  3 
  11 
Total other income/(expense), net
  ( 8)
  2 
  ( 2)
  ( 188)
 
    
    
    
    
Income/(loss) before income tax
  ( 8)
  23 
  ( 208)
  ( 922)
 
    
    
    
    
Income tax benefit/(provision)
  0 
  9 
  ( 15)
  ( 7)
 
    
    
    
    
Net income/(loss)
 $(8)
 $32 
 $(223)
 $(929)
 
    
    
    
    
Net income/(loss) per common share:
    
    
    
    
Basic
 $(0.00)
 $0.00 
 $(0.02)
 $(0.07)
Diluted
 $(0.00)
 $0.00 
 $(0.02)
 $(0.07)
 
    
    
    
    
Weighted-average common shares outstanding:
    
    
    
    
Basic
  14,394,113 
  14,276,729 
  14,332,092 
  13,938,342 
Diluted
  14,394,113 
  14,732,765 
  14,332,092 
  13,938,342 
 
 
5
 
 
CREXENDO, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(In thousands) 
 
 
 
Year Ended December 31,
 
 
 
2018
 
 
2017
 
CASH FLOWS FROM OPERATING ACTIVITIES
 
 
 
 
 
 
Net loss
 $(223)
 $(929)
Adjustments to reconcile net loss to net cash provided by operating activities:
    
    
Amortization of prepaid rent
  - 
  54 
Depreciation and amortization
  92 
  106 
Non-cash interest expense
  - 
  201 
Share-based compensation
  438 
  573 
Amortization of deferred gain
  - 
  (16)
Changes in assets and liabilities:
    
    
Trade receivables
  (26)
  (16)
Contract assets
  (9)
  (1)
Equipment financing receivables
  (77)
  123 
Inventories
  (139)
  39 
Contract costs
  30 
  (40)
Prepaid expenses
  32 
  129 
Income tax receivable
  (1)
  - 
Other assets
  14 
  13 
Accounts payable and accrued expenses
  246 
  (73)
Income tax payable
  - 
  (5)
Contract liabilities
  75 
  136 
Net cash provided by operating activities
  452 
  294 
 
    
    
CASH FLOWS FROM INVESTING ACTIVITIES
    
    
Sale of certificate of deposit
  - 
  252 
Purchase of property and equipment
  (7)
  - 
Net cash provided by/(used for) investing activities
  ( 7)
  252 
 
    
    
CASH FLOWS FROM FINANCING ACTIVITIES
    
    
Repayments made on capital lease
  ( 10)
  - 
Proceeds from notes payable
  130 
  111 
Repayments made on notes payable
  (153)
  (1,156)
Proceeds from exercise of options
  155 
  1,162 
Net cash provided by financing activities
  122 
  117 
 
    
    
NET INCREASE IN CASH, CASH EQUIVALENTS, AND RESTRICTED CASH
  567 
  663 
 
    
    
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH AT THE BEGINNING OF THE YEAR
  1,382 
  719 
 
    
    
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH AT THE END OF THE YEAR
 $1,949 
 $1,382 
 
    
    
Supplemental disclosure of cash flow information:
    
    
Cash used during the year for:
    
    
Income taxes, net
 $(16)
 $(12)
Interest expense
 $(12)
 $(8)
Supplemental disclosure of non-cash investing and financing information:
    
    
Issuance of common stock for payment of interest on related-party note payable
 $- 
 $109 
Prepaid assets financed through notes payable
 $97 
 $111 
Prepaid assets financed through capital lease obligations
 $25 
 $- 
Property and equipment financed through capital lease obligations
 $129 
 $- 
 
 
6
 
 
CREXENDO, INC. AND SUBSIDIARIES
Supplemental Segment Financial Data
(In thousands)
 
 
 
Three Months Ended December 31,
 
 
Year Ended December 31,
 
 
 
2018
 
 
2017
 
 
2018
 
 
2017
 
 
 
 
 
 
As Adjusted
 
 
 
 
 
As Adjusted
 
Revenue:
 
 
 
 
 
 
 
 
 
 
 
 
Cloud telecommunications services
 $2,908 
 $2,573 
 $11,083 
 $9,141 
Web services
  189 
  240 
  825 
  1,046 
Consolidated revenue
  3,097 
  2,813 
  11,908 
  10,187 
 
    
    
    
    
Income/(loss) from operations:
    
    
    
    
Cloud telecommunications services
  (85)
  (107)
  (613)
  (1,239)
Web services
  85 
  128 
  407 
  505 
Total operating income/(loss)
  - 
  21 
  (206)
  (734)
Other income/(expense), net:
    
    
    
    
Cloud telecommunications services
  (2)
  1 
  5 
  (183)
Web services
  (6)
  1 
  (7)
  (5)
Total other income/(expense), net
  (8)
  2 
  (2)
  (188)
Income/(loss) before income tax provision
    
    
    
    
Cloud telecommunications services
  (87)
  (106)
  (608)
  (1,422)
Web services
  79 
  129 
  400 
  500 
Income/(loss) before income tax provision
 $(8)
 $23 
 $(208)
 $(922)
 
 
7
 
 
Use of Non-GAAP Financial Measures
 
To evaluate our business, we consider and use non-generally accepted accounting principles (Non-GAAP) net income (loss) and Adjusted EBITDA as a supplemental measure of operating performance. These measures include the same adjustments that management takes into account when it reviews and assesses operating performance on a period-to-period basis. We consider Non-GAAP net income (loss) to be an important indicator of overall business performance because it allows us to evaluate results without the effects of share-based compensation, rent expense paid with common stock, interest expense paid with common stock, and amortization of intangibles. We define EBITDA as U.S. GAAP net income (loss) before interest income, interest expense, other income and expense, provision for income taxes, and depreciation and amortization. We believe EBITDA provides a useful metric to investors to compare us with other companies within our industry and across industries. We define Adjusted EBITDA as EBITDA adjusted for share-based compensation, and rent expense paid with stock. We use Adjusted EBITDA as a supplemental measure to review and assess operating performance. We also believe use of Adjusted EBITDA facilitates investors’ use of operating performance comparisons from period to period, as well as across companies.
 
In our March 5, 2019 earnings press release, as furnished on Form 8-K, we included Non-GAAP net loss, EBITDA and Adjusted EBITDA. The terms Non-GAAP net loss, EBITDA, and Adjusted EBITDA are not defined under U.S. GAAP, and are not measures of operating income, operating performance or liquidity presented in analytical tools, and when assessing our operating performance, Non-GAAP net loss, EBITDA, and Adjusted EBITDA should not be considered in isolation, or as a substitute for net loss or other consolidated income statement data prepared in accordance with U.S. GAAP. Some of these limitations include, but are not limited to:
 
●
EBITDA and Adjusted EBITDA do not reflect our cash expenditures or future requirements for capital expenditures or contractual commitments;
●
they do not reflect changes in, or cash requirements for, our working capital needs;
●
they do not reflect the interest expense, or the cash requirements necessary to service interest or principal payments, on our debt that we may incur;
●
they do not reflect income taxes or the cash requirements for any tax payments;
●
although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will be replaced sometime in the future, and EBITDA and Adjusted EBITDA do not reflect any cash requirements for such replacements;
●
while share-based compensation is a component of operating expense, the impact on our financial statements compared to other companies can vary significantly due to such factors as the assumed life of the options and the assumed volatility of our common stock; and
●
other companies may calculate EBITDA and Adjusted EBITDA differently than we do, limiting their usefulness as comparative measures.
We compensate for these limitations by relying primarily on our U.S. GAAP results and using Non-GAAP net income (loss), EBITDA, and Adjusted EBITDA only as supplemental support for management’s analysis of business performance. Non-GAAP net income (loss), EBITDA and Adjusted EBITDA are calculated as follows for the periods presented.
 
 
8
 
 
Reconciliation of Non-GAAP Financial Measures
 
In accordance with the requirements of Regulation G issued by the SEC, we are presenting the most directly comparable U.S. GAAP financial measures and reconciling the unaudited Non-GAAP financial metrics to the comparable U.S. GAAP measures.
Reconciliation of U.S. GAAP Net Income/(Loss) to Non-GAAP Net Income/(Loss)
(Unaudited)
 
 
 
Three Months Ended December 31,
 
 
Year Ended December 31,
 
 
 
2018
 
 
2017
 
 
2018
 
 
2017
 
 
 
 
 
 
As Adjusted
 
 
 
 
 
As Adjusted
 
 
 
(In thousands)
 
 
(In thousands)
 
U.S. GAAP net income/(loss)
 $(8)
 $32 
 $(223)
 $(929)
Share-based compensation
  94 
  92 
  438 
  573 
Amortization of rent expense paid in stock, net of deferred gain
  - 
  - 
  - 
  38 
Amortization of intangible assets
  18 
  23 
  72 
  96 
Non-cash interest expense
  - 
  3 
  - 
  201 
Non-GAAP net income/(loss)
 $104 
 $150 
 $287 
 $(21)
 
    
    
    
    
Non-GAAP net income/(loss) per common share:
    
    
    
    
Basic
 $0.01 
 $0.01 
 $0.02 
 $(0.00)
Diluted
 $0.01 
 $0.01 
 $0.02 
 $(0.00)
 
    
    
    
    
Weighted-average common shares outstanding:
    
    
    
    
Basic
  14,394,113 
  14,276,729 
  14,332,092 
  13,938,342 
Diluted
  14,902,330 
  14,732,765 
  15,095,262 
  13,938,342 
 
 
 Reconciliation of U.S. GAAP Net Income/(Loss) to EBITDA to Adjusted EBITDA
(Unaudited)
 
 
 
Three Months Ended December 31,
 
 
Year Ended December 31,
 
 
 
2018
 
 
2017
 
 
2018
 
 
2017
 
 
 
 
 
 
As Adjusted
 
 
 
 
 
As Adjusted
 
 
 
(In thousands)
 
 
(In thousands)
 
U.S. GAAP net income/(loss)
 $(8)
 $32 
 $(223)
 $(929)
Depreciation and amortization
  26 
  25 
  92 
  106 
Interest expense
  4 
  4 
  12 
  209 
Interest and other expense/(income)
  4 
  (6)
  (10)
  (21)
Income tax provision/(benefit)
  - 
  (9)
  15 
  7 
EBITDA
  26 
  46 
  (114)
  (628)
Share-based compensation
  94 
  92 
  438 
  573 
Amortization of rent expense paid in stock, net of deferred gain
  - 
  - 
  - 
  38 
Adjusted EBITDA
 $120 
 $138 
 $324 
 $(17)
 
 
9