Crexendo Announces Suspension of Dividend

Marketwired

PHOENIX, AZ--(Marketwire - Oct 24, 2012) - Crexendo, Inc. (NYSE MKT: EXE), a hosted services company that provides e-commerce software, website development, web hosting, search engine optimization, link building, hosted telecommunication services and broadband internet for businesses and entrepreneurs, today reported suspension of its quarterly dividend program.

Steven G. Mihaylo, Chief Executive Officer, commented, "With the company successfully redeploying assets to complete the transition to B2B operations which has essentially put the Company in the position of being a "start up," the board determined this was the time to invest all available cash directly in the business. It was concluded that it is the most prudent option to deploy our capital towards expanding and further developing our core assets. There are substantial investments that the Company is currently engaged in, including the establishment of our telecom and web services dealer programs, expanding the Crexendo University Program, improving sales leads, adding additional redundancy and upgrading our cloud infrastructure, as well as adding features to continue to make our telecom and web services the best in the industry. These investments together with the fact that our legacy receivables are declining as expected, and that the core Crexendo operations are not yet performing profitably, make it clear that it is in the best interest of our shareholders and Company to use all available resources to continuing to improve the business. We continue to cut costs, increase efficiencies and run the Company as if it were a startup; therefore the quarterly dividend is an option we can no longer afford. Management and the board of directors unanimously believe this will be a far more accretive use of capital at this time."

Mihaylo continued, "As a management team we are spending all of our time making the business more efficient and working towards reducing costs and improving the bottom line. As discussed earlier, I am very excited by our product progress, which is why it was time to start a dealer program. I continue to be impressed by the prospect of the University Program. The University Program has the dual advantage of training bright interested leaders of tomorrow on our web products and introducing them to the entire suite of Crexendo products and services while providing us with the immediate benefit of sticky business customers who can use our products now. We continue to improve our other products and services ensuring our technology is world class and continuing to improve on our intellectual property so we may provide our customers the best web and telecom services that are available. Considering the investments that we need to make in the Company and what I see as great opportunities with those investments, suspending the quarterly dividend is the right decision for our shareholders, our Company, our employees and our customers."

About Crexendo

Crexendo is a hosted services company that provides e-commerce software, website development, web hosting, search engine optimization, link building, hosted telecommunication services and broadband internet for businesses and entrepreneurs. Crexendo's services are designed to make enterprise-class hosting services available to small and medium-sized businesses at affordable monthly rates without having to make large capital investments.

Safe Harbor Statement

This press release contains forward-looking statements. The Private Securities Litigation Reform Act of 1995 provides a "safe harbor" for such forward-looking statements. The words "believe," "expect," "anticipate," "estimate," "will" and other similar statements of expectation identify forward-looking statements. Specific forward-looking statements in this press release include information about Crexendo (i) being in the position of being a "start up,"; (ii) determining this is the time to invest all available cash directly in the business; (iii) determining that the most prudent option is to deploy its capital towards expanding and further developing its core assets; (iv) being involved in substantial investments; (v) adding features to continue to make its telecom and web services the best in the industry; (vi) determining that it is in the best interest of its shareholders and the Company to use all available resources to continuing to improve the business; (vii) continuing to cut costs, increase efficiencies and run the Company as if it were a startup; (viii) determining that the quarterly dividend is an option it can no longer afford; (ix) management and board unanimously believing suspending the dividend will be a far more accretive use of capital; (x) management team spending all of its time making the business more efficient and working towards reducing costs and improving the bottom line; (xi) being excited by its product progress; (xii) University Program having the dual advantage of training bright interested leaders of tomorrow on its web products and introducing them to the entire suite of Company products and services as well as providing the immediate benefit of sticky business customers who can use products now; (xiii) continue to improve its other products and services ensuring its technology is world class and continuing to improve on our intellectual property; (xiv)providing its customers the best web and telecom services that are available; (xv) having very great opportunities and (xvi) determining that suspending the quarterly dividend is the right decision for its shareholders, Company, employees customers.

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 period ended December 31, 2011 and Forms 10Q for the periods ending March 31, 2012 and June 30, 2012. 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. AND SUBSIDIARIES  
Condensed Consolidated Balance Sheets  
(In thousands, except par value and share data)  
(unaudited)  
   
    June 30, 2012     December 31, 2011  
Assets            
             
Current Assets:            
  Cash and cash equivalents   $ 8,443     $ 8,658  
  Restricted cash     1,965       1,965  
  Trade receivables, net of allowance of doubtful accounts of $852 as of June 30, 2012 and $3,512 as of December 31, 2011  
 
 
 
 
7,735
 
 
 
 
 
 
 
9,420
 
 
 
  Inventories     204       232  
  Equipment financing receivables     9       -  
  Income taxes receivable     514       552  
  Prepaid expenses and other     762       725  
    Total Current Assets     19,632       21,552  
                 
Certificate of deposit     500       500  
Long-term trade receivables, net of allowance of doubtful accounts of $185 as of June 30, 2012 and $1,949 as of December 31, 2011    
1,625
     
6,097
 
Long term equipment financing receivables     16       -  
Property and equipment, net     3,718       4,055  
Deferred income tax assets, net     272       279  
Intangible assets     42       79  
Goodwill     265       265  
Other long-term assets     213       233  
    Total Assets   $ 26,283     $ 33,060  
                 
Liabilities and Stockholders' Equity                
                 
Current Liabilities:                
  Accounts payable   $ 463     $ 1,153  
  Accrued expenses and other     1,718       2,240  
  Dividend payable     -       211  
  Deferred income tax liability     272       279  
  Deferred revenue, current portion     7,774       9,288  
    Total Current Liabilities     10,227       13,171  
                 
Deferred revenue, net of current portion     1,637       6,123  
Other long-term liabilities     250       419  
    Total Liabilities     12,114       19,713  
                 
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 100,000,000 shares; 10,669,201 shares outstanding as of June 30, 2012 and 10,523,078 shares outstanding as of December 31, 2011    

11
     

11
 
  Additional paid-in capital     49,680       48,938  
  Accumulated deficit     (35,522 )     (35,602 )
    Total Stockholders' Equity     14,169       13,347  
                 
    Total Liabilities and Stockholders' Equity   $ 26,283     $ 33,060  
                 
   
   
   
CREXENDO, INC. AND SUBSIDIARIES  
Condensed Consolidated Statements of Operations  
(In thousands, except per share and share data)  
(unaudited)  
   
    Three Months Ended June 30,     Six Months Ended June 30,  
    2012     2011     2012     2011  
                         
Revenue   $ 4,914     $ 17,496     $ 10,169     $ 32,064  
Operating expenses:                                
  Cost of revenue     1,298       7,675       2,719       13,980  
  Selling and marketing     984       10,076       1,917       18,839  
  General and administrative     2,741       3,333       5,774       6,092  
  Research and development     505       871       1,099       1,743  
    Total operating expenses     5,528       21,955       11,509       40,654  
                                 
Loss from operations     (614 )     (4,459 )     (1,340 )     (8,590 )
                                 
Other income (expense):                                
  Interest income     524       1,316       1,266       2,469  
  Interest expense     -       (1 )     -       (2 )
  Other income (expense), net     (14 )     (39 )     14       (33 )
    Total other income, net     510       1,276       1,280       2,434  
                                 
Loss before income tax provision     (104 )     (3,183 )     (60 )     (6,156 )
                                 
Income tax benefit (provision)     (13 )     (6,162 )     140       (5,040 )
                                 
Net (loss) income   $ (117 )   $ (9,345 )   $ 80     $ (11,196 )
                                 
Net income (loss) per common share:                                
  Basic   $ (0.01 )   $ (0.88 )   $ 0.01     $ (1.05 )
  Diluted   $ (0.01 )   $ (0.88 )   $ 0.01     $ (1.05 )
                                 
Dividends per common share:   $ 0.00     $ 0.02     $ 0.02     $ 0.04  
                                 
Weighted average common shares outstanding:                                
  Basic     10,634,104       10,642,384       10,582,372       10,640,489  
  Diluted     10,634,104       10,642,384       10,614,888       10,640,489  
                                 
   
   
   
CREXENDO, INC. AND SUBSIDIARIES  
Condensed Consolidated Statement of Stockholders' Equity  
Six Months Ended June 30, 2012  
(In thousands, except share data)  
(unaudited)  
   
                           
    Common Stock                  
    Shares   Amount   Additional Paid-in Capital     Accumulated Deficit     Total Stockholders' Equity  
Balance, December 31, 2011   10,523,078   $ 11   $ 48,938     $ (35,602 )   $ 13,347  
  Expense for stock options granted to employees   -     -     455       -       455  
  Proceeds from the exercise of stock options   146,123     -     498       -       498  
  Dividends declared   -     -     (211 )     -       (211 )
  Net income   -     -     -       80       80  
Balance, June 30, 2012   10,669,201   $ 11   $ 49,680     $ (35,522 )   $ 14,169  
   
   
   
CREXENDO, INC. AND SUBSIDIARIES  
Condensed Consolidated Statements of Cash Flows  
(In thousands)  
(unaudited)  
   
    Six Months Ended June 30,  
    2012     2011  
             
CASH FLOWS FROM OPERATING ACTIVITIES            
Net income (loss)   $ 80     $ (11,196 )
Adjustments to reconcile net income to netcash provided by (used for) operating activities:                
  Depreciation and amortization     759       704  
  Impariment of inventory and intangible assets     -       1,075  
  Expense for stock options issued to employees     455       362  
Deferred income tax provision     -       5,973  
Change in uncertain tax positions     (167 )     -  
Changes in assets and liabilities:                
  Trade receivables     6,157       (3,223 )
  Equipment financing receivables     (25 )     -  
  Inventories     28       345  
  Income taxes receivable     38       570  
  Prepaid expenses and other     (37 )     411  
  Other long-term assets     20       (8 )
  Accounts payable, accrued expenses and other     (573 )     (1,624 )
  Deferred revenue     (6,000 )     4,773  
  Other long-term liabilities     4       (931 )
    Net cash provided by (used for) operating activities     739       (2,769 )
CASH FLOWS FROM INVESTING ACTIVITIES                
  Acquisition of property and equipment     (1,024 )     (348 )
  Investment in subsidiary     -       (56 )
    Net cash used for investing activities     (1,024 )     (404 )
CASH FLOWS FROM FINANCING ACTIVITIES                
  Proceeds from exercise of stock options     498       60  
  Repurchase of common stock     -       (89 )
  Payments made on contingent consideration     (6 )     -  
  Dividend payments     (422 )     (427 )
    Net cash provided by (used for) financing activities     70       (456 )
                 
NET DECREASE IN CASH AND CASH EQUIVALENTS     (215 )     (3,629 )
                 
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD     8,658       14,207  
CASH AND CASH EQUIVALENTS, END OF PERIOD   $ 8,443     $ 10,578  
                 
Supplemental disclosure of cash flow information:                
Cash paid (received) during the period:                
  Interest   $ -     $ 1  
  Income taxes     (11 )     (569 )
Supplemental disclosure of non-cash investing and financing information:                
  Dividends declared     -       213  
  Purchase of property and equipment included in accounts payable     16       395  
                 
                 
                 
Contact:


Crexendo, Inc.
Steven G. Mihaylo
CEO
775-530-3955
Stevemihaylo@crexendo.com

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