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Crexendo Reports Financial Results for the Fourth Quarter and Year Ended December 31, 2016

PHOENIX, AZ / ACCESSWIRE / March 7, 2017 / Crexendo, Inc. (CXDO), a CLEC cloud services company that provides award winning cloud telecommunications services, broadband internet services, and other cloud business services, today reported financial results for its fourth quarter and full year ended December 31, 2016.

Financial Highlights for the Fourth Quarter of 2016

Consolidated revenue for the fourth quarter of 2016 increased 11% to $2.3 million, compared to $2.1 million for the fourth quarter of 2015.

Cloud Telecommunications Services Segment revenue for the fourth quarter of 2016 increased 20% to $2.0 million, compared to $1.7 million for the fourth quarter of 2015.

Web Services Segment revenue for the fourth quarter of 2016 decreased 27% to $299,000, compared to $407,000 for the fourth quarter of 2015.

Consolidated operating expenses for the fourth quarter of 2016 decreased 17% to $2.9 million, compared to $3.4 million for the fourth quarter of 2015.

On a GAAP basis, the Company reported a $(525,000) net loss for the fourth quarter of 2016, or $(0.04) loss per diluted common share, compared to net loss of $(1.3) million, or $(0.10) loss per diluted common share, for the fourth quarter of 2015.

Non-GAAP net loss was $(256,000) for the fourth quarter of 2016, or $(0.02) loss per diluted common share, compared to a non-GAAP net loss of $(645,000), or $(0.05) loss per diluted common share, for the fourth quarter of 2015.

EBITDA loss for the fourth quarter of 2016 was $(473,000), compared to loss of $(1.3) million for the fourth quarter of 2015. Adjusted EBITDA loss for the fourth quarter of 2016 was $(266,000), compared to loss of $(694,000) for the fourth quarter of 2015.

Financial Highlights for the Year Ended December, 2016

Consolidated revenue for year ended December 31, 2016 increased 17% to $9.1 million, compared to $7.8 million for the year ended December 31, 2015.

Cloud Telecommunications Services Segment revenue for the year ended December 31, 2016 increased 30% to $7.8 million, compared to $6.0 million for the year ended December 31, 2015.

Web Services Segment revenue for the year ended December 31, 2016 decreased 26% to $1.4 million, compared to $1.8 million for the year ended December 31, 2015.

Consolidated operating expenses for the year ended December 31, 2016 decreased 6% to $11.9 million, compared to $12.7 million for the year ended December 31, 2015.

On a GAAP basis, the Company reported a $(2.8) million net loss for the year ended December 31, 2016, or $(0.21) loss per diluted common share, compared to net loss of $(4.6) million, or $(0.35) loss per diluted common share, for the year ended December 31, 2015.

Non-GAAP net loss was $(1.7) million for the year ended December 31, 2016, or $(0.13) loss per diluted common share, compared to a non-GAAP net loss of $(2.8) million, or $(0.22) loss per diluted common share, for the year ended December 31, 2015.

EBITDA loss for the year ended December 31, 2016 was $(2.6) million, compared to loss of $(4.6) million for the year ended December 31, 2015. Adjusted EBITDA loss for the year ended December 31, 2016 was $(1.7) million, compared to loss of $(3.0) million for the year ended December 31, 2015.

Total cash and cash equivalents, excluding restricted cash, at December 31, 2016 was $619,000, compared to $1.5 million at December 31, 2015.

Cash used for operating activities for the year ended December 31, 2016 was $(1.1) million, compared to $(3.0) million for the year ended December 31, 2015. Cash provided by investing activities for the year ended December 31, 2016 was $11,000, compared to cash used for investing activities of $(4,000) for the year ended December 31, 2015. Cash provided by financing activities for the year ended December 31, 2016 was $237,000, compared to $1.6 million for the year ended December 31, 2015.

Steven G. Mihaylo, Chief Executive Officer, commented, "We continue to make substantial progress. We have reduced our loss on an EBITDA basis in 2016, cutting the loss almost in half. Our yearly results were much stronger in 2016 than previous years across all reporting metrics. I am confident this trend will continue in 2017 and beyond. The results for Q4 were not as strong as I anticipated. However, we have already seen good progress in the first two months of Q1 2017. I do believe we have turned the corner and our results will be stronger going forward. I am very pleased with our continual cost cutting. We are running the business very effectively. We continue to provide award winning industry best products and services. I have every confidence we will reach GAAP cash flow breakeven by Q3 2017 and GAAP income in Q4 2017."

Conference Call

The Company is hosting a conference call today, March 7, 2017, at 5:30 PM EST. The telephone dial-in number is 888-297-0353 for domestic participants and 719-457-2600 for international participants. The conference ID to join the call is 1256203. Please dial in five to ten minutes prior to the beginning of the call at 5:30 PM EST.

About Crexendo

Crexendo, Inc. (CXDO) is a CLEC cloud services company that provides award winning cloud telecommunications services, broadband internet services and other cloud business services. Our solutions are designed to provide enterprise-class cloud services available to any size businesses 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) continuing to make substantial progress; (ii) cutting its EBITDA loss almost in half in 2016; (iii) yearly results being much stronger in 2016 than previous years across all reporting metrics; (iv) being confident that trend will continue in 2017 and beyond; (v) results for Q4 not being as strong as anticipated; (vi) having seen good progress in the first two months of Q1 2017; (vii) having turned the corner and results will be stronger going forward; (viii) being very pleased with our continual cost cutting and running the business very effectively; (ix) providing award winning industry best products and services; and (x) reaching GAAP cash flow breakeven by Q3 2017 and GAAP income in Q4 2017.

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, 2016 when filed subsequent to this press release; and Form 10-K for the year ended December 31, 2015, as well as Form 10-Qs filed with the SEC during 2016. 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
Consolidated Balance Sheets
(In thousands, except par value and share data)

December 31,
2016
2015
Assets
Current assets:
Cash and cash equivalents
$ 619 $ 1,497
Restricted cash
100 112
Trade receivables, net of allowance for doubtful accounts of $34
as of December 31, 2016 and $35 as of December 31, 2015
346 364
Inventories
170 134
Equipment financing receivables
121 131
Prepaid expenses
686 1,046
Other current assets
8 15
Total current assets
2,050 3,299
Certificate of deposit
252 251
Long-term trade receivables, net of allowance for doubtful accounts
of $13 as December 31, 2016 and $24 as of December 31, 2015
43 81
Long-term equipment financing receivables
176 319
Property and equipment, net
18 33
Deferred income tax assets, net
- 482
Intangible assets, net
335 466
Goodwill
272 272
Long-term prepaid expenses
251 288
Other long-term assets
136 169
Total Assets
$ 3,533 $ 5,660
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable
$ 116 $ 76
Accrued expenses
997 812
Notes payable, current portion
66 57
Income taxes payable
5 -
Contingent consideration
- 99
Deferred income tax liability
- 482
Deferred revenue, current portion
809 775
Total current liabilities
1,993 2,301
Deferred revenue, net of current portion
43 81
Notes payable, net of current portion
966 965
Other long-term liabilities
16 109
Total liabilities
3,018 3,456
Commitments and contingencies
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, 13,578,556
shares issued and outstanding as of December 31, 2016 and 13,227,489 shares issued
and outstanding as of December 31, 2015
14 13
Additional paid-in capital
58,716 57,614
Accumulated deficit
(58,215 ) (55,423 )
Total stockholders' equity
515 2,204
Total Liabilities and Stockholders' Equity
$ 3,533 $ 5,660

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,
2016
2015
2016
2015
Revenue
$ 2,345 $ 2,109 $ 9,119 $ 7,823
Operating expenses:
Cost of revenue
863 979 3,625 3,577
Selling and marketing
604 638 2,531 2,445
General and administrative
1,195 1,617 4,900 5,861
Research and development
192 202 826 779
Total operating expenses
2,854 3,436 11,882 12,662
Loss from operations
(509 ) (1,327 ) (2,763 ) (4,839 )
Other income/(expense):
Interest income
3 5 15 24
Interest expense
(33 ) (12 ) (138 ) (28 )
Other income, net
15 26 106 290
Total other income/(expense), net
(15 ) 19 (17 ) 286
Loss before income tax
(524 ) (1,308 ) (2,780 ) (4,553 )
Income tax benefit/(provision)
(1 ) 40 (12 ) 12
Net loss
$ (525 ) $ (1,268 ) $ (2,792 ) $ (4,541 )
Net loss per common share:
Basic
$ (0.04 ) $ (0.10 ) $ (0.21 ) $ (0.35 )
Diluted
$ (0.04 ) $ (0.10 ) $ (0.21 ) $ (0.35 )
Weighted-average common shares outstanding:
Basic
13,483,502 13,227,385 13,358,311 12,960,625
Diluted
13,483,502 13,227,385 13,358,311 12,960,625

CREXENDO, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(In thousands)

Year Ended December 31,
2016
2015
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss
$ (2,792 ) $ (4,541 )
Adjustments to reconcile net loss to net cash used for operating activities:
Amortization of prepaid rent
322 322
Depreciation and amortization
146 270
Expense for stock options issued to employees
653 1,306
Non-cash interest expense
124 -
Amortization of deferred gain
(93 ) (94 )
Change in fair value of contingent consideration
- (11 )
Changes in assets and liabilities, net of effects of acquisitions:
Trade receivables
56 162
Equipment financing receivables
153 176
Inventories
(36 ) (62 )
Prepaid expenses
75 (112 )
Other assets
40 (69 )
Accounts payable and accrued expenses
225 (380 )
Income tax payable
5 (7 )
Deferred revenue
(4 ) 66
Net cash used for operating activities
(1,126 ) (2,974 )
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment
- (25 )
Release of restricted cash
12 21
Purchase of long-term investment
(1 ) -
Net cash provided by/(used for) investing activities
11 (4 )
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from notes payable
150 1,000
Repayments made on notes payable
(163 ) (110 )
Proceeds from exercise of options
9 50
Payment of contingent consideration
(59 ) (61 )
Proceeds from exercise of warrants
300 690
Net cash provided by financing activities
237 1,569
NET DECREASE IN CASH AND CASH EQUIVALENTS
(878 ) (1,409 )
CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE YEAR
1,497 2,906
CASH AND CASH EQUIVALENTS AT THE END OF THE YEAR
$ 619 $ 1,497
Supplemental disclosure of cash flow information:
Cash used during the year for:
Income taxes, net
$ (2 ) $ (1 )
Supplemental disclosure of non-cash investing and financing information:
Issuance of common stock for payment of interest on related-party note payable
$ 101 $ -
Issuance of common stock for contingent consideration related to business acquisition
$ 40 $ 40
Prepaid assets financed through notes payable
$ 124 $ 137
Note payable discount
$ - $ 115

CREXENDO, INC. AND SUBSIDIARIES
Supplemental Segment Financial Data
(In thousands)

Three Months Ended December 31,
Year Ended December 31,
2016
2015
2016
2015
Revenue:
Cloud telecommunications services
$ 2,046 $ 1,702 $ 7,757 $ 5,989
Web services
299 407 1,362 1,834
Consolidated revenue
2,345 2,109 9,119 7,823
Income/(loss) from operations:
Cloud telecommunications services
(623 ) (1,344 ) (3,174 ) (4,904 )
Web services
114 17 411 65
Total operating loss
(509 ) (1,327 ) (2,763 ) (4,839 )
Other income/(expense), net:
Cloud telecommunications services
(15 ) 13 (36 ) 71
Web services
- 6 19 215
Total other income/(expense), net
(15 ) 19 (17 ) 286
Income/(loss) before income tax provision
Cloud telecommunications services
(638 ) (1,331 ) (3,210 ) (4,833 )
Web services
114 23 430 280
Loss before income tax provision
$ (524 ) $ (1,308 ) $ (2,780 ) $ (4,553 )

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 7, 2017 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.

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 Loss to Non-GAAP Net Loss
(Unaudited)

Three Months Ended December 31,
Year Ended December 31,
2016
2015
2016
2015
(In thousands)
(In thousands)
U.S. GAAP net loss
$ (525 ) $ (1,268 ) $ (2,792 ) $ (4,541 )
Share-based compensation
149 522 653 1,306
Amortization of rent expense paid in stock, net of deferred gain
58 57 229 228
Amortization of intangible assets
32 44 131 210
Amortization of interest expense paid in stock
30 - 101 -
Non-GAAP net loss
$ (256 ) $ (645 ) $ (1,678 ) $ (2,797 )

Reconciliation of U.S. GAAP Net Loss to EBITDA to Adjusted EBITDA
(Unaudited)

Three Months Ended December 31,
Year Ended December 31,
2016
2015
2016
2015
(In thousands)
(In thousands)
U.S. GAAP net loss
$ (525 ) $ (1,268 ) $ (2,792 ) $ (4,541 )
Depreciation and amortization
36 54 146 270
Interest expense
33 12 138 28
Interest and other income
(18 ) (31 ) (121 ) (314 )
Income tax provision/(benefit)
1 (40 ) 12 (12 )
EBITDA
(473 ) (1,273 ) (2,617 ) (4,569 )
Share-based compensation
149 522 653 1,306
Amortization of rent expense paid in stock, net of deferred gain
58 57 229 228
Adjusted EBITDA
$ (266 ) $ (694 ) $ (1,735 ) $ (3,035 )

CONTACT:

Crexendo, Inc.
Steven G. Mihaylo
CEO
602-345-7777
Smihaylo@crexendo.com

SOURCE: Crexendo, Inc.