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Crexendo Reports Financial Results for the Fourth Quarter and Year Ended December 31, 2018

PHOENIX, AZ / ACCESSWIRE / March 5, 2019 / Crexendo, Inc. (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.

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.''

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.

CONTACT:

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

CREXENDO, INC. AND SUBSIDIARIES

Consolidated Balance Sheets

(In thousands, except par value and share data)



December 31,

2018

2017
Assets






Current assets:






Cashand cash equivalents

$ 1,849

$ 1,282
Restricted cash


100


100
Trade receivables, net of allowance for doubtful accounts of $14








asof 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 $0as 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
Otherlong-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








andoutstanding 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










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


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

$ -


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 )


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.

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-GAAPNet 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 toAdjusted 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 )

SOURCE: Crexendo, Inc.



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