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8-K - CURRENT REPORT - Crexendo, Inc. | cxdo_8k.htm |
Exhibit 99.1
Crexendo
Reports Financial Results for the Third Quarter of
2016
PHOENIX,
AZ—(Marketwired – November 11, 2016)
Crexendo, Inc.
(OTCQX: CXDO), a hosted services company that provides hosted
telecommunications services, broadband internet services and
website hosting services for businesses, today reported financial
results for its third quarter ended September 30,
2016.
Financial
highlights for the three months ended September 30,
2016
Consolidated
revenue for the third quarter of 2016 increased 18% to $2.3 million
compared to $2.0 million for the third quarter of
2015.
Hosted
Telecommunications Services Segment revenue for the third quarter
of 2016 increased 31% to $2.0 million compared to $1.5 million for
the third quarter of 2015.
Web Services
Segment revenue for the second quarter of 2016 decreased 26% to
$320,000, compared to $430,000 for the third quarter of
2015.
Consolidated
operating expenses for the third quarter of 2016 decreased 3% to
$2.9 million compared to $3.0 million for the third quarter of
2015.
On a GAAP basis,
the Company reported a $(621,000) net loss for the third quarter of
2016, or $(0.05) loss per diluted common share, compared to net
loss of $(1.0) million or $(0.08) loss per diluted common share for
the third quarter of 2015.
Non-GAAP net loss
was $(353,000) for the third quarter of 2016, or $(0.03) loss per
diluted common share, compared to a non-GAAP net loss of $(742,000)
or $(0.06) loss per diluted common share for the third quarter of
2015.
EBITDA for the
third quarter of 2016 was $(574,000) compared to $(1.0) million for
the third quarter of 2015. Adjusted EBITDA for the third
quarter of 2016 was $(364,000) compared to $(738,000) for the third
quarter of 2015.
Financial
highlights for the nine months ended September 30,
2016
Consolidated
revenue for the nine months ended September 30, 2016 increased 19%
to $6.8 million compared to $5.7 million for the nine months ended
September 30, 2015.
Hosted
Telecommunications Services Segment revenue for the nine months
ended September 30, 2016 increased 33% to $5.7 million compared to
$4.3 million for the nine months ended September 30,
2015.
Web Services
Segment revenue for the nine months ended September 30, 2016
decreased 26% to $1.1 million compared to $1.4 million for the nine
months ended September 30, 2015.
Consolidated
operating expenses for the nine months ended September 30, 2016
decreased 2% to $9.0 million compared to $9.2 million for the nine
months ended September 30, 2015.
On a GAAP basis,
the Company reported a $(2.3) million net loss for the nine months
ended September 30, 2016, or $(0.17) loss per diluted common share,
compared to net loss of $(3.3) million or $(0.25) loss per diluted
common share for the nine months ended September 30,
2015.
Non-GAAP net loss
was $(1.4) million for the nine months ended September 30, 2016, or
$(0.11) loss per diluted common share, compared to a non-GAAP net
loss of $(2.2) million or $(0.17) loss per diluted common share for
the nine months ended September 30, 2015.
EBITDA for the nine
months ended September 30, 2016 was $(2.1) million compared to
$(3.3) million for the nine months ended September 30,
2015. Adjusted EBITDA for the nine months ended
September 30, 2016 was $(1.5) million compared to $(2.3) million
for the nine months ended September 30, 2015.
Total cash and cash
equivalents, excluding restricted cash, at September 30, 2016 was
$854,000 compared to $1.7 million at September 30,
2015.
Cash used for
operating activities for the nine months ended September 30, 2016
was $(737,000) compared to $(2.0) million for the nine months ended
September 30, 2015. Cash provided by investing
activities for the nine months ended September 30, 2016 was $11,000
compared to cash used for investing activities of $(20,000) for the
nine months ended September 30, 2015. Cash provided by financing
activities for the nine months ended September 30, 2016 was $83,000
compared to $678,000 for the nine months ended September 30,
2015.
Steven G. Mihaylo,
Chief Executive Officer commented, “We continue to make
progress. We have again increased our revenue on a quarterly basis
2016 over 2015. We also continue to increase our backlog and
sequential quarterly revenue. We have continued our cost
reduction initiatives and have completed a thorough review of
costs. We have targeted cost reductions for software programs that
we can cancel and others that we can replace with significantly
more cost-effective replacements. We have also implemented other
cost reduction initiatives. We believe these actions will have a
very positive impact in 2017. We are also deferring planned
expenditures in accounting software while we continue to work
toward reaching GAAP cash flow breakeven.
Mihaylo added,
“Our number one priority is amplifying our marketing campaign
while continuing to work to increase our Dealer Partner Channel and
our Direct Sales Channel. Our products, services, solutions and
support are second to none. I continue to be firmly convinced that
Crexendo will be very successful so long as we continue to put our
customers first with the best solutions
available.”
Conference
Call
The Company is
hosting a conference call today, November 11, 2016 at 5:30 PM EST.
The telephone dial-in number is 877-795-3604 for domestic
participants and 719-325-4750 for international participants. The
conference ID to join the call is 1971912. 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 hosted services company that provides hosted
telecommunications services, broadband internet services and
website hosting services for businesses. Our services are designed
to make enterprise-class hosting 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 progress; (ii)
continuing our cost reduction initiates with having
completed a thorough review of costs; (iii) having targeted cost
reductions for software programs that can be canceled
and others that can be replaced with
significantly more cost-effective software and having implemented
other cost reduction initiatives: (iv) believing the
enumerated actions will have a very positive impact in
2017; (v) deferring planned expenditures in accounting software
while continuing to work toward reaching GAAP cash flow breakeven;
having its number one priority be amplifying marketing campaign;
(vi) continuing to work to increase Dealer Partner
Channel and the Direct Sales Channel; products, services, solutions
and support being second to none; and believing that it
will be very successful so long as it continues to put our
customers first with the best solutions available.
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, 2015 as well as Forms 10Q for 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)
|
September 30,
2016
|
December 31,
2015
|
Assets
|
|
|
Current
assets:
|
|
|
Cash and cash
equivalents
|
$854
|
$1,497
|
Restricted
cash
|
100
|
112
|
Trade receivables,
net of allowance for doubtful accounts of $34
|
|
|
as of September 30,
2016 and $35 as of December 31, 2015
|
303
|
364
|
Inventories
|
124
|
134
|
Equipment financing
receivables
|
123
|
131
|
Prepaid
expenses
|
862
|
1,046
|
Other current
assets
|
8
|
15
|
Total current
assets
|
2,374
|
3,299
|
|
|
|
Certificate of
deposit
|
252
|
251
|
Long-term trade
receivables, net of allowance for doubtful accounts
|
|
|
of $17 as of
September 30, 2016 and $24 as of December 31, 2015
|
46
|
81
|
Long-term equipment
financing receivables
|
208
|
319
|
Property and
equipment, net
|
21
|
33
|
Deferred income tax
assets, net
|
482
|
482
|
Intangible assets,
net
|
368
|
466
|
Goodwill
|
272
|
272
|
Long-term prepaid
expenses
|
250
|
288
|
Other long-term
assets
|
138
|
169
|
Total
assets
|
$4,411
|
$5,660
|
|
|
|
Liabilities
and Stockholders' Equity
|
|
|
|
|
|
Current
liabilities:
|
|
|
Accounts
payable
|
$308
|
$76
|
Accrued
expenses
|
941
|
812
|
Notes payable,
current portion
|
98
|
57
|
Income taxes
payable
|
4
|
-
|
Contingent
consideration
|
-
|
99
|
Deferred income tax
liability
|
482
|
482
|
Deferred revenue,
current portion
|
827
|
775
|
Total current
liabilities
|
2,660
|
2,301
|
|
|
|
Deferred revenue,
net of current portion
|
46
|
81
|
Notes payable, net
of current portion
|
973
|
965
|
Other long-term
liabilities
|
39
|
109
|
Total
liabilities
|
3,718
|
3,456
|
|
|
|
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,
13,413,556
|
|
|
shares issued and
outstanding as of September 30, 2016 and 13,227,489 shares issued
and
|
|
|
outstanding as of
December 31, 2015
|
13
|
13
|
Additional paid-in
capital
|
58,370
|
57,614
|
Accumulated
deficit
|
(57,690)
|
(55,423)
|
Total stockholders'
equity
|
693
|
2,204
|
|
|
|
Total Liabilities
and Stockholders' Equity
|
$4,411
|
$5,660
|
CREXENDO,
INC. AND SUBSIDIARIES
Consolidated
Statements of Operations
(In thousands,
except per share and share data)
|
Three Months
Ended
September
30,
|
Nine Months
Ended
September
30,
|
||
|
2016
|
2015
|
2016
|
2015
|
Revenue
|
$2,333
|
$1,972
|
$6,774
|
$5,714
|
Operating
expenses:
|
|
|
|
|
Cost of
revenue
|
932
|
882
|
2,762
|
2,598
|
Selling and
marketing
|
681
|
624
|
1,927
|
1,807
|
General and
administrative
|
1,140
|
1,309
|
3,705
|
4,244
|
Research and
development
|
189
|
209
|
634
|
577
|
Total operating
expenses
|
2,942
|
3,024
|
9,028
|
9,226
|
|
|
|
|
|
Loss from
operations
|
(609)
|
(1,052)
|
(2,254)
|
(3,512)
|
|
|
|
|
|
Other
income/(expense):
|
|
|
|
|
Interest
income
|
4
|
6
|
12
|
19
|
Interest
expense
|
(39)
|
(3)
|
(105)
|
(16)
|
Other income,
net
|
27
|
16
|
91
|
264
|
Total other
income/(expense), net
|
(8)
|
19
|
(2)
|
267
|
|
|
|
|
|
Loss before income
tax
|
(617)
|
(1,033)
|
(2,256)
|
(3,245)
|
|
|
|
|
|
Income tax
provision
|
(4)
|
(10)
|
(11)
|
(28)
|
|
|
|
|
|
Net
loss
|
$(621)
|
$(1,043)
|
$(1,422)
|
$(2,152)
|
|
|
|
|
|
Net loss per common
share:
|
|
|
|
|
Basic
|
$(0.05)
|
$(0.08)
|
$(0.11)
|
$(0.17)
|
Diluted
|
$(0.05)
|
$(0.08)
|
$(0.11)
|
$(0.17)
|
|
|
|
|
|
Weighted-average
common shares outstanding:
|
|
|
|
|
Basic
|
13,411,569
|
13,207,041
|
13,316,277
|
12,870,728
|
Diluted
|
13,411,569
|
13,207,041
|
13,316,277
|
12,870,728
|
CREXENDO,
INC. AND SUBSIDIARIES
Consolidated
Statements of Cash Flows
(In thousands)
|
Nine Months
Ended
September
30,
|
|
|
2016
|
2015
|
CASH FLOWS FROM
OPERATING ACTIVITIES
|
|
|
Net
loss
|
$(2,267)
|
$(3,273)
|
Adjustments to
reconcile net loss to net cash used for operating
activities:
|
|
|
Amortization of
prepaid rent
|
242
|
242
|
Depreciation and
amortization
|
110
|
216
|
Non-cash interest
expesnse
|
18
|
-
|
Expense for stock
options issued to employees
|
504
|
784
|
Amortization of
deferred gain
|
(70)
|
(70)
|
Changes in assets
and liabilities:
|
|
|
Trade
receivables
|
96
|
111
|
Equipment financing
receivables
|
119
|
130
|
Inventories
|
10
|
(43)
|
Prepaid
expenses
|
81
|
(69)
|
Other
assets
|
38
|
(96)
|
Accounts payable
and accrued expenses
|
361
|
(40)
|
Income tax
payable
|
4
|
27
|
Deferred
revenue
|
17
|
112
|
Net cash used for
operating activities
|
(737)
|
(1,969)
|
|
|
|
CASH FLOWS FROM
INVESTING ACTIVITIES
|
|
|
Purchase of
property and equipment
|
-
|
(29)
|
Release of
restricted cash
|
12
|
9
|
Purchase of
long-term investment
|
(1)
|
-
|
Net cash provided
by/(used for) investing activities
|
11
|
(20)
|
|
|
|
CASH FLOWS FROM
FINANCING ACTIVITIES
|
|
|
Proceeds from notes
payable
|
150
|
-
|
Repayments made on
notes payable
|
(119)
|
-
|
Proceeds from
exercise of options
|
9
|
49
|
Proceeds from
exercise of warrants
|
102
|
690
|
Payment of
contingent consideration
|
(59)
|
(61)
|
Net cash provided
by financing activities
|
83
|
678
|
|
|
|
NET DECREASE IN
CASH AND CASH EQUIVALENTS
|
(643)
|
(1,311)
|
|
|
|
CASH AND CASH
EQUIVALENTS AT THE BEGINNING OF THE PERIOD
|
1,497
|
2,906
|
|
|
|
CASH AND CASH
EQUIVALENTS AT THE END OF THE PERIOD
|
$854
|
$1,595
|
|
|
|
Supplemental
disclosure of cash flow information:
|
|
|
Cash used during
the period for:
|
|
|
Income taxes,
net
|
$(2)
|
$(1)
|
Supplemental
disclosure of non-cash investing and financing
information:
|
|
|
Issuance of common
stock for prepayment of interest on related-party note
payable
|
$101
|
$-
|
Issuance of common
stock for contingent consideration related to business
acquisition
|
$40
|
$40
|
CREXENDO,
INC. AND SUBSIDIARIES
Supplemental
Segment Financial Data
(In thousands)
|
Three Months
Ended
September
30,
|
Nine Months
Ended
September
30,
|
||
|
2016
|
2015
|
2016
|
2015
|
Revenue:
|
|
|
|
|
Hosted
telecommunications services
|
$2,013
|
$1,542
|
$5,711
|
$4,287
|
Web
services
|
320
|
430
|
1,063
|
1,427
|
Consolidated
revenue
|
2,333
|
1,972
|
6,774
|
5,714
|
|
|
|
|
|
Income/(loss) from
operations:
|
|
|
|
|
Hosted
telecommunications services
|
(716)
|
(1,119)
|
(2,551)
|
(3,560)
|
Web
services
|
107
|
67
|
297
|
48
|
Total operating
loss
|
(609)
|
(1,052)
|
(2,254)
|
(3,512)
|
Other
income/(expense), net:
|
|
|
|
|
Hosted
telecommunications services
|
(11)
|
19
|
(21)
|
58
|
Web
services
|
3
|
-
|
19
|
209
|
Total other
income/(expense), net
|
(8)
|
19
|
(2)
|
267
|
Income/(loss)
before income tax provision
|
|
|
|
|
Hosted
telecommunications services
|
(727)
|
(1,100)
|
(2,572)
|
(3,502)
|
Web
services
|
110
|
67
|
316
|
257
|
Loss before income
tax provision
|
$(617)
|
$(1,033)
|
$(2,256)
|
$(3,245)
|
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 November 11, 2016
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
September
30,
|
Nine Months
Ended
September
30,
|
||
|
2016
|
2015
|
2016
|
2015
|
|
(In
thousands)
|
(In
thousands)
|
||
U.S. GAAP net
loss
|
$(621)
|
$(1,043)
|
$(2,267)
|
$(3,273)
|
Share-based
compensation
|
153
|
201
|
504
|
784
|
Amortization of
rent expense paid in stock, net of deferred gain
|
57
|
57
|
171
|
171
|
Amortization of
intangible assets
|
33
|
43
|
99
|
166
|
Amortization of
interest expense paid in stock
|
25
|
-
|
71
|
-
|
Non-GAAP net
loss
|
$(353)
|
$(742)
|
$(1,422)
|
$(2,152)
|
Reconciliation
of U.S. GAAP Net Loss to EBITDA to Adjusted EBITDA
|
||||
(Unaudited)
|
||||
|
||||
|
Three Months
Ended
September
30,
|
Nine Months
Ended
September
30,
|
||
|
2016
|
2015
|
2016
|
2015
|
|
(In
thousands)
|
(In
thousands)
|
||
U.S. GAAP net
loss
|
$(621)
|
$(1,043)
|
$(2,267)
|
$(3,273)
|
Depreciation and
amortization
|
35
|
56
|
110
|
216
|
Interest
expense
|
39
|
3
|
105
|
16
|
Interest and other
income
|
(31)
|
(22)
|
(103)
|
(283)
|
Income tax
provision
|
4
|
10
|
11
|
28
|
EBITDA
|
(574)
|
(996)
|
(2,144)
|
(3,296)
|
Share-based
compensation
|
153
|
201
|
504
|
784
|
Amortization of
rent expense paid in stock, net of deferred gain
|
57
|
57
|
171
|
171
|
Adjusted
EBITDA
|
$(364)
|
$(738)
|
$(1,469)
|
$(2,341)
|