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8-K - CURRENT REPORT - Crexendo, Inc. | cxdo_8k.htm |
Exhibit 99.1
Crexendo Reports Financial Results for the Second Quarter of
2017
PHOENIX,
AZ—(Marketwired – August 7, 2017)
Crexendo,
Inc. (OTCQX: CXDO), a CLEC cloud telecom-services company that
provides award winning cloud telecommunications services, broadband
internet services and other cloud business services, today reported
financial results for its second quarter ended June 30,
2017.
Financial highlights for the three months ended June 30,
2017
Consolidated
total revenue for the second quarter of 2017 increased 10% to $2.5
million compared to $2.3 million for the second quarter of
2016.
Consolidated
service revenue for the second quarter of 2017 increased 19% to
$2.2 million compared to $1.8 million for the second quarter of
2016.
Consolidated
product revenue for the second quarter of 2017 decreased 30% to
$303,000 compared to $430,000 for the second quarter of
2016.
Cloud
Telecommunications Segment service revenue for the second quarter
of 2017 increased 28% to $1.9 million compared to $1.5 million for
the second quarter of 2016.
Cloud
Telecommunications Segment product revenue for the second quarter
of 2017 decreased 30% to $303,000 compared to $430,000 for the
second quarter of 2016.
Web
Services Segment service revenue for the second quarter of 2017
decreased 22% to $269,000, compared to $347,000 for the second
quarter of 2016.
Consolidated
operating expenses for the second quarter of 2017 decreased 10% to
$2.7 million compared to $3.0 million for the second quarter of
2016.
On a
GAAP basis, the Company reported a $(281,000) net loss for the
second quarter of 2017, or $(0.02) loss per diluted common share,
compared to a net loss of $(778,000) or $(0.06) loss per diluted
common share for the second quarter of 2016.
Non-GAAP
net loss was $(91,000) for the second quarter of 2017, or $(0.01)
loss per diluted common share, compared to a non-GAAP net loss of
$(502,000) or $(0.04) loss per diluted common share for the second
quarter of 2016.
EBITDA
for the second quarter of 2017 was a $(217,000) loss compared to a
$(740,000) loss for the second quarter of 2016. Adjusted EBITDA for
the second quarter of 2017 was an $(85,000) loss compared to a
$(525,000) loss for the second quarter of 2016.
Financial highlights for the six months ended June 30,
2017
Consolidated
total revenue for the six months ended June 30, 2017 increased 9%
to $4.8 million compared to $4.4 million for the six months ended
June 30, 2016.
Consolidated
service revenue for the six months ended June 30, 2017 increased
16% to $4.2 million compared to $3.7 million for the six months
ended June 30, 2016.
Consolidated
product revenue for the six months ended June 30, 2017 decreased
25% to $582,000 compared to $781,000 for the six months ended June
30, 2016.
1
Cloud
Telecommunications Segment service revenue for the six months ended
June 30, 2017 increased 27% to $3.7 million compared to $2.9
million for the six months ended June 30, 2016.
Cloud
Telecommunications Segment product revenue for the six months ended
June 30, 2017 decreased 25% to $582,000 compared to $781,000 for
the six months ended June 30, 2016.
Web
Services Segment service revenue for the six months ended June 30,
2017 decreased 26% to $552,000, compared to $743,000 for the six
months ended June 30, 2016.
Consolidated
operating expenses for the six months ended June 30, 2017 decreased
8% to $5.6 million compared to $6.1 million for the six months
ended June 30, 2016.
On a
GAAP basis, the Company reported a $(824,000) net loss for the six
months ended June 30, 2017, or $(0.06) loss per diluted common
share, compared to a net loss of $(1.6) million or $(0.12) loss per
diluted common share for the six months ended June 30,
2016.
Non-GAAP
net loss was $(279,000) for the six months ended June 30, 2017, or
$(0.02) loss per diluted common share, compared to a non-GAAP net
loss of $(1.1) million or $(0.08) loss per diluted common share for
the six months ended June 30, 2016.
EBITDA
for the six months ended June 30, 2017 was a $(699,000) loss
compared to a $(1.6) million loss for the six months ended June 30,
2016. Adjusted EBITDA for the six months ended June 30, 2017 was a
$(269,000) loss compared to a $(1.1) million loss for the six
months ended June 30, 2016.
Total
cash and cash equivalents, excluding restricted cash, at June 30,
2017 was $929,000 compared to $619,000 at December 31,
2016.
Cash
used for operating activities for the six months ended June 30,
2017 was $(143,000) compared to $(710,000) for the six months ended
June 30, 2016. Cash provided by investing activities for the six
months ended June 30, 2017 was $252,000 compared to $11,000 for the
six months ended June 30, 2016. Cash provided by financing
activities for the six months ended June 30, 2017 was $201,000
compared to $125,000 for the six months ended June 30,
2016.
Steven
G. Mihaylo, Chief Executive Officer commented, “We continue
to execute on our internal plans. We achieved a solid increase of
10% in Second Quarter 2017 total revenue compared to second quarter
of 2016. More importantly our Cloud Telecommunications Segment
service revenue had a very impressive 28% increase compared to the
second quarter of 2016. Cloud Telecommunications service revenue is
a very important factor to use in gauging our future growth. That
growth will propel us to cash flow break even and profitability.
Even with this impressive growth we have continued to be very
effective in controlling our costs, we reduced our operating
expenses for the second quarter of 2017 10% compared to the second
quarter of 2016. Also, very encouraging is the substantial
reduction in GAAP loss of $(0.02) per diluted common share,
compared to a net GAAP loss of $(0.06) per diluted common share for
the second quarter of 2016.”
Mihaylo
added, “We continue to provide top of the line products at a
price point that will save most businesses money. I am proud of the
effort of our team, we have highly satisfied customers and our
products and services continue to be the best in the industry as
shown by our recent 2017 Communications Solutions Products of the
Year Award. I continue to be convinced that we will achieve cash
flow breakeven and GAAP net income this year. We will continue to
grow the business organically and we are always open to accretive
acquisitions. The growth in our business convinced us that it is
now time to take the Crexendo Ride The Cloud © to a larger
audience, we will be attending the 2017 Rodman & Renshaw Annual
Global Investment Conference in New York taking place September 11
– 12.”
Doug
Gaylor, President and COO, stated, "The entire team and I are
working hard every day to increase sales, provide the best customer
products, services and experiences in the industry. We believe the
changes we have put forth in the sales process are impacting our
results positively. We are continuously making improvements in our
marketing and customer acquisition process. We believe that if
customers compare Crexendo’s Ride The Cloud © service
and technology, to any of our competitors we can provide a product
second to none at a highly competitive price. I share Steve’s
excitement and belief in our strong future."
2
Conference Call
The
Company is hosting a conference call today, August 7, 2017 at 5:30
PM EST. The telephone dial-in number is 866-548-4713 for domestic
participants and 323-794-2093 for international participants. The
conference ID to join the call is 6465807. 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 telecom-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 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 execute on its internal plans; (ii) achieving a solid increase
in Second Quarter 2017 total revenue and a very impressive increase
in Cloud Telecommunications service revenue; for the second
quarter; (iii) telecommunications service revenue being a very
important factor to use in gauging future growth; (iv) growth will
propel the Company to cash flow break even and profitability; (v)
continuing to be very effective in controlling its costs; (vi)
being very encouraged in the substantial reduction in GAAP loss for
the second quarter of 2017; (vii) continuing to provide top of the
line products at a price point that will save most businesses
money; (viii) having highly satisfied customers and its products
and services continue to be the best in the industry; (ix)
continuing to be convinced that it will achieve cash flow breakeven
and GAAP net income this year; (x) will continue to grow its
business organically and being open to accretive acquisitions; (xi)
working hard every day to increase sales, provide the best customer
products, services and experiences in the business; (xii) believing
the changes in the sales process are impacting results positively;
(xiii) continuously making improvements in its marketing and
customer acquisition process; (xiv) believing that if customers
compare Crexendo ride the cloud © service and technology, to
any of our competitors it can provide a product second to none at a
highly competitive price; (xv) having excitement and belief in its
strong future and (xvi) being convinced that it is now time to take
the Crexendo ride the cloud © to a larger
audience.
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, and
quarterly Forms 10-Q as filed. 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.
3
CREXENDO, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
|
June 30,
2017
|
December 31,
2016
|
Assets
|
|
|
Current
assets:
|
|
|
Cash
and cash equivalents
|
$929
|
$619
|
Restricted
cash
|
100
|
100
|
Trade
receivables, net of allowance for doubtful accounts of
$42
|
|
|
as
of June 30, 2017 and $34 as of December 31, 2016
|
404
|
346
|
Inventories
|
254
|
170
|
Equipment
financing receivables
|
128
|
121
|
Prepaid
expenses
|
629
|
686
|
Other
current assets
|
8
|
8
|
Total
current assets
|
2,452
|
2,050
|
|
|
|
Certificate
of deposit
|
-
|
252
|
Long-term
trade receivables, net of allowance for doubtful
accounts
|
|
|
of
$11 as of June 30, 2017 and $13 as of December 31,
2016
|
36
|
43
|
Long-term
equipment financing receivables
|
104
|
176
|
Property
and equipment, net
|
12
|
18
|
Intangible
assets, net
|
286
|
335
|
Goodwill
|
272
|
272
|
Long-term
prepaid expenses
|
169
|
251
|
Other
long-term assets
|
122
|
136
|
Total
assets
|
$3,453
|
$3,533
|
|
|
|
Liabilities and Stockholders' Equity
|
|
|
|
|
|
Current
liabilities:
|
|
|
Accounts
payable
|
$162
|
$116
|
Accrued
expenses
|
853
|
997
|
Notes
payable, current portion
|
127
|
66
|
Income
taxes payable
|
5
|
5
|
Deferred
revenue, current portion
|
960
|
809
|
Total
current liabilities
|
2,107
|
1,993
|
|
|
|
Deferred
revenue, net of current portion
|
36
|
43
|
Notes
payable, net of current portion
|
952
|
966
|
Other
long-term liabilities
|
-
|
16
|
Total
liabilities
|
3,095
|
3,018
|
|
|
|
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,
13,830,556
|
|
|
shares
issued and outstanding as of June 30, 2017 and 13,578,556 shares
issued and
|
|
|
outstanding
as of December 31, 2016
|
14
|
14
|
Additional
paid-in capital
|
59,383
|
58,716
|
Accumulated
deficit
|
( 59,039)
|
( 58,215)
|
Total
stockholders' equity
|
358
|
515
|
|
|
|
Total
Liabilities and Stockholders' Equity
|
$3,453
|
$3,533
|
4
CREXENDO, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
(In thousands, except per share and share data)
|
Three Months Ended June 30,
|
Six Months Ended June 30,
|
||
|
2017
|
2016
|
2017
|
2016
|
Service
revenue
|
$2,182
|
$1,837
|
$4,247
|
$3,660
|
Product
revenue
|
303
|
430
|
582
|
781
|
Total
revenue
|
2,485
|
2,267
|
4,829
|
4,441
|
|
|
|
|
|
Operating
expenses:
|
|
|
|
|
Cost
of service revenue
|
703
|
741
|
1,397
|
1,503
|
Cost
of product revenue
|
124
|
176
|
232
|
327
|
Selling
and marketing
|
709
|
636
|
1,399
|
1,246
|
General
and administrative
|
1,009
|
1,274
|
2,180
|
2,565
|
Research
and development
|
185
|
216
|
375
|
445
|
Total
operating expenses
|
2,730
|
3,043
|
5,583
|
6,086
|
|
|
|
|
|
Loss
from operations
|
( 245)
|
( 776)
|
( 754)
|
( 1,645)
|
|
|
|
|
|
Other
income/(expense):
|
|
|
|
|
Interest
income
|
2
|
4
|
5
|
8
|
Interest
expense
|
( 36)
|
(31)
|
( 71)
|
(66)
|
Other
income, net
|
2
|
29
|
4
|
64
|
Total
other income/(expense), net
|
( 32)
|
2
|
( 62)
|
6
|
|
|
|
|
|
Loss
before income tax
|
( 277)
|
( 774)
|
( 816)
|
( 1,639)
|
|
|
|
|
|
Income
tax provision
|
( 4)
|
( 4)
|
( 8)
|
( 7)
|
|
|
|
|
|
Net
loss
|
$(281)
|
$(778)
|
$(824)
|
$(1,646)
|
|
|
|
|
|
Net
loss per common share:
|
|
|
|
|
Basic
|
$(0.02)
|
$(0.06)
|
$(0.06)
|
$(0.12)
|
Diluted
|
$(0.02)
|
$(0.06)
|
$(0.06)
|
$(0.12)
|
|
|
|
|
|
Weighted-average
common shares outstanding:
|
|
|
|
|
Basic
|
13,819,281
|
13,292,334
|
13,759,666
|
13,268,107
|
Diluted
|
13,819,281
|
13,292,334
|
13,759,666
|
13,268,107
|
5
CREXENDO, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(In thousands)
|
Six Months Ended June 30,
|
|
|
2017
|
2016
|
CASH
FLOWS FROM OPERATING ACTIVITIES
|
|
|
Net
loss
|
$(824)
|
$(1,646)
|
Adjustments
to reconcile net loss to net cash used for operating
activities:
|
|
|
Amortization
of prepaid rent
|
54
|
161
|
Depreciation
and amortization
|
55
|
74
|
Non-cash
interest expense
|
66
|
57
|
Share-based
compensation
|
392
|
351
|
Amortization
of deferred gain
|
(16)
|
(47)
|
Changes
in assets and liabilities:
|
|
|
Trade
receivables
|
(51)
|
(30)
|
Equipment
financing receivables
|
65
|
77
|
Inventories
|
(84)
|
5
|
Prepaid
expenses
|
140
|
(85)
|
Other
assets
|
14
|
34
|
Accounts
payable and accrued expenses
|
(98)
|
323
|
Deferred
revenue
|
144
|
16
|
Net
cash used for operating activities
|
( 143)
|
( 710)
|
|
|
|
CASH
FLOWS FROM INVESTING ACTIVITIES
|
|
|
Sale
of long-term investment
|
252
|
-
|
Purchase
of long-term investment
|
-
|
(1)
|
Release
of restricted cash
|
-
|
12
|
Net
cash provided by investing activities
|
252
|
11
|
|
|
|
CASH
FLOWS FROM FINANCING ACTIVITIES
|
|
|
Proceeds
from notes payable
|
111
|
150
|
Repayments
made on notes payable
|
( 76)
|
(68)
|
Proceeds
from exercise of options
|
166
|
102
|
Payment
of contingent consideration
|
-
|
(59)
|
Net
cash provided by financing activities
|
201
|
125
|
|
|
|
NET
INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS
|
310
|
( 574)
|
|
|
|
CASH
AND CASH EQUIVALENTS AT THE BEGINNING OF THE PERIOD
|
619
|
1,497
|
|
|
|
CASH
AND CASH EQUIVALENTS AT THE END OF THE PERIOD
|
$929
|
$923
|
|
|
|
Supplemental
disclosure of cash flow information:
|
|
|
Cash
used during the period for:
|
|
|
Income
taxes, net
|
$(9)
|
$(2)
|
Supplemental
disclosure of non-cash investing and financing
information:
|
|
|
Issuance
of common stock for prepayment of interest on related-party note
payable
|
$109
|
$90
|
Issuance
of common stock for contingent consideration related to business
acquisition
|
$-
|
$40
|
Prepaid
assets financed through notes payable
|
$111
|
$116
|
6
CREXENDO, INC. AND SUBSIDIARIES
Supplemental Segment Financial Data
(In thousands)
|
Three Months Ended June 30,
|
Six Months Ended June 30,
|
||
|
2017
|
2016
|
2017
|
2016
|
Revenue:
|
|
|
|
|
Cloud
telecommunications
|
$2,216
|
$1,920
|
$4,277
|
$3,698
|
Web
services
|
269
|
347
|
552
|
743
|
Consolidated
revenue
|
2,485
|
2,267
|
4,829
|
4,441
|
|
|
|
|
|
Income/(loss)
from operations:
|
|
|
|
|
Cloud
telecommunications
|
(373)
|
(872)
|
(989)
|
(1,835)
|
Web
services
|
128
|
96
|
235
|
190
|
Total
operating loss
|
(245)
|
(776)
|
(754)
|
(1,645)
|
Other
income/(expense), net:
|
|
|
|
|
Cloud
telecommunications
|
(32)
|
(3)
|
(62)
|
(10)
|
Web
services
|
-
|
5
|
-
|
16
|
Total
other income/(expense), net
|
(32)
|
2
|
(62)
|
6
|
Income/(loss)
before income tax provision
|
|
|
|
|
Cloud
telecommunications
|
(405)
|
(875)
|
(1,051)
|
(1,845)
|
Web
services
|
128
|
101
|
235
|
206
|
Loss
before income tax provision
|
$(277)
|
$(774)
|
$(816)
|
$(1,639)
|
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
August 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.
8
Reconciliation of U.S. GAAP Net Loss to Non-GAAP Net
Loss
(Unaudited)
|
Three Months Ended June 30,
|
Six Months Ended June 30,
|
||
|
2017
|
2016
|
2017
|
2016
|
|
(In
thousands)
|
(In
thousands)
|
||
U.S.
GAAP net loss
|
$(281)
|
$(778)
|
$(824)
|
$(1,646)
|
Share-based
compensation
|
132
|
158
|
392
|
351
|
Amortization
of rent expense paid in stock, net of deferred gain
|
-
|
57
|
38
|
114
|
Amortization
of intangible assets
|
25
|
33
|
49
|
66
|
Non-cash
interest expense
|
33
|
28
|
66
|
57
|
Non-GAAP
net loss
|
$(91)
|
$(502)
|
$(279)
|
$(1,058)
|
Reconciliation of U.S. GAAP Net Loss to EBITDA to Adjusted
EBITDA
(Unaudited)
|
Three Months Ended June 30,
|
Six Months Ended June 30,
|
||
|
2017
|
2016
|
2017
|
2016
|
|
(In
thousands)
|
(In
thousands)
|
||
U.S.
GAAP net loss
|
$(281)
|
$(778)
|
$(824)
|
$(1,646)
|
Depreciation
and amortization
|
28
|
36
|
55
|
74
|
Interest
expense
|
36
|
31
|
71
|
66
|
Interest
and other income
|
(4)
|
(33)
|
(9)
|
(72)
|
Income
tax provision
|
4
|
4
|
8
|
7
|
EBITDA
|
(217)
|
(740)
|
(699)
|
(1,571)
|
Share-based
compensation
|
132
|
158
|
392
|
351
|
Amortization
of rent expense paid in stock, net of deferred gain
|
-
|
57
|
38
|
114
|
Adjusted
EBITDA
|
$(85)
|
$(525)
|
$(269)
|
$(1,106)
|
9