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8-K - CURRENT REPORT - Crexendo, Inc. | cxdo_8k.htm |
Exhibit 99.1
Crexendo Reports Financial Results for the Fourth Quarter and Year
Ended December 31, 2017
PHOENIX,
AZ—(Marketwired – March 6, 2018)
Crexendo,
Inc. (OTCQX: CXDO), a next-generation CLEC and an award-winning
leader and provider of unified communications cloud telecom
services, broadband internet services, and other cloud business
services that are designed to provide enterprise-class cloud
services to any size businesses at affordable monthly rates, today
reported financial results for its fourth quarter and full year
ended December 31, 2017.
Financial highlights for the fourth quarter of 2017
Consolidated
total revenue for the fourth quarter of 2017 increased 22% to $2.9
million compared to $2.3 million for the fourth quarter of
2016.
Consolidated
service revenue for the fourth quarter of 2017 increased 22% to
$2.5 million compared to $2.0 million for the fourth quarter of
2016.
●
Cloud
Telecommunications Segment UCaaS service revenue for the fourth
quarter of 2017 increased 29% to $2.2 million compared to $1.7
million for the fourth quarter of 2016.
●
Web Services
Segment service revenue for the fourth quarter of 2017 decreased
19% to $242,000, compared to $299,000 for the fourth quarter of
2016.
Consolidated
product revenue for the fourth quarter of 2017 increased 24% to
$380,000 compared to $307,000 for the fourth quarter of
2016.
Consolidated
operating expenses for
the fourth quarter of 2017 increased slightly by
$21,000 to $2.87 million compared to $2.85 million for the fourth
quarter of 2016.
On a
GAAP basis, the Company reported a $(7,000) net loss for the fourth
quarter of 2017, or breakeven per diluted common share, compared to
net loss of $(525,000) or $(0.04) loss per diluted common share for
the fourth quarter of 2016.
Non-GAAP
net income was $111,000 for the fourth quarter of 2017, or $0.01
per diluted common share, compared to a non-GAAP net loss of
$(256,000) or $(0.02) loss per diluted common share for the fourth
quarter of 2016.
EBITDA
for the fourth quarter of 2017 was $8,000 compared to $(473,000)
for the fourth quarter of 2016. Adjusted EBITDA for the fourth
quarter of 2017 was $100,000 compared to $(267,000) for the fourth
quarter of 2016.
Financial highlights for the year ended December, 2017
Consolidated
total revenue for year ended December 31, 2017 increased 14% to
$10.4 million compared to $9.1 million for the year ended December
31, 2016.
Consolidated
service revenue for the year ended December 31, 2017 increased 18%
to $9.0 million compared to $7.6 million for the year ended
December 31, 2016.
●
Cloud
Telecommunications Segment UCaaS service revenue for the year ended
December 31, 2017 increased 27% to $8.0 million compared to $6.3
million for the year ended December 31, 2016.
●
Web Services
Segment service revenue for the year ended December 31, 2017
decreased 22% to $1.1 million, compared to $1.4 million for the
year ended December 31, 2016.
Consolidated
product revenue for the year ended December 31, 2017 decreased 9%
to $1.3 million compared to $1.5 million for the year ended
December 31, 2016.
Consolidated
operating expenses for the year ended December 31, 2017 decreased
6% to $11.2 million compared to $11.9 million for the year ended
December 31, 2016.
On a
GAAP basis, the Company reported a $(1.0) million net loss for the
year ended December 31, 2017, or $(0.07) loss per diluted common
share, compared to net loss of $(2.8) million or $(0.21) loss per
diluted common share for the year ended December 31,
2016.
Non-GAAP
net loss was $(112,000) for the year ended December 31, 2017, or
$(0.01) loss per diluted common share, compared to a non-GAAP net
loss of $(1.7) million or $(0.12) loss per diluted common share for
the year ended December 31, 2016.
EBITDA
for the year ended December 31, 2017 was $(719,000) compared to
$(2.6) million for the year ended December 31, 2016. Adjusted
EBITDA for the year ended December 31, 2017 was $(108,000) compared
to $(1.7) million for the year ended December 31,
2016.
Total
cash and cash equivalents, excluding restricted cash of $100,000
for both periods, at December 31, 2017 was $1.3 million compared to
$619,000 at December 31, 2016.
Cash
provided by operating activities for the year ending December 31,
2017 was $294,000 compared to cash used for operating activities of
$(1.1) million for the year ended December 31, 2016. Cash provided
by investing activities for the year ending December 31, 2017 was
$252,000 compared to $11,000 for the year ended December 31, 2016.
Cash provided by financing activities for the year ending December
31, 2017 was $117,000 compared to $237,000 for the year ended
December 31, 2016.
Steven
G. Mihaylo, Chief Executive Officer, commented “We are very
excited with the results just announced. 2017 results were a
substantial improvement over 2016 results. This is due to our
performance and commitment to driving improvements to the business.
We have performed very well, and I believe our results will
continue to impress. I find particularly promising the strong
improvement in the fourth quarter 2017 over the fourth quarter
2016. The substantial increase in consolidated revenue for Q4 2017
over Q4 2016 of 22% is very encouraging, and I believe supports
that the operational improvements we have undertaken are the reason
for the results. It is particularly promising that we were
breakeven on a GAAP basis per diluted common share in Q4 compared
to a $(.04) loss in Q4 2016. The results were even more dramatic on
a Non-GAAP basis with a profit of $.01 per diluted common share in
Q4 2017 compared to a $(.02) loss in Q4 2016.
Mihaylo
added, “I am also very pleased that even with our increase in
revenue and continued upgrades in the business we have still
managed to keep costs in line. I believe we did a remarkable job of
containing costs with only a very small increase in expenses in Q4
2017 compared to Q4 2016. We expect to continue to work hard on
keeping our costs as reasonable as possible, while working to
improve operations and results. We continue to work diligently on
growing and improving our Partner Channel and that resulted in some
significant new Partners added to our team during the Quarter. We
never lose focus on providing our customers the best service, the
best products and the best support in the industry. We know our
award-winning Ride The Cloud ® Unified
Communications as a Service (UCaaS) are second to none and 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 our processes and partnerships to
increase shareholder value.”
Doug
Gaylor, President and COO, stated, "While these results are very
encouraging it is only a start. The team and I work every day to
improve our sales efforts, processes and results, and we are seeing
the effects of these efforts. We know that when we get our top of
the industry services and products in front of customers we can win
that business. Our sales and engineering integration allows us to
provide our customers with solutions that meet their needs. We
believe that ability as well as our products and services will
continue to distinguish us with our partners and enable us to build
new partnerships like the recently announced partnership we
developed with U.S. Cellular. We fully expect to have those
partnerships improve our results.”
Conference Call
The
Company is hosting a conference call today, March 6, 2018 at 5:30
PM EST. The telephone dial-in number is 800-239-9838 for domestic
and Canadian participants. The conference ID to join the call is
1872120. 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 next-generation CLEC and an award-winning leader
and provider of unified communications cloud telecom services,
broadband internet services, and other cloud business services that
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) being very excited with the results
just announced; (ii) 2017 results being positive due to Company
performance and commitment to driving improvements to the business;
(iii) having performed very well and expecting that results will
continue to impress; (iv) finding promising the strong improvement
in the Q4 2017 over Q4 quarter 2016; (v)finding the increase in
consolidated revenue for Q4 2017 over Q4 2016 being very
encouraging which supports that operational improvements undertaken
are shown in the results; (v) finding promising that it was
breakeven on a GAAP basis per diluted common share in Q4; (vi)
being pleased that it managed to keep costs in line and doing a
remarkable job of containing costs; (vii) expecting to continue to
work hard on keeping costs as reasonable as possible while working
to improve operations and results; (viii) working diligently on
growing and improving its Partner Channel which resulted in some
significant new Partners added during the Quarter; (ix) never
losing focus on providing customers the best service, the best
products and the best support in the industry; (x) having UCaaS
that are second to none and will save customers substantial amounts
of money while increasing their productivity; (xi) being in the
right space at the right time; (xii) team constantly working to
improve processes and partnerships to increase shareholder value;
(xiii) team
working every day to improve sales efforts, processes and results
and seeing the effects of these efforts; (xiv) knowing when its
services and products are in front of customers it can win that
business; (xv) sales and engineering integration allowing it to
provide its customers with solutions that meet their needs; (xvi)
believing it will be able to build new partnerships like the
recently announce partnership with U.S. Cellular and (xvii)
expecting to have those partnerships improve results.
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, 2017 when filed
subsequent to this press release; and Form 10-K for the year ended
December 31, 2016, as well as Form 10-Qs filed with the SEC during
2017. 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,
|
|
|
2017
|
2016
|
Assets
|
|
|
Current
assets:
|
|
|
Cash
and cash equivalents
|
$1,282
|
$619
|
Restricted
cash
|
100
|
100
|
Trade
receivables, net of allowance for doubtful accounts of
$19
|
|
|
as
of December 31, 2017 and $34 as of December 31, 2016
|
375
|
346
|
Inventories
|
131
|
170
|
Equipment
financing receivables
|
116
|
121
|
Prepaid
expenses
|
530
|
686
|
Other
current assets
|
10
|
8
|
Total
current assets
|
2,544
|
2,050
|
|
|
|
Certificate
of deposit
|
-
|
252
|
Long-term
trade receivables, net of allowance for doubtful
accounts
|
|
|
of
$10 as December 31, 2017 and $13 as of December 31,
2016
|
31
|
43
|
Long-term
equipment financing receivables
|
58
|
176
|
Property
and equipment, net
|
8
|
18
|
Intangible
assets, net
|
239
|
335
|
Goodwill
|
272
|
272
|
Long-term
prepaid expenses
|
173
|
251
|
Other
long-term assets
|
121
|
136
|
Total
Assets
|
$3,446
|
$3,533
|
|
|
|
Liabilities and Stockholders' Equity
|
|
|
Current
liabilities:
|
|
|
Accounts
payable
|
$79
|
$116
|
Accrued
expenses
|
961
|
997
|
Notes
payable, current portion
|
69
|
66
|
Income
taxes payable
|
-
|
5
|
Deferred
revenue, current portion
|
957
|
809
|
Total
current liabilities
|
2,066
|
1,993
|
|
|
|
Deferred
revenue, net of current portion
|
31
|
43
|
Notes
payable, net of current portion
|
10
|
966
|
Other
long-term liabilities
|
-
|
16
|
Total
liabilities
|
2,107
|
3,018
|
|
|
|
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,
14,287,556
|
|
|
shares
issued and outstanding as of December 31, 2017 and 13,578,556
shares issued
|
|
|
and
outstanding as of December 31, 2016
|
14
|
14
|
Additional
paid-in capital
|
60,560
|
58,716
|
Accumulated
deficit
|
(59,235)
|
(58,215)
|
Total
stockholders' equity
|
1,339
|
515
|
|
|
|
Total
Liabilities and Stockholders' Equity
|
$3,446
|
$3,533
|
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,
|
||
|
2017
|
2016
|
2017
|
2016
|
Service
revenue
|
$2,478
|
$2,038
|
$9,030
|
$7,644
|
Product
revenue
|
380
|
307
|
1,347
|
1,475
|
Total
revenue
|
2,858
|
2,345
|
10,377
|
9,119
|
Operating
expenses:
|
|
|
|
|
Cost
of service revenue
|
802
|
714
|
2,908
|
2,993
|
Cost
of product revenue
|
165
|
149
|
549
|
632
|
Selling
and marketing
|
791
|
604
|
2,924
|
2,531
|
General
and administrative
|
936
|
1,195
|
4,071
|
4,900
|
Research
and development
|
181
|
192
|
750
|
826
|
Total
operating expenses
|
2,875
|
2,854
|
11,202
|
11,882
|
|
|
|
|
|
Loss
from operations
|
(17)
|
(509)
|
(825)
|
(2,763)
|
|
|
|
|
|
Other
income/(expense):
|
|
|
|
|
Interest
income
|
2
|
3
|
10
|
15
|
Interest
expense
|
(3)
|
(33)
|
(209)
|
(138)
|
Other
income, net
|
2
|
15
|
11
|
106
|
Total
other income/(expense), net
|
1
|
(15)
|
(188)
|
(17)
|
|
|
|
|
|
Loss
before income tax
|
(16)
|
(524)
|
(1,013)
|
(2,780)
|
|
|
|
|
|
Income
tax benefit/(provision)
|
9
|
( 1)
|
(7)
|
(12)
|
|
|
|
|
|
Net
loss
|
$(7)
|
$(525)
|
$(1,020)
|
$(2,792)
|
|
|
|
|
|
Net
loss per common share:
|
|
|
|
|
Basic
|
$(0.00)
|
$(0.04)
|
$(0.07)
|
$(0.21)
|
Diluted
|
$(0.00)
|
$(0.04)
|
$(0.07)
|
$(0.21)
|
|
|
|
|
|
Weighted-average
common shares outstanding:
|
|
|
|
|
Basic
|
14,276,729
|
13,483,502
|
13,938,342
|
13,358,311
|
Diluted
|
14,276,729
|
13,483,502
|
13,938,342
|
13,358,311
|
CREXENDO, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(In thousands)
|
Year Ended December 31,
|
|
|
2017
|
2016
|
CASH
FLOWS FROM OPERATING ACTIVITIES
|
|
|
Net
loss
|
$(1,020)
|
$(2,792)
|
Adjustments
to reconcile net loss to net cash provided by/(used for)
operating activities:
|
|
|
Amortization
of prepaid rent
|
54
|
322
|
Depreciation
and amortization
|
106
|
146
|
Non-cash
interest expense
|
201
|
124
|
Share-based
compensation
|
573
|
653
|
Amortization
of deferred gain
|
(16)
|
(93)
|
Changes
in assets and liabilities:
|
|
|
Trade
receivables
|
(17)
|
56
|
Equipment
financing receivables
|
123
|
153
|
Inventories
|
39
|
(36)
|
Prepaid
expenses
|
180
|
75
|
Other
assets
|
13
|
40
|
Accounts
payable and accrued expenses
|
(73)
|
225
|
Income
tax payable
|
(5)
|
5
|
Deferred
revenue
|
136
|
(4)
|
Net
cash provided by/(used for) operating activities
|
294
|
(1,126)
|
|
|
|
CASH
FLOWS FROM INVESTING ACTIVITIES
|
|
|
Sale
of certificate of deposit
|
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
|
(1,156)
|
(163)
|
Proceeds
from exercise of options
|
1,162
|
9
|
Proceeds
from exercise of warrants
|
-
|
300
|
Payment
of contingent consideration
|
-
|
(59)
|
Net
cash provided by financing activities
|
117
|
237
|
|
|
|
NET
INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS
|
663
|
( 878)
|
|
|
|
CASH
AND CASH EQUIVALENTS AT THE BEGINNING OF THE YEAR
|
619
|
1,497
|
|
|
|
CASH
AND CASH EQUIVALENTS AT THE END OF THE YEAR
|
$1,282
|
$619
|
|
|
|
Supplemental
disclosure of cash flow information:
|
|
|
Cash
used during the year for:
|
|
|
Income
taxes, net
|
$(12)
|
$(2)
|
Supplemental
disclosure of non-cash investing and financing
information:
|
|
|
Issuance
of common stock for payment of interest on related-party note
payable
|
$109
|
$101
|
Issuance
of common stock for contingent consideration related to business
acquisition
|
$-
|
$40
|
Prepaid
assets financed through notes payable
|
$111
|
$124
|
CREXENDO, INC. AND SUBSIDIARIES
Supplemental Segment Financial Data
(In thousands)
|
Three Months Ended December 31,
|
Year Ended December 31,
|
||
|
2017
|
2016
|
2017
|
2016
|
Revenue:
|
|
|
|
|
Cloud
telecommunications services
|
$2,616
|
$2,046
|
$9,320
|
$7,757
|
Web
services
|
242
|
299
|
1,057
|
1,362
|
Consolidated
revenue
|
2,858
|
2,345
|
10,377
|
9,119
|
|
|
|
|
|
Income/(loss)
from operations:
|
|
|
|
|
Cloud
telecommunications services
|
(146)
|
(623)
|
(1,331)
|
(3,174)
|
Web
services
|
129
|
114
|
506
|
411
|
Total
operating loss
|
(17)
|
(509)
|
(825)
|
(2,763)
|
Other
income/(expense), net:
|
|
|
|
|
Cloud
telecommunications services
|
1
|
(15)
|
(183)
|
(36)
|
Web
services
|
-
|
-
|
(5)
|
19
|
Total
other income/(expense), net
|
1
|
(15)
|
(188)
|
(17)
|
Income/(loss)
before income tax provision
|
|
|
|
|
Cloud
telecommunications services
|
(145)
|
(638)
|
(1,514)
|
(3,210)
|
Web
services
|
129
|
114
|
501
|
430
|
Loss
before income tax provision
|
$(16)
|
$(524)
|
$(1,013)
|
$(2,780)
|
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 6, 2018 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
Income/(Loss)
(Unaudited)
|
Three Months Ended December 31,
|
Year Ended December 31,
|
||
|
2017
|
2016
|
2017
|
2016
|
|
(In thousands)
|
(In thousands)
|
||
U.S.
GAAP net loss
|
$(7)
|
$(525)
|
$(1,020)
|
$(2,792)
|
Share-based
compensation
|
92
|
149
|
573
|
653
|
Amortization
of rent expense paid in stock, net of deferred gain
|
-
|
57
|
38
|
229
|
Amortization
of intangible assets
|
23
|
33
|
96
|
131
|
Non-cash
interest expense
|
3
|
30
|
201
|
124
|
Non-GAAP
net income/(loss)
|
$111
|
$(256)
|
$(112)
|
$(1,655)
|
|
|
|
|
|
Non-GAAP
net income/(loss) per common share:
|
|
|
|
|
Basic
|
$0.01
|
$(0.02)
|
$(0.01)
|
$(0.12)
|
Diluted
|
$0.01
|
$(0.02)
|
$(0.01)
|
$(0.12)
|
|
|
|
|
|
Weighted-average
common shares outstanding:
|
|
|
|
|
Basic
|
14,276,729
|
13,483,502
|
13,938,342
|
13,358,311
|
Diluted
|
14,732,765
|
13,483,502
|
13,938,342
|
13,358,311
|
Reconciliation of U.S. GAAP Net Loss to EBITDA to Adjusted
EBITDA
(Unaudited)
|
Three Months Ended December 31,
|
Year Ended December 31,
|
||
|
2017
|
2016
|
2017
|
2016
|
|
(In thousands)
|
(In thousands)
|
||
U.S.
GAAP net loss
|
$(7)
|
$(525)
|
$(1,020)
|
$(2,792)
|
Depreciation
and amortization
|
25
|
36
|
106
|
146
|
Interest
expense
|
3
|
33
|
209
|
138
|
Interest
and other income
|
(4)
|
(18)
|
(21)
|
(121)
|
Income
tax provision/(benefit)
|
(9)
|
1
|
7
|
12
|
EBITDA
|
8
|
(473)
|
(719)
|
(2,617)
|
Share-based
compensation
|
92
|
149
|
573
|
653
|
Amortization
of rent expense paid in stock, net of deferred gain
|
-
|
57
|
38
|
229
|
Adjusted
EBITDA
|
$100
|
$(267)
|
$(108)
|
$(1,735)
|