Crexendo, Inc. Q1 FY2021 Earnings Call

Good afternoon, everyone, and welcome to the Crexendo First Quarter 2021 Earnings Conference Call. It is now my pleasure to hand over the call to your host, Steven Mihaylo. Steven, you have the floor.

Thank you, Catherine. Good afternoon, everyone. I'm Steve Mihaylo, Chairman and CEO of Crexendo. I want to welcome all of you to the Crexendo First Quarter 2021 Conference Call. On the call with me today are Doug Gaylor, our President and COO; Ron Vincent, our CFO; Jon Brinton, our Chief Revenue Officer; and Jeff Korn, our General Counsel. The people with me today make up the best executive team I've ever had the pleasure of working with. But that is not the entire team. I also want to point out that the rest of the management team includes Nishith Chudasama, our VP of Engineering; Theresa Weitzel, our Head of Channel sales; Joe Seeler, our Controller; and Brian Spitler, our VP of Operations. These individuals all have undergraduate degrees, and some have master's degrees with an average of over 20 years of experience. In addition, we are excited that we will be adding from NetSapiens to our senior executive management team Anand Buch, CEO and Co-founder of NetSapiens with a degree in electrical engineering and an MBA; David Wang, Co-Founder and Chief Architect of the NetSapiens platform, who is also a degreed engineer. David also participated in drafting the standard in the Frame Relay Forum or TF and ETSI. We will also be adding Jim Murphy, NetSapiens' Executive Vice President, who holds an MSEE degree and has spent most of his career in telephony. The senior management of NetSapiens all have over 20 years of experience. This is a merger that is perfect for both companies. I'm going to ask Jeff to read our safe harbor statement, and after that, I will provide some brief general comments about the quarter. Ron will provide more detail on the numbers. Doug will offer a business and sales update, and then we will open the call to questions. Jeff, could you please read the safe harbor agreement?

Yes, Steve. I want to take this opportunity to remind listeners that this call will contain forward-looking statements within the meaning of the Securities Act of 1933 and the Securities Exchange Act of 1954. The Private Securities Litigation Reform Act of 1995 provides a safe harbor for such forward-looking statements. All statements made in this conference call other than statements of historical fact are forward-looking statements. Forward-looking statements include, but are not limited to, words such as believe, expect, anticipate, estimate, will, and other similar statements of expectation identifying forward-looking statements. Investors and listeners should be aware that any forward-looking statements are based on assumptions and are subject to risks and uncertainties that could cause actual results to differ materially from those discussed here today. These risk factors are explained in detail in the company's filings with the Securities and Exchange Commission, including the Form 10-K for fiscal year ended December 31, 2020, and the forms 10-Q as filed. Crexendo does not undertake any obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or any other circumstance. I'd now like to turn the call back to Steve. Steve?

Thank you, Jeff. This is an exciting time for the country and for Crexendo. People are starting to return to a more normal life and business is picking up. Although business has changed, Crexendo is well positioned to take advantage of the new work-from-anywhere environment. This has been a remarkable quarter for us. While I would have preferred to maintain our streak of GAAP profitability, we anticipated that the costs associated with the NetSapiens merger would make that challenging. Despite the GAAP loss, we remain profitable on a non-GAAP basis, reporting a non-GAAP net income of $308,000, or $0.02 per diluted and basic common share. We are continuing to expand the business. UCaaS service revenue for the first quarter of 2021 grew by 21% compared to the first quarter of 2020, and consolidated service revenue increased 19% year-over-year. These are very encouraging trends. While we do not provide financial guidance and this is simply my viewpoint, I have expressed to the team my belief that we can achieve even more. I will not be satisfied with anything less than 40% or greater annual growth for the next two to three years. The revenue growth is a significant part of our story. We have already finalized the merger agreement with NetSapiens. Our proxy is available to our shareholders, and NetSapiens shareholders have also received their information. We have received approval from a majority of Crexendo shareholders for the merger, and NetSapiens has informed us that a majority of their shareholders have also approved it. Therefore, we only have the formality of our shareholder meeting and then the closing. We hope to finalize the merger by the end of this month. This merger is transformative for both companies. Our team is dedicated to ensuring that our customers and the NetSapiens community receive the best telephony service possible. Crexendo's customers will also benefit, as we will be able to provide them with the NetSapiens video collaboration and mobility solutions, which I believe are the best in the industry, even surpassing the current market leader. I am confident that our combined company will be a significant advantage for our shareholders. NetSapiens recently received recognition in Frost & Sullivan's UCaaS report as the third-party platform with the fastest growth in the North American market. Additionally, a report ranks NetSapiens fourth in UCaaS seats in North America. This merger will enhance our reach. The pro forma consolidated revenue for our combined company was $27.8 million for 2020, nearly a 20% increase from $23.3 million in 2019. This strong growth demonstrates that the merger is beneficial for all our shareholders. A key element of Crexendo is operating efficiently, and we will be diligent in monitoring every penny of shareholder funds. However, we will make essential investments to foster continued improvement and growth for the company. We have been carefully following our plan. We have achieved profitability, successfully uplisted to NASDAQ, completed a public offering, and expanded the company through both organic growth and acquisitions. I am confident we will continue to execute our plan. I have never been more optimistic about our future. 2021 will focus on growth. With that, I'll turn the meeting over to Ron. Ron?

Thank you, Steve. Consolidated total revenue for the first quarter increased 17%, as Steve mentioned, to $4.5 million compared to $3.9 million for the first quarter of the prior year. Our consolidated service revenue for the first quarter increased 19% to $4.1 million compared to $3.5 million reported for the first quarter of the prior year. Our consolidated telecommunications segment service revenue for the quarter increased 21% or $691,000 to $4 million as compared to $3.3 million reported for the first quarter of the prior year, offset by a 26% decrease or $40,000 decrease in our web service segment service revenue. Product revenue for the first quarter decreased 3% or only $11,000 to $368,000 compared to $379,000 for the first quarter of the prior year. Our consolidated operating expenses for the first quarter increased 45% to $5.3 million compared to $3.7 million for the first quarter of the prior year. During the first quarter, our acquisition-related expenses accounted for $684,000 of additional general and administrative expenses, making up a large part of that increase. Net loss for the first quarter of $715,000 or $0.04 per basic and diluted common share compared to net income of $140,000 or $0.01 per basic and diluted common share for the first quarter of the prior year. On a non-GAAP basis, net income for the first quarter of $308,000 or $0.02 per basic and diluted share as compared to $275,000 or $0.02 per basic and diluted common share for the same period of the prior year. Our EBITDA for the first quarter was a loss of $721,000 as compared to earnings of $284,000 for the same period in the prior year. Adjusted EBITDA for the first quarter was income of $245,000 as compared to $389,000 for the same period of the prior year. Our cash, cash equivalents, and restricted cash balance at March 31 was $16.2 million as compared to $17.7 million at December 31, 2020. Operating activities utilized $248,000 of cash, cash equivalents. Our investing activities utilized $2.2 million of our cash, cash equivalents. Financing activities provided $965,000 of cash, cash equivalents and restricted cash, primarily provided by proceeds from stock option exercise. I will now turn the call over to Doug Gaylor, our President and COO, for additional comments on sales recovery.

Thanks, Ron. We had a strong Q1 to begin the year with a 17% year-over-year total revenue increase and a 21% increase year-over-year in our UCaaS service revenue. On top of the strong revenue numbers, we announced our exciting merger with NetSapiens that will add a strong increasing revenue recurring revenue stream, along with a tremendous UCaaS platform that currently exports north of 1.7 million end users. We also made significant investments in our UCaaS offerings and are prepared to launch our new Crexendo VIP platform this month that will enhance our current offerings with the concentration on VIP, which stands for video, interactions, and phone. I believe this offering will be a game changer for us, and I will highlight more on that in a moment. Our solid revenue growth year-over-year, despite the headwinds from the pandemic and slowdown in the economy, is a testament to the strength of our UCaaS offering and the need for our work from anywhere capabilities that most businesses need to survive in today's new business environment. While our growth for the quarter did not produce GAAP income for the first time after 8 consecutive quarters, we expected that due to the nearly $700,000 in acquisition-related costs, combined with our investments made for our new Crexendo VIP offering and additional investments in our sales and support teams. Our non-GAAP net income of $308,000 or $0.02 per share continues to show that we are managing the business well as we continue to grow and improve. The costs associated with our acquisition of NetSapiens are a significant investment in our future growth and our success. As you are aware, we have been spot on with following up on our plans. We're committed to managing a profitable business, and we're successful in that endeavor for 8 quarters in a row. We're committed to uplifting organically to a major exchange and completed that in July of last year with our listing on NASDAQ. We're committed to raising funds to help our growth through accretive acquisitions, and we were successful with that with our S-1 offering in September. We're committed to using those funds to invest in strong acquisitions to help spur our growth and our offerings, and that commitment will be met shortly as we close on our merger with NetSapiens in the coming weeks. The NetSapiens acquisition as a UCaaS platform provider that experienced 30% revenue growth from 2019 to 2020, along with tremendous growth in end users utilizing their platform, total over 1.7 million end users, and that propelled them to the fourth largest UCaaS platform provider in the U.S., according to a recent Frost & Sullivan report. Not only are we acquiring a strong and increasing revenue stream in a solid UCaaS platform, but we are also adding a terrific video collaboration tool that we will own as opposed to white-labeling our current collaboration tool that has lower margins and less capabilities. We have already started marketing the new collaboration tool as Crexendo HD and have had great reviews and early success. We are also extremely excited about working within the NetSapiens team. We are committed to ensuring that their platform is the best offering in the UCaaS industry and are committed to their partner community and our customers. The platform will be the core foundation for our Crexendo VIP offering, with the concentration on video with our collaboration tool, interactions with our strong suite of text, chat, messaging and factoring options and phones with our Crexendo-branded desktop phones with lifetime warranties, along with our cellphone capabilities for computers and our mobile phone applications for cellular and tablets. We will have an offering that customers, partners and resellers will all love. As we integrate the 2 organizations, there are a lot of benefits that the combined company will recognize, including the aforementioned technology, along with great personnel resources and industry experience that will help us maintain strong growth with healthy EBITDA and strong cash flow. We're excited to get the merger finalized and start implementing our combined plans, which are already in the designing stages and planning stages. Until the merger is consummated, and afterwards, as a combined company, we will continue to manage our costs and reinvest in our organization. There's still tremendous opportunity in the UCaaS market, and the need for work-from-anywhere solutions for businesses will only continue to grow and intensify. We are well positioned to take advantage of this growth as a stand-alone entity. But with the combination of Crexendo and NetSapiens, it will be a significant force to be reckoned with in the industry. I'm excited about our past performance and even more excited about our future. We continue to execute on our plans and commitments for our shareholders, and our strategy for continued organic growth and growth through acquisitions will only gain more traction in the months and years ahead. With the opportunity to increase our market share, not only here in the U.S., but in the previously untapped international markets as well, we are positioned extremely nicely to deliver for our shareholders. And with that, I will turn it back over to Steve for any additional comments.

Thank you, Doug. That was a wonderful report. I have no additional comments except to echo what you've heard so far. Catherine, we're going to open it up for questions, if you have any.

Your first question is coming from Josh Nichols.

It's great to hear that the merger is nearly finalized with the majority of the shareholder vote. Could you provide more details on the integration timeline, assuming you're already planning for it? What do you see as the closest opportunities for cross-selling after the merger?

I'm going to let Doug handle that. But I do want to make a couple of comments. First of all, we were working on this merger probably 18 months ago. Part of it is the bureaucracy we had to deal with and new rules that the SEC and accounting folks had us up against. But we've been doing the integration work for the last couple of months, and Jon Brinton and Doug Gaylor and the entire team for that matter, have been preparing for this. With that, I'm going to turn it over to Doug, and he's going to fill in the blanks for me and you.

Yes. Great. Thanks, Josh, and good talking to you. So yes, obviously, the integration discussions are already well underway. So departmental meetings, planning sessions, planning strategies that we anticipate our shareholder meeting on Monday of next week, we'll get everything formally approved. And then it's just a matter of crossing the Ts and dotting the Is. As Ron mentioned earlier, we anticipate to have everything closed, hopefully, by the end of this month. From that point, it's really working on the synergies between the 2 organizations and growing both organizations consistently. So as I mentioned, with our 20%, 21% growth on the UCaaS side in the last quarter and NetSapiens' 30% in the last year, we anticipate that being able to continue to grow both sides of the equation. So we're extremely excited about putting the organizations together. The NetSapiens management team is extremely excited as well. So it's, as Steve said earlier, just a perfect match and a perfect fit for both organizations.

Thank you, Doug. Does that answer your question, Josh?

Yes, it did. And then just as a follow-up, I'm curious as to the trends you're seeing in business communications spend. Has that been improving post-COVID? And then also any commentary about backlog, see growth or anything that you're seeing on the business side?

I'm going to let Doug handle that one.

Yes. I think that we are seeing businesses coming back to the office. That's spurring on a need for them to reinvest in our communication platforms. The whole pandemic for the last 15 months has been a little strange in the fact that businesses were a little hesitant for a while and then realizing that they had to move forward. So we've seen kind of a little ebb and flow in the sales traction there. But I think we're seeing businesses today coming back, reopening their offices and needing more and more communication tools. So I think that the work-from-home environment is not going to change. It may continue to shrink a little bit, but it's going to be well above what the prepandemic work from home environments where. The need for collaboration and the tools that we bring to the table with our UCaaS offerings are only going to become more and more prominent in today's business society. Our backlog was up year-over-year. We continue to see strong demand out there for our products and our platforms. We've got a lot of interest from our partners in the new VIP platform that's going to be rolling out and some of the new capabilities with our collaboration tool. So I'm extremely, extremely excited and extremely bullish on the future.

Your next question is coming from Catharine Trebnick.

Congratulations. Nice sprint in the acquisition also.

We're obviously very excited about the future.

Definitely. Doug, I have a question for you. Operating expenses increased, particularly in general and administrative costs due to the acquisition. However, sales and marketing expenses were also up. Did you invest in any new marketing tools or launch specific marketing programs that contributed to this increase? How should we view this trend for the remainder of the year?

Yes, great question. So yes, we're obviously reinvesting in sales. We've hired new additional salespeople, additional channel managers, obviously, putting a marketing pitch in and building the new Crexendo VIP platform. We've had a lot of marketing initiatives. I'll let Jon Brinton, our Chief Revenue Officer, add a little bit more color on that because he's really spearheading the VIP rollout. So we did obviously have some additional sales and marketing expenses as we queue up for that. And we put some additional incentives out there as well to keep sales exciting, and keep the partner channel exciting.

Yes. Catherine, good to talk to you. A couple of investments that we've made over the longer term, I think, that are important for the program as we look to expand, especially with the launch of the VIP platform and just the great tools that this gives us to reach out to a new community of selling partners is we did invest in a SaaS contract tool that we've been deploying over the last 3 months and have just released, called MasterStream. Basically, what it does is if we have a channel partner who's got a sales rep that gets up in the morning and has an appointment at 10 o'clock, they can log in, price and propose our solutions, and have all our collateral marketing material available to be presented electronically or physically to a customer. So that's one area that we've made some improvements into our sales and marketing processes to kind of remove friction from that environment. The other area is just the preparation for the launch of the VIP platform. I mean, that's one of the things that I'm just thrilled with about the NetSapiens acquisition, is just that it's great technology. More and more meetings that we have permanently, some people that are not in those meetings will not be present with us in the room. While more of us may be back together, there's still the requirement to bring in people who are not there and have an immersive environment. With this platform and the technology that we're getting through this acquisition, we've positioned it as the Crexendo VIP platform. We've made some investments in preparing for that launch, and we're going to continue to drive it because we really think it changes the dialogue that we can have with our partners and prospects for Crexendo.

Your next question is coming from Charles Ronson.

Steve, best congratulations to you and your team and your new team as well. This quarter was really great. I have to say that in addition to just doing a significant acquisition, your revenues have continued actually better, looking at the trade lines in there before.

Yes. One of the things I'd like to add is if you just do the math, what we've already got in place is going to be 50% or 60% ahead of last year. And that, hopefully, will be the low mark.

I wouldn't be surprised. I haven't had time to calculate yet, but we have a couple of minutes before the call began. It’s been great. I look at the pro formas of the two organizations together. The issue with pro formas is that they are static, while I am dealing with two very dynamic organizations. I understand you'll be making necessary investments. From a static perspective, how many expenses do you think you can actually cut from historical levels just by merging the two companies? To the extent you're able to share, what kind of projections could you provide right now? I'm not trying to put you on the spot.

We're not going to put out any projections. We don't do that. But if you think about this thing, there's 2 accounting departments. There's only going to be 1 eventually. There are multiple data centers, and right now, we may have one too many. So that will be eliminated over time, but it's probably going to take 12 to 18 months. You have to understand that our sales are going to grow every single day into the future. So we'll either grow into those data centers or we'll optimize them. Those are just a few of the synergies. Of course, we watch every single penny at Crexendo, and we're going to spend more and more money on training to make sure that our culture is aligned with each other. I would say by the end of this year, based on what I'm hearing, the NetSapiens folks and the Crexendo folks are going to be in lockstep. We're all A players. We all expect to win, and that's just in our DNA. You're going to see more and more of that and improvement. It isn't going to be a straight line. It may look like a stair-step or jagged line, but the net result is going to be onward and upward. Do you want to add anything to that, Doug?

No, I think those are great comments, Steve. Again, when we look at combining the 2 organizations, they've both been extremely well run. So we're excited about seeing where there are opportunities to cut costs, and those are areas like software applications and dual applications that we may be running. So there's definitely some bit upside opportunity. Most importantly, it's growing the top line revenue, and so we'll be reinvesting on both sides to make sure that we're growing the top line.

Your next question is coming from Damon Finaldi.

It's Damon. This question is for Jon and Theresa. I've noticed that many of our national competitors are trying to increase their market share by raising spiff amounts. How are you addressing this issue? What are your strategies for managing spiffs?

Well, let me just comment on this. This is one of the largest markets in the world. Even the leaders in this business only have about 1% of the market. I think there's room for growth for decades, not just today and tomorrow, but for decades. I'm excited about this because we are going to have one platform. It's slightly better than our platform or it does a little more. But more important than that, we added a whole bunch of A players to the team. I'm just thrilled with this merger, and I believe it's going to propel us into the first class. But you have to understand we're going to grow organically and through mergers forever. That's how we've done it in our former business, and that's how we're going to do it going forward. This is not a strategy. It's a way of life. And Doug, do you want to add anything to that?

Yes, just a little bit. And then I'll have Jon add a little color as well. So obviously spiffs are something that have always been out there. We want to earn end users' business, and we're always out there making sure that we've got something that's a competitive offering. So it's something that we're not prepared to go out there and buy the business at all costs. If you look at our competitors that are doing that, they continue to bleed money. In just the last few days, the results of some of our competitors continue to show massive losses. We're going to do it prudently, and we're going to go out there and earn the business. Jon, do you want to add more color to that?

Thank you for the question, Damon. I believe that the merger of Crexendo and NetSapiens will create significant opportunities for our potential channel partners. If you examine NetSapiens' approach to building and selling their platform alongside their SNAPaccel model, which hosts services for providers, combined with our method of enabling agents to engage with us, we present a compelling story for our portfolio of offerings. While I acknowledge that there are certain pay-to-play aspects and various incentives, factors like ease of doing business and reliability play a crucial role. In response to Catherine's earlier question, we selected MasterStream as a SaaS tool for our agents to simplify pricing and proposals, which reduces friction in the sales process. Additionally, through our VIP platform, a result of our merger with NetSapiens, we are implementing a 100% uptime guarantee to ensure maximum reliability for our customers. We are focused on adding value and fostering long-term relationships rather than engaging in promotional activities. We do not feel pressured to provide the highest incentives or match market offers due to the overall advantages of our program.

Our next question is coming from Ronald Saul.

Maybe this question is for Ron. On the income statement, we saw there were $684,000 of SG&A related to the merger. But in the cash flow statement, it shows a business acquisition of $2.163 million.

Yes. Those are separate transactions. So that $2.1 million on the statement cash flow is related to business acquisition costs directly related to a small acquisition we completed during the quarter that was not significant to the business. So it wasn't called out specifically.

Okay. And maybe one more question. Will the people from NetSapiens be moving? Will Anand be moving to Arizona? I assume they're going to keep most of their present structure in La Jolla.

I'm going to answer this one. We are a virtual company, and that's what we sell. You don't see it right now, and we probably won't be able to use it, but we'll use it internally. All of our video conferencing and everything is better than the current leaders out there. With that, we'll be able to work together as if we're in the same room. It just happens that Anand Buch has relatives here in the Phoenix area. Whether he moves or not, that's not for me to decide. That's for him to decide. Whether any of those people move or don't move, that's for them to decide. I think that with virtual communication like we are in, the UCaaS business, it's not really necessary. But of course, if they want to move their business, they're more than welcome to. Did you want to add anything to that?

No. I'm just looking forward to the 115-degree days in Phoenix, so I can go over to San Diego just to drive in La Jolla in business meetings because it's a little warm here in Phoenix.

Yes. Most people get out of knowledge in the summer time.

Any follow-ups, Ron?

No, I'm good. Thank you.

Thank you.

Your next question is coming from Edward Gilmore.

Congrats on the quarter and getting this merger to the finish line here. I just had a couple of quick questions on pricing and sales. I was wondering if you could maybe comment a little bit on expected gross margins for the VIP solution and the Crexendo HD solutions.

Well, I'm going to let one of the guys jump in on this one.

Yes. I would think that we anticipate strong gross margins. I mean, obviously, we'll own the platform with the merger with NetSapiens. So having our own platform today with the Crexendo current platform, we've got strong margins and continue to have strong margins because we own that platform. The hardware aspect of it has always been a little bit lower margins. But combined, our gross margins have always been strong. We anticipate the Crexendo VIP platform continuing to be strong margins. NetSapiens runs a strong margin on their side of the equation as well. So we anticipate strong margins going forward on both sides.

Okay. And then just a follow-up question. Do you all have a sense yet of how many customers you may be able to onboard to the NetSapiens solution or, I guess, the HD solution per month or quarter or however you're going to model that?

Yes. Again, 2 sides of the equation there. If you look at NetSapiens, they brought on about 24 new partners selling their platform just last year. We anticipate those numbers to continue and be even maybe higher numbers in 2021. That's obviously from a platform perspective. When you talk about us onboarding customers, we anticipate continuing growing our sales, onboarding more customers onto the VIP platform. That's going to start in June, and we anticipate that taking off like a rocket. From a SNAP.HD, from a Crexendo HD and the collaboration tool, that's going to be part and parcel of our offering on the VIP platform. We'll have different licenses, and one of the licenses will include the video application. As we anticipate, we'll see a lot of adoption for licenses that have the Crexendo HD collaboration tool built into it.

Your last question is coming from Greyson Hillman.

This is Greg Hillman. I was just reading a few of the documents for the merger. Number one, it says that NetSapiens was interested in a potential merger or sale. Why were they interested in a potential merger or sale, as you could ascertain?

Yes. I think that when you look at both organizations, growth obviously was a major component for both organizations. So Crexendo obviously has been looking for growth, and NetSapiens is looking for growth. As a public company, we had access to the public markets to go out and raise that capital. NetSapiens, being private, didn't have that same luxury to raise capital. To grow in this competitive market takes the right talent and the right people onboard, which is an expensive endeavor. This industry, telecom, has been ripe with M&A for quite some time because it is so competitive. For NetSapiens to continue growing their platform, they needed a good partner. Crexendo was a perfect partner for them. To grow the way we want, NetSapiens was a perfect fit for us.

Okay. In some of the major verticals, NetSapiens was going after included new contact center as a service and also offerings to education. I noticed that they signed up Kaplan University. Are they new areas for you, verticals that you haven't been in before?

Yes. Good question. When you think about verticals, we've always talked about the fact on the UCaaS side that every business out there has a phone system, and most of them need our service. Whether it's a school, whether it's a doctor's office, whether it's a car dealership, we sell from an end-user perspective to all different verticals. NetSapiens sells platforms to UCaaS providers, very similar to Crexendo. The UCaaS providers that NetSapiens sells to, obviously, sell to all different types of verticals out there. Kaplan is a unique proposition in that they're not actually a reseller of the platform, but they purchased the platform for their own internal use, which is a unique aspect in that NetSapiens is a platform. It's also a system for large enterprises. That's a very good opportunity for us and one that NetSapiens has just begun exploring. That will likely yield many opportunities for that further.

Okay. And then contact center as a service, did Crexendo sell that offering already?

Yes. Both organizations have contact center applications built into their platform. Crexendo had a contact center solution, as did NetSapiens. The exciting part is taking the best of both platforms and the engineering talents from both sides to build a better mousetrap. The offerings that both organizations had were great and will only get better with a focus on cross-migrating technology. If there was a weakness on one side, whether it was Crexendo or NetSapiens, we'll be able to fill that void with the strength from the other organization.

Yes. One thing I'd like to add, Greg, is that having multiple platforms is very costly. We will unify onto one platform in about 12 to 24 months, which will allow us to optimize various aspects such as expenses and efficiency. While we're growing, I anticipate that we won't need every person on board once we streamline these two organizations. This isn't about cutting expenses and halting growth; we are a dynamic and evolving organization. Everyone here shares the same goal: to succeed. As Doug and Jon Brinton noted, we are going to succeed; it's just a matter of time. It's not a question of if, and everyone around here agrees.

Steve, is the NetSapiens team, like their founder, does he spend 100% of his time on the company or does he have other ventures?

No. I think he spends 100% of his time. Whether you have other ventures as long as you're spending 100% of your time and when you take a shower or a bath in the morning, you're thinking about Crexendo, we don't care about all of that.

I can say, Greg, that the executive team at NetSapiens, that is 100% their core focus, just as it's 100% of our core focus on the executive team here at Crexendo. They live, breathe, and die for the growth and the success of their organization as we do. I can't be more excited about the commonalities between our teams because we have the same work ethic, ideals, and dedication to make this a tremendous success.

Okay. And Doug, I don't think I got to the right page yet in the document, but who's going to own what percentage of the combined company between NetSapiens and Crexendo?

Yes. Ron can probably give a better breakdown on percentages there. But I think after the merger is complete, Ron?

Yes. I believe and you'll find in the document that the NetSapiens shareholders will own approximately 14% of the combined entity's outstanding common shares. A large portion of the purchase price is the exchange of our common stock options for their stock options. So all employees or the majority of the employees will be option holders in the combined entity.

Okay. Is there a table that shows the owner, what percentage they have somewhere, the combined entity in the document?

In the document, yes.

It's in the proxy, Greg. I'm not sure what page it is, but there is a beneficial ownership page in that phone book that you have.

Yes. Greg, it's important to remember that Crexendo operated more like a private company due to my ownership. My goal is to gradually dilute my stake until we have a substantial number of shares available. We may never reach the share quantity that many of our competitors have, but this approach benefits shareholders. I believe there are four key constituents: shareholders, employees, vendors, and customers, listed in order of importance. I would actually prioritize customers above vendors. Aside from that, the other groups are equal in importance, with shareholders being slightly more prioritized. And thankfully, one of my key guys provided me with a webpage here. I can't read it; the font's too small. But you'll get the theory you're dealing with. We consider our shareholders to be the number one constituency that we have to provide for. What we want to do is get a bigger float out there so that it's easier to trade our stock. You'll have that when NetSapiens' lockup period expires. It just happens naturally as we offer more employees options. The important thing is, everyone benefits from this. We have a community of people. We want to improve everyone's life. If I get diluted down to nothing, to 0, it will probably happen when I'm dead. I don't intend to die anytime soon. So everyone around the table is laughing. The point is we're going to make sure that our shareholders are number one. I've been way too wordy, so I'm going to shut up. If you have another question, feel free to ask it.

We have no further questions from the lines at this time.

All right. Thank you, everyone. Thanks for being on the call. We've had the most questions we've ever had. We ran for just about 1 hour today, and we look forward to seeing you or hearing from all of you in July. By the way, we know what our numbers are a week or 2 before we release them, but we're trying to be sensitive to our shareholders and our analysts. We've been having our conference call a week later than most of our competitors. If they get their act together and have their conference call a little earlier, we'll rebut the whole thing a day or 2 after them. Thank you, and we look forward to seeing you next quarter. In the meantime, we're going to work very hard for all of you. Thank you.

Thank you, everybody. Appreciate it.

Thank you, ladies and gentlemen. This does conclude today's event. You may disconnect at this time, and have a wonderful day. Thank you for your participation.