Greetings. Welcome to the Crexendo Fourth Quarter 2022 Earnings Call. Please note this conference is being recorded. I will now turn the conference over to your host, Steve Mihaylo, Chairman of the Board. You may begin.

Thank you, Jon. Good afternoon, everyone. I'm Steve Mihaylo, Chairman of Crexendo. As you have seen, it's been a very busy day for us. I want to welcome all of you to the Crexendo Q4 2022 and year end conference call. Joining me on the call is Jeff Korn, our new CEO; Doug Gaylor, our President and COO; Ron Vincent, our CFO; Jon Brinton, our CRO; and Anand Buch, our CSO. I'm going to ask Jeff to read our Safe Harbor statement. After that I will have a few personal statements, then turn the call over to Jeff for more brief comments. Ron will provide more details on the numbers, Doug will provide a sales and business update, and then we will open the call up to questions. Jeff, would you please read the Safe Harbor?

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 1934. 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 may include but are not limited to, words like believe, expect, anticipate, estimate, will, and other similar statements of expectation identifying forward-looking statements. Investors 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. The risk factors are explained in detail in the company's filings with the Securities and Exchange Commission, including the Form 10-K for the fiscal year ended December 31st, 2022 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 otherwise. I'll now turn the call back to Steve.

Thank you, Jeff. Well, as you probably know by now, I've decided to retire. This has not been a spontaneous decision but one that I have thought through for some time now. I will turn 80 in November. My health is great, and I wanted to retire while I had good health and enjoy my retirement. The process we undertook allowed me to retire knowing Crexendo is in good hands. And I might add that Ron Vincent has thoroughly cleaned up the balance sheet across the board and is poised for greatness. Let me now address my stock ownership interest. I will not have to sell any shares for estate planning purposes. My family and I have decided that Crexendo will be given to my foundation. I have been very fortunate in my life, and I do not take that lightly, and I want to do good fortune to be shared with those who haven't had the advantages or opportunities that I've had. This is why the shares are going to the foundation which supports education, drug addiction, women's issues, community issues, and a host of other issues. I have full faith in the foundation. As a matter of fact, both Doug and Jeff sit on the Foundation Board, which is a benefit to both the Foundation and Crexendo. Let me briefly discuss the transition. We have an amazing management team I have worked with. Doug for over 35 years. I have worked closely with Jeff and Doug, and Doug worked together, and I have had a history with the rest of the senior management team. I have worked with Jeff for over 14 years now. He is steady; he has a deep understanding of legal, business, and regulatory issues that we exist in, and he has a broad view of the company's operation. He is an excellent communicator and problem solver. I could not be more excited about the transition and our future. This is the best management team I have worked with. And I will turn the call over to CEO, Jeff.

Thank you, Steve. And Steve, a thank you is not perfunctory; it's genuine. And it's not just for me but it's everyone here at Crexendo as well as everyone in the industry that you've impacted in the tens of thousands of people whose lives you've enriched, both personally and professionally. Steve has been a trailblazer in this industry for over 50 years and a mentor to many who have gone on to senior leadership positions in our industry, including most of the people sitting with me here today in this room. Steve's belief that we must provide the best Software Solutions, products, and services while also providing exceptional support and respect to our customers will remain the guiding principles under which Crexendo will continue to operate. As Steve pointed out, he and I have worked together for over 14 years. He's taught me the telecom business, showed me that a CEO must have an open door, lead by example, strive to always treat everyone respectfully, and always listen. His leadership and generosity, both of time and of his personal resources, will be something that I strive to emulate. I am very pleased that he has agreed to remain on the Board to help the team in this transition. I am thrilled to be working with such a talented and dedicated executive team. We have worked together well, and I'm sure we'll continue to do that. I have worked with Doug for over 12 years, Ron for 10 and have an excellent working relationship with the remainder of the executive team. We will work as a team and do our best to drive strong performance and continue our culture of excellence. Doug, Ron, and I meet every day and discuss operations. That will not change. We have regular meetings with the executive management team, including Jon, Anand, David, and Jim, as well as Bryan, who recently joined our team from Allegiant. I know that experience and knowledge will make our sessions that much more valuable. I believe in a collaborative approach, so I guess the only change is if we can't agree, I get to decide, but that really almost never happens because there is consensus within the group. At today's Board meeting, I discussed my belief that with our current growth trajectory and with all the available opportunities for additional investment, it is in the best interest of our shareholder value to discontinue our quarterly dividend. We believe the cash would be better served by investing in our technology, saving potential acquisitions, or other corporate action, including potentially a stock buyback. We have agreed to pay a dividend this quarter as we believe it was an expected action, but going forward, we do not expect that we will continue, and I will convene the Board to determine other uses for the cash. In addition, we believe it is important to do a better job of getting our stories out to investors. You may have noticed in our press release that we have retained an IR firm to assist us in that regard. Now getting to the actual results and our performance, this was an exceptional quarter and year for Crexendo. Our financial performance is tracking ahead of plan, which supports our belief that we are on the right track. In the fourth quarter, we drove a 34% increase in consolidated revenue while continuing to grow on an organic basis. We substantially improved our non-GAAP net income to $4.1 million. During that period, we did record a substantial write-down in goodwill as a result of the downturn in the market, which heavily contributed to the GAAP loss. However, we had very strong non-GAAP earnings and positive cash flow, underscoring the inherent profitability of our operations and once our performance can be viewed on a comparable basis. That said, the team will be working to improve GAAP results and non-GAAP results and will continue managing the business efficiently and productively. We want to increase our organic growth and we will work hard on that. I expect to spend the rest of the year working with the team to fully integrate all the parts of the business and particularly the Allegiant team. We plan to complete the migration of our Crexendo classic customers to our award-winning VIP platform. We want to add exciting upgrades to the software and we will not rest until we are operating as one highly-functioning team. We will work to increase productivity, watch our margins and costs carefully and have positive cash flow. If we do all these things, I believe we will be in a great position to continue our growth, improve productivity, and generate additional shareholder value. We are watching what Doug calls the fishing pond, and while we in the short-term are not concentrating on integration, we understand that sometimes the fish will jump in the boat. But we will use our cash for acquisitions hopefully, as our intention, that we generate from operations, as we don't want to dilute existing shareholders any more than is necessary. We intend that all acquisitions are accretive primarily from the fishing pond. I thank all of you for your support and interest in Crexendo. And with that, I will turn the call over to Ron for more details on the numbers.

Thank you, Jeff. Jeff went over some of the highlights for the quarter and the full year but I'll go into the details. Financial highlights for the fourth quarter of 2022 are as follows. Total revenue for the quarter increased 27% to $11.4 million as compared to $9 million for the prior year. Service revenue for the quarter increased 41% to $6.1 million compared to $4.3 million for the prior year. Software Solutions revenue for the quarter increased 14% to $4.4 million compared to $3.9 million, and product revenue increased 16% to $947,000, compared to $815,000 for the prior year. Margins remain strong, with telecom service margin on a combined basis at 66%, our software solutions gross margin at 65%, and our product gross margin at 43%. Consolidated operating expenses for the quarter increased 370% to $46 million. That's compared to $9.8 million for the prior year. During the fourth quarter, we completed our goodwill and intangible asset annual impairment analysis and recorded a goodwill and long-lived asset impairment of $32.7 million. The Allegiant acquisition contributed $2 million of the additional increase in operating expenses. The company reported a net loss of $32.6 million for the quarter, or $1.33 loss per basic and diluted share, compared to a loss of $602,000 or $0.03 loss per basic and diluted common share for the prior year. The majority of that loss is the $32.7 million goodwill and long-lived asset impairment we recorded during the quarter. We reported a non-GAAP net income of $2.5 million for the quarter, or $0.10 per basic and $0.09 per diluted common share compared to non-GAAP net income of $592,000 or $0.03 per basic and $0.02 per diluted share in the prior year. EBITDA for the quarter was a $1 million loss compared to a $102,000 loss in the prior year, but our adjusted EBITDA for the quarter increased $596,000 compared to $474,000 for the prior year. Now, I'll go over some highlights for the full year ended December 31st, 2022. Total revenue increased 34% to $37.6 million compared to $28.1 million for the prior year. The Allegiant acquisition contributed $1.8 million of the increase in total revenue. Service revenue increased 14% to $19.5 million compared to $17.1 million for the prior year, with Allegiant contributing $1.5 million of the increase in service revenue in 2022. Software Solutions increased 75% to $15.1 million for 2022, compared to $8.7 million for the prior year, or let's say the 7 months in the prior year from the acquisition date of June 1st. Our product revenue increased 24% to $2.9 million for 2022 compared to $2.3 million for the prior year. Operating expenses increased 143% to $74.9 million for 2022 compared to $30.9 million in the prior year. The goodwill and long-lived asset impairment we discussed earlier of $32.7 million contributed to this operating loss. The Allegiant Networks business acquisition contributed $2 million of the increase in operating expenses, and for comparison purposes, the Software Solutions segment for 2021 only included 7 months of operating expenses. The company reported a net loss of $35.4 million for 2022, or $1.54 loss per basic and diluted common share, compared to a net loss of $2.4 million or $0.12 loss per basic and diluted common share in the prior year. Again, if you back out that $32.7 million in goodwill and long-lived asset impairment, it was a pretty good year. Non-GAAP net income of $4.1 million for 2022, that's $0.18 per basic common share and $0.16 per diluted common share compared to non-GAAP of $1.7 million or $0.09 per basic and $0.07 per diluted common for the prior year. EBITDA loss was $2 million for the year compared to a loss of $1.2 million in the prior year, but our adjusted EBITDA came in at $2.5 million for 2022 compared to $1.6 million for the prior year. Cash, cash equivalents at December 31st was $5.5 million. That's compared to $7.5 million at the end of the prior year. During the year we paid $2 million for the Allegiant acquisition in cash, so that's a large part of the decrease. We used cash for operating activities of $411,000, compared to $1 million used in the prior year. Cash used for investing activities of $1.7 million, compared to $9.9 million in the prior year, which was the Software Solutions acquisition in 2021. Cash used for financing activities of $54,000 compared to cash provided by investing activities of $650,000 in the prior year. With that, I'll turn it over to Doug Gaylor, our President and COO, for additional comments on sales and operations.

Thanks, Ron. I'm very pleased with our Q4 and our year-end numbers. Highlighting our performance was a 27% year-over-year increase in Q4 revenues and a 34% increase in annual revenue over the prior year. We reached $11.4 million in revenue for the quarter and $37.5 million in revenue for 2022, putting us on a trajectory for $45 million plus in revenue for 2023. Our strong organic performance for the quarter, combined with our acquisition of Allegiant Networks in November, gives us great momentum as we start 2023. As Ron mentioned, while our GAAP results were affected by a large one-time goodwill impairment charge and acquisition-related charges and an asset impairment charge, our non-GAAP earnings were very strong totaling $2.5 million or $0.10 a share for the quarter and $4.1 million or $0.18 per share for the year. Our financial results validate that we are improving organic growth while realizing significant synergies from past acquisitions, allowing us to quickly leverage the power and opportunity to rapidly scale our business. Much of our success is due to our phenomenal team who, through tremendous hard work and effort, has laid the foundation for greater success in the future. We believe we will continue to realize more efficiencies and cost synergies as we continue our growth. As most of you know, we announced the acquisition of one of our licensees, Allegiant Networks, on November 1st. Allegiant checked all the boxes of a highly complementary and synergistic acquisition. First, it was highly accretive, generating over $10 million in annual revenue and was profitable; second, Allegiant was a Crexendo platform customer and we are already seeing great synergies as we integrate their customers onto ours; third, Allegiant offers managed services, IT services, and network services to their clients, services that we intend to offer our Crexendo customer base in the near term. The 200-plus licensees using the Crexendo platform to run their UCaaS business are the ideal candidates for us to find additional highly-accretive acquisitions. We believe Allegiant marked the first of many trophy fishes from our pond. More broadly, we continue to see tremendous demand and growth in the UCaaS industry. These robust industry tailwinds contributed to our recent milestone of eclipsing 3 million users on our platform, nearly double the 1.7 million end users we had in July of 2021. Our Crexendo licensees and agents continue to benefit from the rapid migration of small, mid-sized, and enterprise-level businesses to the cloud. As our licensees grow, they need additional services from Crexendo, which in turn drives organic Software Solutions growth. Highlighting this unique demand model, in the fourth quarter, our Software Solutions were up 14% on an organic basis compared to Q4 of last year. Our unique model combined with our robust platform continues to drive new partners to Crexendo. It allows us to differentiate ourselves from our two largest competitors, Cisco's BroadSoft and Microsoft's Metaswitch offerings, which are significantly higher priced based on their cost per seat model. We recently announced new partners that left the likes of Cisco and Avaya and hope to secure more partner wins in the year ahead. We also continue to see strong traction in the European market reflected by the large increase in bookings and new logos added in 2022. Our traditional Crexendo agent program continues to grow as well. We've seen great success from our two large master agent partnerships with Talaris and OTG Consulting and recently signed Jenne Distributors as our newest master agent. Our traditional agent program highlights our Crexendo VIP offering powered by NetSapiens and has a 100% uptime guarantee along with a lifetime warranty on our Crexendo phones. We continue to add new and larger agent partners to the program and are excited about the opportunities and the funnel that these new partner agents are bringing to Crexendo. Along that line, our backlog, excluding Allegiant, exceeded $46.8 million at year end, which is up 12% year over year. As a reminder, our backlog is the sum of the remaining contract values for our Telecom Services and Software Solutions customers that will be recognized on a sliding scale over the next 60 months. Our Telecom Services margins declined slightly to 66% for the year, affected by lower margins from the Allegiant's service revenue contribution. However, we expect the Telecom Services margin to return to the 70% range quickly as we recognize synergies from the acquisition. Our Software Solutions revenue increased from 53% in 2021 to 65% in 2022, and our product gross margins also saw a nice increase from 34% to 43% year over year, assisted by better cost management and lower shipping costs that spiked in 2021. Our tremendous engineering talent continues to add to and improve our award-winning technology. We were recently recognized by G2, the premier business software and services review site, as the leader in its 2023 Winter Voice-over-IP Report, along with being awarded the Easiest to Do Business With, Best Support, and Easiest to Use awards. During Q4, we released our newest version of software, version 43, to great reviews and acceptance, and we just released our Insight Management Application for the platform and have had great adoption from our licensees. We also recently released our Contact Center as a Service, or CCaaS offering which provides omnichannel customer engagement, chatbots, and automation into our platform for larger call center applications. We have begun receiving orders for the new offering and are seeing a lot of larger opportunities being proposed. As we start 2023, I couldn't be more excited about the direction and opportunity for Crexendo. The burgeoning demand for our product offerings, disruptive pricing model, and world-class team have us perfectly positioned for the future. We are committed to delivering the best UCaaS offering in the industry to our customers and our partners, which we believe will enable us to deliver strong returns for our shareholders. With our combination of the fastest-growing platform solution in the country, along with our direct end-user offerings, we are positioned extremely well for continued growth and success in the years ahead. And finally, on a personal note, I want to thank Steve for his leadership, his mentorship, and his friendship over the amazing 35 years that we have worked together. It's been a tremendous ride, and I look forward to helping you enjoy your next chapter. You're the best, Steve. And with that, I will now turn it back over to Jeff for any further comments.

Well, no, thank you, Doug. Thank you, Ron. Thank you, Steve. We'll now open the call to questions.

Operator Instructions. And the first question comes from Eric Martinuzzi with Lake Street.

First a comment. Congratulations, Steve, on your retirement. You certainly have created a wonderful business here at a $45 million plus run rate. And Jeff, congratulations on your promotion. I guess my first question is actually on the management side. Are you going to be adding a General Counsel, or are you going to be wearing both hats?

For the current period, I'm going to wear both hats, and primarily because I'm much more approachable as General Counsel. It's very nice when a junior salesperson can reach out to me and feel like they can ask me a question about a contract or other matters. So I like getting information from everybody this way. We'll see how it works. If I find it's too taxing, we'll make some changes. We do have some support within the organization. So I will get some assistance in that. But for the time being, I intend to do both.

Okay. And I wanted to get your take on the macro demand environment where continued headwinds seems to be the message across most of my technology-oriented coverage companies. If you could address it from both the service business as well as the software solutions business, kind of what are you seeing out there in the macro?

I think it looks good, but I'm going to turn that over to Doug for a little more information.

Eric, thanks. Great question. No, I think we still continue to see a lot of adoption of cloud communication services. The statistics show that approximately half of the U.S. business market is still using older legacy telecom equipment. It's not a matter of if they move to the cloud, it's when. All the reports from Gartner and Frost & Sullivan and others show that that's going to be a very rapid migration over the next 3 to 4 years. So when we look at the amount of opportunity out there, we still see a tremendous opportunity, and we're seeing that in our sales. We haven't seen a slowdown in sales. We see a lot of demand for our product, both on the direct side from end user customers and on the platform side. As I mentioned in my comments, we recently had Cisco BroadSoft clients move over, Avaya clients move over from their hosted offerings to the Crexendo platform. We just got done exhibiting at the IT Expo in Miami and had tremendous excitement about our platform. So we couldn't be more excited about the opportunity for growth, and we continue to see a lot of opportunity coming to us looking for our products and services.

Okay. And final question for me. I think it’s probably for Ron. The retention had been trending at around 0.75% churn on a monthly basis through Q3. How did we finish up the year?

We were coming in around Q3 at that 0.75%.

Sorry, did you provide the update on whether Q4 was in line with that?

Yes, Q4 was absolutely in line with the 0.75% that we were previously reporting.

The next question comes from Josh Nichols with B. Riley.

Yes. Well, first off, congratulations, Steve. And Jeff, looking forward to working with you more directly going forward here. I know on the call you mentioned that you’re a little bit more focused on integration rather than acquisitions. Today, could you talk a little bit about what’s left to be done with the Allegiant acquisition? And then just to dive a little bit further on your comment regarding services gross margin, how long until those get back to the 70% level? Is that sometime within the first half or back half of ‘23?

I'll let Doug answer the second half of the question. I'll answer the first half. What we have to do with Allegiant is they have a very, very talented group of engineers and a talented group of salespeople and a very talented group across the company. What we want to do is spread them out so they're providing support to all facets of the organization and vice versa; our engineers are working more closely with them. We just want to be one brand. As Doug mentioned a little bit in his comments, the fact that they're an MSP is very exciting to us. Because we want them to extend that expertise to Crexendo's telecom side of the business, so we can add that as an offering and hopefully increase our sales. So it's an exciting time. It's going to take a little bit of a challenge but we're working tirelessly at it. And Bryan is working very hard and he's rolled up his sleeves amazingly, providing support to everybody in the organization. So I think it's going to be a great win for us when we get that fully integrated.

From a financial accounting standpoint, we’ve completed our 805 valuation, finalized our purchase price allocation during the year-end close process, and so the numbers presented in the footnotes will be final. We’re continuing to work with the local accounting team giving them oversight and GAAP assistance. So everything’s working well from a finance and accounting perspective.

You want to discuss the margins, Doug?

Yes. And finally on the gross margins, as I said, we saw a great increase on the Software Solutions gross margins on a year-over-year basis. On the Telecom Services side, we saw a little bit of a decline, but we expect those to get back into the 70% range relatively quickly. The Allegiant Group obviously will be able to take advantage of some of the buying opportunities and cost synergies that we’ll have bringing in Crexendo as a much larger organization. And with the cost management aspect of the business, we anticipate getting back to those margins. I’m not sure if we’ll see them in Q1, but definitely relatively quickly.

I’ll assume that margin expansion will likely occur by Q2 or Q3 at the latest, which is a quick turnaround. On the revenue side, I understand that you are already exceeding a $45 million run rate, especially since the Allegiant acquisition started just two months ago on November 1st. Was that business growing? What are your expectations for organic growth going forward compared to what was reported in Q4?

Yes, we did see growth from Allegiant from 2021 to 2022 on an overall basis. We've got a great pipeline of opportunities there, so we see strong growth opportunities. We don't give forward guidance, but I anticipate seeing good organic growth coming out of Allegiant and their numbers along with good organic growth coming out of both segments of the Crexendo side of the house.

Great to hear. And then I guess last thing for me. I think I might have missed it. Did you mention where the backlog is at today?

I did. I mentioned that in my comments. So backlog at the end of the year finished at $46.8 million, which is up 12% from the end of 2021.

$46.846 million.

$46.846 million.

$46.846 million, which is up 12% from the end of 2021. As a reminder, this number does not include any of Allegiant's backlog. So we have not been able to do a full calculation on Allegiant's backlog. So that number is pure organic backlog growth, and we will have Allegiant backlog numbers hopefully for our Q1 earnings call. But that $46.8 million does not include any Allegiant backlog; it's all organic backlog.

Oh, great. So 12% year over year excluding the acquisition?

That's correct.

And congratulations again, Steve. Looking forward to working with you more in the future, Jeff.

Okay. The next question is coming from Mike Latimore with Northland Capital Market.

Congrats on the changes here, Steve and Jeff. And Steve, I hope you have a great retirement.

Thank you. I plan to.

Sounds good. You’re over 3 million subscribers on the software platform and clearly really strong growth there. Maybe, Doug, could you go into a little bit more detail on what’s driving that? Was it new service providers coming on? Is it current expanding? Are you mostly replacing legacy systems or is it greenfield? Just a little more detail.

Yes, that's a great question, Mike. We're experiencing growth from multiple sources. In 2022, we added a significant number of new clients. These new clients contribute seats, but migrating those seats from their previous platforms takes time. Therefore, when a new client comes on board, we don't immediately see a large influx of seats; it's a gradual process. Our existing clients, over 205 in total, are also seeing substantial growth across various markets and sectors. During our user group meeting in October, we had record attendance and enthusiasm from our clients, as they are experiencing healthy business growth. They are seeing organic growth due to the rising demand as businesses transition from on-premise equipment to the cloud. We believe that while competitors like Avaya and Mitel are facing challenges, our clients, including Crexendo, are not struggling with a lack of opportunities. There's still a vast amount of business that needs to move to the cloud, and we, along with our partners, are leveraging this. The numbers I mentioned also encompass international growth. Although international contributions to our figures are not yet substantial, we have observed significant growth in international markets, which are further behind in adoption compared to the U.S. We're seeing positive momentum in the U.K., European markets, and also significant progress in Australia.

Okay, that sounds good. And then in terms of cross-selling Allegiant's managed services into the Crexendo base, can you just give a little more detail there about timing, how you're going to package that, or any other relevant information?

Yes. I’m going to pass that over to Jon and he’ll give a little bit more color but the benefit of Allegiant is that they had IT services, managed services along with network services. All three of those components are services that we didn’t necessarily offer as a core competency at Crexendo to our direct end-user customers. Allegiant has done a great job of boxing all of that into a single-source provider for their end-user customers. We anticipate using that for a lot of our larger opportunities on the Crexendo direct side. I’ll have Jon provide a little bit more color to that.

Yes. One of the areas that we can already see some fruit of that is that Allegiant had a greater level of expertise in the omnichannel CCaaS offerings than we did within our core business. So we're already leveraging their employees and associates that were in that business now to help us deploy those services, to scope them with customers, and we're having good success there. Those opportunities are really greenfield to us from a share-of-wallet perspective. When you look at their portfolio, they have several other services that are really interesting for us to offer through our partners in an expanded distribution. We're working on bringing those through our system to offer them to our Crexendo retail offerings and, in some cases, even looking at ones that we could offer to our other platform licensees. We're really excited about being able to drive more through our offer and expanding our average billings per customer based on additional offerings through Allegiant.

Great. And then just last one. Did you have a price increase at the start of this year and maybe just a little more detail?

Yes. For our licensee applications out there, we are anticipating a price increase that was not announced to the community yet, so thanks, Mike, for giving them a heads up on that. But we do anticipate a little bit of a price increase coming down the pipe for our licensees that'll be announced soon.

The next question is coming from Chris Sakai with Singular Research.

My first question is, can you go over the reasoning for stopping the dividend and what you plan to use that money for now?

Yes, Chris. As you know, we're a microcap business and we're in a growth industry, and we think there are better uses for the money than paying a dividend. We could use it for anything from a stock buyback to buying companies which would be accretive to using it as investment in technologies. We thought at this point of our growth trajectory, there were just better uses of the money. It doesn't mean if we start throwing off a lot of money, we might not look at it again but right now we have to manage to where we are. At this point, it just didn't make a lot of sense to us to continue it.

Okay, that sounds good. For future acquisitions, what can we expect for 2023?

Well, Doug always talks about the fishing pond. We often have people in our Software Solutions community who reach out looking for an ability to sell their business. We reached out to other people. Obviously, something within the community is almost immediately accretive to us, so that would be our primary interest. But we will look at any appropriate accretive acquisitions that come along.

Okay. And then you mentioned growth out of Europe. Can you mention or talk about how much market share do you have there and the same in Australia, and will that grow in the future?

It's not large yet, but we're hoping to change that.

It’s not large yet, Chris, as I said, the contributions outside of the U.S. domestic market is not material in our financials at this point but we do see tremendous opportunity for growth there. When we look at the opportunities, I think we’ve got 18 logos, maybe 20 logos internationally, most of those in the U.K. and European market, 4 in Australia, 2 in New Zealand, 1 in the Philippines. We continue to see opportunities there. If you think about BroadSoft and Metaswitch owning the majority of the markets out there from a platform perspective, they are notoriously tough to deal with and expensive. When people are looking for alternatives for the platform, we are the third-largest platform provider and the fastest-growing platform provider domestically. We’re starting to take that same message across the pond on both sides of the waters and we’re seeing a lot of great demand because our product is so easy to use, so simple to implement, and easy to expand. We’re getting a lot of excitement and a lot of traction there.

I would just add that as we've talked about a couple of times, some of the opportunities, just so you understand, most new licensees for a platform that come to us, virtually none of them are starting a UCaaS offering for the first time. Almost all of them are offering our solutions built on somebody else's technology. BroadSoft and Metaswitch, with there being far enough time between the Cisco and Microsoft acquisitions to date, there are more opportunities in our funnel with larger partners that had worked with those platforms in the past and have seen the change in the structure and the way they're supported now over time. That's irrespective of the country that people are in. So we have a very good funnel growing in Europe in largely what you call the cricket countries, but in the areas where you've got customers on different platforms that like, as Doug said, the ease of use of deploying our solution and its scalability and like our model for monetizing that as well.

Okay. Can you discuss whether your performance this quarter has improved compared to last quarter or if it remains about the same?

Yes. Churn is currently at the same percentage rate it was for Q3 at 0.75% on average.

The next question comes from an unidentified analyst.

This Q4 diluted EPS of $0.09 shows a significant year-over-year increase from $0.03. Do you consider this $0.09 a one-time occurrence, or is it possible to improve beyond this $0.09 level in the future?

I'll let Ron answer that. Obviously, we want to continue to do better but we're not going to commit to better than $0.09. But go ahead, Ron.

Yes. We don’t give forward guidance but we were very excited about this strong fourth quarter and the end of the 2022 ending strong, and we would like to continue to improve on our EPS but at this time we can’t really give guidance as to where that would trend.

The next question comes from Michael Kaufman with MK Investments.

I want to thank Steve for his leadership and building a great company and management team, and I wish him the best of luck in his retirement which I hope will be many, many years.

Thank you, Michael.

Also, I want to thank Doug for driving the growth in sales and marketing, and I look forward to Jeffrey Korn’s leadership and his experience which I think will be very helpful for the company. I wanted to just comment on the fact that with the Silicon Valley Bank failure, the regulators and banks are very nervous and gun-shy. It's closing down the small-cap IPO window. Small companies are under pressure for financing. I guess the question for Jeffrey is what keeps you up at night in this environment where clearly positive cash flow and minimal leverage in terms of debt and profitability are going to be key?

Well, what you just mentioned is which does not keep me up at night. We have positive cash flows; we run the business incredibly conservatively and carefully. We don't make unwise decisions or investments. I'll tell you what does keep me up at night. To be honest, in this market, our stock, in my opinion, is tremendously undervalued. We are in a weak sector and we've been hit even harder than some of our competitors. The stock prices will keep me up at night because I'm very concerned that somebody might try to make a run at us before we've had the opportunity to fully value and appreciate the value that I know is going to be unlocked here. So if we can get by without that happening, I'm very excited about our future.

I guess as a last comment, some of our competitors like 8x8 and Ring and others have brought on a lot of debt. They really can’t lower their pricing structure because they have the installed base. So we have a huge opportunity to win market share with our pricing strategy. Anything we can do in that regard is going to be great because they can’t react because they have an installed base, and we’re not there yet. So I wish you guys the best of luck in making that happen and making this a multi-hundred-million-dollar company quickly.

Thank you, Michael. And rest assured, even with Steve's retirement, we're not going to start running the business recklessly. We will not take on any unnecessary debt. We're a very cohesive management team. We look at the world similarly and run our business based upon fundamentals.

It's also important to note, since you brought up Silicon Valley Bank, that we have no holdings and dealings with them at present or in the past. So we don’t have any exposure there.

Speak for yourself. I actually owned some stock which got wiped out.

Sorry.

Our next question comes from Ron with Private Investor.

I want to go back to the topic of the dividend. That dividend was necessary to, I thought anyway, participate in the institutional market. Is that correct?

Well, Ron, it's partially correct. There are some funds which will only invest in companies that pay a dividend. We have spoken with a number of those funds and they don't tend to be as interested in microcaps as we were hoping they would be. Since that didn't materialize where those kinds of funds took a large interest in us, we looked at the cost of paying the dividend, the benefits of paying the dividend, and the detriments of paying the dividend. Without getting the return we were expecting, we thought it made more sense to suspend or cancel it.

Yes. So that leaves the smaller buyers as the principal target then for investment, rather. So if that's the case, the problem I've always had is that if there is a spike in the share price and you've got a lot of, let's say, little investors involved, many of those are just in for a quick buck and they're going to be selling off as fast as the price spikes, I think. So I don't know, I just see the reliance on small investors as being detrimental maybe to the increase in share price for investors. Do you guys agree with that?

I have a slight disagreement regarding the dividend. Many institutional investors we’ve talked to are less enthusiastic about us paying a dividend; they want us to start showing improvement. As the sector begins to recover, I believe we will attract larger investors. While it’s true that some small investors may sell quickly, we also have many who have remained loyal to us for a long time. We have significant loyalty in our stock and strong potential. If the stock rises to $6, I see that as a positive beginning. We won’t lose a substantial number of investors. Some may choose to take profits, but that’s a common occurrence with success.

I think that's also another reason why we decided to invest in investor relations. We realized there's a lot of opportunities out there with high-net-worth individuals, audiences that we haven't been able to get our message out to. By hiring an IR firm, we anticipate being able to get in front of new investment audiences that we haven't been able to reach before. We want to make sure that as we tell our story and continue to execute on our plan that we get in front of bigger and more long-term investors because we really feel like, as Jeff said, the stock is undervalued today and we see the long-term opportunity. That's the message that we'll be getting out to hopefully a new group of investors with our IR firm.

Yes. You guys are doing so well, that loyalty really is a card in your hand. I can vouch for that because I'm one small investor that's been around a while because I just like your company. So thank you very much for your time.

Thank you, Ron. We appreciate your support.

We have no further questions at this time. We have reached the end of the question-and-answer session, and I will now turn the call back to Jeff for closing remarks.

Well, I want to thank all of you for your time and attention and for joining us on the Q4 and 2022 results conference call. We look forward to speaking with you in the not-too-distant future when we announce Q1 results. Thank you. Everybody have a great afternoon.

Thanks, everybody.

Thank you.

This concludes today's conference, and you may disconnect your lines at this time. Thank you for your participation.