Crexendo, Inc. Q4 FY2023 Earnings Call

Greetings. Welcome to Crexendo’s Fourth Quarter and Year End 2023 Earnings Call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. Please note, this conference is being recorded. I will now turn the conference over to your host, Jeff Korn, CEO of Crexendo. You may begin.

Thank you, Paul, and good afternoon, everyone. Welcome to Crexendo’s Fourth Quarter and Year End 2023 Conference Call. I am Jeff Korn, Chairman of the Board of Directors and CEO. On the call with me today are Doug Gaylor, our President and COO; Ron Vincent, our CFO; Jon Brinton, our CRO; and Anand Buch, our CSO. In a moment, Jon will read our Safe Harbor statement. After that, I will give some brief comments on our performance for the year end and fourth quarter. Ron will then provide more detail on the numbers, before handing over the call to Doug to provide a business and sales update. After that, we'll open the call up to questions. Jon, would you please read the Safe Harbor statement?

Thank you, Jeff. 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 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. 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, 2023, 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’d now like to turn the call back over to Jeff. Jeff?

Thank you, Jon. I'm very pleased to report that in the fourth quarter, Crexendo once again achieved GAAP profitability. While my focus has been on cash flow and EBITDA as primary indicators of our operational health, maintaining GAAP profitability represents a significant milestone for us. This achievement is particularly meaningful as it marks roughly one year since I stepped into the CEO role, a period during which the management team last year deliberately paused our acquisition strategy to concentrate on maximizing the efficiencies of our existing operations and fully integrating the acquisitions we had already made. Our efforts have been very successful and continue to work well. In the fourth quarter, we maintained our commitment to driving robust growth alongside continual operational enhancements and sales improvements. Our efforts brought more fruit as we entered the fourth quarter with strong momentum accumulating in a remarkable 24% increase in fourth-quarter revenue compared to the same period last year. This achievement is part of a broader success story for the year with our total annual revenues climbing by an impressive 42% year-over-year to reach $53.2 million. These results are particularly noteworthy given the challenging start we had at the beginning of last year with an initial loss position in the first quarter. This turnaround reflects our team's hard work and dedication to not only achieving, but exceeding our strategic goals. This hard work and dedication continues every day by everyone with me in this room and everyone working at Crexendo. The transition of our customers from our classic Crexendo system to the cutting-edge VIP platform is advancing smoothly and effectively. We are very optimistic about completing the migration by year end. Achieving this milestone will allow us significant operational efficiencies including vacating the premises we currently leased and eliminating the expense associated with hosting and an additional system. Furthermore, it will enable us to relocate our workforce more effectively; employees who have been dedicated to migrating customers and maintaining the old system will transition to new roles. This shift not only reduces cost, but also enhances our support capabilities aligning with our commitment to delivering exceptional service and value to our customers. Our journey over the last year has not been about chasing creating success; rather it's been a dedicated effort toward integrating our acquisitions thoroughly, enhancing operational efficiencies and overall improving our company's standing. The ability to quickly generate additional cash and achieve GAAP profitability is a testament to the strategic timing and value of our past acquisitions, affirming the strength of our business model and the mechanisms under which we review and approve acquisitions. As we move forward, we will again be pursuing accretive acquisitions with confidence in securing at least one meaningful addition to our portfolio this year. Though maintaining GAAP profitability might become more challenging as we embark on new acquisitions due to the associated intangible costs, I am optimistic about our continued profitability, positive EBITDA and our capacity for growth and value creation. As part of our ongoing commitment to strengthen and grow Crexendo, I am pleased to announce a series of strategic investments aimed at enhancing our operational capabilities and ensuring our competitive edge in the market. We are doubling down on our hosted platform, a cornerstone of our offering to maintain our position as the third largest and fastest growing platform in the country. The demand for our hosted solution is accelerating with more customers preferring our hosted platform over the hassle of managing and hosting themselves. Recognizing this shift, we are proactively investing in what we call Hosted 2.0. This initiative is not merely an upgrade; it's a transformation. Hosted 2.0 is designed to facilitate seamless growth, integration and provide the essential tools our licensees need to run their business effectively. Our current solution while excellent and effective needs to evolve to accommodate the growth we anticipate. Through that investment we are not just preparing for the future, we are shaping it. Our aim is to continue offering unparalleled service to our customers while ensuring our platform remains robust, scalable and capable of integrating new technologies and acquisitions effortlessly. We're also upgrading our accounting system. This upgrade is not just a step toward modernization; it's a move to seamlessly integrate future acquisitions and manage the growth we are anticipating. The updated system will provide us with the agility to effectively scale our future growth. In conclusion, our fourth quarter and year-end results have been highly encouraging, serving as a testament to our strategic and operational strengths. Our technology continues to receive exceptional reviews and awards. Our team is excited about that and we're also looking forward to our communication system being used here at our hometown of Phoenix at the Final Four coming up next month. Looking ahead, we anticipate not only sustaining our double-digit organic growth, but also amplifying it through strategic acquisitions. The future is very, very bright for us. I, along with our dedicated team, am excited about the year ahead and our opportunities to continue our tremendous growth and success. We are committed to continual improvement in driving growth for our company, technological advancements for our customers and partners and value for all of our shareholders. With that, I'll turn the call over to Ron for more detail on the numbers. Ron?

Thank you, Jeff. Good afternoon, everyone. I'll start with some financial highlights for the fourth quarter of 2023. Total revenue for the quarter increased 24% to $14.2 million, compared to $11.4 million for the prior year. Our service revenue for the quarter increased 26% to $7.7 million, compared to $6.1 million for the prior year. Our Software Solutions segment revenue for the quarter increased 21% to $5.3 million compared to $4.4 million for the prior year. And product revenues for the quarter increased 23% to $1.2 million compared to $947,000 for the prior year. Operating expenses for the quarter decreased 69% to $14.1 million, compared to $46 million for the prior year. The significant decrease is primarily related to the goodwill and long-lived asset impairment of $32.7 million we reported in the prior year due to sustained decreases in our stock price. The company reported net income for the quarter of $61,000 which is breakeven on a basic and diluted common share, compared to a net loss of $32.6 million or a $1.33 loss per basic and diluted common share for the prior year. Non-GAAP net income of $1.6 million for the quarter, $0.16 per basic and diluted common share as compared to $2.5 million or $0.10 per basic and $0.09 per diluted common share in the prior year. EBITDA for the quarter was $918,000, compared to a loss of $1 million for the prior year. Adjusted EBITDA for the quarter was $1.7 million, and that's compared to $596,000 for the prior year. And I'll give you some highlights for the full year ended December 31st 2023. Total revenue for the year increased 42% to $53.2 million, compared to $37.6 million for the prior year. Service revenue increased 52% to $29.7 million. Our Software Solutions segment revenue increased 19% to $18 million, compared to $15.1 million in the prior year, and product revenue increased 90% to $5.5 million, compared to $2.9 million for the prior year. Operating expenses for the year decreased 27% to $54.9 million, compared to $74.9 million for the prior year. As discussed earlier, this significant decrease is primarily related to the goodwill and long-lived assets. With two consecutive quarters of net income, the company was able to reduce net loss for the full year to $362,000 or $0.01 loss per basic and diluted common share, that's compared to a net loss of $35.4 million or $1.54 loss per basic and diluted common share in the prior year. Non-GAAP net income was $6.7 million for the year, that's $0.26 per basic common share and $0.24 per diluted common share, compared to non-GAAP net income of $4.1 million or $0.18 per basic and $0.16 per diluted common share for the prior year. EBITDA for the year was $1.9 million, compared to a loss of $2 million for the prior year. Our adjusted EBITDA was $5.7 million for the year, as compared to $2.4 million for the prior year. Our cash balance at December 31st was $10.3 million as compared to $5.5 million at the end of the prior year. We had positive cash flows from operating activities of $3.5 million. The fourth quarter had positive operating cash flows of $2.6 million, compared to $887,000 for the first nine months of the year. Our investing activities provided $3.7 million of cash, compared to $1.7 million used for investing activities in the prior year. During the year, we received $3.8 million in proceeds from the sale of our corporate office building. We utilized $2.3 million of our cash for financing activities during the year, that's compared to $54,000 used in the prior year. In connection with the sale of our corporate office building, we repaid the note payable on the building of $2.3 million. I will now turn the call over to Doug Gaylor, our president and COO for additional comments on sales and operations.

Thanks, Ron. I'm extremely pleased with our record Q4 and year-end numbers that we reported today and very excited about our strong momentum as we start 2024. Our 24% year-over-year increase in Q4 revenues, along with our 42% year-over-year increase in annual revenue were the direct results of our focus on growing organically, as well as through acquisition. Our growth combined with our dedication to managing cost allowed us to achieve GAAP profitability ahead of schedule and finished both Q3 and Q4 with positive GAAP earnings. We had GAAP net income of $60,000 for the quarter and a small GAAP loss for the year of $362k. On a non-GAAP basis, we had strong non-GAAP net income of $1.6 million for the quarter and $6.7 million or $0.26 per share for the year. Our results for the quarter and for the year highlight our success in managing costs and recognizing significant synergies from our acquisitions allowing us to quickly leverage the opportunity to grow our business. Our entire team worked tirelessly together to improve business processes and make our company more efficient and we believe we will continue to see more efficiencies and cost synergies as we continue our growth. Our acquisition of one of our Software Solution licensees, Allegiant Networks that we completed at the end of 2022 had a great first year under Crexendo. We saw nearly a 21% organic growth rate on a standalone basis for Allegiant as they benefited from transitioning from a local provider to a division of the fastest growing UCaaS provider in the country. We’ve also been able to benefit from cross-utilization of the talent from our acquisitions to help improve our Revenue production per employee on an overall basis. As Jeff mentioned, we paused acquisition discussions in 2023 to maximize synergies from our previous acquisitions and we're excited to be priming the pump for an additional one or two accretive acquisitions in 2024. We’ve highlighted in the past that the 220 licensees that we have that are using the Crexendo platform to run their UCaaS business are the ideal stock fishing pond of candidates for us to our highly accretive acquisition targets and we look forward to landing our next big fish from the pond. We continue to see tremendous demand and growth in the UCaaS industry and are proud of the fact that Frost & Sullivan recently awarded us their 2024 North American strategy leadership award and highlighted our outstanding 36% user surge in 2023, which was nearly double the industry average. Our platform now supports over four million users across the globe. Our Crexendo licensees and our agents continue to benefit from the rapid migration by small and midsize businesses and enterprise-level businesses to the cloud. As our licensees grow, they need additional services from Crexendo which helped drive a 19% organic growth rate on the Software Solutions side of the business for the year. Our unique pricing and support model for our Software Solutions platform, combined with our robust feature set continues to drive new licensees to our platform and allows us to differentiate ourselves from our two largest competitors, Cisco's BroadSoft and Microsoft’s Metaswitch platforms. We had great success in adding new licenses in 2023 and have left the likes of Cisco, Microsoft, and Avaya for Crexendo and hope to see more of those in the year ahead. We also continue to see strong traction in our international efforts as we saw a large increase in bookings and new logos added in 2023 outside of the US. Our Telecom Services segment grew at 9% organically excluding our Allegiant acquisition and we saw strong demand for our offerings from our channel partners and saw 405% growth in sales for the year from our master agent partnerships. Our channel partners sell our services to their prospects and customers on a revenue share basis and we saw nice growth from our existing channel partners and added 28 new resellers to the program over the course of the year. Our channel partners have great confidence representing the Crexendo VIP offering because of our 100% uptime guarantee, along with our lifetime warranty on our Crexendo phones and our best-in-class customer service and customer satisfaction results. We continue to add new and larger agent partners to the programs and are excited about the opportunities in the funnel that these new agent partners are bringing to the table. Our backlog continues to grow and at the end of the year is now at $63.9 million, an increase of 36% from the end of 2022. Our backlog number 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 and it's a very strong indicator of our future revenue stream. We continue to focus on improving our gross margins and saw a nice increase from 65% to 69% for the year in our Software Solutions segment. Telecom Service segment gross margins continue to be affected by lower margins from some of the Allegiant acquisitions. But the Telecom service margins were 58% and Telecom Services product margins were 39% including Allegiant. Excluding Allegiant those margins were very consistent with prior year at 68% for Telecom Services and 42% on the product. Our amazing engineering team continues to add to and improve our award-winning technology. We were ranked by g2.com, which is the premier business software and services review site, as the best usability solution in the hosted telecom sector for the fall of 2023. We're also honored with the Remote Work Pioneer Award, as well as the Product of The Year award from INTERNET TELEPHONY magazine. In addition, we released our Version 44 software in Q4 to great reviews. Version 44 allows for new Communication Platform as a Service or CPaaS capabilities via our open API 2.0 release and this offering also allows us for new generative artificial intelligence or AI technology features to be easily integrated into the platform. The first AI solution released during Q4 allows for AI powered by ChatGPT in our company's contact center solution that enables the system to interact and answer commonly posed questions using AI without the need for a live operator. So as we start 2024, I couldn't be more excited about the future direction and opportunity for Crexendo. Three years ago, we had revenues of $16.4 million and by executing well on our plan for organic and inorganic growth, we have more than tripled our size in three short years to over $53 million. We are positioned perfectly with the combination of strong demand for our product offerings, along with great solutions with a disruptive pricing model and the best and most talented workforce in the industry to continue our strong growth and success. We're committed to delivering the best UCaaS, CCaaS and CPaaS offerings in the sector to our customers and our partners and the best returns for our shareholders. As the fastest growing platform solution in the country supporting over four million users, we are focused on enhancing our solutions, improving our efficiencies and returning strong results. With that I'll now turn it back over to Jeff for any further comments.

Thank you, Doug. Actually, I don't have any further comments. So, Paul, why don't we now open the call up to questions?

And the first question is from Mike Latimore from Northland Capital Market. Mike, your line is live.

All right. Thanks. Yeah. Congrats on the great year there. Very, very nice.

Thank you, Mike.

Just on the users, 4 million or so relative to 3.5 million in the September quarter. Can you just give a little more detail on what drove that strong growth? I mean, 14% sequential growth is pretty impressive. Was it like a couple big onboardings there? Was it just kind of broad-based demand or?

Yeah, great question, Mike, and it's really a combination of all of the above. So, when we think about last year, we had new logos from our platform providers, which as those new logos come on board, they tend to ramp up very quickly. So, if they're putting in a platform, once they go live, they move all of their customers or quickly try and move all of their customers from their old platform over to our new platform. So that obviously gives us a nice bump. But our existing licensees, now over 220 in total, are growing at the industry rate if not higher, and as they grow, we continue to grow. The demand in the SMB market for our services and solutions is still strong. As our licensees continue to grow and add more users, it really allows us to see that trajectory. So, the increase from 3.5 million to 4 million was a significant achievement for us, and we anticipate reaching 4.5 million and 5 million here in the course of this year or so.

Great, great. And then on Allegiant, really strong growth for that entity alone, but how are you thinking about the cross-sale opportunity with that group this year?

Yeah, great question again. So, when we look at the cross-sales opportunity, there's a lot of potential for us to sell the MSP services and the internet services that they provide. Their average size transaction with their customers is much larger than our average size transaction on the direct side of the house. So, when we look at selling that bundle of services, we're excited about that prospect. Jon Brinton, our Chief Revenue Officer, is here, and I’m going to have him just comment a little bit on some of that cross-migration from the Allegiant team over to the Crexendo team.

Yeah, hi, Mike. How are you doing today? Good to be here. So, as Doug mentioned, the Frost & Sullivan Leadership award that we received and that we are benchmarked as growing at double the rate of the market is a point of pride for us and is attributed to the success of our licensees and their continued growth. As for the Allegiant cross-sale opportunity, we believe it will give us significant opportunities to increase our share of wallet with customers for the services that align. We've been integrating some of our operations and support teams to ensure that customers continue to receive the great experience we are known for, as reflected in our G2 rankings. We're starting to look at the necessary services we can include in the bundle on what we call the VIP side of the house, so we can add those to our offerings there. We're excited to proceed but want to ensure we maintain the same high customer experience and excellent outcomes like we’ve delivered in the past.

Excellent. Excellent. I want one more quick one here; I guess, can you provide any color on just how January and February have played out from a bookings perspective? Kind of is it normal seasonality? Better, worse, how do you see January and February relative to those normal months at the start of the year?

Mike, we don't provide guidance. But I will say that I'm pleased with the results we're seeing for Q1. I wouldn't have indicated that we expect double-digit growth if I didn't see Q1 going well.

Yeah, and I would add, Mike, that sales momentum is very strong right now. We continue to add new reseller partners and our funnel for sales opportunities is as robust as it has ever been. So, we are not seeing any slowdown in opportunities out there, and bookings continue to have great momentum.

All right. Great.

Thank you. The next question is coming from Josh Nichols from B. Riley. Josh, your line is live.

Yeah, thanks for taking my question. Just because you mentioned you've been doing a lot of work to finish the migration to the Crexendo VIP platform and it looks like that's going to be done this year. You said service gross margins excluding the Allegiant acquisition were around 68%. Do you expect that you will get back to that level for the entire company by the end of this year if you do complete that migration?

Yeah, I'll tell you where the migration is currently, and then I'll have Ron add a little more context on where we see the pick up in gross margin once that migration is complete. But we believe we're about 70% complete with that migration right now, so we're almost three-quarters of the way there. I am a little hopeful we might complete it by the end of summer rather than the end of the year. Customers are very happy because they're getting a more robust feature set for roughly the same cost investment. Once we complete the migration, we should gain a lot since we won't need to support two platforms.

Yeah, Josh, so we will have a little bit of anticipated pickup in our gross margins as we no longer have to support two platforms and an extra data center. But it's hard to pinpoint exactly what that percentage will be for guidance. We’re going to continue to have lower margin sales from the Allegiant acquisition due to the nature of the products and services they offer. That will put some weight on overall margins. We may not return to the 70% to 72% range we were trending prior to the acquisition, but we expect some improvement as we progress.

Fair enough. Good to hear that there is probably going to be some improvement. And then just curious because you did hit the pause on acquisitions understandably, so right, for the last year, but it looks like you're back at it. What are the company’s KPIs or criteria in terms of the size, gross margin, gross profitability or how you think about acquisitions?

All of the above, I mean, all of the above to be honest. As Doug likes to say, we look at our stock fishing pond, and we have some natural pools of candidates. Obviously, our preference would be to pick up one of our licensees because that becomes an easier acquisition for us. We essentially just have to change the billing from their name to Crexendo. We can usually pick up some good engineers and customer service people. But we're open to an acquisition that incorporates technology or other aspects that can help us grow our business. We are looking at a number of things now, but the metrics you mentioned are priorities for us.

And there are plenty of opportunities out there. When evaluating opportunities, the size of the opportunity is less critical than how well it will integrate into our company and serve as an accretive acquisition. We have plenty of options, and we are excited about the opportunities surfacing.

Appreciate it. Thanks, guys.

Thank you.

Thank you. The next question is coming from Max Michaelis from Lake Street. Max, your line is live.

Hey guys, nice quarter. First one out of me is just related to international revenue. Where did that finish out in Q4 as a percentage of revenue? And then maybe, looking out into 2024, it sounds like Q4 bookings were strong there. But what could we expect as goalposts for percentages of revenue in 2024 from the international space?

I’m going to let Ron answer the percentage question and then we’ll have Anand discuss our international sales a bit more. Go ahead, Ron.

Currently, international revenue is less than 5% of our total revenue. We're continuing to see traction in that area and I'll let Anand give you some more details on our sales efforts in international locations.

Yeah, so, internationally, even with a tiny effective team, we're starting to see growth in our Australian markets. Because our team is based out of the UK, we have a number of partners who are continuing to expand. In terms of user growth, we’re early in the journey with respect to the international partners we have. Europe is our main target number one. We are actively pursuing partners throughout EMEA, Australia, and New Zealand, and in APAC as well.

All right. Thank you. Next one. Just I wonder if you can go into more detail on the Hosted 2.0 investment, as well as the accounting system. Maybe put a size to the investment you expect maybe in 2024?

Yeah, Max. I think we're going to spend... We put it in our 10-K. So we've contracted with Oracle for hosting and back-end support, which opens up a world of opportunities for us. I think we'll probably spend about $300,000 this year, Ron? And probably $1 million next year as we expect the growth to accelerate substantially next year with the Hosted solution fully up and running.

All right, guys. That's it for me. Thanks.

Thank you. The next question is coming from John Roy from Water Tower Research. John, your line is live.

Thank you. To take a step back a little bit, I know you mentioned you’re getting started on AI. I was curious as to other areas you might be looking to exploit it. Is it better customer experience, more cost control? Are you going to try and look at it to help with sales? Just if you could give us any color on projects you've got going on there, that would be great.

AI allows us many different user case scenarios. As I mentioned, one use case is having contact center capabilities where a live body gets replaced with an AI interface utilizing ChatGPT to be able to follow questions and answers and respond to commonly asked questions without the engagement of a human. We have other AI applications such as sentiment analysis, analyzing call recordings and acting on them, allowing supervisors to intervene when necessary. There are many applications in the pipeline, and Anand can elaborate more on our third-party application partners.

I’d be happy to. AI opens a plethora of use cases; for example, generative voice prompts or customized hold music. We’re seeing applications from actual voice system AI to internal productivity enhancements for coding checks, allowing us to speed up processes significantly. In terms of third-party applications, if you consider the 4 million users we have, there are numerous integrations with CRM systems and specific voice integrations that will continue to grow within our ecosystem.

Great. And, slightly different question, I believe you said you're going to be moving out of some buildings. Can you give us some color on how much you expect to see there?

While it's challenging for us to quantify these savings, if we don't see at least $1 million in cost reductions, I would be very surprised. The relocation to new properties is also aimed at decreasing monthly expenses, not just from supporting our data center.

We are currently doing a sale leaseback with a 12-month lease and six-month extension option after selling our building. We're looking at new spaces in the Phoenix market for our corporate headquarters and expect significant monthly expense savings through this relocation.

Great. Thanks so much and congratulations on the growth.

Thank you.

Thanks, John.

Thank you. The next question is coming from Chris Sakai from Singular Research. Chris, your line is live.

Hi, yes. Good afternoon. I just had a question on Allegiant. If you could - I know last quarter you had a carve-out for gross margin, I know it was a little less than the overall segment. So, I wanted to see if you could provide any improvements to the Allegiant gross margin?

Yeah. We do have a carve-out on that. So, our Crexendo Business Solutions service revenue came in, in the fourth quarter at 67%. Allegiant came in at 37% for service revenue, with our product revenue from Crexendo Business Solutions was 45%, up slightly from 42% in Q3. Allegiant product revenue came in at 35% for the quarter.

Okay. Sounds good. And just talking about AI, will that lead to any cost savings as far as taking the place of any jobs?

When we look at AI, it's more focused on boosting sales and revenue for us. All our licensees and end-user customers are looking for advancements where AI can assist their businesses. We’ll utilize some AI internally for customer support, but we do not anticipate cutting existing positions; we’re proud of our customer support team.

AI will enhance our access to information for customer service and should reduce our response times. To this extent, we might not hire as many new employees as planned, but we certainly don’t anticipate cutting jobs.

Okay. Sounds good. And then, can you talk about license growth internationally? How is that going?

I'll hand it back to Anand.

Certainly. As Ron mentioned earlier, the number of logos coming in from international locations continues to grow across the board. We’ve acquired about three or four logos in the UK and one in Australia. We're seeing expansion in companies headquartered there as well as those with operations in the US but remote offices abroad.

Okay. Thanks.

Thank you, Chris. Appreciate it.

Thank you. The next question is coming from Michael Kaufman from MK Investments. Michael, your line is live.

Hi, Jeff and Doug. I want to congratulate you and the team for maintaining balanced growth in both revenue and profits, which is unusual in this segment of the industry. A specific question I had is, regarding the Telcloud partnership; is there any way to get a handle on the potential expansion of the total available market, either for user growth or revenue potential? I do not have statistics on that.

Mike, I'm going to let Jon answer that. Jon, go ahead.

Hi, Michael, good to hear from you again. JumpCloud specifically is what we call a POTS line replacement or a Plain Old Telephone Service replacement. Recently, AT&T filed with the state to decommission all of their traditional copper line service in California. Industry estimates suggest there are over 5 million lines of service that are currently traditional POTS services in the US. The Telcloud partnership targets finding ways to migrate those services so they can be supported in the cloud as the copper infrastructure is retired. This includes services like fax lines, alarm lines, fire alarm lines, and any other analog line that hasn’t been easily movable to the cloud. The POTS line replacement service presents fantastic opportunities for us and our licensees in accommodating the migration of those 5 million plus lines.

Yeah, it sounds like an interesting entry because of the legal requirements to sustain that stuff and enhance growth prospects. Sounds like a great opportunity.

We are very excited about it.

But great job overall.

Thank you, Michael.

Thank you. There are no other questions in the queue at this time. I would now like to hand the call back to Jeff Korn for closing remarks.

Thank you, Paul. I want to thank everybody for their time and attention. We will, in the not too distant future, be having our Q1 results. I can tell you that everyone in this room is excited about the results we've seen today and exceptionally excited about our future results. Enjoy the ride with us, and we look forward to speaking with you in May. Have a great evening. Thank you.

Thanks, everyone.

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