8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

_______________

FORM 8-K

_______________

CURRENT REPORT

Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934

Date of report (Date of earliest event reported): May 5, 2020

_______________

Crexendo, Inc.

(Exact Name of Registrant as Specified in Its Charter)

_______________

Nevada	001-32277	87-0591719
(State or Other Jurisdictionof Incorporation)	(CommissionFile Number)	(IRS EmployerIdentification No.)

1615 South 52nd Street, Tempe, AZ 85281

(Address of Principal Executive Offices) (Zip Code)

(602) 714-8500

(Registrant’s Telephone Number, Including Area Code)

Not applicable.

(Former Name or Former Address, if Changed Since Last Report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

☐

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

☐

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

☐

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

☐

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (17 CFR §230.405) or Rule 12b-2 of the Securities Exchange Act of 1934 (17 CFR §240.12b-2)

Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Item 2.02 Results of Operations and Financial Condition.

On May 5, 2020, Crexendo, Inc. issued a press release, a copy of which is being furnished as Exhibit 99.1 hereto and is incorporated herein by reference. Pursuant to the rules and regulations of the Securities and Exchange Commission, such exhibit and the information set forth therein and herein shall be deemed "furnished" and not "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.

Item 9.01 Financial Statements and Exhibits.

(d) Exhibits

The following exhibit is furnished with this Current Report on Form 8-K:

Exhibit No.	Description
99.1	Press<br>release dated May 5, 2020 by Registrant, reporting its results<br>of operations for quarter ended March 31, 2020.

2

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Dated:<br>May 5, 2020	Crexendo, Inc.
	By:	/s/<br>Ronald<br>Vincent
		Ronald<br>Vincent<br><br><br>Chief<br>Financial Officer

3

cxdo_ex991

Exhibit 99.1

Crexendo Announces First Quarter 2020 Results

PHOENIX, AZ—(Marketwired – May 5, 2020)

Crexendo, Inc. (OTCQX: CXDO), an award-winning premier provider of cloud communications, UCaaS (Unified Communications as a Service), call center, collaboration services, and other cloud business services that are designed to provide enterprise-class cloud services to any size business at affordable monthly rates, today reported financial results for the first quarter ended March 31, 2020.

Financial highlights:

●

Total revenue increased 11% year-over-year to $3.9 million.

●

UCaaS service revenue increased 18% year-over-year to $3.3 million.

●

GAAP net income was $140,000.

●

Non-GAAP net income was $275,000.

Financial Results

Consolidated total revenue for the first quarter of 2020 increased 11% to $3.9 million compared to $3.5 million for the first quarter of 2019.

Consolidated service revenue for the first quarter of 2020 increased 16% to $3.5 million compared to $3.0 million for the first quarter of 2019.

●

Cloud Telecommunications Segment UCaaS service revenue for the first quarter of 2020 increased 18% to $3.3 million compared to $2.8 million for the first quarter of 2019.

●

Web Services Segment service revenue for the first quarter of 2020 decreased 12% to $156,000, compared to $178,000 for the first quarter of 2019.

Consolidated product revenue for the first quarter of 2020 decreased 22% to $379,000 compared to $484,000 for the first quarter of 2019.

Consolidated operating expenses for the first quarter of 2020 increased 13% to $3.7 million compared to $3.3 million for the first quarter of 2019.

The Company reported net income of $140,000 for the first quarter of 2020, or $0.01 per basic and diluted common share, compared to $239,000 or $0.02 per basic and diluted common share for the first quarter of 2019.

Non-GAAP net income was $275,000 for the first quarter of 2020, or $0.02 per basic and diluted common share, compared to a non-GAAP net income of $343,000 or $0.02 per basic and diluted common share for the first quarter of 2019.

EBITDA for the first quarter of 2020 was $284,000 compared to $263,000 for the first quarter of 2019. Adjusted EBITDA for the first quarter of 2020 was $389,000 compared to $354,000 for the first quarter of 2019.

Total cash, cash equivalents, and restricted cash at March 31, 2020 was $3.5 million compared to $4.3 million at December 31, 2019.

Cash used for operating activities for the first quarter of 2020 was ($288,000) compared to $294,000 provided by operating activities for the first quarter of 2019. Cash used for investing activities for the first quarter of 2020 was ($528,000) compared to no investing activities for the first quarter of 2019. Cash provided by financing activities for the first quarter of 2020 was $71,000 compared to cash used for financing activities of ($49,000) for the first quarter of 2019.

Steven G. Mihaylo, Chief Executive Officer commented, “I am incredibly pleased with our results and particularly pleased with our commitment to our customers. We at Crexendo take our responsibility as a regulated utility providing essential services very seriously. We realize that to most of our customers we are their communication lifeline, and that has never been more apparent than in this current COVID-19 time. When we started this year, we obviously did not know the world would literally be rocked and everything we planned for would change. As you know, we took the FCC’s "Keep Americans Connected Pledge" and agreed not to disconnect any Crexendo customer's business or residential phone service for non-payment during, or until at least the middle of May. It is possible that some of our customers may have a hard time making payments, we also believe that some of our customers may reduce their operations or even cease operations entirely; some customers have deferred expenditures of new or additional systems. This is the situation we and many others are facing. The results we achieved are particularly impressive with these unprecedented headwinds. I think our results are a testament to our products, services and team. Our core business continues to grow. Of particular note is what is perhaps our most important metric, UCaaS service revenue for the first quarter of 2020 increased 18% to $3.3 million compared to $2.8 million for the first quarter of 2019. I am also extremely pleased that we continue to be profitable on both a GAAP and Non-GAAP basis. This continues our sequential profitability.”

Mihaylo added, "We have had additional expenses in Q1 2020 as compared to Q1 2019 as we have increased investments in the business which we must do in order to accelerate future growth. We are however carefully reviewing our expenses every day to make sure we are strong fiduciaries of shareholder money. We believe our business is uniquely positioned to withstand the economic uncertainties in this period. We also believe that the effects of COVID-19 on our business will be short term and that as economic conditions start to improve, we will strongly capitalize on the new business order of people working remotely for the long term. Our products are designed and completely effective in allowing seamless transition from office to home and back. I continue to be extremely optimistic about our future and I am overly excited about our long-term growth and strong balance sheet.”

Doug Gaylor, President and Chief Operating Officer, stated, “The Crexendo suite of services are what every business needs at this time. Our services allow people to quickly and seamlessly alter their communication patterns to meet their immediate needs. We have tremendous incentives for new customers to join us and Ride the Cloud® including Up to 4 free months of service for new customers, waiving activation fees for new customers, free collaboration licenses that include screen sharing and videoconferencing for new and existing customers and free mobile applications and softphone applications for new and existing customers. We are working hard every day to make sure our existing and new customers can continue to communicate to help them survive during this economic upheaval”.

Conference Call The Company is hosting a conference call today, May 5, 2020 at 5:30 PM EST. The dial-in number for domestic participants is 844-369-8770 and 862-298-0840 for international participants. Please dial in five to ten minutes prior to the beginning of the call at 5:30 PM EST and reference Crexendo. A replay of the call will be available until May 12, 2020 by dialing toll-free at 877-481-4010 or 919-882-2331 for international callers. The replay passcode is 34306.

About Crexendo

Crexendo, Inc. is an award-winning premier provider of cloud communications, UCaaS (Unified Communications as a Service), call center, collaboration services, and other cloud business services that are designed to provide enterprise-class cloud services to any size business at affordable monthly rates.

Safe Harbor Statement

This press release contains forward-looking statements. The Private Securities Litigation Reform Act of 1995 provides a "safe harbor" for such forward-looking statements. The words "believe," "expect," "anticipate," "estimate," "will" and other similar statements of expectation identify forward-looking statements. Specific forward-looking statements in this press release include information about Crexendo (i) being incredibly pleased with the results and commitment to its customers;(ii) providing essential services that most of its customers use as their communication lifeline; (iii) when we starting this year not knowing everything planned for would change; (iv) finding that some of its customers are having a hard time making payments having some customers reduce their operations or cease operations entirely and having some customers defer expenditures of new or additional systems; (v) finding that its results are particularly impressive with the current economic and world headwinds; (vi) increased its investments in the business which must be done to accelerate future growth; (vii) carefully reviewing expenses every day to make sure it is a strong fiduciaries of shareholder money; (viii) being uniquely positioned to withstand the economic uncertainties and that the effects of COVID-19 on its business will be short term; (ix) will strongly capitalize on the new business order of people working remotely for the long term when economic conditions begin to improve; (x) products being designed and being completely effective in allowing seamless transition from office to home and back; (xi) being extremely optimistic about its future and its long-term growth and strong balance sheet; (xii) suite of services being what every business needs at this time; (xiii) having tremendous incentives for new customers; and (xiv) working hard every day to make sure its existing and new customers can continue to communicate with their customers and help them survive this economic upheaval.

For a more detailed discussion of risk factors that may affect Crexendo’s operations and results, please refer to the company's Form 10-K for the year ended December 31, 2019, and quarterly Form 10-Qs as filed with the SEC. These forward-looking statements speak only as of the date on which such statements are made, and the company undertakes no obligation to update such forward-looking statements, except as required by law.

CREXENDO, INC. AND SUBSIDIARIES<br><br><br>Consolidated Balance Sheets<br><br><br>(In thousands, except par value and share data)
	December 31,<br><br><br>2019
---	---
Assets
Current<br>assets:
Cash<br>and cash equivalents	$4,180
Restricted<br>cash	100
Trade<br>receivables, net of allowance for doubtful accounts of<br>17
as<br>of March 31, 2020 and 14 as of December 31, 2019	380
Contract<br>assets	22
Inventories	382
Equipment<br>financing receivables	143
Contract<br>costs	379
Prepaid<br>expenses	141
Income<br>tax receivable	4
Total<br>current assets	5,731
Long-term<br>trade receivables, net of allowance for doubtful<br>accounts
of<br>0 as of March 31, 2020 and December 31, 2019	6
Long-term<br>equipment financing receivables, net	561
Property<br>and equipment, net	155
Operating<br>lease right-of-use assets	51
Intangible<br>assets, net	465
Goodwill	272
Contract<br>costs, net of current portion	436
Other<br>long-term assets	106
Total<br>Assets	$7,783
Liabilities and Stockholders' Equity
Current<br>liabilities:
Accounts<br>payable	$86
Accrued<br>expenses	1,754
Finance<br>leases	30
Notes<br>payable	-
Operating<br>lease liabilities	50
Contigent<br>consideration	175
Contract<br>liabilities	791
Total<br>current liabilities	2,886
Contract<br>liabilities, net of current portion	423
Finance<br>leases, net of current portion	86
Notes<br>payable, net of current portion	-
Operating<br>lease liabilities, net of current portion	1
Total<br>liabilities	3,396
Stockholders'<br>equity:
Preferred<br>stock, par value 0.001 per share - authorized 5,000,000 shares;<br>none issued	—
Common<br>stock, par value 0.001 per share - authorized 25,000,000 shares,<br>14,941,453
shares<br>issued and outstanding as of March 31, 2020 and 14,884,755 shares<br>issued
and<br>outstanding as of December 31, 2019	15
Additional<br>paid-in capital	62,400
Accumulated<br>deficit	(58,028)
Total<br>stockholders' equity	4,387
Total<br>Liabilities and Stockholders' Equity	$7,783

All values are in US Dollars.

CREXENDO, INC. AND SUBSIDIARIES

Consolidated Statements of Operations

(In thousands, except per share and share data)

	Three Months Ended March 31,
	2020	2019
Service<br>revenue	$3,488	$3,008
Product<br>revenue	379	484
Total<br>revenue	3,867	3,492
Operating<br>expenses:
Cost<br>of service revenue	970	877
Cost<br>of product revenue	220	249
Selling<br>and marketing	1,038	899
General<br>and administrative	1,188	1,014
Research<br>and development	270	212
Total<br>operating expenses	3,686	3,251
Income<br>from operations	181	241
Other<br>income/(expense):
Interest<br>income	1	1
Interest<br>expense	(9)	(5)
Other<br>income/(expense), net	(30)	5
Total<br>other income/(expense), net	(38)	1
Income<br>before income tax	143	242
Income<br>tax provision	(3)	(3)
Net<br>income	$140	$239
Earnings<br>per common share:
Basic	$0.01	$0.02
Diluted	$0.01	$0.02
Weighted-average<br>common shares outstanding:
Basic	14,904,599	14,394,645
Diluted	16,262,886	15,139,858

CREXENDO, INC. AND SUBSIDIARIES

Consolidated Statements of Cash Flows

(In thousands)

	Three Months Ended March 31,
	2020	2019
CASH<br>FLOWS FROM OPERATING ACTIVITIES
Net<br>income	$140	$239
Adjustments<br>to reconcile net income to net cash provided by/(used for)<br>operating activities:
Depreciation<br>and amortization	103	22
Share-based<br>compensation	105	91
Changes<br>in assets and liabilities:
Trade<br>receivables	(54)	(165)
Contract<br>assets	(6)	(4)
Equipment<br>financing receivables	(102)	(94)
Inventories	153	(70)
Contract<br>costs	(20)	(43)
Prepaid<br>expenses	(323)	61
Income<br>tax receivable	3	1
Other<br>assets	(50)	15
Accounts<br>payable and accrued expenses	(290)	138
Income<br>tax payable	-	2
Contract<br>liabilities	53	101
Net<br>cash provided by/(used for) operating activities	(288)	294
CASH<br>FLOWS FROM INVESTING ACTIVITIES
Purchase<br>of property and equipment	(528)	-
Net<br>cash used for investing activities	(528)	-
CASH<br>FLOWS FROM FINANCING ACTIVITIES
Repayments<br>made on finance leases	(8)	(9)
Repayments<br>made on notes payable	(5)	(40)
Proceeds<br>from exercise of options	84	-
Net<br>cash provided by/(used for) financing activities	71	(49)
NET<br>INCREASE/(DECREASE) IN CASH, CASH EQUIVALENTS, AND RESTRICTED<br>CASH	(745)	245
CASH,<br>CASH EQUIVALENTS, AND RESTRICTED CASH AT THE BEGINNING OF THE<br>PERIOD	4,280	1,949
CASH,<br>CASH EQUIVALENTS, AND RESTRICTED CASH AT THE END OF THE<br>PERIOD	$3,535	$2,194
Cash<br>used during the year for:
Interest<br>expense	$(9)	$(5)
Supplemental<br>disclosure of non-cash investing and financing<br>information:
Purchase<br>of property and equipment with a note payable	$2,000	$-

CREXENDO, INC. AND SUBSIDIARIES

Supplemental Segment Financial Data

(In thousands)

	Three Months Ended March 31,
	2020	2019
Revenue:
Cloud<br>telecommunications	$3,711	$3,314
Web<br>services	156	178
Consolidated<br>revenue	3,867	3,492
Income<br>from operations:
Cloud<br>telecommunications	129	163
Web<br>services	52	78
Total<br>operating income	181	241
Other<br>income/(expense), net:
Cloud<br>telecommunications	(6)	(3)
Web<br>services	(32)	4
Total<br>other income/(expense), net	(38)	1
Income<br>before income tax provision:
Cloud<br>telecommunications	123	160
Web<br>services	20	82
Income<br>before income tax provision	$143	$242

Use of Non-GAAP Financial Measures

To evaluate our business, we consider and use non-generally accepted accounting principles (Non-GAAP) net income and Adjusted EBITDA as a supplemental measure of operating performance. These measures include the same adjustments that management takes into account when it reviews and assesses operating performance on a period-to-period basis. We consider Non-GAAP net income to be an important indicator of overall business performance because it allows us to evaluate results without the effects of share-based compensation and amortization of intangibles. We define EBITDA as U.S. GAAP net income before interest income, interest expense, other income and expense, provision for income taxes, and depreciation and amortization. We believe EBITDA provides a useful metric to investors to compare us with other companies within our industry and across industries. We define Adjusted EBITDA as EBITDA adjusted for share-based compensation. We use Adjusted EBITDA as a supplemental measure to review and assess operating performance. We also believe use of Adjusted EBITDA facilitates investors’ use of operating performance comparisons from period to period, as well as across companies.

In our May 5, 2020 earnings press release, as furnished on Form 8-K, we included Non-GAAP net income, EBITDA and Adjusted EBITDA. The terms Non-GAAP net income, EBITDA, and Adjusted EBITDA are not defined under U.S. GAAP, and are not measures of operating income, operating performance or liquidity presented in analytical tools, and when assessing our operating performance, Non-GAAP net income, EBITDA, and Adjusted EBITDA should not be considered in isolation, or as a substitute for net income or other consolidated income statement data prepared in accordance with U.S. GAAP. Some of these limitations include, but are not limited to:

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EBITDA and Adjusted EBITDA do not reflect our cash expenditures or future requirements for capital expenditures or contractual commitments;

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they do not reflect changes in, or cash requirements for, our working capital needs;

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they do not reflect the interest expense, or the cash requirements necessary to service interest or principal payments, on our debt that we may incur;

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they do not reflect income taxes or the cash requirements for any tax payments;

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although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will be replaced sometime in the future, and EBITDA and Adjusted EBITDA do not reflect any cash requirements for such replacements;

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while share-based compensation is a component of operating expense, the impact on our financial statements compared to other companies can vary significantly due to such factors as the assumed life of the options and the assumed volatility of our common stock; and

●

other companies may calculate EBITDA and Adjusted EBITDA differently than we do, limiting their usefulness as comparative measures.

We compensate for these limitations by relying primarily on our U.S. GAAP results and using Non-GAAP net income, EBITDA, and Adjusted EBITDA only as supplemental support for management’s analysis of business performance. Non-GAAP net income, EBITDA and Adjusted EBITDA are calculated as follows for the periods presented.

Reconciliation of Non-GAAP Financial Measures

In accordance with the requirements of Regulation G issued by the SEC, we are presenting the most directly comparable U.S. GAAP financial measures and reconciling the unaudited Non-GAAP financial metrics to the comparable U.S. GAAP measures.

Reconciliation of U.S. GAAP Net Income to Non-GAAP Net Income, , ,

(Unaudited),

	Three Months Ended March 31,
	2020	2019
	(In<br>thousands)
U.S.<br>GAAP net income	$140	$239
Share-based<br>compensation	105	91
Amortization<br>of intangible assets	30	13
Non-GAAP<br>net income	$275	$343
Non-GAAP<br>earnings per common share:
Basic	$0.02	$0.02
Diluted	$0.02	$0.02
Weighted-average<br>common shares outstanding:
Basic	14,904,599	14,394,645
Diluted	16,262,886	15,139,858

Reconciliation of U.S. GAAP Net Income to EBITDA to Adjusted EBITDA

(Unaudited)

	Three Months Ended March 31,
	2020	2019
	(In<br>thousands)
U.S.<br>GAAP net income	$140	$239
Depreciation<br>and amortization	103	22
Interest<br>expense	9	5
Interest<br>and other expense/(income)	29	(6)
Income<br>tax provision	3	3
EBITDA	284	263
Share-based<br>compensation	105	91
Adjusted<br>EBITDA	$389	$354

Crexendo, Inc.

Steven G. Mihaylo

CEO

602-345-7777

Smihaylo@crexendo.com