Exhibit
99.1
Crexendo Announces Fourth Quarter and Year Ended December 31, 2019
Results
PHOENIX,
AZ—(Marketwired – March 3, 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 fourth quarter and full year ended December 31,
2019.
Fourth Quarter Financial highlights:
●
Total revenue
increased 20% year-over-year to $3.7 million.
●
UCaaS service
revenue increased 23% year-over-year to $3.2 million.
●
GAAP net income was
$228,000.
●
Non-GAAP net income
was $347,000.
Financial Results for the Fourth Quarter 2019
Consolidated
total revenue for the fourth quarter of 2019 increased 20% to $3.7
million compared to $3.1 million for the fourth quarter of
2018.
Consolidated
service revenue for the fourth quarter of 2019 increased 20% to
$3.3 million compared to $2.8 million for the fourth quarter of
2018.
●
Web Services
Segment service revenue for the fourth quarter of 2019 decreased
19% to $154,000, compared to $189,000 for the fourth quarter of
2018.
Consolidated
product revenue for the fourth quarter of 2019 increased 20% to
$397,000 compared to $330,000 for the fourth quarter of
2018.
Consolidated
operating expenses for the fourth quarter of 2019 increased 13% to
$3.5 million compared to $3.1 million for the fourth quarter of
2018.
The
Company reported net income of $228,000 for the fourth quarter of
2019, or $0.02 per basic common share and $0.01 per diluted common
share, compared to a net loss of $(8,000) or breakeven per basic
and diluted common share for the fourth quarter of
2018.
Non-GAAP
net income was $347,000 for the fourth quarter of 2019, or $0.02
per basic and diluted common share, compared to a non-GAAP net
income of $104,000 or $0.01 per basic and diluted common share for
the fourth quarter of 2018.
EBITDA
for the fourth quarter of 2019 was $243,000 compared to $26,000 for
the fourth quarter of 2018. Adjusted EBITDA for the fourth quarter
of 2019 was $349,000 compared to $120,000 for the fourth quarter of
2018.
1
Financial Results for the Year Ended December 31, 2019
Consolidated
total revenue for the year ended December 31, 2019 increased 21% to
$14.4 million compared to $11.9 million for the year ended December
31, 2018.
Consolidated
service revenue for the year ended December 31, 2019 increased 22%
to $12.7 million compared to $10.5 million for the year ended
December 31, 2018.
●
Cloud
Telecommunications Segment UCaaS service revenue for the year ended
December 31, 2019 increased 25% to $12.1 million compared to $9.6
million for the year ended December 31, 2018.
●
Web Services
Segment service revenue for the year ended December 31, 2019
decreased 20% to $656,000, compared to $825,000 for the year ended
December 31, 2018.
Consolidated
product revenue for the year ended December 31, 2019 increased 17%
to $1.7 million compared to $1.4 million for the year ended
December 31, 2018.
Consolidated
operating expenses for the year ended December 31, 2019 increased
10% to $13.3 million compared to $12.1 million for the year ended
December 31, 2018.
The
Company reported net income of $1.1 million for the year ended
December 31, 2019, or $0.08 per basic common share and $0.07 per
diluted common share, compared to a net loss of $(223,000) or
$(0.02) loss per basic and diluted common share for the year ended
December 31, 2018.
Non-GAAP
net income was $1.6 million for the year ended December 31, 2019,
or $0.11 per basic common share and $0.10 per diluted common share,
compared to $287,000 or $0.02 per basic and diluted common share
for the year ended December 31, 2018.
EBITDA
for the year ended December 31, 2019 was $1.2 million compared to a
$(114,000) loss for the year ended December 31, 2018. Adjusted
EBITDA for the year ended December 31, 2019 was $1.6 million
compared to $324,000 for the year ended December 31,
2018.
Total
cash, cash equivalents, and restricted cash at December 31, 2019
was $4.3 million compared to $1.9 million at December 31,
2018.
Cash
provided by operating activities for the year ended December 31,
2019 was $1.6 million compared to $452,000 for the year ended
December 31, 2018. Cash used for investing activities for the year
ended December 31, 2019 was $(72,000) compared to $(7,000) for the
year ended December 31, 2018. Cash provided by financing activities
for the year ended December 31, 2019 was $765,000 compared to
$122,000 for the year ended December 31, 2018.
Steven
G. Mihaylo, Chief Executive Officer commented, “We are very
pleased with the results for both the fourth quarter and for the
year. Our goal was to be GAAP positive for the year and we
performed as expected. Our GAAP profit of eight cents per basic
common share for 2019 compared to a loss of two cents per basic
common share in 2018 is certainly very impressive. The results did
not happen in a vacuum, it was part of a methodical process. This
is our second year in a row of Non-GAAP profitability and sales
growth. It shows we have been managing and growing the business on
a regular basis. I am very pleased with the results of our core
business the Cloud Telecommunications Segment UCaaS services. We
had a very substantial UCaaS service revenue increase of 25% in
2019 compared to the year ended December 31, 2018. Our cash
position has more than doubled with total cash, cash equivalents,
and restricted cash being $4.3 million at the end of 2019 compared
to $1.9 million at the end of 2018. I am also pleased with both the
increase in our current ratio to 2.0 to 1 and that our shareholders
equity increased by 119% in 2019. I would also like to point out
that the fourth quarter results included an accrual of $200,000 for
bonuses. All and all a very good year. Even with those excellent
results no one is resting on their laurels we fully expect to
continue to grow this business and increase sales. I am confident
our results will continue to impress.”
Mihaylo
added, "These results have not changed our attitude toward how we
manage cash, we are very prudent. We have started to make necessary
investments in the business so we can sustain the growth, but we
still watch every penny of shareholder money and spend it carefully
and strategically. We believe the market for and need for UCaaS
services has never been greater, and we further believe we are in a
unique position to capitalize on that market. I am convinced that
our services, products and technology are the top in the industry.
I know customers who use our Ride the Cloud® UCaaS services
will be both impressed and, in most instances, save a substantial
amount of money from what they currently spend. We will continue to
work to grow shareholder value.”
Doug
Gaylor, President and Chief Operating Officer, stated, “I
share Steve’s enthusiasm for our future growth. The team will
work every day with Steve to continue this momentum. As part of our
future growth plans, we will increase our marketing spend and we
have just hired a full time dedicated marketing employee who should
start with us soon. We believe this will help us to continue to
sustain our positive momentum.”
2
Conference Call The Company is hosting a conference call
today, March 3, 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 March 10,
2020 by dialing toll-free at 877-481-4010 or 919-882-2331 for
international callers. The replay passcode is 33134.
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 very pleased with the results for both the fourth
quarter and for the year; (ii) that the GAAP profit for 2019
compared to 2018 is very impressive; (iii) that the results did not
happen in a vacuum, and was part of a methodical process; (iv) that
the results show that it has managed and grown the business on a
regular basis; (iv) being very pleased with the results of its core
business; (v) being pleased with both the increase in cash balances
and the increase in shareholder equity for the year; (vi) believing
the results were all and all a very good year; (vii) not sitting on
their laurels even with those excellent results; (vii) fully
expecting to continue to grow this business and increase sales;
(viii) believing that its results will continue to impress; (ix)
the having the results changing its attitude toward managing cash
and continuing to be very prudent; (x) making necessary investments
in the business so it can sustain the growth; (xi) watching every
penny of shareholder money and spending it carefully and
strategically; (xii) believing the market for and need for UCaaS
services has never been greater and that the Company is in a unique
position to capitalize on that market; (xiii) being convinced that
its services, products and technology are the top in the industry;
(xiv) finding that its customers who use Ride the Cloud® UCaaS
services will be both impressed and, in most instances save a
substantial amount of money from what they currently spend; (xv)
will continue to work to grow shareholder value and continue this
momentum; (xvi) will increase its marketing spend and has
hired a full time dedicated marketing
employee who should start soon and (xvii) believing those actions
will help to continue to sustain our positive
momentum.
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.
3
|
CREXENDO, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(In thousands, except par value and share data)
|
|
|
December
31,
|
|
|
|
2019
|
2018
|
|
Assets
|
|
|
|
Current
assets:
|
|
|
|
Cash
and cash equivalents
|
$4,180
|
$1,849
|
|
Restricted
cash
|
100
|
100
|
|
Trade
receivables, net of allowance for doubtful accounts of
$14
|
|
|
|
as
of December 31, 2019 and $14 as of December 31, 2018
|
380
|
419
|
|
Contract
assets
|
22
|
12
|
|
Inventories
|
382
|
270
|
|
Equipment
financing receivables
|
143
|
67
|
|
Contract
costs
|
379
|
371
|
|
Prepaid
expenses
|
141
|
244
|
|
Income
tax receivable
|
4
|
1
|
|
Total
current assets
|
5,731
|
3,333
|
|
|
|
|
|
Long-term
trade receivables, net of allowance for doubtful
accounts
|
|
|
|
of
$0 as December 31, 2019 and $0 as of December 31, 2018
|
6
|
10
|
|
Long-term
equipment financing receivables, net
|
561
|
184
|
|
Property
and equipment, net
|
155
|
124
|
|
Operating
lease right-of-use assets
|
51
|
-
|
|
Intangible
assets, net
|
465
|
167
|
|
Goodwill
|
272
|
272
|
|
Contract
costs, net of current portion
|
436
|
342
|
|
Other
long-term assets
|
106
|
117
|
|
Total
Assets
|
$7,783
|
$4,549
|
|
|
|
|
|
Liabilities and Stockholders' Equity
|
|
|
|
Current
liabilities:
|
|
|
|
Accounts
payable
|
$86
|
$155
|
|
Accrued
expenses
|
1,754
|
1,131
|
|
Finance
leases
|
30
|
28
|
|
Notes
payable
|
-
|
56
|
|
Operating
lease liabilities
|
50
|
-
|
|
Contingent
consideration
|
175
|
-
|
|
Contract
liabilities
|
791
|
641
|
|
Total
current liabilities
|
2,886
|
2,011
|
|
|
|
|
|
Contract
liabilities, net of current portion
|
423
|
422
|
|
Finance
leases, net of current portion
|
86
|
116
|
|
Operating
lease liabilities, net of current portion
|
1
|
-
|
|
Total
liabilities
|
3,396
|
2,549
|
|
|
|
|
|
Commitments
and contingencies
|
|
|
|
|
|
|
|
Stockholders'
equity:
|
|
|
|
Preferred
stock, par value $0.001 per share - authorized 5,000,000 shares;
none issued
|
—
|
—
|
|
Common
stock, par value $0.001 per share - authorized 25,000,000 shares,
14,884,755
|
|
|
|
shares
issued and outstanding as of December 31, 2019 and 14,394,113
shares issued
|
|
|
|
and
outstanding as of December 31, 2018
|
15
|
14
|
|
Additional
paid-in capital
|
62,400
|
61,153
|
|
Accumulated
deficit
|
( 58,028)
|
( 59,167)
|
|
Total
stockholders' equity
|
4,387
|
2,000
|
|
|
|
|
|
Total
Liabilities and Stockholders' Equity
|
$7,783
|
$4,549
|
4
CREXENDO, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
(In thousands, except per share and share data)
|
|
Year
Ended December 31,
|
|
|
|
2019
|
2018
|
|
Service
revenue
|
$12,745
|
$10,461
|
|
Product
revenue
|
1,691
|
1,447
|
|
Total
revenue
|
14,436
|
11,908
|
|
|
|
|
|
Operating
expenses:
|
|
|
|
Cost
of service revenue
|
3,456
|
3,092
|
|
Cost
of product revenue
|
895
|
727
|
|
Selling
and marketing
|
3,862
|
3,403
|
|
General
and administrative
|
4,235
|
4,091
|
|
Research
and development
|
853
|
801
|
|
Total
operating expenses
|
13,301
|
12,114
|
|
|
|
|
|
Income/(loss)
from operations
|
1,135
|
( 206)
|
|
|
|
|
|
Other
income/(expense):
|
|
|
|
Interest
income
|
6
|
7
|
|
Interest
expense
|
( 12)
|
( 12)
|
|
Other
income, net
|
16
|
3
|
|
Total
other income/(expense), net
|
10
|
( 2)
|
|
|
|
|
|
Income/(loss)
before income tax
|
1,145
|
( 208)
|
|
|
|
|
|
Income
tax provision
|
( 6)
|
( 15)
|
|
|
|
|
|
Net
income/(loss)
|
$1,139
|
$(223)
|
|
|
|
|
|
Earnings/(loss)
per common share:
|
|
|
|
Basic
|
$0.08
|
$(0.02)
|
|
Diluted
|
$0.07
|
$(0.02)
|
|
|
|
|
|
Weighted-average
common shares outstanding:
|
|
|
|
Basic
|
14,570,286
|
14,332,092
|
|
Diluted
|
15,559,863
|
14,332,092
|
5
CREXENDO, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(In thousands)
|
|
Year
Ended December 31,
|
|
|
|
2019
|
2018
|
|
CASH
FLOWS FROM OPERATING ACTIVITIES
|
|
|
|
Net
income/(loss)
|
$1,139
|
$(223)
|
|
Adjustments
to reconcile net income/(loss) to net cash provided by
operating activities:
|
|
|
|
Depreciation
and amortization
|
94
|
92
|
|
Share-based
compensation
|
399
|
438
|
|
Changes
in assets and liabilities:
|
|
|
|
Trade
receivables
|
43
|
(26)
|
|
Contract
assets
|
(10)
|
(9)
|
|
Equipment
financing receivables
|
(453)
|
(77)
|
|
Inventories
|
(112)
|
(139)
|
|
Contract
costs
|
(102)
|
30
|
|
Prepaid
expenses
|
103
|
32
|
|
Income
tax receivable
|
(3)
|
(1)
|
|
Other
assets
|
11
|
14
|
|
Accounts
payable and accrued expenses
|
378
|
246
|
|
Contract
liabilities
|
151
|
75
|
|
Net
cash provided by operating activities
|
1,638
|
452
|
|
|
|
|
|
CASH
FLOWS FROM INVESTING ACTIVITIES
|
|
|
|
Purchase
of property and equipment
|
(72)
|
(7)
|
|
Net
cash used for investing activities
|
( 72)
|
( 7)
|
|
|
|
|
|
CASH
FLOWS FROM FINANCING ACTIVITIES
|
|
|
|
Repayments
made on finance leases
|
( 28)
|
( 10)
|
|
Proceeds
from notes payable
|
-
|
130
|
|
Repayments
made on notes payable
|
(56)
|
(153)
|
|
Proceeds
from exercise of options
|
849
|
155
|
|
Net
cash provided by financing activities
|
765
|
122
|
|
|
|
|
|
NET
INCREASE IN CASH, CASH EQUIVALENTS, AND RESTRICTED
CASH
|
2,331
|
567
|
|
|
|
|
|
CASH,
CASH EQUIVALENTS, AND RESTRICTED CASH AT THE BEGINNING OF THE
YEAR
|
1,949
|
1,382
|
|
|
|
|
|
CASH,
CASH EQUIVALENTS, AND RESTRICTED CASH AT THE END OF THE
YEAR
|
$4,280
|
$1,949
|
|
|
|
|
|
Supplemental
disclosure of cash flow information:
|
|
|
|
Cash
used during the year for:
|
|
|
|
Income
taxes, net
|
$(9)
|
$(16)
|
|
Interest
expense
|
$(12)
|
$(12)
|
|
Supplemental
disclosure of non-cash investing and financing
information:
|
|
|
|
Prepaid
assets financed through finance leases
|
$-
|
$25
|
|
Property
and equipment financed through finance leases
|
$-
|
$129
|
|
Contingent
consideration related to intangible asset acquisition
|
$175
|
$-
|
|
Purchase
of intangible assets included in accrued expenses
|
$176
|
$-
|
6
CREXENDO, INC. AND SUBSIDIARIES
Supplemental Segment Financial Data
(In thousands)
|
|
Three
Months Ended December 31,
|
Year
Ended December 31,
|
||
|
|
2019
|
2018
|
2019
|
2018
|
|
Revenue:
|
|
|
|
|
|
Cloud
telecommunications
|
$3,574
|
$2,908
|
$13,780
|
$11,083
|
|
Web
services
|
154
|
189
|
656
|
825
|
|
Consolidated
revenue
|
3,728
|
3,097
|
14,436
|
11,908
|
|
|
|
|
|
|
|
Income/(loss)
from operations:
|
|
|
|
|
|
Cloud
telecommunications
|
172
|
(85)
|
864
|
(613)
|
|
Web
services
|
46
|
85
|
271
|
407
|
|
Total
operating income/(loss)
|
218
|
-
|
1,135
|
(206)
|
|
Other
income/(expense), net:
|
|
|
|
|
|
Cloud
telecommunications
|
-
|
(2)
|
(2)
|
5
|
|
Web
services
|
9
|
(6)
|
12
|
(7)
|
|
Total
other income/(expense), net
|
9
|
(8)
|
10
|
(2)
|
|
Income/(loss)
before income tax provision:
|
|
|
|
|
|
Cloud
telecommunications
|
172
|
(87)
|
862
|
(608)
|
|
Web
services
|
55
|
79
|
283
|
400
|
|
Income/(loss)
before income tax provision
|
$227
|
$(8)
|
$1,145
|
$(208)
|
Use of Non-GAAP Financial Measures
To
evaluate our business, we consider and use non-generally accepted
accounting principles (Non-GAAP) net income/(loss) and Adjusted
EBITDA as a supplemental measure of operating performance. These
measures include the same adjustments that management takes into
account when it reviews and assesses operating performance on a
period-to-period basis. We consider Non-GAAP net income/(loss) to
be an important indicator of overall business performance because
it allows us to evaluate results without the effects of share-based
compensation and amortization of intangibles. We define EBITDA as
U.S. GAAP net income/(loss) before interest income, interest
expense, other income and expense, provision for income taxes, and
depreciation and amortization. We believe EBITDA provides a useful
metric to investors to compare us with other companies within our
industry and across industries. We define Adjusted EBITDA as EBITDA
adjusted for share-based compensation. We use Adjusted EBITDA as a
supplemental measure to review and assess operating performance. We
also believe use of Adjusted EBITDA facilitates investors’
use of operating performance comparisons from period to period, as
well as across companies.
In our
March 3, 2020 earnings press release, as furnished on Form 8-K, we
included Non-GAAP net income/(loss), EBITDA and Adjusted EBITDA.
The terms Non-GAAP net income/(loss), EBITDA, and Adjusted EBITDA
are not defined under U.S. GAAP, and are not measures of operating
income, operating performance or liquidity presented in analytical
tools, and when assessing our operating performance, Non-GAAP net
income/(loss), EBITDA, and Adjusted EBITDA should not be considered
in isolation, or as a substitute for net income/(loss) or other
consolidated income statement data prepared in accordance with U.S.
GAAP. Some of these limitations include, but are not limited
to:
●
EBITDA and Adjusted
EBITDA do not reflect our cash expenditures or future requirements
for capital expenditures or contractual commitments;
●
they do not reflect
changes in, or cash requirements for, our working capital
needs;
●
they do not reflect
the interest expense, or the cash requirements necessary to service
interest or principal payments, on our debt that we may
incur;
●
they do not reflect
income taxes or the cash requirements for any tax
payments;
●
although
depreciation and amortization are non-cash charges, the assets
being depreciated and amortized will be replaced sometime in the
future, and EBITDA and Adjusted EBITDA do not reflect any cash
requirements for such replacements;
●
while share-based
compensation is a component of operating expense, the impact on our
financial statements compared to other companies can vary
significantly due to such factors as the assumed life of the
options and the assumed volatility of our common stock;
and
●
other companies may
calculate EBITDA and Adjusted EBITDA differently than we do,
limiting their usefulness as comparative measures.
We
compensate for these limitations by relying primarily on our U.S.
GAAP results and using Non-GAAP net income/(loss), EBITDA, and
Adjusted EBITDA only as supplemental support for management’s
analysis of business performance. Non-GAAP net income/(loss),
EBITDA and Adjusted EBITDA are calculated as follows for the
periods presented.
7
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/(Loss) to Non-GAAP Net
Income
|
|||||||
|
(Unaudited)
|
|
|
Three
Months Ended December 31,
|
Year
Ended December 31,
|
||
|
|
2019
|
2018
|
2019
|
2018
|
|
|
(In
thousands)
|
(In
thousands)
|
||
|
U.S.
GAAP net income/(loss)
|
$228
|
$(8)
|
$1,139
|
$(223)
|
|
Share-based
compensation
|
106
|
94
|
399
|
438
|
|
Amortization
of intangible assets
|
13
|
18
|
53
|
72
|
|
Non-GAAP
net income
|
$347
|
$104
|
$1,591
|
$287
|
|
|
|
|
|
|
|
Non-GAAP
net income per common share:
|
|
|
|
|
|
Basic
|
$0.02
|
$0.01
|
$0.11
|
$0.02
|
|
Diluted
|
$0.02
|
$0.01
|
$0.10
|
$0.02
|
|
|
|
|
|
|
|
Weighted-average
common shares outstanding:
|
|
|
|
|
|
Basic
|
14,755,818
|
14,394,113
|
14,570,286
|
14,332,092
|
|
Diluted
|
15,929,874
|
14,902,330
|
15,559,863
|
15,095,262
|
|
Reconciliation of U.S. GAAP Net Income/(Loss) to EBITDA to Adjusted
EBITDA
|
|
|||||||
|
(Unaudited)
|
|
|||||||
|
|
Three
Months Ended December 31,
|
Year
Ended December 31,
|
||
|
|
2019
|
2018
|
2019
|
2018
|
|
|
(In
thousands)
|
(In
thousands)
|
||
|
U.S.
GAAP net income/(loss)
|
$228
|
$(8)
|
$1,139
|
$(223)
|
|
Depreciation
and amortization
|
25
|
26
|
94
|
92
|
|
Interest
expense
|
3
|
4
|
12
|
12
|
|
Interest
and other expense/(income)
|
(12)
|
4
|
(22)
|
(10)
|
|
Income
tax provision/(benefit)
|
(1)
|
-
|
6
|
15
|
|
EBITDA
|
243
|
26
|
1,229
|
(114)
|
|
Share-based
compensation
|
106
|
94
|
399
|
438
|
|
Adjusted
EBITDA
|
$349
|
$120
|
$1,628
|
$324
|
8