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8-K - CURRENT REPORT - Crexendo, Inc. | cxdo_8k.htm |
Exhibit 99.1
Crexendo Reports Financial Results for the First Quarter of
2017
PHOENIX,
AZ—(Marketwired – May 3, 2017)
Crexendo,
Inc. (OTCQX: CXDO), a CLEC cloud services company that provides
award winning cloud telecommunications services, broadband internet
services and other cloud business services, today reported
financial results for its first quarter ended March 31,
2017.
Financial highlights for the three months ended March 31,
2017
Consolidated
revenue for the first quarter of 2017 increased 8% to $2.3 million
compared to $2.2 million for the first quarter of
2016.
Cloud
Telecommunications Services Segment revenue for the first quarter
of 2017 increased 16% to $2.1 million compared to $1.8 million for
the first quarter of 2016.
Web
Services Segment revenue for the first quarter of 2017 decreased
29% to $283,000, compared to $396,000 for the first quarter of
2016.
Consolidated
operating expenses for the first quarter of 2017 decreased 6% to
$2.9 million compared to $3.0 million for the first quarter of
2016.
On a
GAAP basis, the Company reported a $(543,000) net loss for the
first quarter of 2017, or $(0.04) loss per diluted common share,
compared to net loss of $(868,000) or $(0.07) loss per diluted
common share for the first quarter of 2016.
Non-GAAP
net loss was $(188,000) for the first quarter of 2017, or $(0.01)
loss per diluted common share, compared to a non-GAAP net loss of
$(556,000) or $(0.04) loss per diluted common share for the first
quarter of 2016.
EBITDA
for the first quarter of 2017 was $(482,000) compared to $(830,000)
for the first quarter of 2016. Adjusted EBITDA for the first
quarter of 2017 was $(184,000) compared to $(580,000) for the first
quarter of 2016.
Total
cash and cash equivalents, excluding restricted cash, at March 31,
2017 was $968,000 compared to $619,000 at December 31,
2016.
Cash
used for operating activities for the first quarter of 2017 was
$(52,000) compared to $(261,000) for the first quarter of 2016.
Cash provided by investing activities for the first quarter of 2017
was $252,000 compared to $12,000 for the first quarter of 2016.
Cash provided by financing activities for the first quarter of 2017
was $149,000 compared to cash used for financing activities of
$(97,000) for the first quarter of 2016.
Steven
G. Mihaylo, Chief Executive Officer commented, “I am pleased
that we continue to have year over year quarterly growth, including
16% growth in our Telecom revenue. The increase in telecom revenue
is encouraging and I am convinced that the growth will start to
accelerate in the Q2 2017 quarter. Our Web Hosting revenue should
start to level off in the coming quarters and should start to
stabilize. I am also encouraged by the fact that we have reduced
our Non-GAAP loss for Q1 2017 compared to Q1 loss in 2016 by
approximately 66%. Our GAAP results were impacted by a stock option
charge of approximately $260,000 for the quarter. These results
convince me that we are following our internal plan and we are
geared toward reaching cash flow breakeven and GAAP net income this
year. We continue to watch every penny we spend and our cost
reductions have been highly successful. We however continue to make
appropriate and necessary investments. We always want to make sure
that we provide the best products and subscription
services.
Mihaylo
added, “We can continue to grow this business and I have high
confidence in our future. I also believe that we can accelerate our
growth; in reviewing our sales, over the last few quarters, I was
convinced that we could make improvements in both enterprise sales
and in attracting dealer partners that have better qualified leads.
We have changed our sales management structure to improve those
metrics. We have added a new VP of Sales and a new Director of
Sales to guide our dealer partners and direct sales groups. In
addition, we have increased our partner channel by over 20% and
increased our direct sales group by over 30%. I believe these
changes will start to show improvements to backlog and subscription
revenue over the next several quarters. I continue to be firmly
convinced that Crexendo will be very
successful.”
1
Doug
Gaylor, President and COO stated “I am pleased that our
telecom revenue continues to grow which provides confidence for our
future. I have high expectations for Crexendo and I look forward to
working with our new sales management team. I am convinced that we
have the right people in place to deliver the solid growth that
Steve is expecting.”
Conference Call
The
Company is hosting a conference call today, May 3, 2017 at 5:30 PM
EST. The telephone dial-in number is 877-741-4251 for domestic
participants and 719-325-4915 for international participants. The
conference ID to join the call is 3155446. Please dial in five to
ten minutes prior to the beginning of the call at 5:30 PM
EST.
About Crexendo
Crexendo,
Inc. (CXDO) is a CLEC cloud services company that provides award
winning cloud telecommunications services, broadband internet
services and other cloud business services. Our solutions are
designed to provide enterprise-class cloud services available to
any size businesses 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 confident that telecom revenue
and backlog will start to accelerate in our Q2 2017 quarter; (ii)
being confident that revenue growth will start to accelerate in the
Q2 2017 quarter; (iii) expecting that the increase in revenue is
very encouraging; (iv) believing that its Web Hosting revenue
should start to level off in the coming quarters and should start
to stabilize; (v) being convinced that it is following its internal
plan and is geared toward reaching cash flow breakeven and GAAP net
income this year; (vi) continuing to watch every penny spent with
its cost reductions have been highly successful; (vii) making
appropriate and necessary investments; (viii) making sure it
provides the best products and subscription services; (ix)
continuing to grow this business and having high expectations for
its future; (x) will be accelerating its growth (xi) improving both
enterprise sales and in attracting dealer partners that have better
qualified leads and expecting the new sales management team to
deliver those improvements; (xii) increasing its partner channel by
over 20% and increasing its direct sales group by over 30% and
believing these changes will start to show improvements to backlog
and subscription revenue over the next several quarters; (xiii)
continuing to be firmly convinced that Crexendo will be very
successful; (xiv) believing that the growth in backlog bodes well
for the future and (xv) believing that has the right people in
place to deliver the solid growth expected”
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, 2016, and
quarterly Forms 10-Q as filed. 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.
2
CREXENDO,
INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(In thousands, except par value and share data)
|
March 31,
2017
|
December 31,
2016
|
Assets
|
|
|
Current
assets:
|
|
|
Cash
and cash equivalents
|
$968
|
$619
|
Restricted
cash
|
100
|
100
|
Trade
receivables, net of allowance for doubtful accounts of
$43
|
|
|
as
of March 31, 2017 and $34 as of December 31, 2016
|
399
|
346
|
Inventories
|
294
|
170
|
Equipment
financing receivables
|
126
|
121
|
Prepaid
expenses
|
626
|
686
|
Other
current assets
|
8
|
8
|
Total
current assets
|
2,521
|
2,050
|
|
|
|
Certificate
of deposit
|
-
|
252
|
Long-term
trade receivables, net of allowance for doubtful
accounts
|
|
|
of
$11 as of March 31, 2017 and $13 as of December 31,
2016
|
41
|
43
|
Long-term
equipment financing receivables
|
140
|
176
|
Property
and equipment, net
|
15
|
18
|
Intangible
assets, net
|
311
|
335
|
Goodwill
|
272
|
272
|
Long-term
prepaid expenses
|
205
|
251
|
Other
long-term assets
|
120
|
136
|
Total
assets
|
$3,625
|
$3,533
|
|
|
|
Liabilities and Stockholders' Equity
|
|
|
|
|
|
Current
liabilities:
|
|
|
Accounts
payable
|
$173
|
$116
|
Accrued
expenses
|
926
|
997
|
Notes
payable, current portion
|
62
|
66
|
Income
taxes payable
|
9
|
5
|
Deferred
revenue, current portion
|
948
|
809
|
Total
current liabilities
|
2,118
|
1,993
|
|
|
|
Deferred
revenue, net of current portion
|
41
|
43
|
Notes
payable, net of current portion
|
959
|
966
|
Other
long-term liabilities
|
-
|
16
|
Total
liabilities
|
3,118
|
3,018
|
|
|
|
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,
13,803,556
|
|
|
shares
issued and outstanding as of March 31, 2017 and 13,578,556 shares
issued and
|
|
|
outstanding
as of December 31, 2016
|
14
|
14
|
Additional
paid-in capital
|
59,251
|
58,716
|
Accumulated
deficit
|
( 58,758)
|
( 58,215)
|
Total
stockholders' equity
|
507
|
515
|
|
|
|
Total
Liabilities and Stockholders' Equity
|
$3,625
|
$3,533
|
3
CREXENDO, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
(In thousands, except per share and share data)
|
Three Months Ended March 31,
|
|
|
2017
|
2016
|
Revenue
|
$2,344
|
$2,174
|
Operating
expenses:
|
|
|
Cost
of revenue
|
802
|
913
|
Selling
and marketing
|
690
|
610
|
General
and administrative
|
1,171
|
1,291
|
Research
and development
|
190
|
229
|
Total
operating expenses
|
2,853
|
3,043
|
|
|
|
Loss
from operations
|
( 509)
|
( 869)
|
|
|
|
Other
income/(expense):
|
|
|
Interest
income
|
3
|
4
|
Interest
expense
|
( 35)
|
(35)
|
Other
income, net
|
2
|
35
|
Total
other income/(expense), net
|
( 30)
|
4
|
|
|
|
Loss
before income tax
|
( 539)
|
( 865)
|
|
|
|
Income
tax provision
|
( 4)
|
( 3)
|
|
|
|
Net
loss
|
$(543)
|
$(868)
|
|
|
|
Net
loss per common share:
|
|
|
Basic
|
$(0.04)
|
$(0.07)
|
Diluted
|
$(0.04)
|
$(0.07)
|
|
|
|
Weighted-average
common shares outstanding:
|
|
|
Basic
|
13,699,389
|
13,243,880
|
Diluted
|
13,699,389
|
13,243,880
|
4
CREXENDO, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(In thousands)
|
Three Months Ended March 31,
|
|
|
2017
|
2016
|
CASH
FLOWS FROM OPERATING ACTIVITIES
|
|
|
Net
loss
|
$(543)
|
$(868)
|
Adjustments
to reconcile net loss to net cash used for operating
activities:
|
|
|
Amortization
of prepaid rent
|
54
|
81
|
Depreciation
and amortization
|
27
|
39
|
Non-cash
interest expesnse
|
33
|
29
|
Expense
for stock options issued to employees
|
260
|
193
|
Amortization
of deferred gain
|
(16)
|
(23)
|
Changes
in assets and liabilities:
|
|
|
Trade
receivables
|
(51)
|
(112)
|
Equipment
financing receivables
|
31
|
37
|
Inventories
|
(124)
|
5
|
Prepaid
expenses
|
134
|
41
|
Other
assets
|
16
|
22
|
Accounts
payable and accrued expenses
|
(14)
|
330
|
Income
tax payable
|
4
|
-
|
Deferred
revenue
|
137
|
(35)
|
Net
cash used for operating activities
|
( 52)
|
( 261)
|
|
|
|
CASH
FLOWS FROM INVESTING ACTIVITIES
|
|
|
Sale
of long-term investment
|
252
|
-
|
Release
of restricted cash
|
-
|
12
|
Net
cash provided by investing activities
|
252
|
12
|
|
|
|
CASH
FLOWS FROM FINANCING ACTIVITIES
|
|
|
Proceeds
from notes payable
|
25
|
-
|
Repayments
made on notes payable
|
( 42)
|
(38)
|
Proceeds
from exercise of options
|
166
|
-
|
Payment
of contingent consideration
|
-
|
(59)
|
Net
cash provided by/(used for) financing activities
|
149
|
(97)
|
|
|
|
NET
INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS
|
349
|
( 346)
|
|
|
|
CASH
AND CASH EQUIVALENTS AT THE BEGINNING OF THE PERIOD
|
619
|
1,497
|
|
|
|
CASH
AND CASH EQUIVALENTS AT THE END OF THE PERIOD
|
$968
|
$1,151
|
|
|
|
Supplemental
disclosure of cash flow information:
|
|
|
Cash
used during the period for:
|
|
|
Income
taxes, net
|
$-
|
$(2)
|
Supplemental
disclosure of non-cash investing and financing
information:
|
|
|
Issuance
of common stock for prepayment of interest on related-party note
payable
|
$109
|
$-
|
Issuance
of common stock for contingent consideration related to business
acquisition
|
$-
|
$40
|
Prepaid
assets financed through notes payable
|
$25
|
$23
|
5
CREXENDO, INC. AND SUBSIDIARIES
Supplemental Segment Financial Data
(In thousands)
|
Three Months Ended March 31,
|
|
|
2017
|
2016
|
Revenue:
|
|
|
Cloud
telecommunications services
|
$2,061
|
$1,778
|
Web
services
|
283
|
396
|
Consolidated
revenue
|
2,344
|
2,174
|
|
|
|
Income/(loss)
from operations:
|
|
|
Cloud
telecommunications services
|
(616)
|
(963)
|
Web
services
|
107
|
94
|
Total
operating loss
|
(509)
|
(869)
|
Other
income/(expense), net:
|
|
|
Cloud
telecommunications services
|
(30)
|
(7)
|
Web
services
|
-
|
11
|
Total
other income/(expense), net
|
(30)
|
4
|
Income/(loss)
before income tax provision
|
|
|
Cloud
telecommunications services
|
(646)
|
(970)
|
Web
services
|
107
|
105
|
Loss
before income tax provision
|
$(539)
|
$(865)
|
6
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, rent expense paid with common stock, interest expense
paid with common stock, 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,
and rent expense paid with stock. 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 3, 2017 earnings press release, as furnished on Form 8-K, we
included Non-GAAP net loss, EBITDA and Adjusted EBITDA. The terms
Non-GAAP net 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 loss,
EBITDA, and Adjusted EBITDA should not be considered in isolation,
or as a substitute for net 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.
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.
7
Reconciliation of U.S. GAAP Net Loss to Non-GAAP Net
Loss
(Unaudited)
|
Three Months Ended March 31,
|
|
|
2017
|
2016
|
|
(In
thousands)
|
|
U.S.
GAAP net loss
|
$(543)
|
$(868)
|
Share-based
compensation
|
260
|
193
|
Amortization
of rent expense paid in stock, net of deferred gain
|
38
|
57
|
Amortization
of intangible assets
|
24
|
33
|
Non-cash
interest expense
|
33
|
29
|
Non-GAAP
net loss
|
$(188)
|
$(556)
|
Reconciliation of U.S. GAAP Net Loss to EBITDA to Adjusted
EBITDA
(Unaudited)
|
Three Months Ended March 31,
|
|
|
2017
|
2016
|
|
(In
thousands)
|
|
U.S.
GAAP net loss
|
$(543)
|
$(868)
|
Depreciation
and amortization
|
27
|
39
|
Interest
expense
|
35
|
35
|
Interest
and other income
|
(5)
|
(39)
|
Income
tax provision
|
4
|
3
|
EBITDA
|
(482)
|
(830)
|
Share-based
compensation
|
260
|
193
|
Amortization
of rent expense paid in stock, net of deferred gain
|
38
|
57
|
Adjusted
EBITDA
|
$(184)
|
$(580)
|
8