Crexendo Q1 2025 Earnings Call Transcript

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Provided by Quartr
May 6, 2025

Key Takeaways

  • In Q1 Crexendo delivered 12% year-over-year revenue growth to $16.1 M and reported GAAP net income of $1.2 M, non-GAAP net income of $2.6 M, and adjusted EBITDA of $2.6 M while generating strong cash flow.
  • The company’s Software Solutions segment grew revenue by 33% year-over-year to $6.9 M, achieved a 78% gross margin (up 500 bps from Q1 2024), and surpassed 6 million users as a milestone underscoring platform scalability.
  • Crexendo reaffirmed its commitment to profitable UCaaS growth, avoiding loss-leading pricing tactics, instead leveraging industry-leading customer service and its VIP bundle to compete effectively in a crowded telecom market.
  • Management highlighted completion of the migration from classic systems to the VIP platform and a full shift to Oracle Cloud Infrastructure by end of 2025 as key drivers for operational efficiency, cost savings, and further margin expansion.
  • The company’s Ecosystem Vendor Partner (EVP) program is gaining momentum—particularly in AI and customer-service applications—and Crexendo is evaluating disciplined, accretive M&A opportunities that can contribute within two quarters.
AI Generated. May Contain Errors.
Earnings Conference Call
Crexendo Q1 2025
00:00 / 00:00

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Operator

note this conference is being recorded. I will now turn the conference over to your host, Jeff Corrin, Chairman of the Board. You may begin.

Jeff Korn
Jeff Korn
CEO & Executive Chairman of the Board at Crexendo

Thank you, John, and good afternoon, everyone. Welcome to the Crexendo Q1 twenty twenty five year end conference call. I'm Jeff Corin, CEO and Chairman of the Board. On the call with me today are Doug Gaylor, our President and COO Ron Vincent, our CFO and in the room with us is John Britton, our CRO and Anand Bouche, our CSO. In a moment, John will read our safe harbor statement.

Jeff Korn
Jeff Korn
CEO & Executive Chairman of the Board at Crexendo

After that, I will give some brief comments on our performance for Q1 and for Q1. Ron will then provide more details on the numbers before handing over the call to Doug to provide a business and sales update. After that, we will open the call up to questions. John, would you please read the safe harbor statement?

Jon Brinton
Jon Brinton
CRO at Crexendo

Thank you, Jeff.

Jon Brinton
Jon Brinton
CRO at Crexendo

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.

Jon Brinton
Jon Brinton
CRO at Crexendo

These risk factors are explained in detail in the company's filings with the Securities and Exchange Commission, including the Form 10 ks for fiscal year ending 12/31/2024, 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 to Jeff. Jeff?

Jeff Korn
Jeff Korn
CEO & Executive Chairman of the Board at Crexendo

Thank you, John.

Jeff Korn
Jeff Korn
CEO & Executive Chairman of the Board at Crexendo

I am incredibly pleased with our first quarter results and remain more excited than ever about the direction Crexendo is heading. We continue to execute our strategic vision, delivering strong performance while making meaningful meaningful and disciplined investments in our business. Our ability to grow while remaining profitable is a testament to the strength of our team, our differential model and the significant opportunities ahead. Let me highlight a few key points from the quarter. Our first quarter results once again validate our strategy and business model.

Jeff Korn
Jeff Korn
CEO & Executive Chairman of the Board at Crexendo

We grew total revenue by 12% year over year to $16,100,000 fueled by a 33% increase in software solutions revenue while delivering strong GAAP profitability and generating substantial cash flow. Our ability to invest meaningfully in innovation, infrastructure and talent, while maintaining strong profitability underscores the strength of our disciplined approach. Our software solutions platform surpassed 6,000,000 users during the quarter, a major milestone that reflects the growing demand for our award winning offerings. The 33% growth in software revenue was accomplished by significant margin expansion with gross margins in the segment increasing 500 basis points to 78% compared to Q1 twenty twenty four and one thousand basis points higher than Q4 twenty twenty four. These results clearly demonstrate the scalability and operating leverage of our platform.

Jeff Korn
Jeff Korn
CEO & Executive Chairman of the Board at Crexendo

I am particularly excited by the continued momentum in our software solutions division. This reinforces not only the power of our platform, but also the strength of our licensees and partner ecosystem. We believe the disruption in the market, particularly with Metaswitch and Cisco BroadSoft, continues to work to our advantage. And we have been and continue to meticulously target new logos as a result. We have won more than our fair share of logos, and I am convinced we will continue to win more.

Jeff Korn
Jeff Korn
CEO & Executive Chairman of the Board at Crexendo

Our differentiated software model with session based pricing instead of seat based, our open APIs and our flexible deployment options, whether cloud, facilities, or hybrid, are critical factors in why companies are choosing Crexendo. We are building a platform for the future, giving customers flexibility and the control they both demand and need. You may have noticed we've become more strategic about publicizing customer acquisitions. We believe it's not in our best interest to put out our battle plans in plain view from our competitors. We are focused on execution and winning our share of the market quietly and effectively.

Jeff Korn
Jeff Korn
CEO & Executive Chairman of the Board at Crexendo

We will announce customer wins when it's strategically appropriate, but we will not issue press releases for every conversion. On the telecom side, with the UCaaS market remaining highly competitive, I want to be clear, we are committed to growing our telecom division, but we will do so profitably. UCaaS sales across the industry are extremely competitive with some competitors engaging in unsustainable practices, including aggressive spits and incentives that are making sales unprofitable. That is not something I am willing to do. Acquiring customers at a loss is a zero sum game, a strategy that has driven many of our competitors into debt and significant financial instability.

Jeff Korn
Jeff Korn
CEO & Executive Chairman of the Board at Crexendo

We believe in a better way, prioritizing sustainable growth, profitability, and delivering real value to our customers. Our secret sauce in UCaaS is our industry best customer service as independently verified by g two and our award winning VIP platform bundle, which remains unmatched in the market. We lead with differentiated service and superior products, not desperate pricing, and we will continue to grow the telecom division profitably. We reported strong net income on a GAAP and non GAAP basis of $1,200,000 and $2,600,000 respectively for the quarter and adjusted EBITDA of $2,600,000 driven by our disciplined focused approach to growth and how we manage the business. While many CEOs are pulling back guidance due to macroeconomic uncertainty, we have not seen a measurable weakening in demand for our offerings.

Jeff Korn
Jeff Korn
CEO & Executive Chairman of the Board at Crexendo

I remain confident that we will continue to deliver double digit revenue growth moving forward. We will continue to invest in innovation, expanding our engineering, service and support teams, and making strategic investments in automation, financial systems and product development to drive even greater operation operating leverage in the future. This is important to maintain and grow our position in the industry. Our ecosystem vendor partner program, EVP as we call it, is gaining real traction and momentum. By investing in our open API architecture and empowering our developer and licensee community, we are setting the stage for e b EVP to become a significant revenue driver in the years ahead.

Jeff Korn
Jeff Korn
CEO & Executive Chairman of the Board at Crexendo

We are very excited about the improvements and benefits we expect to see from two major current initiatives. First, the end of our classic migration to our VIP system is close to completion and will free up internal resources, improve overall margins, and reduce operational draft. Second, our goal to close our current hosted data centers and fully migrate to Oracle Cloud Infrastructure, OCI, by the end of twenty twenty five will drive substantial cost savings and allow us to focus resources on innovation and customer success rather than infrastructure manage. We expect these actions to contribute significantly to margin expansion and growth. We are also evaluating strategic acquisition opportunities.

Jeff Korn
Jeff Korn
CEO & Executive Chairman of the Board at Crexendo

We believe the market has become more rational regarding business valuations from nonpublic companies, and we are currently engaged in discussions. If we identify acquisition targets where we can be confident of making the acquisition accretive within two quarters, we will selectively pursue those opportunities. I have never been more confident in our path forward. Over the past two years, we have transformed Crexendo into a profitable, high growth software leader. As the telecom and software sectors continue to evolve, Crexendo is better positioned than ever to capitalize on industry disruption, customer needs, and emerging opportunities.

Jeff Korn
Jeff Korn
CEO & Executive Chairman of the Board at Crexendo

Our mission remains the same, to provide the best software solutions, the best customer service, and the most flexible and customer centric platform in the market. We will continue to focus on customer acquisition, customer retention, sustainable growth, market expansion and strategic innovation. With that, I'll turn the call over to Ron to walk you through the financial results for the quarter. Ron?

Ron Vincent
Ron Vincent
CFO at Crexendo

Thank you, Jeff, and good afternoon, everyone.

Ron Vincent
Ron Vincent
CFO at Crexendo

We had a strong first quarter, as Jeff highlighted, and I am happy to share the results with you today. Consolidated revenue for the quarter increased 12% to $16,100,000 That's compared to $14,300,000 for the first quarter of the prior year. Our service revenue increased 4% to $8,200,000 compared to $7,800,000 for the first quarter of the prior year. Our software solutions revenue for the quarter increased 33% to $6,900,000 compared to $5,100,000 for the first quarter of the prior year. Product revenue for the quarter declined 22% to $1,100,000 compared to $1,300,000 for the first quarter of the prior year.

Ron Vincent
Ron Vincent
CFO at Crexendo

Gross margin for the first quarter compared to the first quarter of the prior year, Service revenue gross margin decreased 3% quarter over quarter to 57% and no change from the fourth quarter of twenty twenty four. Software solutions revenue gross margins increased by 5% quarter over quarter to 78%, up and up 10% from the fourth quarter of twenty twenty four. Product revenue gross margin decreased by 3% quarter over quarter to 41% and down 1% from the fourth quarter of twenty twenty four. Consolidated revenue gross margin increased by 2% quarter over quarter to 65% and up 4% from the fourth quarter of twenty twenty four. Operating expenses for the quarter increased 8% to $14,900,000 compared to $13,800,000 for the first quarter of the prior year.

Ron Vincent
Ron Vincent
CFO at Crexendo

The operating margin for the quarter was 7.2% compared to 3.4% for the same period of the prior year. That's a 12% increase. Net income of 1,200,000 for the quarter, that's 4¢ per basic and diluted common share compared to net income of 400,000 or $02 per basic and $01 per diluted common share reported for the first quarter of the prior year. Non GAAP net income was 2,600,000.0 for the quarter. That's $09 per basic and $08 per diluted common share compared to non GAAP net income of 1,900,000.0 or $07 per basic and $06 per diluted common share reported for the first quarter of the prior year.

Ron Vincent
Ron Vincent
CFO at Crexendo

EBITDA for the quarter was 1,900,000.0 as compared to $1,300,000 for the first quarter of the prior year. And adjusted EBITDA for the quarter was $2,600,000 compared to $2,100,000 for the first quarter of the prior year. Our cash and cash equivalents at 03/31/2025 was 21,200,000.0 compared to 18,200,000.0 at 12/31/2024. Cash provided by operating activities for the three months was 1,200,000. That's compared to 200,000 used for operating activities in the first quarter of the prior year.

Ron Vincent
Ron Vincent
CFO at Crexendo

Cash provided by finance activities for the three month period was 1,800,000.0. That's compared to 900,000 provided for the first quarter of the prior year. I will now turn it over to Doug Gaylor, our President and COO, for additional comments on sales and operations.

Doug Gaylor
Doug Gaylor
COO & President at Crexendo

Thanks, Ron. I'm extremely pleased with our strong Q1 results to start 2025.

Doug Gaylor
Doug Gaylor
COO & President at Crexendo

Our 12% year over year increase in Q1 revenue, along with our 300 percent year over year increase in GAAP profitability, were the direct result of our focus on growing organically and profitably. Our top line growth, combined with our dedication to managing costs, allowed us to achieve GAAP profitability for our seventh consecutive quarter and achieve both our internal and external targets for the quarter. Our GAAP net income of $1,200,000 for the quarter and non GAAP net income of $2,600,000 for the quarter were a direct result of our success in managing the fundamentals of the business and making a strong effort to maximize and recognize synergies within the business. Our entire team is continually working 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 and continue our data center migrations that will show additional meaningful cost savings over the next twelve months. We saw tremendous organic growth of 33% from our software solutions segment of the business during the quarter, and that was fueled by uncertainties created by our two largest software solutions competitors, Cisco and Metaswitch, and we continue to see very strong demand for our UCaaS platform offering.

Doug Gaylor
Doug Gaylor
COO & President at Crexendo

Cisco has increased pricing, decreased support, and slowed future development on their BroadSoft platform, while Microsoft recently sold their Metaswitch division to a company that already has their own proprietary platform, creating a lot of uncertainty amongst their licensees. These disruptive actions continue to help build our pipeline of prospects for our software platform. Our unique pricing and support model for our software solutions platform, combined with our robust feature set, allows us to differentiate ourselves from the rest of our competition. Our telecom services retail segment grew at 1% organically as we have proactively substantially reduced selling some lower margin opportunities to maintain margin. We continue to see strong demand for our offerings from our channel partners and our master agent technology service distributors and expect that growth number to rebound.

Doug Gaylor
Doug Gaylor
COO & President at Crexendo

Our channel partner resellers sell our services to their prospects and customers on a revenue share basis, and these channel partner and reseller agents have great confidence representing our Crexendo VIP offering because of our % uptime guarantee combined with our best in class customer service and customer satisfaction, which consistently ranks number one. As Jeff previously mentioned, we are focused on profitably growing this segment, and we are not pursuing low margin or unprofitable retail opportunities. Our remaining performance obligation, also referred to as backlog, is now $82,000,000 an increase of 22% from Q1 of twenty twenty four. Our remaining performance obligation number is the sum of the remaining contract values for our telecom services and our software solutions customers that will be recognized on a sliding scale over the next sixty months and is a strong indicator of our future revenue stream. Of the $82,000,000 in remaining performance obligation, over $30,000,000 is currently slated to be recognized over the remainder of 2025.

Doug Gaylor
Doug Gaylor
COO & President at Crexendo

We continue to focus on improving our gross margins and saw a strong increase in overall gross margins in the quarter. Consolidated gross margin increased 61% at the end of 2024 to 65% in Q1. The increase in consolidated gross margin was primarily due to the significant improvement in our Software Solutions segment gross margins, which improved from 72% at the end of last year to 78% in q one, highlighting the scalability and operating leverage we have on the software segment of the business. Our telecom services gross margins for services remained at 70 at 57% consistent with q four. We are confident that we will continue to see gross margin improvements in both segments of the business in the future.

Doug Gaylor
Doug Gaylor
COO & President at Crexendo

Crexendo's tremendous engineering team continues to enhance and improve our award winning technology. During q one, we were rated by g2.com, which is the premier business software and services review site as the number one cloud communications provider in 18 separate satisfaction metrics, including easiest to use, quality of support, and ease of doing business with, just to name a few. Crexenda was also honored during the quarter as the twenty twenty five product of the year as well as receiving the hosted VoIP Excellence Award from Internet Telephony Magazine, highlighting the strength of our platform and our products. Both awards highlighted our groundbreaking AI features that enable users to create, engage, and analyze business communications effectively, efficiently, and affordably using artificial intelligence. We currently have a variety of AI solutions available for end users, including our video AI studio, our voice AI studio, AI call recording, and our contact center AI powered by ChatGPT.

Doug Gaylor
Doug Gaylor
COO & President at Crexendo

After starting 2025 with a strong q one, I couldn't be more excited about the future direction and opportunity for Crexendo. Over the past three years, we have more than doubled our revenue while improving our bottom line significantly and have now posted seven consecutive quarters of GAAP profitability and 26 with non GAAP net income. 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 our strong success. We are committed to delivering the best UCaaS, CCaaS, and CPaaS offerings in the sector to our customers and our partners and the best return for our shareholders. As the fastest growing platform solution in the country, now supporting over 6,000,000 end users, we are focused on enhancing our solutions, improving our efficiencies and continuing to return strong results.

Doug Gaylor
Doug Gaylor
COO & President at Crexendo

With that, I will now turn it over to Jeff for any further comments.

Jeff Korn
Jeff Korn
CEO & Executive Chairman of the Board at Crexendo

I don't have any further comments at this time. So, John, let's open the call up to questions.

Operator

Certainly. At this time, we will be conducting a question and answer session.

Operator

You may press 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment please while we poll for questions. First question comes from Eric Martinuzzi with Lake Street Capital. Please proceed.

Eric Martinuzzi
Eric Martinuzzi
Senior Research Analyst at Lake Street Capital

Yes. Congratulations on the terrific start to the year. I had a question regarding your comment about the double digit growth. Jeff, you talked about, yes, the double digit growth is sustainable. But I know that you, in some cases, there's puts and takes in a given quarter.

Eric Martinuzzi
Eric Martinuzzi
Senior Research Analyst at Lake Street Capital

So I assume that comment was relevant to 2025. Or was it perhaps specifically for Q2? Do we see that double digit? Is that anticipated for the current quarter?

Jeff Korn
Jeff Korn
CEO & Executive Chairman of the Board at Crexendo

Eric, the guidance I've given has been year over year because as you're right, there can be quarterly variances, which depend upon upgrades or new logos, which we are confident will come in over the year, but it's hard to gauge quarter to quarter.

Jeff Korn
Jeff Korn
CEO & Executive Chairman of the Board at Crexendo

And I see nothing in our future, which makes me want to change our guidance of 10% year over year, a minimum double digit growth year over year.

Eric Martinuzzi
Eric Martinuzzi
Senior Research Analyst at Lake Street Capital

Got it. And then you talked about unnatural behaviors by competitors regarding Spitz and master distributor relationships. I'm just wondering if there is any change there with the, you know, the turning of the calendar year, or would you just describe it as similar to 2024?

Jeff Korn
Jeff Korn
CEO & Executive Chairman of the Board at Crexendo

Thus far, it seems to be similar to 2024.

Jeff Korn
Jeff Korn
CEO & Executive Chairman of the Board at Crexendo

As I mentioned in my comments, I believe it's unsustainable. And if you look at some of our competitors with the deep debt they have and the other organic problems they have, I think it makes it clear it's unsustainable. So we will continue to pursue and grow at a profitable basis, which is what we've always done. As I said in my comments, we differentiate ourselves not by buying customers at a loss, but by delivering better service and better customer service.

Eric Martinuzzi
Eric Martinuzzi
Senior Research Analyst at Lake Street Capital

Got it. Thanks for taking my question.

Jeff Korn
Jeff Korn
CEO & Executive Chairman of the Board at Crexendo

My pleasure. Thank you, sir.

Operator

The next question comes from Mike Latimore with Northland Capital Market. Please proceed.

Jeff Korn
Jeff Korn
CEO & Executive Chairman of the Board at Crexendo

Afternoon, Mike.

Mike Latimore
Mike Latimore
Managing Director & Senior Research Analyst at Northland Capital Markets

Great. Good afternoon. Good afternoon. Great results. Awesome to see.

Jeff Korn
Jeff Korn
CEO & Executive Chairman of the Board at Crexendo

Thank you.

Mike Latimore
Mike Latimore
Managing Director & Senior Research Analyst at Northland Capital Markets

On the software gross margin, you know, really impressive improvement there. Can you just give a little bit more detail on what that drove what drove that improvement? And also, is that sustainable?

Mike Latimore
Mike Latimore
Managing Director & Senior Research Analyst at Northland Capital Markets

You know, I I think you said maybe even some improvements from there, but just a little bit color on where we might go from here.

Ron Vincent
Ron Vincent
CFO at Crexendo

Mike, obviously, increase in the margin is driven by the higher increase in quarter over quarter top line revenue in the Software Solutions division. And so it's evident as we continue to grow at a rapid pace, our margins will improve. We feel for the year are still in that viewpoint of mid mid 70, the 73 to 75 is our target for the full year. We had a great quarter, so we had significant improvement in the quarter.

Ron Vincent
Ron Vincent
CFO at Crexendo

But I'm not gonna guide to 78% and higher from this point forward, but, yeah, I would say in that that that 73, 70 five percent range is where we like to target.

Mike Latimore
Mike Latimore
Managing Director & Senior Research Analyst at Northland Capital Markets

Yeah. Okay. Got it. And then I guess it's been a few months now since the Metaswitch acquisition by Alessandra.

Mike Latimore
Mike Latimore
Managing Director & Senior Research Analyst at Northland Capital Markets

Can you provide a little bit more color on what you're seeing there in terms of just are they getting more or less aggressive in the market? You clearly are winning a lot of business here, but any kind of change in what you're seeing out of Mediswitz since that acquisition?

Jeff Korn
Jeff Korn
CEO & Executive Chairman of the Board at Crexendo

We we haven't seen a lot of change yet. People are still asking for sandboxes and are looking at our platform. It wouldn't shock us if decisions took a little bit longer as people were looking at what Allianz was doing, but we are highly confident due to our differentiated model, due to the level of service we provide, due to the fact that you can you can create your own system using our open APIs, that you could choose a hybrid system, you can use an cloud system, or you can use a facility based system that we will continue to win more than our fair share of all of these licensees.

Jeff Korn
Jeff Korn
CEO & Executive Chairman of the Board at Crexendo

We believe we provide a better product, better service, and better pricing with more flexibility, and we believe that's what will drive the market.

Mike Latimore
Mike Latimore
Managing Director & Senior Research Analyst at Northland Capital Markets

Great. Great. And just last on your I think you called EVP, but basically the app ecosystem here. How many are sort of fully integrated now?

Mike Latimore
Mike Latimore
Managing Director & Senior Research Analyst at Northland Capital Markets

And, you know, of the of the group you have, are there a couple that are, you know, getting the best amount of interest?

Jeff Korn
Jeff Korn
CEO & Executive Chairman of the Board at Crexendo

I'm gonna let Anand answer that because I he he deals with that far more than the rest of us.

Anand Buch
Anand Buch
Chief Strategy Officer, GM of Software Division & Director at Crexendo

Sure. Thanks, Jeff. Yeah.

Anand Buch
Anand Buch
Chief Strategy Officer, GM of Software Division & Director at Crexendo

I mean, I think I think, as Jeff pointed out, we'll continue to see growth there. We, you know, are constantly looking at kind of an inflow of partners that wanna add into the ecosystem. We're, you know, on a regular clip trying to onboard 10 to 12. There's other specific ones that are in their varies depending on what the customer needs are at that given time. So there's just kind of constant inflow of ecosystem partners.

Anand Buch
Anand Buch
Chief Strategy Officer, GM of Software Division & Director at Crexendo

So there's no one specific area, if you will. But, obviously, more recently, a a big uptick in folks that wanna leverage AI type applications and also customer service type applications. That's that's where most of the the interest lies.

Eric Martinuzzi
Eric Martinuzzi
Senior Research Analyst at Lake Street Capital

And quite a few punctuate sales over the last quarter.

Ron Vincent
Ron Vincent
CFO at Crexendo

So Yeah.

Ron Vincent
Ron Vincent
CFO at Crexendo

Absolutely. And actually, that's that was a question that we we've got that's one of the ones that we've actually onboarded probably within the last year or so, but we've seen that actually take a big uplift more recently, you know, as customers get their hands on this stuff and it gets onboarded and put out to the field.

Mike Latimore
Mike Latimore
Managing Director & Senior Research Analyst at Northland Capital Markets

Yeah. Great. Great. Okay. Thanks a lot. Congratulations.

Jeff Korn
Jeff Korn
CEO & Executive Chairman of the Board at Crexendo

Thank you, Mike.

Operator

Up next is George Sutton with Craig Hallum. Please proceed.

Jeff Korn
Jeff Korn
CEO & Executive Chairman of the Board at Crexendo

Hi, George. How are you?

George Sutton
Partner & Senior Research Analyst at Craig-Hallum Capital Group LLC

Great. I'm doing great.

George Sutton
Partner & Senior Research Analyst at Craig-Hallum Capital Group LLC

Great results. So you had mentioned the term meticulously targets licensees. I'm curious if you could just give us a sense of how exactly you are targeting what seems to be a very big open ended market. And there was no voiply discussion on the call. I'm curious if you can give us any more details there. That looks like a great win.

Jeff Korn
Jeff Korn
CEO & Executive Chairman of the Board at Crexendo

Well, I'm not going to give you our marketing plan publicly, George, because I'm sure Alejandra and, Cisco would love that. So but I am going to tell you that we obviously know who most of the customers are in the field. We reach out to them. We have our salespeople reach out to them.

Jeff Korn
Jeff Korn
CEO & Executive Chairman of the Board at Crexendo

We target them with marketing and blogs, and we have found it quite effective thus far. John, do you want to give a little color on the Voigtley opportunity?

Jon Brinton
Jon Brinton
CRO at Crexendo

Yeah. Just if you look at Doug mentioned the Voigtley opportunity, which we run recently. They have 25,000 customers that they currently have that they're looking to potentially move over to us.

Jon Brinton
Jon Brinton
CRO at Crexendo

With some of the other partners, you know, our value proposition is well defined for them. Jeff talked about some of those points. The the sessions not seats model, the flexibility of deployment that they can deploy it in their cloud or in our cloud, you know, just several of the differentiators we talked about, the a the APIs and what we've been able to do with AI applications and some of the other items. We still support perpetual license or subscription based pricing. So no matter who we're competing against, that value proposition appeals to a lot of partners, and we're reaching out to them.

Jon Brinton
Jon Brinton
CRO at Crexendo

We're we're working with them. And when they come in, then they're going through an evaluation with our platform versus the competitors. Some of those things are just the the key indicators of whether they're gonna move forward. And and much of the competition is walking away from several components of that, or they just don't support it anymore. So we do give a differentiated value that's easy for us to communicate in a in a in a kind of a a defined, confined market of companies that are the prospects we're going after.

George Sutton
Partner & Senior Research Analyst at Craig-Hallum Capital Group LLC

Great. And then one one other thing, Jeff, you meant you certainly sounded more optimistic about M and A, I would say, than you have prior in prior quarters. I think you sounded somewhat frustrated about expectations on behalf of the sellers, and now you're sounding a little bit more optimistic. Can you just give us a little bit better sense there?

Jeff Korn
Jeff Korn
CEO & Executive Chairman of the Board at Crexendo

Yes, George.

Jeff Korn
Jeff Korn
CEO & Executive Chairman of the Board at Crexendo

It, obviously, I don't wanna give numbers out over the phone, but a lot of private companies were looking with an eye toward even COVID and believe multiples still belong there. Obviously, COVID multiples made no sense as as you look at current multiples, and public company multiples don't necessarily make sense for private companies. That message is beginning to be realized, and the people we've spoken with are getting to a more rational and realistic value proposition. There's still a still a difference between what they think they may be worth and we think they may be worth, but that's a bridge we can now cross.

George Sutton
Partner & Senior Research Analyst at Craig-Hallum Capital Group LLC

Got you.

George Sutton
Partner & Senior Research Analyst at Craig-Hallum Capital Group LLC

Just one other question and take advantage of John being on the call. With Mike Bell announcing or filing for bankruptcy, can you just talk about what you see as potential opportunities from that?

Jon Brinton
Jon Brinton
CRO at Crexendo

Yeah. I would just say, George, with some of the legacy providers, you know, we've seen an ongoing, interest from their channel that, you know, as you know, they had a host to offer at one point in time, had a partnership with RingCentral. And over over the last three years, there's been a trend of both Mitel and Avaya, and I would say other legacy soft switch providers, partners looking to for alternatives in the market.

Jon Brinton
Jon Brinton
CRO at Crexendo

So we continue to sell and onboard partners that had built a business with them at one point in time, and they currently, frankly, today don't think that's the best place for their customers to to live for the next five years or ten years. And so the the positive benefit to that is they continue to look at the NetSagience platform and value the history that we have of being very friendly with our partners and our our channel and really having a channel focused go to market. And many of them have chosen to deploy our platform as an alternative to those legacy platform.

George Sutton
Partner & Senior Research Analyst at Craig-Hallum Capital Group LLC

Perfect. Thanks, guys.

Jeff Korn
Jeff Korn
CEO & Executive Chairman of the Board at Crexendo

Thank you, George.

Operator

Once again, if you have a question or a comment, please indicate so by pressing star one on your touch tone phone. Up next is Matthew Moss Riley. Please proceed, Matthew.

Matthew Maus
Equity Research Associate at B.Riley Securities

Hi. This is Matthew on for Josh Nichols. Thanks for taking my questions.

Jeff Korn
Jeff Korn
CEO & Executive Chairman of the Board at Crexendo

Thank you, Matthew. Good afternoon.

Matthew Maus
Equity Research Associate at B.Riley Securities

Yes. Good afternoon. I guess to start off, I was wondering what drove the large sequential drop in software COGS. Was it mainly because there was about $1,000,000 of lower margin event revenue in Q4? Or what is sort of explanation for that?

Ron Vincent
Ron Vincent
CFO at Crexendo

Yeah. So, you know, primarily driven by the higher growth in sales and revenue and six 667,000 reduction in calls.

Matthew Maus
Equity Research Associate at B.Riley Securities

Alright. Thank you. And I guess on the telecom side, I'm wondering what do you see as a driver of growth for telecom, and what's the trajectory on that given the current environment where the competitors are pricing aggressively?

Jeff Korn
Jeff Korn
CEO & Executive Chairman of the Board at Crexendo

Well, again, as we discussed, we believe that our customer service is a differentiation. Our bundle of services included in, UCaaS is a differentiation. And as I said, the the current purchasing of customers at a loss is probably not sustainable, which should put everybody on a more equal footing. But we will continue to work hard to increase UCaaS sales, but only do so profitably.

Doug Gaylor
Doug Gaylor
COO & President at Crexendo

Yeah.

Doug Gaylor
Doug Gaylor
COO & President at Crexendo

And, Matthew, as as John highlighted on that previous question, you know, the two largest premise providers out there, and and the estimates are that they're still probably 40% of the businesses in The US that are still on premise based equipment. The two largest premise providers in the country are Avaya and Mitel. Avaya just came out of bankruptcy for the second time in five years, really concentrated and announced their concentration on just their largest enterprise level customers. So that leaves a lot of small and mid sized business Avaya customers out there looking for an alternative. And the same as John highlighted with Mitel.

Doug Gaylor
Doug Gaylor
COO & President at Crexendo

Mitel has got a significant amount of smaller midsize customers out there using the Mitel platform. And if they're uncertain about the future of that product direction and support, they're gonna be looking for alternatives. So on the telecom services, on the retail side of the house, we still see a tremendous amount of opportunity there for growth.

Jeff Korn
Jeff Korn
CEO & Executive Chairman of the Board at Crexendo

Just just with the platform disruption in the industry is to our advantage because we have better service, better products, and top of the line pricing.

Matthew Maus
Equity Research Associate at B.Riley Securities

Got it.

Matthew Maus
Equity Research Associate at B.Riley Securities

That was really helpful. I guess I just have one last question, and that was just in terms of international growth. I know last call you mentioned Europe being a big growth opportunity you're fighting for. So is there any update on on the progress on that front and international growth in general?

Jeff Korn
Jeff Korn
CEO & Executive Chairman of the Board at Crexendo

We we continue to see strong demand in Europe.

Jeff Korn
Jeff Korn
CEO & Executive Chairman of the Board at Crexendo

Obviously, some of the tariffs and trade wars and European indifference to Americans may start to have an impact. We have not seen that yet, but but demand seems to be strong.

Matthew Maus
Equity Research Associate at B.Riley Securities

Got it. That was it for me. Thank you so much.

Jeff Korn
Jeff Korn
CEO & Executive Chairman of the Board at Crexendo

Thank you.

Operator

Next question is from Jesse Sobolson with D Borrow Capital. Please proceed.

Jesse Sobelson
Jesse Sobelson
VP - Equity Research at D. Boral Capital

Hi, everyone. Solid quarter here.

Jesse Sobelson
Jesse Sobelson
VP - Equity Research at D. Boral Capital

I was just, looking at the the numbers here. A bit of a modeling question. But so I think gross backlog was 89,000,000, which is up from 86 last quarter. And then of the next twelve months revenue from those contracts, this quarter, I think you guys mentioned 30,000,000 plus, which I think was down somewhat from the 39,000,000. Could you just explain the dichotomy here and if this is a sign of the shift in contract length or if there's some seasonality here that we should consider?

Ron Vincent
Ron Vincent
CFO at Crexendo

Well, we have a little bit of seasonality. We typically have lower sales bookings in the first quarter of the year. Most most companies run out their capital expenditures at the end of the year. And so q one is typically a slower year for us slower period for us. Sorry.

Ron Vincent
Ron Vincent
CFO at Crexendo

And so that's the it's the recognition of our revenue of our existing customers and then offset by the deals we booked during the quarter. And so obviously, Q1, if you look back over the last couple of years, Q1 is usually the lower of the four quarters in the year for the last couple of years.

Jesse Sobelson
Jesse Sobelson
VP - Equity Research at D. Boral Capital

Okay. Great. Good good to understand there.

Jesse Sobelson
Jesse Sobelson
VP - Equity Research at D. Boral Capital

And then just I was curious if you guys might be able to just give a little bit more color on, you know, average revenue per user. Someone last quarter asked if there was any 7 figure contract signed. I'm curious on that myself, and then what underlying revenue per user trends are today. Thank you.

Doug Gaylor
Doug Gaylor
COO & President at Crexendo

Yeah.

Doug Gaylor
Doug Gaylor
COO & President at Crexendo

Revenue per user, I think, is pretty stable. I think revenue per user on the sales side was right at $20 in q four. You have an updated number for q one. So 6425.

Jesse Sobelson
Jesse Sobelson
VP - Equity Research at D. Boral Capital

'60 '4 '20 '5?

Ron Vincent
Ron Vincent
CFO at Crexendo

Yeah. $64.25 was for the software solutions customer.

Doug Gaylor
Doug Gaylor
COO & President at Crexendo

No. On the retail side, the revenue per user on the retail side.

Ron Vincent
Ron Vincent
CFO at Crexendo

Oh, retail. So retail was $3.51.

Doug Gaylor
Doug Gaylor
COO & President at Crexendo

3 hundred 50 1 per account. So that's about our advertised customer about 18 statements and that's almost $20 per per user. And what was the second part of that question, Jesse?

Jesse Sobelson
Jesse Sobelson
VP - Equity Research at D. Boral Capital

Just on the the larger trends.

Jesse Sobelson
Jesse Sobelson
VP - Equity Research at D. Boral Capital

You know, I think the the customers coming from Metaswitch are considerably larger than the the average user, and there's some dynamic there. I think someone asked last quarter if there were any 7 figure contracts signed. I was kinda curious about that myself.

Doug Gaylor
Doug Gaylor
COO & President at Crexendo

Yeah. So I I think that we always have 7 figure or 6 figure type contracts on the, software solutions side.

Doug Gaylor
Doug Gaylor
COO & President at Crexendo

I don't know if, we had any huge ones in q one, that would probably just We we just we did not have a 7 figure contract. No. Okay.

Jesse Sobelson
Jesse Sobelson
VP - Equity Research at D. Boral Capital

Cool. Well, thanks for the details, and, you know, good luck with the rest of the year.

Doug Gaylor
Doug Gaylor
COO & President at Crexendo

Thank you, sir.

Operator

If there are any remaining questions, please indicate so now by pressing 1. Okay. We have no further questions in the queue. I'd like to turn the floor back over to Jeff Cohen for any closing remarks.

Jeff Korn
Jeff Korn
CEO & Executive Chairman of the Board at Crexendo

Thank you, John, and thank all of you for your attention and calling in, and we look forward to sharing with you our Q2 results in August. So until then, thank you, and have a great day. This concludes today's conference, and you may disconnect your lines at this time. Thank you for your participation.

Executives
    • Jeff Korn
      Jeff Korn
      CEO & Executive Chairman of the Board
    • Jon Brinton
      Jon Brinton
      CRO
    • Ron Vincent
      Ron Vincent
      CFO
    • Doug Gaylor
      Doug Gaylor
      COO & President
    • Anand Buch
      Anand Buch
      Chief Strategy Officer, GM of Software Division & Director
Analysts
    • Eric Martinuzzi
      Senior Research Analyst at Lake Street Capital
    • Mike Latimore
      Managing Director & Senior Research Analyst at Northland Capital Markets
    • George Sutton
      Partner & Senior Research Analyst at Craig-Hallum Capital Group LLC
    • Matthew Maus
      Equity Research Associate at B.Riley Securities
    • Jesse Sobelson
      VP - Equity Research at D. Boral Capital
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