Crexendo NASDAQ: CXDO executives highlighted strong revenue growth, continued profitability, and early progress integrating its recent Estech Systems (ESI) acquisition during the company’s first quarter 2026 earnings call. Management also discussed new artificial intelligence offerings, expanding channel momentum, and a newly secured debt facility intended to support future acquisitions.
Financial results and profitability
Chairman and CEO Jeff Korn called the quarter “very special,” pointing to execution across operations and the company’s strategy of combining organic growth with disciplined M&A. Crexendo reported first-quarter revenue of $20.7 million, up 29% year-over-year, reflecting both organic growth and a one-month contribution from the ESI acquisition, which closed March 1.
CFO Ron Vincent said organic growth for the quarter was 15.9% year-over-year, excluding $2.1 million in revenue from ESI. Korn said the company delivered GAAP net income of $0.6 million and non-GAAP income of $3.3 million, marking the company’s 11th consecutive quarter of GAAP profitability, even as it absorbed acquisition-related costs and incremental amortization tied to the transaction.
Vincent reported the company posted $0.02 in GAAP earnings per share (basic and diluted) and $0.10 in non-GAAP EPS. EBITDA for the quarter was $1.6 million, and adjusted EBITDA was $3.2 million.
By revenue category, Vincent said:
- Service revenue increased 29% to $10.6 million with a 63% gross margin.
- Software solutions revenue increased 12% to $7.7 million with a 68% gross margin.
- Product revenue increased 141% to $2.4 million with a 31% gross margin.
Vincent said service revenue gross margin improved by 300 basis points and software solutions gross margin improved by 500 basis points versus the fourth quarter of 2025, while product margins declined due to “additional network equipment product sales” with “very low margins.” Operating expenses increased by about $3.2 million excluding ESI operations, driven by higher product revenue-related costs, acquisition-related expenses, and increased Oracle Cloud Infrastructure (OCI) hosting costs.
Crexendo’s operating margin was 2% for the quarter. Vincent said excluding roughly $800,000 in acquisition-related expenses, operating margins would “return to 6% or 7% as they had been in the historical years.”
ESI acquisition contribution and integration
Korn said the ESI acquisition is “exceeding our expectations” and is already contributing “meaningfully across the income statement,” with integration “advancing ahead of plan across sales, operation, engineering.” Vincent noted ESI’s operating results were included for one month in the quarter and that the company filed pro forma financial disclosures on Form 8-K/A on May 4 following completion of ESI’s historical audit.
Asked for additional color, Korn said ESI’s performance has been ahead of his expectations “all of the above” in terms of sales, profitability (excluding amortization), and integration. He also cited early synergy efforts including combined purchasing and plans to migrate ESI-hosted data centers to OCI. “It has just moved faster and more efficiently than I anticipated,” Korn said.
On the balance sheet, Vincent said cash and cash equivalents ended the quarter at $7.2 million, down from $31.4 million at the end of 2025, reflecting the cash portion of the ESI purchase. Operating activities provided $2.0 million in cash, while investing activities used $26.2 million.
Demand trends, sales activity, and backlog
President and COO Doug Gaylor said strong demand across both retail telecom services and wholesale software solutions helped drive Crexendo’s 11th consecutive GAAP profitable quarter and its 30th consecutive quarter of non-GAAP net income. He said telecom services revenue grew 18% organically year-over-year, while software solutions grew 12% organically. Including one month of ESI revenue, telecom services increased 41% year-over-year, he said.
Vincent said the company booked five new logos and nine upgrade orders from existing customers during the quarter. Gaylor called the five new logos a “dramatic improvement” from Q1 2025, when Crexendo had no new logos, and said two of the five new logos are migrating from Metaswitch.
On the retail side, management attributed the quarter’s organic growth to a combination of larger wins and improved channel performance. In response to analyst questions about the 18% organic telecom services growth, Korn said the company would not detail deal size, but noted enterprise deals can take significant time and that Crexendo has “several other in the hoppers.” Gaylor added that retail demand was led by a 51% year-over-year increase in sales bookings from master agent technology service distributors, plus traction with the company’s new AI Receptionist and higher SMB retail orders.
Crexendo reported remaining performance obligations (RPO) of $135.6 million at quarter-end, up from $89.1 million at the end of 2025. Vincent said ESI contributed $49.6 million of the increase. Gaylor said much of ESI’s retail customer base is on long-term contracts—typically five-year terms—which he said creates a “sticky customer base.” He also said RPO for the remainder of 2026 stood at $46 million.
Management emphasized the rollout of new AI capabilities. Korn highlighted the launch of CAIRO, Crexendo’s AI-driven solution, and said the company plans to continue releasing AI applications that “overlay onto our platform” to increase productivity and “increase our sales per customer.”
Gaylor provided more detail on CAIRO, describing it as an AI receptionist that can answer calls, handle FAQs, schedule or cancel appointments, access customer records, and escalate to a live person. He said initial sales success over the first two months has been strong. Gaylor also said Crexendo’s average retail revenue per account is roughly $350 per month and that adding CAIRO could increase a customer’s monthly payment by 25% or more, with additional usage-based revenue if customers exceed included minutes.
In Q&A, management said CAIRO demand spans multiple use cases, including replacing or augmenting receptionist coverage and diverting calls in environments like healthcare. Chief Revenue Officer Jon Brinton said “staff augmentation” is a key theme, as many companies have employees covering multiple roles. Korn later said Crexendo is “seeing quite a few customers exceed the usage bundled in the minimums.”
Gaylor also discussed Crexendo’s Ecosystem Vendor Partner (EVP) program, which he said has grown to 48 official partners, including 11 focused on AI applications. He cited examples including call sentiment analysis, call recording summarization, and agentic AI for contact center applications.
On margins, Gaylor said consolidated gross margin was 61%, slightly above the fourth quarter, but noted the quarter reflected higher OCI costs during the final stages of migrations from legacy hosting to OCI in the software solutions segment. He said the migration is now complete and the legacy hosted environment has been “fully decommissioned,” which he expects will drive cost savings and improved margins going forward.
Capital flexibility, acquisition strategy, and regulatory watch
Korn reiterated Crexendo’s intent to pursue “disciplined, accretive acquisitions” and said the company recently secured $5 million in term debt along with a line of credit, which Vincent later described as a $5 million term loan and a $5 million revolving credit facility with Wells Fargo. Korn said the company did not borrow out of necessity, but rather to ensure capital is available for future acquisition opportunities, adding that management does not expect to deploy the capital “in the immediate quarter or two.” In Q&A, Vincent said the company had not drawn on the facility.
Korn also said Crexendo is monitoring an early-stage Federal Trade Commission proposal that, if adopted, could require certain customer service and content support operations to be located entirely within the U.S. He cautioned the proposal is in an early phase with an approximate one-year public comment period and may not be implemented, but said the company aims to be positioned to respond if the change creates incremental sales opportunities in customer experience and customer center markets.
Looking ahead, Korn said Crexendo remains confident in sustained double-digit organic growth, while acknowledging macro conditions can affect the timing of larger enterprise decisions. He also reiterated the company’s trajectory toward $100 million in annual revenue, a goal Gaylor said the company previously targeted to reach on a run-rate basis by the end of 2026.
About Crexendo NASDAQ: CXDO
Crexendo, Inc NASDAQ: CXDO is a provider of cloud-based communications and collaboration solutions tailored to businesses of varying sizes. The company's flagship offering, CXsuite, integrates enterprise-grade voice, video conferencing, instant messaging, presence, and contact center functionality into a single platform delivered over the internet. By leveraging hosted infrastructure and a subscription-based model, Crexendo aims to reduce on-premises hardware costs and simplify management for IT teams and resellers.
Crexendo's product portfolio includes a multi-tenant cloud PBX, SIP trunking, session border controllers and an application programming interface (API) suite that allows partners and customers to embed real-time communications into custom workflows.
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