Crexendo Reports Fourth Quarter and Year End December 31, 2015 Financial Results
/EINPresswire.com/ -- PHOENIX, AZ -- (Marketwired) -- 03/01/16 -- Crexendo, Inc. (OTCQX: CXDO), a hosted services company that provides hosted telecommunications services, hosted website services, website development software and broadband internet services for businesses and entrepreneurs, today reported financial results for its fourth quarter and year ended December 31, 2015.
Financial highlights for the 2015 fourth quarter
Consolidated revenue for the fourth quarter of 2015 increased 6% to $2.1 million compared to $2.0 million for the fourth quarter of 2014.
Hosted Telecommunications Services Segment revenue for the fourth quarter of 2015 increased 27% to $1.7 million compared to $1.3 million for the fourth quarter of 2014.
Web Services Segment revenue for the fourth quarter of 2015 decreased 37% to $407,000, compared to $645,000 for the fourth quarter of 2014. Revenue from our Web Services Segment declined due to our strategic decision to limit our web services to our enterprise sized customers, our declining extended payment term arrangements (EPTAs) cash collections, and decrease in website hosting customers.
Consolidated operating expenses for the fourth quarter of 2015 decreased 9% to $3.4 million compared to $3.8 million for the fourth quarter of 2014.
On a GAAP basis, the Company reported a $(1.3) million net loss for the fourth quarter of 2015, or $(0.10) loss per diluted common share, compared to net loss of $(1.7) million or $(0.15) loss per diluted common share for the fourth quarter of 2014.
Non-GAAP net loss was $(0.6) million for the fourth quarter of 2015, or $(0.05) loss per diluted common share, compared to a non-GAAP net loss of $(1.2) million or $(0.10) loss per diluted common share for the fourth quarter of 2014.
EBITDA for the fourth quarter of 2015 was $(1.3) million compared to $(1.7) million for the fourth quarter of 2014. Adjusted EBITDA for the fourth quarter of 2015 was $(0.7) million compared to $(1.2) million for the fourth quarter of 2014.
Financial highlights for the year ended December 31, 2015
Consolidated revenue for the year ended December 31, 2015 increased 3% to $7.8 million compared to $7.6 million for the year ended December 31, 2014.
Hosted Telecommunications Services Segment revenue for the year ended December 31, 2015 increased 39% to $6.0 million compared to $4.3 million for the year ended December 31, 2014. Hosted Telecommunications Services backlog, which is anticipated to be recognized within the next thirty-six to sixty months, increased 42% to $13.9 million at December 31, 2015 compared to a backlog of $9.8 million at December 31, 2014.
Web Services Segment revenue for the year ended December 31, 2015 decreased 44% to $1.8 million, compared to $3.3 million for the year ended December 31, 2014. Revenue from our Web Services Segment declined due to our strategic decision to limit our provision of web services to our enterprise sized customers, our declining extended payment term agreements (EPTAs) cash collections and a decrease in website hosting customers.
Consolidated operating expenses for the year ended December 31, 2015 decreased 11% or $1.5 million to $12.7 million compared to $14.2 million for the year ended December 31, 2014
On a GAAP basis, the Company reported a $(4.5) million net loss for the year ended December 31, 2015, or $(0.35) loss per diluted common share, compared to net loss of $(6.4) million or $(0.57) loss per diluted common share for the year ended December 31, 2014.
Non-GAAP net loss was $(2.7) million for the year ended December 31, 2015, or $(0.23) loss per diluted common share, compared to a non-GAAP net loss of $(4.8) million or $(0.43) loss per diluted common share for the year ended December 31, 2014.
EBITDA for the year ended December 31, 2015 was $(4.6) million compared to $(5.9) million for the year ended December 31, 2014. Adjusted EBITDA for the year ended December 31, 2015 was $(2.9) million compared to $(4.6) million for the year ended December 31, 2014.
Total cash and cash equivalents, excluding restricted cash, at December 31, 2015 was $1.5 million compared to $2.9 million at December 31, 2014.
Cash used for operations for the year ended December 31, 2015 was $(3.0) million compared to $(4.4) million for the year ended December 31, 2014. Cash used for investing activities for the year ended December 31, 2015 was $4,000 compared to cash provided by investing activities of $2.1 million for the year ended December 31, 2014. Cash provided by financing activities for the year ended December 31, 2015 was $1.6 million compared to cash provided by financing activities of $2.1 million for the year ended December 31, 2014.
Steven G. Mihaylo, Chief Executive Officer, commented, "I am pleased with the progress we have been making. We continue to keep a laser focus on expenses. We have improved our tracking of expenses substantially and expenses for the year were fully in line with our expectations. If this trend continues, which we expect it will, that bodes very well for our reaching break even and profitability in the near future. Obviously reducing expenses is not enough and I am also very encouraged by our sales trends. Our year over year increase in both backlog and hosted telecommunications service has been steady and has been in line with our expectations. We fully expect to continue to increase revenue quarter over quarter.
"Our solutions and phones are among the best in our industry. We effectively provide solutions for customers who need one phone, to customers who need thousands of phones. We have been particularly adept at working with large enterprise clients and crafting solutions that meet their needs, which we believe differentiates us in the industry and is one of the keys to our future growth."
Mihaylo continued "We just completed another successful CrexWorx conference. This is an opportunity for our dealer partners to work with our management and sales team to get in-depth training on the Crexendo suite of services. The conference allows us to show our latest innovations and how Crexendo's Ride the Cloud ™ solutions can save their customers substantial amounts of money and increase productivity, while providing industry leading products and services. In addition, we get to show our dealer partners that our compensation package is amongst the best in the industry. I am very encouraged as I meet and work with our dealer partners.
"I am convinced this channel will also continue to grow Q over Q, and assist our reaching profitability. Our customers continue to be very pleased with our services, solutions and people. Our renewal rates have been very gratifying and we rarely lose any customers over our service or products. We continue to add qualified inside sales personnel and members to our dealer program, which we expect will increase our direct and dealer partner sales. I believe the future of the Company is very good, I continue to be firmly convinced we are in the right space, with the right products, right services and the right people."
Conference Call
The Company is hosting a conference call today, March 1, 2016 at 5:30 PM EST. The telephone dial-in number is 888-395-3227 for domestic participants and 719-325-2144 for international participants. The conference ID to join the call is 7622856. Please dial in five to ten minutes prior to the beginning of the call at 5:30 PM EST.
About Crexendo
Crexendo is a hosted services company that provides hosted telecommunications services, hosted website services, broadband internet services, and website development software for businesses and entrepreneurs. Our services are designed to make enterprise-class hosting services available to small, medium-sized and enterprise-sized 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 pleased with the progress made; (ii) continuing to keep a laser focus on expenses; (iii) improving the tracking of expenses, (iv) with expenses being fully in line with expectations; (v) having the expectation that if those trends continue it bodes very well for reaching break even and profitability in the near future; (vi) being very encouraged by sales trends with year over year increase in both backlog and hosted telecommunications service being in line with expectations; (vii) expecting to continue to increase revenue quarter over quarter; (viii) solutions and phones are among the best in our industry; (ix) effectively providing solutions for customers who need one phone, to customers who need thousands of phones; (x) being particularly adept at working with large enterprise clients and crafting solutions that meet their needs which differentiates the Company in the industry and is one of the keys to future growth; (xi) completing another successful CrexWorx conference where dealer partners work with management and sales team to get in-depth training on the Crexendo suite of services; (xii) solutions can save dealer partner customers substantial amounts of money and increase their productivity while providing industry leading products and services; (xiii) compensation package for dealer partners is amongst the best in the industry; (xiv) dealer partner channel sales will also continue to grow Q over Q, and assist reaching profitability; (xv) customers being very pleased with services, solutions and people; (xvi) renewal rates being very gratifying with rarely losing any customers over service or products; (xvii) continuing to add qualified inside sales personnel and members to the dealer program which is expected to increase direct and dealer sales and (xviii) believing the future of the Company is very good and that it is in the right space, with the right products and the right people.
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, 2015 when filed subsequent to this press release; and Form 10-K for the year ended December 31, 2014, as well as Forms 10Q for 2015. These forward-looking statements speak only as of the date on which such statements are made and the company undertakes no obligation to update such forward-looking statements, except as required by law.
CREXENDO, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(In thousands, except par value and share data)
December 31,
--------------------
2015 2014
--------- ---------
Assets
Current assets:
Cash and cash equivalents $ 1,497 $ 2,906
Restricted cash 112 133
Trade receivables, net of allowance for doubtful
accounts of $35 as of December 31, 2015 and $49 as
of December 31, 2014 364 543
Inventories 134 72
Equipment financing receivables 131 171
Prepaid expenses 1,046 1,031
Other current assets 15 1
--------- ---------
Total current assets 3,299 4,857
Certificate of deposit 251 251
Long-term trade receivables, net of allowance for
doubtful accounts of $24 as December 31, 2015 and $19
as of December 31, 2014 81 64
Long-term equipment financing receivables 319 455
Property and equipment, net 33 68
Deferred income tax assets, net 482 381
Intangible assets, net 466 676
Goodwill 272 272
Long-term prepaids 288 376
Other long-term assets 169 114
--------- ---------
Total Assets $ 5,660 $ 7,514
========= =========
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 76 $ 47
Accrued expenses 812 1,221
Income tax payable - 7
Notes payable, current portion 57 110
Contingent consideration 99 211
Deferred income tax liability 482 381
Deferred revenue, current portion 775 726
--------- ---------
Total current liabilities 2,301 2,703
Deferred revenue, net of current portion 81 64
Notes payable, net of current portion 965 -
Other long-term liabilities 109 203
--------- ---------
Total liabilities 3,456 2,970
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, 13,227,489 shares
issued and outstanding as of December 31, 2015 and
12,681,617 shares issued and outstanding as of
December 31, 2014 13 13
Additional paid-in capital 57,614 55,413
Accumulated deficit (55,423) (50,882)
--------- ---------
Total stockholders' equity 2,204 4,544
--------- ---------
--------- ---------
Total Liabilities and Stockholders' Equity $ 5,660 $ 7,514
========= =========
CREXENDO, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
(In thousands, except per share and share data)
Three Months Ended
December 31, Year Ended December 31,
------------------------ ------------------------
2015 2014 2015 2014
----------- ----------- ----------- -----------
Revenue $ 2,109 $ 1,989 $ 7,823 $ 7,594
Operating expenses:
Cost of revenue 979 978 3,577 3,582
Selling and marketing 638 577 2,445 2,280
General and
administrative 1,617 1,880 5,861 6,727
Research and
development 202 361 779 1,604
----------- ----------- ----------- -----------
Total operating
expenses 3,436 3,796 12,662 14,193
----------- ----------- ----------- -----------
Loss from operations (1,327) (1,807) (4,839) (6,599)
----------- ----------- ----------- -----------
Other income:
Interest income 5 28 24 150
Other income, net 14 52 262 150
----------- ----------- ----------- -----------
Total other income,
net 19 80 286 300
----------- ----------- ----------- -----------
Loss before income tax (1,308) (1,727) (4,553) (6,299)
Income tax benefit 40 (21) 12 (77)
----------- ----------- ----------- -----------
Net loss $ (1,268) $ (1,748) $ (4,541) $ (6,376)
=========== =========== =========== ===========
Net loss per common
share:
Basic $ (0.10) $ (0.15) $ (0.35) $ (0.57)
Diluted $ (0.10) $ (0.15) $ (0.35) $ (0.57)
Weighted-average common
shares outstanding:
Basic 13,227,385 11,342,245 12,960,625 11,163,592
Diluted 13,227,385 11,342,245 12,960,625 11,163,592
CREXENDO, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(In thousands)
Year Ended December 31,
-----------------------
2015 2014
---------- ----------
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (4,541) $ (6,376)
Adjustments to reconcile net loss to net cash used
for operating activities:
Amortization of prepaid rent 322 268
Depreciation and amortization 270 663
Expense for warrants and stock options issued to
employees 1,306 1,049
Loss on disposal of property and equipment - (1)
Amortization of deferred gain (94) (78)
Change in fair value of contingent consideration (11) 3
Changes in assets and liabilities, net of effects of
acquisitions:
Trade receivables 162 599
Equipment financing receivables 176 (134)
Inventories (62) 145
Prepaid expenses (112) (89)
Other current assets (14) 54
Other long-term assets (55) 5
Accounts payable and accrued expenses (380) (38)
Income tax payable (7) 7
Deferred revenue 66 (525)
---------- ----------
Net cash used for operating activities (2,974) (4,448)
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of property and equipment (25) (8)
Proceeds from sale of property and equipment - 2,002
Acquisition of certificate of deposit - (1)
Change in restricted cash 21 354
Business acquisitions - (195)
---------- ----------
Net cash (used for)/provided by investing
activities (4) 2,152
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from notes payable and common stock
warrants issued 1,000 110
Repayments of notes payable (110) -
Proceeds from exercise of options 50 70
Payments of contingent consideration (61) (54)
Proceeds from sale of common stock and exercise of
warrants 690 2,000
---------- ----------
Net cash provided by financing activities 1,569 2,126
---------- ----------
NET DECREASE IN CASH AND CASH EQUIVALENTS (1,409) (170)
CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE
YEAR 2,906 3,076
---------- ----------
CASH AND CASH EQUIVALENTS AT THE END OF THE YEAR $ 1,497 $ 2,906
========== ==========
Supplemental disclosure of cash flow information:
Cash used during the year for:
Income taxes, net $ (1) $ (14)
Supplemental disclosure of non-cash investing and
financing information:
Prepayment of rent with common stock $ - $ 966
Business acquisition with stock (Note 3) $ - $ 134
Contingent consideration related to acquisition
(Note 3) $ - $ 211
Issuance of common stock from contingent
consideration related to a business acquisition $ 40 $ -
Prepaid assets financed through notes payable $ 137 $ -
Note payable discount $ 115 $ -
CREXENDO, INC. AND SUBSIDIARIES
Supplemental Segment Financial Data
(In thousands)
December 31,
2015 2014
--------- ---------
Revenue:
Hosted Telecommunications Services $ 5,989 $ 4,297
Web Services 1,834 3,297
--------- ---------
Consolidated revenue 7,823 7,594
--------- ---------
Gain/(Loss) from Operations:
Hosted Telecommunications Services (4,904) (5,776)
Web Services 65 (823)
--------- ---------
Total operating loss (4,839) (6,599)
--------- ---------
Other Income, net:
Hosted Telecommunications Services 71 87
Web Services 215 213
--------- ---------
Total other income 286 300
--------- ---------
Gain/(Loss) before income tax provision
Hosted Telecommunications Services (4,833) (5,689)
Web Services 280 (610)
--------- ---------
Loss before income tax provision $ (4,553) $ (6,299)
========= =========
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, 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 March 1, 2016 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.
Reconciliation of U.S. GAAP Net Loss to Non-GAAP Net Loss
(Unaudited)
Three Months Ended Year Ended
December 31, December 31,
---------------------- ----------------------
2015 2014 2015 2014
---------- ---------- ---------- ----------
(In thousands)
U.S. GAAP net loss $ (1,268) $ (1,748) $ (4,541) $ (6,376)
Share-based compensation 522 437 1,306 1,049
Amortization of rent expense
paid in stock 81 81 322 268
Amortization of intangible
assets 43 72 210 248
---------- ---------- ---------- ----------
Non-GAAP net loss $ (622) $ (1,158) $ (2,703) $ (4,811)
========== ========== ========== ==========
Reconciliation of U.S. GAAP Net Loss to EBITDA to Adjusted EBITDA
(Unaudited)
Three Months Ended Year Ended
December 31, December 31,
---------------------- ----------------------
2015 2014 2015 2014
---------- ---------- ---------- ----------
(In thousands) (In thousands)
U.S. GAAP net loss $ (1,268) $ (1,748) $ (4,541) $ (6,376)
Depreciation and
amortization 54 109 270 663
Interest expense 12 2 28 3
Interest and other (income)
expense (31) (82) (314) (303)
Income tax
provision/(benefit) (40) 21 (12) 77
---------- ---------- ---------- ----------
EBITDA $ (1,273) $ (1,698) $ (4,569) $ (5,936)
Share-based compensation 522 437 1,306 1,049
Amortization of rent expense
paid in stock 81 81 322 268
---------- ---------- ---------- ----------
Adjusted EBITDA $ (670) $ (1,180) $ (2,941) $ (4,619)
========== ========== ========== ==========
Crexendo, Inc.
Steven G. Mihaylo
CEO
602-345-7777
Smihaylo@crexendo.com
