Crexendo Reports Second Quarter 2016 Financial Results
/EINPresswire.com/ -- PHOENIX, AZ -- (Marketwired) -- 08/02/16 -- Crexendo, Inc. (OTCQX: CXDO), a hosted services company that provides hosted telecommunications services, broadband internet services and website hosting services for businesses, today reported financial results for its second quarter ended June 30, 2016.
Financial highlights for the 2016 second quarter
Consolidated revenue for the second quarter of 2016 increased 20% to $2.3 million compared to $1.9 million for the second quarter of 2015.
Hosted Telecommunications Services Segment revenue for the second quarter of 2016 increased 35% to $1.9 million compared to $1.4 million for the second quarter of 2015.
Web Services Segment revenue for the second quarter of 2016 decreased 26% to $347,000, compared to $469,000 for the second quarter of 2015.
Consolidated operating expenses for the second quarter of 2016 increased 2% to $3.0 million compared to $3.0 million for the second quarter of 2015.
On a GAAP basis, the Company reported a $(778,000) net loss for the second quarter of 2016, or $(0.06) loss per diluted common share, compared to net loss of $(1.1) million or $(0.08) loss per diluted common share for the second quarter of 2015.
Non-GAAP net loss was $(507,000) for the second quarter of 2016, or $(0.04) loss per diluted common share, compared to a non-GAAP net loss of $(734,000) or $(0.06) loss per diluted common share for the second quarter of 2015.
EBITDA for the second quarter of 2016 was $(740,000) compared to $(1.0) million for the second quarter of 2015. Adjusted EBITDA for the second quarter of 2016 was $(525,000) compared to $(744,000) for the second quarter of 2015.
Financial highlights for the six months ended June 30, 2016
Consolidated revenue for the six months ended June 30, 2016 increased 19% to $4.4 million compared to $3.7 million for the six months ended June 30, 2015.
Hosted Telecommunications Services Segment revenue for the six months ended June 30, 2016 increased 35% to $3.7 million compared to $2.7 million for the six months ended June 30, 2015.
Web Services Segment revenue for the six months ended June 30, 2016 decreased 25% to $743,000, compared to $997,000 for the six months ended June 30, 2015.
Consolidated operating expenses for the six months ended June 30, 2016 decreased 2% to $6.1 million compared to $6.2 million for the six months ended June 30, 2015.
On a GAAP basis, the Company reported a $(1.6) million net loss for the six months ended June 30, 2016, or $(0.12) loss per diluted common share, compared to net loss of $(2.2) million or $(0.18) loss per diluted common share for the six months ended June 30, 2015.
Non-GAAP net loss was $(1.1) million for the six months ended June 30, 2016, or $(0.08) loss per diluted common share, compared to a non-GAAP net loss of $(1.4) million or $(0.11) loss per diluted common share for the six months ended June 30, 2015.
EBITDA for the six months ended June 30, 2016 was $(1.6) million compared to $(2.3) million for the six months ended June 30, 2015. Adjusted EBITDA for the six months ended June 30, 2016 was $(1.1) million compared to $(1.6) million for the six months ended June 30, 2015.
Total cash and cash equivalents, excluding restricted cash, at June 30, 2016 was $923,000 compared to $1.9 million at June 30, 2015.
Cash used for operating activities for the six months ended June 30, 2016 was $(710,000) compared to $(1.7) million for the six months ended June 30, 2015. Cash provided by investing activities for the six months ended June 30, 2016 was $11,000 compared to cash used for investing activities of $(20,000) for the six months ended June 30, 2015. Cash provided by financing activities for the six months ended June 30, 2016 was $125,000 compared to $629,000 for the six months ended June 30, 2015.
Steven G. Mihaylo, Chief Executive Officer commented, "I am pleased with our ongoing progress. We increased our revenue Q2 2016 over Q2 2015 and our backlog continues to grow. We have kept a lid on expenses, even with the substantial year over year increase in revenue, and we have not increased our costs year over year. Our ability to control our costs, while increasing our backlog is a strong indication of our ability to grow this business. We will continue to work to increase our Dealer Partner Channel and our Direct Sales Channel. We continue to provide service, technology and phones that provide exceptional value. We are the right solution to support customers who are moving their expensive legacy phone services to the cloud."
Mihaylo added, "We continue to excel at providing solutions for enterprise customers. As I have discussed before our integrated sales process with engineering is particularly suited to providing enterprise solutions. Enterprise customers with multi-location instillations however do have a longer lag time from sale to recognizing revenue. We continue to work on improving and growing the business."
Conference Call
The Company is hosting a conference call today, August 2, 2016 at 5:30 PM EST. The telephone dial-in number is 888-430-8709 for domestic participants and 719-325-2393 for international participants. The conference ID to join the call is 2637145. Please dial in five to ten minutes prior to the beginning of the call at 5:30 PM EST.
About Crexendo
Crexendo, Inc. (OTCQX: CXDO) is a hosted services company that provides hosted telecommunications services, broadband internet services and website hosting services for businesses. Our services are designed to make enterprise-class hosting 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 pleased with ongoing progress; (ii) keeping a lid on expenses even with the substantial year over year increase in revenue; (iii) ability to control costs and increasing backlog is a strong indication of the ability to grow business; (iv) continue working to increase Dealer Partner Channel and Direct Sales Channel; (v) providing service, technology and phones that provide exceptional value; (vi) being the right solution to support customers who are moving their expensive legacy phone services to the cloud; (vii) excelling at providing solutions for enterprise customers; (viii) integrated sales process with engineering being particularly suited to providing enterprise solutions; (ix) enterprise customers with multi-location instillations having a longer lag time from sale to recognizing revenue and (x) continuing to work on improving and growing the business.
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 as well as Forms 10Q for 2016. 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)
June 30, 2016 December 31, 2015
------------- ---------------------
Assets
Current assets:
Cash and cash equivalents $ 923 $ 1,497
Restricted cash 100 112
Trade receivables, net of allowance
for doubtful accounts of $13
as of June 30, 2016 and $35 as of
December 31, 2015 422 364
Inventories 129 134
Equipment financing receivables 131 131
Prepaid expenses 1,065 1,046
Other current assets 8 15
------------- ---------------------
Total current assets 2,778 3,299
Certificate of deposit 252 251
Long-term trade receivables, net of
allowance for doubtful accounts
of $22 as of June 30, 2016 and $24
as of December 31, 2015 53 81
Long-term equipment financing
receivables 242 319
Property and equipment, net 24 33
Deferred income tax assets, net 482 482
Intangible assets, net 401 466
Goodwill 272 272
Long-term prepaids 238 288
Other long-term assets 142 169
------------- ---------------------
Total Assets $ 4,884 $ 5,660
============= =====================
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 263 $ 76
Accrued expenses 948 812
Notes payable, current portion 136 57
Contingent consideration - 99
Deferred income tax liability 482 482
Deferred revenue, current portion 819 775
------------- ---------------------
Total current liabilities 2,648 2,301
Deferred revenue, net of current
portion 53 81
Notes payable, net of current portion 980 965
Other long-term liabilities 62 109
------------- ---------------------
Total liabilities 3,743 3,456
------------- ---------------------
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, 13,405,246
shares issued and outstanding as
of June 30, 2016 and 13,227,489
shares issued and
outstanding as of December 31,
2015 13 13
Additional paid-in capital 58,197 57,614
Accumulated deficit (57,069) (55,423)
------------- ---------------------
Total stockholders' equity 1,141 2,204
------------- ---------------------
Total Liabilities and
Stockholders' Equity $ 4,884 $ 5,660
------------- ---------------------
CREXENDO, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
(In thousands, except per share and share data)
Three Months Ended June 30, Six Months Ended June 30,
--------------------------- --------------------------
2016 2015 2016 2015
------------ ------------- ------------ ------------
Revenue $ 2,267 $ 1,890 $ 4,441 $ 3,742
Operating expenses:
Cost of revenue 917 855 1,830 1,716
Selling and
marketing 636 580 1,246 1,183
General and
administrative 1,274 1,375 2,565 2,935
Research and
development 216 165 445 368
------------ ------------- ------------ ------------
Total operating
expenses 3,043 2,975 6,086 6,202
------------ ------------- ------------ ------------
Loss from
operations (776) (1,085) (1,645) (2,460)
------------ ------------- ------------ ------------
Other income
(expense):
Interest income 4 7 8 13
Interest expense (31) (3) (66) (13)
Other income, net 29 29 64 248
------------ ------------- ------------ ------------
Total other
income, net 2 33 6 248
------------ ------------- ------------ ------------
Loss before income
tax (774) (1,052) (1,639) (2,212)
Income tax
provision (4) (8) (7) (18)
------------ ------------- ------------ ------------
Net loss $ (778) $ (1,060) $ (1,646) $ (2,230)
============ ============= ============ ============
Net loss per common
share:
Basic $ (0.06) $ (0.08) $ (0.12) $ (0.18)
Diluted $ (0.06) $ (0.08) $ (0.12) $ (0.18)
Weighted-average
common shares
outstanding:
Basic 13,292,334 12,700,624 13,268,107 12,699,784
Diluted 13,292,334 12,700,624 13,268,107 12,699,784
CREXENDO, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(In thousands)
Six Months Ended June 30,
----------------------------
2016 2015
------------- -------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (1,646) $ (2,230)
Adjustments to reconcile net loss to net cash
used for operating activities:
Amortization of prepaid rent 161 161
Depreciation and amortization 74 160
Amortization of prepaid interest expense 12 -
Expense for stock options issued to
employees 351 582
Amortization of deferred gain (47) (47)
Changes in assets and liabilities, net of
effects of acquisitions:
Trade receivables (30) 167
Equipment financing receivables 77 76
Inventories 5 (7)
Prepaid expenses (40) (162)
Other assets 34 (114)
Accounts payable and accrued expenses 323 (258)
Deferred revenue 16 (61)
------------- -------------
Net cash used for operating activities (710) (1,733)
------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment - (24)
Release of restricted cash 12 4
Purchase of long-term investment (1) -
------------- -------------
Net cash provided by/(used for) investing
activities 11 (20)
------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from notes payable 150 -
Repayments made on notes payable (68) -
Proceeds from exercise of warrants 102 690
Payment of contingent consideration (59) (61)
------------- -------------
Net cash provided by financing activities 125 629
------------- -------------
NET DECREASE IN CASH AND CASH EQUIVALENTS (574) (1,124)
CASH AND CASH EQUIVALENTS AT THE BEGINNING OF
THE PERIOD 1,497 2,906
------------- -------------
CASH AND CASH EQUIVALENTS AT THE END OF THE
PERIOD $ 923 $ 1,782
============= =============
Supplemental disclosure of cash flow
information:
Cash used during the period for:
Income taxes, net $ (2) $ (1)
Supplemental disclosure of non-cash investing
and financing information:
Prepaid assets financed through notes
payable $ 116 $ -
Issuance of common stock for prepayment of
interest on related-party note payable $ 90 $ -
Issuance of common stock for contingent
consideration related to business
acquisition $ 40 $ 40
CREXENDO, INC. AND SUBSIDIARIES
Supplemental Segment Financial Data
(In thousands)
Three Months Ended June
30, Six Months Ended June 30,
2016 2015 2016 2015
----------- ------------ ------------ ------------
Revenue:
Hosted
telecommunications
services $ 1,920 $ 1,421 $ 3,698 $ 2,745
Web services 347 469 743 997
----------- ------------ ------------ ------------
Consolidated revenue 2,267 1,890 4,441 3,742
----------- ------------ ------------ ------------
Income/(loss) from
operations:
Hosted
telecommunications
services (872) (1,091) (1,835) (2,441)
Web services 96 6 190 (19)
----------- ------------ ------------ ------------
Total operating
loss (776) (1,085) (1,645) (2,460)
----------- ------------ ------------ ------------
Other income/(loss),
net:
Hosted
telecommunications
services (3) 18 (10) 39
Web services 5 15 16 209
----------- ------------ ------------ ------------
Total other income,
net 2 33 6 248
----------- ------------ ------------ ------------
Income/(loss) before
income tax provision
Hosted
telecommunications
services (875) (1,073) (1,845) (2,402)
Web services 101 21 206 190
----------- ------------ ------------ ------------
Loss before income
tax provision $ (774) $ (1,052) $ (1,639) $ (2,212)
=========== ============ ============ ============
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 August 2, 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 June 30, Six Months Ended June 30,
2016 2015 2016 2015
------------ ------------ ------------ ------------
(In thousands) (In thousands)
U.S. GAAP net
loss $ (778) $ (1,060) $ (1,646) $ (2,230)
Share-based
compensation 158 211 351 582
Amortization of
rent expense
paid in stock,
net of deferred
gain 57 57 114 114
Amortization of
intangible
assets 33 58 66 123
Amortization of
interest
expense paid in
stock 23 - 46 -
------------ ------------ ------------ ------------
Non-GAAP net loss $ (507) $ (734) $ (1,069) $ (1,411)
============ ============ ============ ============
Reconciliation of U.S. GAAP Net Loss to EBITDA to Adjusted EBITDA
(Unaudited)
Three Months Ended June 30, Six Months Ended June 30,
2016 2015 2016 2015
------------ ------------- ------------ ------------
(In thousands) (In thousands)
U.S. GAAP net loss $ (778) $ (1,060) $ (1,646) $ (2,230)
Depreciation and
amortization 36 73 75 160
Interest expense 31 3 66 13
Interest and other
income (33) (36) (72) (261)
Income tax
provision 4 8 7 18
------------ ------------- ------------ ------------
EBITDA (740) (1,012) (1,570) (2,300)
Share-based
compensation 158 211 351 582
Amortization of
rent expense paid
in stock, net of
deferred gain 57 57 114 114
------------ ------------- ------------ ------------
Adjusted EBITDA $ (525) $ (744) $ (1,105) $ (1,604)
============ ============= ============ ============
Crexendo, Inc.
Steven G. Mihaylo
CEO
602-345-7777
Smihaylo@crexendo.com
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