• Revenue: $15.6 million, up 13% year over year.
• Software Solutions Revenue: $5.9 million, up 25% year over year.
• Service Revenue: $8 million, up 6% year over year.
• Product Revenue: $1.8 million, up 9% year over year.
• Consolidated Gross Margin: 61%, consistent with the prior year.
• Software Solutions Gross Margin: 71%, consistent with the prior year.
• Telecom Services Gross Margin: 55%, consistent with the prior year.
• Net Income: $148,000, or 1 per basic common share.
• Non-GAAP Net Income: $1.7 million, or 6 per basic and diluted common share.
• EBITDA: $1 million, compared to $1.2 million in the prior year.
• Adjusted EBITDA: $1.7 million, compared to $2.1 million in the prior year.
• Cash and Cash Equivalents: $15.5 million as of September 30, 2024.
• Cash Provided by Operating Activities: $4.1 million for the nine-month period.
• Telecom Backlog: $77.4 million, up 22% from Q3 2023.

• Warning! GuruFocus has detected 5 Warning Signs with CXDO.

Release Date: November 06, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Crexendo Inc (NASDAQ:CXDO) reported a 13% year-over-year increase in consolidated revenue, driven by a 25% growth in its software division.
• The company maintained GAAP profitability for the fifth consecutive quarter and non-GAAP net income for the 24th consecutive quarter.
• Crexendo Inc (NASDAQ:CXDO) has increased its cash and cash equivalents to $15.5 million, up from $10.3 million at the end of 2023.
• The company successfully added eight new logos and five expansions from existing licenses in the software solutions segment.
• Crexendo Inc (NASDAQ:CXDO) is experiencing strong international growth, with new wins in Australia and Africa, and is averaging over 100,000 new users added to its platform monthly.

Negative Points

• Operating expenses increased by 15% to $15.5 million due to investments in headcount, Oracle Cloud infrastructure, and accounting system implementation.
• Net income decreased to $148,000 for the quarter compared to $1.7 million in the prior year, partly due to the absence of a gain from the sale of a corporate office building.
• Product margins decreased to 40% from 45% in the third quarter of the prior year.
• The company is facing challenges in maintaining high margins and is working on improving them.
• Crexendo Inc (NASDAQ:CXDO) anticipates that future acquisitions may impact GAAP profitability due to intangible costs.

Q & A Highlights

Q: How many new logos and expansions did Crexendo have in the quarter? A: Doug Gaylor, President and COO, stated that Crexendo added eight new logos and had five expansions from existing licenses during the quarter, marking a significant achievement in their software solutions segment.

Q: Can you provide an update on the tools to help service providers migrate from Microsoft and Broadsoft? A: Anand Buch, Chief Strategy Officer, mentioned that Crexendo has added a partner to automate migrations and is working with a pipeline of additional partners to facilitate migrations from other platforms. Progress is going well.

Q: What is the status of the application ecosystem and its potential financial impact? A: Anand Buch explained that Crexendo's application ecosystem includes automation applications, customer experience chatbots, and verticalized applications. The ecosystem has grown with over 50 vendors, and while specific revenue guidance isn't provided, the applications enhance retention and differentiation.

Q: Is there a macro issue affecting the sequential flatness in services revenue? A: Ronald Vincent, CFO, clarified that there is no macro issue. The flatness was due to a slight increase in churn from a national account and variations in the mix of service versus product revenue.

Q: How does Crexendo balance direct sales versus leveraging the reseller channel? A: Jon Brinton, Chief Revenue Officer, stated that Crexendo maintains a balanced approach, investing heavily in growing software solutions sales due to its high margin profile, while also leveraging direct sales for customer feedback and interaction.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.