SOURCE: Crexendo, Inc.

Crexendo, Inc.

May 15, 2013 16:00 ET

Crexendo Reports First Quarter 2013 Financial Results

PHOENIX, AZ--(Marketwired - May 15, 2013) - Crexendo, Inc. (NYSE MKT: EXE), a hosted services company that provides web hosting, hosted telecommunications services, search engine optimization management, link building, e-commerce software, website development and broadband internet services for businesses and entrepreneurs, today reported financial results for its first quarter of 2013.

Financial highlights for Crexendo's first quarter 2013 included:

Consolidated revenue for the first quarter of 2013 decreased 42% to $3.0 million compared to $5.3 million for the first quarter of prior year. 

Net loss for the first quarter of 2013 was $(398,000) or $(0.04) per diluted common share, compared to net income of $197,000 or $0.02 per diluted common share for the first quarter of prior year.

Cash used for operations for the first quarter of 2013 was $(1.8) million compared to cash provided by operations of $652,000 for the first quarter of prior year. 

Segment Results

The Company has three operating segments, which consist of StoresOnline, Crexendo Web Services and Crexendo Network Services. Effective October 1, 2012, the Company changed its reporting segments to reflect the allocation of previously unallocated corporate expenses to each of the three operating segments. The Company revised its segment reporting to reflect changes in how the Chief Operating Decision Maker (CODM) internally measures performance and allocates resources. Segment operating results for the prior year has been revised to conform to current year segment operating results presentation.

StoresOnline

Revenue for the first quarter of 2013 decreased 52% to $2.1 million compared to $4.4 million for the prior year quarter. Following our decision to suspend our direct mail seminar sales in July 2011, revenue from our StoresOnline segment has been generated primarily through principal amounts collected on historical sales of StoresOnline products and services sold through EPTAs. Fees for our StoresOnline products and services sold under EPTAs are recognized as revenue as cash payments are received from the customer and not at the time of sale.

Total segment operating expenses decreased 61% to $1.1 million compared to $2.7 million for the prior year quarter.

Segment other income, primarily related to interest on the collection of accounts receivable for the first quarter of 2013 decreased 73% to $206,000 compared to $762,000 in the prior year quarter.

Total segment income before income taxes for the first quarter of 2013 decreased 50% to $1.2 million compared to $2.4 million in the prior year quarter.

Crexendo Web Services

Revenue for the first quarter of 2013 decreased 31% to $533,000, from $770,000 in the prior year quarter. Web Services backlog, which is anticipated to be recognized within the next twelve months, was $1.3 million at March 31, 2013 compared to a backlog of $1.2 million at March 31, 2012. 

Total segment operating expenses for the first quarter of 2013 decreased 45% to $1.2 million compared to $2.2 million in the prior year quarter.

Crexendo Network Services 

Revenue for the first quarter of 2013 increased 413% to $385,000 compared to $75,000 in the prior year quarter. Network Services backlog, which is anticipated to be recognized within the next thirty-six months, was $3.4 million at March 31, 2013 compared to a backlog of $965,000 at March 31, 2012.

Total Network Services operating expenses for the first quarter of 2013 increased 60% to $1.6 million compared to $1.0 million in the prior year quarter.

Steven G. Mihaylo, Chief Executive Officer, commented "I have confidence that this quarter's results show we are on a path toward profitability. This is the second quarter in a row that sales results are fully in line with our plan. Our backlog is at healthy levels, and I am very pleased with our marketing and sales initiatives. We continue to add resellers to our dealer program and sales are beginning to increase. I have high expectations for continued growth from that program. We are able to provide world class service to customers of all sizes, and every day our products and services improve. We continue to put our legacy issues firmly in the past; we were able to resolve the dispute with the landlord in Orem, Utah on terms that were reasonable and fair. Every day we continue to move further away from the issues that burdened this company. While our results are in line with our plan and my expectations, every day I work with our management team to streamline operations, keep costs at acceptable levels, improve sales and increase our product reach. We continue to monitor productivity of our sales force improving the efficiencies of our sales team. We continue to look at ways to increase our organic sales while carefully reviewing strategic accretive acquisitions."

Mihaylo continued, "I understand that our shareholders will not be satisfied until we are profitable and the results are fully in line with our expectations. I will not be satisfied until this Company's results demonstrate it is the world class company that I know it to be. I am dedicated to working with this management team to realize that goal. I do however look at the progress we have accomplished over the last two years and realized we have done incredible work, we have resolved mountains of issues that would have destroyed most companies, completely retooled our business and have built a strong company with amazing people and products. I am very proud of this team and confident and excited about our future."

Conference Call

The Company is hosting a conference call today, May 15, 2013 at 5:00 PM EDT. The conference call will be broadcast live over the Internet at http://www.crexendo.com. If you do not have Internet access, the telephone dial-in number is 888-428-9480 for domestic participants and 719-325-2323 for international participants. The conference ID to join the call is 5131127. Please dial in five to ten minutes prior to the beginning of the call at 5:00 PM EDT.

About Crexendo

Crexendo is a hosted services company that provides web hosting, hosted telecommunications services, search engine optimization management, link building, e-commerce software, website development and broadband internet services for businesses and entrepreneurs. Our services are designed to make enterprise-class hosting services available to small and medium-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) backlogs being at healthy levels; (ii) being pleased with its marketing and sales initiatives; adding resellers to our dealer program and having high expectations for continued growth from that program; (iii) providing world class service to customers of all sizes with products and services improving; (iv) resolving the Orem lawsuit on a fair basis while putting legacy issues firmly in the past and continuing to move further away from the issues that burdened the company; (v) working to streamline operations, keep costs at acceptable levels, improve sales and increase product reach; (vi) continuing to look at ways to increase organic sales while carefully reviewing strategic accretive acquisitions; (vii) being profitable and results are fully in line with company expectations; (vii) being a world class company and (ix) being proud of this team and confident and excited about its future.

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, 2012, and Form 10Q for the period ending March 31, 2013. 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  
Condensed Consolidated Balance Sheets  
(In thousands, except par value and share data)  
(Unaudited)  
   
             
    March 31, 2013     December 31, 2012  
Assets                
                 
Current Assets:                
  Cash and cash equivalents   $ 5,565     $ 7,440  
  Restricted cash     1,444       1,444  
  Trade receivables, net of allowance of doubtful accounts of $883 as of March 31, 2013 and $1,326 as of December 31, 2012    
1,937
     
3,043
 
  Inventories     114       171  
  Equipment financing receivables     38       28  
  Income taxes receivable     76       434  
  Prepaid expenses and other     440       333  
  Certificate of Deposit     250       -  
    Total Current Assets     9,864       12,893  
                 
Certificate of deposit     250       500  
Long-term trade receivables, net of allowance of doubtful accounts of $145 as of March 31, 2013 and $196 as of December 31, 2012    
259
     
395
 
Long-term equipment financing receivables     137       96  
Property and equipment, net     2,915       3,172  
Deferred income tax assets, net     105       103  
Intangible assets     -       6  
Goodwill     265       265  
Other long-term assets     97       97  
    Total Assets   $ 13,892     $ 17,527  
                 
Liabilities and Stockholders' Equity                
                 
Current Liabilities:                
  Accounts payable   $ 302     $ 418  
  Accrued expenses and other     1,176       3,010  
  Deferred income tax liability     105       103  
  Deferred revenue, current portion     1,921       3,052  
    Total Current Liabilities     3,504       6,583  
                 
Deferred revenue, net of current portion     261       399  
Other long-term liabilities     -       253  
    Total Liabilities     3,765       7,235  
                 
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 100,000,000 shares; 10,671,388 shares outstanding as of March 31, 2013 and 10,669,201 shares outstanding as of December 31, 2012    

11
     

11
 
  Additional paid-in capital     50,057       49,824  
  Accumulated deficit     (39,941 )     (39,543 )
    Total Stockholders' Equity     10,127       10,292  
                   
    Total Liabilities and Stockholders' Equity   $ 13,892     $ 17,527  
                 
   
CREXENDO, INC. AND SUBSIDIARIES  
Condensed Consolidated Statements of Operations  
(In thousands, except per share and share data)  
(Unaudited)  
   
    Three Months Ended March 31,  
    2013     2012  
                 
Revenue   $ 3,022     $ 5,255  
                 
Operating expenses:                
  Cost of revenue     1,042       1,421  
  Selling and marketing     908       933  
  General and administrative     1,438       3,033  
  Research and development     481       594  
    Total operating expenses     3,869       5,981  
                 
Loss from operations     (847 )     (726 )
                 
Other income (expense):                
  Interest income     219       742  
  Other income (expense), net     (7 )     28  
    Total other income, net     212       770  
                 
Income (loss) before income tax provision     (635 )     44  
                 
Income tax benefit     237       153  
                 
Net income (loss)   $ (398 )   $ 197  
                 
Net income (loss) per common share:                
  Basic   $ (0.04 )   $ 0.02  
  Diluted   $ (0.04 )   $ 0.02  
                 
Dividends per common share:   $ -     $ 0.02  
                 
Weighted average common shares outstanding:                
  Basic     10,669,513       10,530,066  
  Diluted     10,669,513       10,566,273  
                 
   
CREXENDO, INC. AND SUBSIDIARIES  
Condensed Consolidated Statements of Stockholders' Equity  
Three Months Ended March 31, 2013  
(In thousands, except share data)  
(Unaudited)  
   
   
Common Stock
  Additional
Paid-in
 
Accumulated
    Total
Stockholders'
 
    Shares   Amount   Capital   Deficit     Equity  
Balance, January 1, 2013   10,669,201   $ 11   $ 49,824   $ (39,543 )   $ 10,292  
  Expense for stock options granted to employees               230             230  
  Proceeds from the exercise of stock options   2,187           3             3  
  Net loss                     (398 )     (398 )
Balance, March 31, 2013   10,671,388   $ 11   $ 50,057   $ (39,941 )   $ 10,127  
                                 
   
CREXENDO, INC. AND SUBSIDIARIES  
Condensed Consolidated Statements of Cash Flows  
(In thousands)  
(Unaudited)  
   
    Three Months Ended March 31,  
    2013     2012  
                 
CASH FLOWS FROM OPERATING ACTIVITIES                
Net (loss) income   $ (398 )   $ 197  
Adjustments to reconcile net (loss) income to net cash provided by (used for) operating activities:                
  Release of lease abandonment accrual     (606 )        
  Depreciation and amortization     317       391  
  Expense for stock options issued to employees     230       253  
  Change in uncertain tax positions     (253 )     (167 )
Changes in assets and liabilities:                
  Trade receivables     1,242       3,179  
  Equipment financing receivables     (51 )     -  
  Inventories     57       (31 )
  Income taxes receivable     358       18  
  Prepaid expenses and other     (107 )     135  
  Other long-term assets     6       2  
  Accounts payable, accrued expenses and other     (1,344 )     (128 )
  Deferred revenue     (1,269 )     (3,197 )
    Net cash provided by (used for) operating activities     (1,818 )     652  
CASH FLOWS FROM INVESTING ACTIVITIES                
  Acquisition of property and equipment     (55 )     (711 )
  Sale of property and equipment     1       -  
    Net cash (used for) provided by investing activities     (54 )     (711 )
CASH FLOWS FROM FINANCING ACTIVITIES                
  Proceeds from exercise of stock options     3       336  
  Payments made on contingent consideration     (6 )     (1 )
  Dividend payments     -       (211 )
      Net cash (used for) provided by financing activities     (3 )     124  
                 
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS     (1,875 )     65  
                 
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD     7,440       8,658  
CASH AND CASH EQUIVALENTS, END OF PERIOD   $ 5,565     $ 8,723  
                 
Supplemental disclosure of cash flow information:                
Cash (received) during the period:                
  Income taxes   $ (342 )   $ (4 )
Supplemental disclosure of non-cash investing and financing information:                
  Dividends declared     -       211  
  Purchase of property and equipment included in accounts payable     6       125  
                 

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