SOURCE: Crexendo, Inc.

Crexendo, Inc.

August 13, 2013 16:22 ET

Crexendo Reports Second Quarter 2013 Financial Results

PHOENIX, AZ--(Marketwired - Aug 13, 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 second quarter of 2013.

Financial highlights for Crexendo's second quarter 2013 included:

Consolidated revenue for the second quarter of 2013 decreased 45% to $2.7 million compared to $4.9 million for the second quarter of prior year. 

Net loss for the second quarter of 2013 was $(1.1) million or $(0.10) per diluted common share, compared to net loss of $(117,000) or $(0.01) per diluted common share for the second quarter of prior year.

Cash used for operations for the second quarter of 2013 was $(585,000) compared to cash used for operations of $(1.8) million in first quarter of 2013 and cash provided by operations of $759,000 for the second quarter of prior year. 

Segment Results

The Company has three operating segments, which consist of Crexendo Network Services, Crexendo Web Services and StoresOnline. 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 second quarter of 2013 decreased 59% to $1.7 million compared to $4.0 million for the prior year quarter. 

Total segment operating expenses decreased 56% to $1.0 million compared to $ 2.4 million for the prior year quarter.

Segment other income, primarily related to interest on the collection of accounts receivable for the second quarter of 2013 decreased 76% to $120,000 compared to $504,000 in the prior year quarter.

Total segment income before income taxes for the second quarter of 2013 decreased 66% to $749,000 compared to $2.2 million in the prior year quarter.

Crexendo Web Services

Revenue for the second quarter of 2013 decreased 18% to $569,000 from $692,000 in the prior year quarter. Web Services backlog, which is anticipated to be recognized within the next twelve months, was $1.2 million at June 30, 2013 compared to a backlog of $1.0 million at June 30, 2012. 

Total segment operating expenses for the second quarter of 2013 decreased 35% to $1.2 million compared to $1.8 million in the prior year quarter.

Total segment loss before income taxes for the second quarter of 2013 decreased 46% to $(594,000) compared to $(1.1) million in the prior year quarter.

Crexendo Network Services 

Revenue for the second quarter of 2013 increased 192% to $491,000 compared to $168,000 in the prior year quarter. Network Services backlog, which is anticipated to be recognized within the next thirty-six to sixty months, was $4.3 million at June 30, 2013 compared to a backlog of $1.3 million at June 30, 2012.

Total Network Services operating expenses for the second quarter of 2013 increased 28% to $1.7 million compared to $1.4 million in the prior year quarter.

Total segment loss before income taxes for the second quarter of 2013 increased 5% to $(1.3) million compared to $(1.2) million in the prior year quarter.

Steven G. Mihaylo, Chief Executive Officer, commented, "The operating loss this quarter is in line with expectations. As we have discussed the revenues from our legacy business have decreased drastically as our payment arrangements from those customers come to an end. Our telecom and web service revenues are in line with our internal plan, but we are always working to improve results. We continue to experience some growing pains with finding the right mix in our sales force, and I continue to work with Doug Gaylor to find the best sales force we can assemble. We have added internal resources to our dealer program, and we continue to add dealers that I believe will have a long term benefit to Crexendo. I know from experience that with the right dealers you can build a very successful recurring revenue stream. Our dealer sales to date are encouraging. We are also working to build our affiliate program which I also believe can have a long term benefit and particularly drive telecom sales. We continue to improve our telecom product, and I am convinced that the service, features and benefits that we provide are cutting edge and compare favorably to any competing product offering."

Mihaylo continued, "We are integrating our acquisition of PBX Central into Crexendo; we are closely monitoring our progress and our processes so we can improve those to accommodate additional and hopefully larger acquisitions. I am presently working with our team reviewing potential acquisitions. The acquisition process is time consuming, and for competitive reasons we obviously cannot discuss what is on our radar screen, I do hope to grow the business with appropriate and accretive acquisitions. We continue to believe in the University Program, but we are waiting to expand the program until our new web-builder, 'Slingshot,' is completed. Once Slingshot is completed, we will continue expanding our University Program and expand the use of our web-builder software to the developer community. The entire management team is taking steps to assure liquidity and continue our path toward profitability."

Conference Call

The Company is hosting a conference call today, August 13, 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 800-768-6544 for domestic participants and 785-830-7990 for international participants. The conference ID to join the call is 7276122. 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) operating loss this quarter and telecom and web service revenues meeting internal plans and expectations; (ii) always working to improve results; (iii) experiencing some growing pains finding the right mix in the sales force while working to find the best sales force that can be assembled; (iv) continuing to add dealers that will have a long term benefit to Crexendo; (v) having the right dealers building a very successful recurring revenue stream; (vii) dealer sales being encouraging; (vii) building its affiliate program which can have a long term benefit and particularly drive telecom sales; (vii) improving its telecom product with service, features and benefits that are cutting edge and compare favorably to any competing product offering; (viii) integrating the acquisition of PBX Central and closely monitoring progress and our processes to accommodate additional and larger acquisitions; (ix) growing the business with appropriate and accretive acquisitions; (x) continuing to believe in the University Program but waiting to expand the program; (xi) completing the new web-builder, "Slingshot" and (xi) taking steps to assure liquidity and continue our path toward profitability.

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 June 30, 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)  
   
    June 30, 2013     December 31, 2012  
Assets                
                 
Current Assets:                
  Cash and cash equivalents   $ 4,930     $ 7,440  
  Restricted cash     1,444       1,444  
  Trade receivables, net of allowance of doubtful accounts of $641 as of June 30, 2013 and $1,326 as of December 31, 2012     1,341       3,043  
  Inventories     131       171  
  Equipment financing receivables     51       28  
  Income taxes receivable     63       434  
  Prepaid expenses and other     510       333  
    Total Current Assets     8,470       12,893  
                 
Certificate of deposit     250       500  
Long-term trade receivables, net of allowance of doubtful accounts of $106 as of June 30, 2013 and $196 as of December 31, 2012     152       395  
Long-term equipment financing receivables     196       96  
Property and equipment, net     2,658       3,172  
Deferred income tax assets, net     105       103  
Intangible assets     671       6  
Goodwill     340       265  
Other long-term assets     95       97  
    Total Assets   $ 12,937     $ 17,527  
                 
Liabilities and Stockholders' Equity                
                 
Current Liabilities:                
  Accounts payable   $ 307     $ 418  
  Accrued expenses and other     1,307       3,010  
  Deferred income tax liability     105       103  
  Deferred revenue, current portion     1,348       3,052  
  Contingent consideration     87       -  
    Total Current Liabilities     3,154       6,583  
                 
Deferred revenue, net of current portion     143       399  
Other long-term liabilities     -       253  
    Total Liabilities     3,297       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; 10,709,904 shares outstanding as of June 30, 2013 and 10,669,201 shares outstanding as of December 31, 2012     11       11  
  Additional paid-in capital     50,364       49,824  
  Contingent consideration     276       -  
  Accumulated deficit     (41,011 )     (39,543 )
    Total Stockholders' Equity     9,640       10,292  
    Total Liabilities and Stockholders' Equity   $ 12,937     $ 17,527  
         
                 
                 
CREXENDO, INC. AND SUBSIDIARIES  
Condensed Consolidated Statements of Operations  
(In thousands, except per share and share data)  
(Unaudited)  
   
    Three Months Ended June 30,     Six Months Ended June 30,  
    2013     2012     2013     2012  
                                 
Revenue   $ 2,737     $ 4,914     $ 5,759     $ 10,169  
                                 
Operating expenses:                                
  Cost of revenue     970       1,298       2,012       2,719  
  Selling and marketing     717       984       1,625       1,917  
  General and administrative     1,852       2,741       3,290       5,774  
  Research and development     414       505       895       1,099  
    Total operating expenses     3,953       5,528       7,822       11,509  
                                 
Loss from operations     (1,216 )     (614 )     (2,063 )     (1,340 )
                                 
Other income (expense):                                
  Interest income     146       524       365       1,266  
  Other income (expense), net     (26 )     (14 )     (33 )     14  
    Total other income, net     120       510       332       1,280  
                                 
Loss before income tax provision     (1,096 )     (104 )     (1,731 )     (60 )
                                 
Income tax benefit (provision)     26       (13 )     263       140  
                                 
Net income (loss)   $ (1,070 )   $ (117 )   $ (1,468 )   $ 80  
                                 
Net income (loss) per common share:                                
  Basic   $ (0.10 )   $ (0.01 )   $ (0.14 )   $ 0.01  
  Diluted   $ (0.10 )   $ (0.01 )   $ (0.14 )   $ 0.01  
                                 
Dividends per common share:   $ -     $ -     $ -     $ 0.02  
                                 
Weighted average common shares outstanding:                                
  Basic     10,682,393       10,634,104       10,675,990       10,582,372  
  Diluted     10,682,393       10,634,104       10,675,990       10,614,888  
                                   
                                   
                                   
CREXENDO, INC. AND SUBSIDIARIES  
Condensed Consolidated Statements of Stockholders' Equity  
Six Months Ended June 30, 2013  
(In thousands, except share data)  
(Unaudited)  
   
            Additional             Total  
    Common Stock   Paid-in   Contingent   Accumulated     Stockholders'  
    Shares   Amount   Capital   Consideration   Deficit     Equity  
Balance, January 1, 2013   10,669,201   $ 11   $ 49,824   $ -   $ (39,543 )   $ 10,292  
  Expense for stock options granted to employees   -     -     430     -     -       430  
  Proceeds from the exercise of stock options   2,187     -     3     -     -       3  
  Contingent consideration   -     -     -     276     -       276  
  Issuance of common stock for business acquisition   38,516     -     107     -     -       107  
  Net loss   -     -     -     -     (1,468 )     (1,468 )
Balance, June 30, 2013   10,709,904   $ 11   $ 50,364   $ 276   $ (41,011 )   $ 9,640  
                                       
                                       
                                       
CREXENDO, INC. AND SUBSIDIARIES  
Condensed Consolidated Statements of Cash Flows  
(In thousands)  
(Unaudited)  
    Six Months Ended June 30,  
    2013     2012  
CASH FLOWS FROM OPERATING ACTIVITIES                
Net (loss) income   $ (1,468 )   $ 80  
Adjustments to reconcile net (loss) income to net cash provided by (used for) operating activities:                
  Lease abandonment     (606 )     -  
  Depreciation and amortization     598       759  
  Expense for stock options issued to employees     430       455  
  Change in uncertain tax positions     (253 )     (167 )
Changes in assets and liabilities:                
  Trade receivables     1,945       6,157  
  Equipment financing receivables     (123 )     (25 )
  Inventories     40       28  
  Income taxes receivable     371       38  
  Prepaid expenses and other     (177 )     (37 )
  Other long-term assets     2       20  
  Accounts payable, accrued expenses and other     (1,202 )     (573 )
  Deferred revenue     (1,960 )     (6,000 )
  Other long-term liabilities     -       4  
    Net cash (used for) provided by operating activities     (2,403 )     739  
CASH FLOWS FROM INVESTING ACTIVITIES                
  Release of certificate of deposit     250       -  
  Acquisition of property and equipment     (60 )     (1,024 )
  Acquisition of PBX Central     (300 )     -  
    Net cash used for investing activities     (110 )     (1,024 )
CASH FLOWS FROM FINANCING ACTIVITIES                
  Proceeds from exercise of stock options     3       498  
  Payments made on contingent consideration     -       (6 )
  Dividend payments     -       (422 )
    Net cash provided by financing activities     3       70  
                 
NET DECREASE IN CASH AND CASH EQUIVALENTS     (2,510 )     (215 )
                 
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD     7,440       8,658  
CASH AND CASH EQUIVALENTS, END OF PERIOD   $ 4,930     $ 8,443  
                 
Supplemental disclosure of cash flow information:                
Cash received during the period:                
  Income taxes   $ (382 )   $ (11 )
Supplemental disclosure of non-cash investing and financing information:                
  Purchases of property and equipment included in accounts payable   $ -     $ 16  
  Business acquisition with stock   $ 107     $ -  
  Contingent consideration related to acquisition   $ 363     $ -  
                 
                 
 

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