CXDO

This article first appeared on GuruFocus. Revenue: Total revenue increased 49% year-over-year to $24.6 million. Service Revenue: Increased 78% to $14.9 million, with gross margin of 67%. Software Solutions Revenue: Increased 5% to $7.3 million, with gross margin of 70%. Product Revenue: Increased 104% to $2.5 million, with gross margin of 44%. GAAP Net Income: $1.1 million, or $0.03 per diluted share. Non-GAAP Net Income: $4.1 million, or $0.12 per diluted share. Adjusted EBITDA: $4.1 million, an increase of 46% from the prior year quarter, with margin of 17%. Cash Flow: Generated $4.8 million from operating activities during the first six months of the year, an increase of 89% year-over-year. Cash Position: Ended the quarter with $18.3 million in cash and cash equivalents. Remaining Performance Obligation: Increased to $139 million, a 97% increase over Q2 2025. New Platform Customers: Secured 11 new platform logos in the first two quarters of 2026, compared with two in the same period last year. Warning! GuruFocus has detected 3 Warning Sign with CXDO. Is CXDO fairly valued? Test your thesis with our free DCF calculator. Release Date: August 04, 2026 For the complete transcript of the earnings call, please refer to the full earnings call transcript. Revenue increased 49% year-over-year to $24.6 million, with strong growth across all segments. GAAP net income of $1.1 million and non-GAAP net income of $4.1 million, with adjusted EBITDA up 46%. Secured 11 new platform logos in the first half of 2026, compared to only 2 in the same period last year. Gross margins improved significantly, with consolidated gross margin up 500 basis points from Q1. Operating cash flow for the first six months increased 89% to $4.8 million, providing strategic flexibility. Consolidated organic revenue growth was light at 7% for the quarter, below the 11% year-to-date average. Perpetual license revenue decreased by $700,000 due to smaller initial orders from new licensees. Operating expenses increased 53% year-over-year, largely due to the ESI acquisition. The ESI acquisition eliminated approximately $180,000 of revenue recognized in the prior year quarter. AI offerings, including Cairo, are not yet a meaningful contributor to revenue, with significant impact expected only in 2027. Q: Why is the company seeing a substantial acceleration in new platform wins (11 new logos in the first half of 2026 vs. only 2 in the same period last year), and what is the expected timing of the revenue impact from these wins?A: CEO Jeffrey Korn attributes the acceleration to the company's "Sessions Not Seats" model, which offers a compelling economic advantage (potentially 40-50% savings) that is particularly attractive in an uncertain economic environment. He noted that new customers are starting with smaller initial licenses and using a "cap and grow" strategy, which he believes will lead to continued upgrades and a meaningful, durable revenue stream in the future. President Doug Gaylor added that competitors have not been investing heavily in development, creating uncertainty that drives licensees to Crescendo as the best alternative. Q: Can you provide more context on why ESI sales are exceeding expectations, and what benefits the acquisition has shown so far?A: CEO Jeffrey Korn highlighted that ESI contributed $2.1 million in revenue in March and averaged $2.3 million per month in Q2, exceeding initial expectations. President Doug Gaylor explained that the combined entity can tell a bigger and better story to ESI's reseller channel, and the sales team has successfully leveraged the acquisition to raise sales to a new level without the typical post-M&A pause. The management team's proactive communication with channel sellers helped ensure a symbiotic relationship. Q: What is the average size of the new platform deals compared to prior years, and what is the mix between customers choosing hosted infrastructure versus their own?A: CFO Ron Vincent stated that the average initial order is still around $200,000-$250,000, but the prior year quarter had large transactions that were roughly three times that size. Upgrade orders from existing customers average $300,000-$350,000, which is 50% higher than initial orders. CRO Jon Brinton noted the mix skewed slightly more to facilities-based deployments this quarter, but they also had new licensees start on the hosted platform for faster rollout, with some potentially migrating to facilities-based later. The company aims to meet each customer's preferred delivery model. Q: What drove the strong growth in Technology Service Distributor (TSD) bookings (39% increase in Q2, 42% year-to-date), and is this sustainable?A: President Doug Gaylor attributed the growth to the company's focus on TSD partnerships and its top ranking for customer satisfaction on G2.com. He noted that when TSDs have poor experiences with competitors, they look for alternatives, and Crescendo's smooth installations and excellent customer service drive repeat business. CRO Jon Brinton added that the dedicated channel team has built strong relationships over time, and this business continues to grow for all the reasons Doug mentioned. Q: Can you provide metrics on Cairo's (AI receptionist) adoption, how quickly trials convert to deals, and the expected revenue impact?A: President Doug Gaylor reported that Cairo has seen great success since its January launch, with an average revenue increase of approximately $120 per account per month, representing a 35% increase over the average telecom services customer revenue of $340. The product is usage-based, so as customers become more comfortable using it for all calls, overages can tick up significantly. CEO Jeffrey Korn expects AI-related revenue to become meaningful in 2027, noting strong acceptance from licensees and initial excitement from marketing efforts to the existing customer base. Q: Should we expect the second half of 2026 to have a number of high-volume smaller deals, or are there mega deals in the pipeline?A: CEO Jeffrey Korn explained that very large orders have much longer sales cycles (up to four years), while smaller licenses close faster. CRO Jon Brinton stated that the overall pipeline is strong, and while they cannot predict the ultimate size of some licensees, they are talking to some exciting opportunities that they believe will close in the next six months. The company continues to work on large deals, but smaller deals tend to come in faster. Q: Is the 17% adjusted EBITDA margin maintainable, or should we expect it to expand through the end of the year?A: CFO Ron Vincent confirmed that the 17% margin is consistent with what the company experienced all of last year. The dip in Q1 was temporary, and the company regained its 17% margin in Q2. He stated that the company should be able to maintain this level going forward. Q: Is the $2.5 million in product revenue a safe run rate assumption (approximately $10 million annualized) for the full year?A: CFO Ron Vincent confirmed that $2.5 million is a good run rate with the ESI component included. He noted that it is not too accelerated from historical rates and is very maintainable. Q: Is Cairo margin accretive at current pricing, or is the company seeding adoption with the potential to raise prices later?A: CEO Jeffrey Korn stated, "I don't believe in loss leaders, so we are not going to sell anything we can't make money at." President Doug Gaylor added that the product was designed with great margins and should have a positive impact on margins as revenue grows. Q: How should we think about the equipment financing receivables book, which has grown to over $8 million? Does it need a separate funding facility?A: CFO Ron Vincent explained that the receivables relate to a sales-type lease model where revenue is recognized upon delivery and installation, with customers paying over the contract term. This is more of a hosted offering versus an upfront product sale, and the receivables will continue to grow as more customers are added but amortize off over time. He confirmed that a separate funding facility is not needed. For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Image source: The Motley Fool. Tuesday, Aug. 4, 2026 at 4:30 p.m. ET Chairman and Chief Executive Officer - Jeffrey Korn President and Chief Operating Officer - Doug Gaylor Chief Financial Officer - Ron Vincent Chief Revenue Officer - Jon Brinton Operator: Greetings, and welcome to the Crexendo Second Quarter 2026 Earnings Conference Call. [Operator Instructions] And please note, this conference is being recorded. I will now turn the conference over to your host, Mr. Jeff Korn, Chairman and Chief Executive Officer with Crexendo. Sir, the floor is yours. Jeffrey Korn: Thank you, Ali, and good afternoon, everyone. It's my pleasure to welcome you to the Crexendo Q2 2026 Conference Call. I'm Jeff Korn, Chairman of the Board and CEO. Here with me today are Doug Gaylor, our President and COO; Ron Vincent, our CFO; and Jon Brinton, our CRO. In a moment, Jon will read the safe harbor statement. After that, I will provide some brief comments on our performance and strategy. Ron will then provide a more detailed discussion of our financial results, and Doug will provide a business sales and product update. After that, we will open the call for questions. Jon, would you please read the safe harbor statement? Jon Brinton: Thank you, Jeff. I want to take this opportunity to remind listeners that this call will contain forward-looking statements with the meaning of the Securities Act of 1933 and the Securities Exchange Act of 1934. The Private Securities Litigation Reform Act of 1995 provides a safe harbor for such forward-looking statements. All statements made in this conference call other than statements of historical fact are forward-looking statements. Forward-looking statements include, but are not limited to, words like believe, expect, anticipate, estimate, will and other similar statements of expectation identifying forward-looking statements. Investors should be aware that any forward-looking statements are based on assumptions and subject to risks and uncertainties that could cause actual results to differ materially from those discussed here today. These risk factors are explained in detail in the company's filings with the Securities and Exchange Commission, including the Form 10-K for the fiscal year ended December 31, 2025, and the Forms 10-Qs as filed. Crexendo does not undertake any obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. I'd now like to turn the call back to Jeff. Jeff? Jeffrey Korn: Thank you, Jon. We delivered an exceptionally strong quarter. Revenue increased 49% year-over-year to $24.6 million. We generated GAAP net income of $1.1 million or $0.03 per diluted share, non-GAAP net income of $4.1 million and adjusted EBITDA of $4.1 million, an increase of 46% from the prior year quarter. We also continued to improve our margins and generated $4.8 million of cash from operating activities during the first 6 months of the year, an increase of 89% compared with the same period last year. These high-level results demonstrate the growth, increasing scale and operating leverage of the business. They are particularly encouraging because we remain GAAP profitable while absorbing the acquisition-related costs and amortization associated with ESI. Ron will provide a deeper discussion of the financial results, including our revenue mix, margin performance and cash flow in a few minutes. One of the most encouraging developments this year is the substantial increase in new platform customers. We secured 11 new platform logos through the first 2 quarters of 2026 compared with only 2 at the same point last year. That level of activity reinforces my conviction that the Crexendo NetSapiens platform is increasingly the platform of choice for communication providers seeking a modern, improved and scalable solution. The increase in logos strengthens the long-term opportunity of the business. Our "Sessions not Seats" model gives providers a compelling economic advantage, especially in an uncertain economic environment. And our platform gives them the functionability, scalability and flexibility they need to compete. We expect these wins to develop into a meaningful and durable stream of revenue. Doug will give more details on the specifics relating to the new logos. I could not be more pleased with the ESI acquisition. The integration is progressing exceptionally well. The ESI employees are engaged and sales have exceeded our initial expectations. We have already integrated or begun integrating accounting, legal and marketing functions and the engineering teams are working closely together. ESI has significantly increased our revenue, strengthened our customer base and add an experienced team that shares our commitment to innovation and outstanding customer service. It has also meaningfully expanded our telecom operations, adding to the strong growth in service and product revenue this quarter. The performance of ESI demonstrates why we are careful and deliberate in assessing acquisition opportunities. We look for companies that are strategically complementary, operationally actionable and capable of continuing -- contributing to both growth and profitability. ESI is delivering exactly the benefits we expected and further validates our disciplined approach. We are also continuing to invest in the platform. We currently expect to release our next major software version, Volume 46 in Q 2027. (sic) [ Q2 2027 ] It will include a fully redesigned user interface that creates a substantially stronger first impression together with improvements throughout the product that should enhance both the sales process and the day-to-day user experience. We look genuinely forward to showcasing these platform updates, ecosystem and product road map at our upcoming October user group meeting, which is on track to be the largest in our history. Our strong cash generation gives us additional strategic flexibility. We ended the quarter with $18.3 million in cash and cash equivalents after using $26.2 million for the ESI acquisition. The substantial increase in operating cash flow, together with our balance sheet strength, should allow us to continue evaluating strategic, accretive opportunities while having the flexibility and ability to not substantially dilute shareholders. We will remain disciplined and we'll move forward only when the financial, operational and strategic merits of an opportunity support the transaction. Finally, we remain excited about our AI offerings. They are not yet a meaningful contributor to revenue, but they continue to receive strong praise and market acceptance. We expect AI adoption to expand, and I continue to believe that AI-related revenue can become meaningful in 2027. Doug will discuss our AI initiatives in greater detail during his update. In summary, this was a very strong quarter. We delivered substantial revenue growth, continued GAAP profitability, improving margins and significantly stronger operating cash flow. We are successfully integrating a highly beneficial acquisition, winning new platform customers at a dramatically higher rate, advancing an important software release and maintaining financial flexibility to pursue additional accretive growth. We have built a stronger and more valuable company and the opportunities in front of us continue to expand. I am extremely enthusiastic about Crexendo's direction and confident in our ability to deliver profitable growth and meaningful long-term shareholder value. With that, I'll turn the call over to Ron to walk through the financials in more detail. Ron? Ron Vincent: Thank you, Joe. We reported $24.6 million in total revenue, beating top line analyst expectations. That's a 49% increase over the second quarter of the prior year. Consolidated organic revenue came in a little light this quarter at 7% over the prior year. However, year-to-date organic revenue growth of 11% is in line with our guidance of delivering double-digit organic growth for the year. Service revenue increased 78% to $14.9 million, and our gross margin was 67% for the quarter. Software Solutions revenue increased 5% to $7.3 million, and our gross margin was 70% for the quarter. During the quarter, we booked 6 new logos and 7 upgrade orders from existing customers. There are a couple of items to note here. Perpetual license revenue is down $700,000 compared to the prior year quarter, which is primarily the reason for the decrease in organic growth percentage year-over-year as Q2 of 2025 was a record sales quarter as the average order size was 3x our average order size we typically book each quarter. Additionally, the acquisition of ESI eliminated approximately $180,000 of revenue recognized in the prior year quarter. For comparison purposes, if we had added back that $180,000 of ESI revenue to the current quarter, our growth rate would be more like 8% compared to the prior quarter. We are confident that these new customers will need larger upgrade orders in the future as they grow their customer base and migrate their existing customers over to our platform. Product revenue increased 104% to $2.5 million, and our gross margin was 44% for the quarter. During the quarter, our service revenue gross margins improved by 400 basis points. Our product revenue gross margins improved by 1,300 basis points, and our software solutions revenue gross margins improved by 200 basis points compared to the first quarter of this year. Our consolidated revenue gross margin was 66% for the quarter. That's 500 basis points increase compared to the first quarter this year. Operating expenses increased approximately $8.1 million or 53% compared to the prior year. ESI acquisition contributed $6.9 million of the increase in operating expenses. Operating margins improved to 4% for the quarter. That's a 200% -- or 200 basis point increase from the first quarter this year. We reported net income of $1.1 million. That's $0.03 per basic and diluted common share, in line with analyst expectations. On a non-GAAP basis, we reported non-GAAP net income of $4.1 million for the quarter. That's $0.12 per basic and diluted common share, 200 basis points higher than analyst expectations. We reported EBITDA for the quarter of $3 million and adjusted EBITDA of $4.1 million. Our adjusted EBITDA margin was 17% for the quarter, an increase of 200 basis points compared to the first quarter this year. Our cash and cash equivalents at the end of the quarter was $18.3 million compared to $31.4 million at the end of the prior year. Operating activities for the 6-month period provided $4.8 million in free cash flows. For the quarter, we had $2.8 million in free cash flow. That's a 35% increase over the first quarter of this year. Investing activities for the 6-month period utilized $26.2 million in cash related to the cash portion of the ESI acquisition purchase price. Financing activities for the 6-month period provided $8.4 million in cash, primarily related to $4.9 million in proceeds from the term loan we entered into with Wells Fargo and $3.6 million in net proceeds from stock option exercises. With that, I'll turn it over to Doug Gaylor, our President and COO, for additional comments on sales operations and products. Doug Gaylor: Thanks, Ron. It was a great quarter for Crexendo, and we had a lot of significant accomplishments. As Jeff stated, we added 6 new logos on the NetSapiens platform during the quarter. Combine that with the 5 new logos we had in Q1, we have added 11 new logos for the first 6 months of this year compared to 2 new logos for the first 6 months of 2025. Of the 6 new logos in Q2, 2 of them migrated from Metaswitch and 1 of them migrated from Cisco's BroadSoft. Of the 11 new logos so far for this year, 4 have been Metaswitch migrations. In addition, we also had 7 add-on orders during the quarter from our existing licensees, and we're extremely excited about the new logo momentum in our pipeline for new licensees and the pipeline is very solid, and we continue to see strong demand for our award-winning software platform. As Ron mentioned, we saw a $700,000 decrease in perpetual license purchases in the quarter. I believe the economy's financial climate is driving new licensees to launch with a smaller initial investment of sessions and subscription, and that tends to be more attractive as it has a lower upfront cost. The 6 new logos for the quarter were smaller than average deal booked in the prior year quarter as we have seen a trend with our new licensees to start with a smaller initial commitment and grow that commitment over time. It's worthwhile to note that although the average order size was smaller this quarter than the average deal booked in the prior year quarter, our average upgrade order value is increasing and averages 50% higher than our initial orders. As our base of over 250 licensees continues to grow and expand, we have seen and expect to continue to see continual strong add-on orders. We also had strong sales bookings on the Telecom Services segment of the business. During the quarter, we sold 15 6-figure opportunities that helped contribute to a very successful quarter. Most notably, we saw a huge increase in sales from our technology service distributors or TSDs. We saw sales increase by 39% for the quarter. And year-to-date, we have seen sales increase by 42% over the same periods for 2025. We continue to see great momentum in this area of the business and are excited about the number and size of opportunities that we're seeing brought in by the TSDs. As Jeff mentioned, our ESI acquisition is paying off very nicely for us. We saw very strong sales during the quarter, which helped propel us from $2.1 million in revenue that ESI contributed in March of Q1 to an average of $2.3 million per month for a total of $6.9 million in revenue for Q2. We have great momentum with ESI resellers and are excited about the results that we have seen in very short order. We continue to work on synergies and cost savings from the ESI acquisition and are confident these synergies will continue improving our bottom line. Our strong sales bookings in both segments of the business helped increase our remaining performance obligation to $139 million, a 97% increase over Q2 of 2025. And as a reminder, our remaining performance obligation number is the sum of the remaining contract values for our Telecom Services and our Software Solutions customers that will be recognized on a sliding scale over the next 60 months, and it's a very strong indicator of our future revenue stream. We are very pleased with our gross margin improvements for the quarter on both sides of the business. On the Software Solutions side of the house, gross margins improved to 70% for the quarter largely attributable to cost savings recognized from decommissioning our legacy data centers at the end of Q1 as we completed our migration to Oracle Cloud Infrastructure, or OCI. Our Telecom Services segment saw gross margins improve significantly to 67% on the strength of higher-margin sales from our ESI acquisition. In addition, ESI's product contributions also helped improve our overall product gross margins, which improved to 44%, up significantly from the prior quarter. As we successfully scale both segments of the business, we expect these gross margin improvements to continue. At the end of January, we launched CAIRO, Crexendo's AI receptionist/orchestrator, and are seeing great early success on the offering. CAIRO allows businesses to use our artificial intelligence receptionist to answer all calls, handle them accordingly by answering frequently asked questions, processing calls to the right individuals or departments and even setting appointments. We are extremely excited about the new offering and have seen strong customer interest and success in our initial rollout period. The average revenue increase per account during the quarter was approximately $120 per account per month, and that represents an increase of approximately 35% over the average revenue per account of $340 that we see on our average Telecom Services customer. During the quarter, we began rolling out CAIRO to our licensees and are pleased with the initial traction we are seeing from our licensees to also resell CAIRO. Also during the quarter, we started marketing initiatives to roll CAIRO out to our existing base of retail customers. And although still very early in our rollout of the product, we are extremely excited about the successful launch of the solution and are confident we will continue to see strong growth in sales and adoption of the offering. Our ecosystem vendor program, which we refer to as our EVP program, continues to grow and is now up to 57 vendors providing services and solutions to our licensees and customers on a revenue share basis. Of the 57 vendors, 13 of them are providing AI-related applications and solutions. Similar to CAIRO, we are in the very early stages of revenue generation from our EVP program, but we did see $400,000 in revenue contribution from the program during the quarter and are very pleased with the growth trajectory and the opportunities we are seeing. Crexendo has had a great first half of 2026, and we continue to meet and exceed our targeted goals. We are right on track to reach our goal of $100 million revenue run rate by the end of 2026. And I'm thrilled about the future direction and opportunity for Crexendo. Our strong organic and inorganic growth, combined with our 12 consecutive quarters of GAAP profitability, our strong positive cash flow and our growing remaining performance obligation have laid a great foundation for our future success. We're excited about the additional opportunities to drive growth and innovation that our new AI offerings will infuse into our business and are very optimistic that applications like CAIRO will continue to drive even more demand and higher revenues. As the fastest-growing platform solution in the country, supporting nearly 8 million end users, we are laser-focused on growing our business, enhancing our solutions and improving our efficiencies and continue to return very strong results. With that, I'll now turn it back over to Jeff for any further comments. Jeffrey Korn: Thank you, Doug. Thank you, Ron. Ali, I don't have any further comments at this point. So why don't you open the call to questions. Operator: [Operator Instructions] Our first question today is coming from George Sutton with Craig-Hallum. George Sutton: Nice to see the accelerating platform wins. So I'm wondering if you could just give us a picture of why is this happening now versus last year, for example? Is it kind of where an Alianza is in their process of kind of keeping everybody on hold? Or is there something broader we should be aware of? And I'm curious if you could walk through the timing of the impact of these new platforms. So as we look forward a quarter and a year from now, what kind of impact should we see? Jeffrey Korn: Well, George, as I think you realize, our new logos started to accelerate in the second half of last year, and we started to gain additional wins. We think there are a variety of reasons for it, but we think the huge upgrade in logos in the first half of this year have more to do with the economy and the fact that we are offering better solutions than our competitors. The wins didn't just come from Metaswitch, they came from Cisco and other platforms. So it's across the board. I have discussed this before, our model of "Sessions not Seats" is a compelling model. It could save you 40% to 50% for what you're paying for platform usage. And our model is particularly compelling in difficult economic times or uncertain times as to what our platform competitors may be doing as you can purchase a small license and work on a "cap and grow" strategy. And we believe that's what's been happening in the first half of the year. A number of people have purchased licenses to start the "cap and grow" strategy. And I'm particularly excited about that because that's going to mean continued upgrades, more logo wins and more upgrades as we proceed. So of all the things we talked about today, that's perhaps the most exciting thing I see, and I see that as a great propellant for our future. Doug Gaylor: And I would just add, George, that it doesn't hurt that our competition hasn't been doing a lot from a development perspective. And so there's still uncertainty and doubt with a lot of our competitors' licensees. And when they're looking for another alternative solution out there, we're the best option for them. Jeffrey Korn: But I will make clear, George, that irrespective of what our competitors are doing, we are absolutely the best solution out there. We have the best technology. We have the most open APIs. We have the ability to either use facilities-based or cloud-based. And we have the -- we have an amazing EVP program where you can pick and you can literally make the platform your own. Our now more than 250 licensees each have the ability to develop their platform exactly the way they want, go into their metrics and their type of customer, and you wouldn't necessarily know that these aren't NetSapiens customers. So this is an amazing reason why we continue to do well irrespective of what our competitors do. George Sutton: Super. Just one other question on CAIRO. So I know you've been moving to trial with a number of folks. Can you give us a sense of how quickly the trials move to deals? And Jeff, you had mentioned 2027 would be the time frame when we start to see some impact. I wondered if you could just put any metrics around that. Jeffrey Korn: I'll let Doug or Ron give you some metrics. But the reason I believe 2027 will start to show some meaningful income -- some meaningful revenue is that we are starting to see strong acceptance from our licensees on the EVP program. The new customers that we have been actively trying to sell CAIRO to, seem to be excited about it. We've received initial excitement from marketing materials we sent out to the base, which we have not yet started reaching out to. And I expect it will be a slow rollout, but I do expect to start to see some substantial revenue coming in, in 2027. But I'll let Doug or Ron give you some specific metrics. Doug Gaylor: Yes. Obviously, George, since we started out from no customers on CAIRO when we launched the product in January, we saw great success. We started rolling it out initially with new customers combining with our UCaaS offering, obviously. Then about midway through the second quarter, we started rolling it out to our licensees, saw a nice pickup with our licensees jumping on board to sell the product. And then we started rolling out marketing initiatives, as I mentioned, to our base of customers. So we're extremely excited about where we are with CAIRO. We haven't seen any bumps in the road yet. And so we're excited about the future revenue growth opportunity. As I mentioned in my comments, the ones that we have sold, we've seen an average of about $120 revenue uptick on revenue per account. That's pretty significant, 35% increase over what a typical customer is paying us. And we've got the capability to take that number even higher. As we continue to roll this out, one of the things about CAIRO is that it's a usage-based application. So as customers are feeling more and more comfortable having all their calls answered with an AI receptionist, we're seeing overage charges starting to tick up. And so for a customer that's choosing to answer absolutely all of their calls and answering all their frequently asked questions, they could see overage charges upwards of a couple of thousand dollars. And that's a significant savings for them over having a live body answer calls, and it's a great benefit for us from a revenue perspective. Operator: Our next question is coming from Joshua Reilly with Needham. Joshua Reilly: If you look at the 11 new platform wins here in the first half of '26, just a couple of items on that. How much smaller would you say the initial deal sizes are versus the last couple of years? And how -- if you look at the mix, how many are choosing to host on your infrastructure versus their own infrastructure and the implications for the upfront revenue through -- from licenses versus a more ratable structure if they choose your architecture or your infrastructure? Doug Gaylor: Yes, I'll start with the average size deal. So there's still a couple of hundred thousand dollars for the initial orders. But in the prior year, we had some large transactions that spiked that 30% growth that were in the 3x that amount. So the average size deal is in that $0.25 million initial order and then the upgrade orders are in the $300,000, $350,000 -- so $350,000 type orders. So a significant increase over the initial order, but that's the average order size. Jon, would you like to comment on the mix between perpetual versus subscription? Jon Brinton: Yes. We skewed -- this quarter, George, (sic) [ Joshua ] we skewed a little bit more to facilities-based while we have hosted opportunities also, one thing that I think is really exciting is we had a couple of new licensees that started with us on a hosted platform, so we could get it rolled out more -- sorry, Josh. So we get it rolled out for them as quickly as they could and then they may migrate to facilities-based later. And we've also had a couple of our legacy licensees that have chose to move from a facilities-based to hosted environment. So the key being able to meet each of them individually with the type of delivery platform that they prefer. And the mix will vary a little bit from quarter-to-quarter, but we're seeing good direction across the base overall. And apologies for calling you, George there, Josh. Jeffrey Korn: And Josh, I'll add one thing. No, I'll call you, Josh. Large -- very large orders are a much longer sales cycle. We have taken as long as 4 years to close very large orders. An initial smaller license is much easier to close and these people almost always, if not always, do upgrades, continue to expand, continue to put people on the platform. So I am very excited by the large number of new logos we got and the size of them does not bother me in the least because to me, that's a future annuity. Joshua Reilly: Sure. And then just following up on that, if you look at the pipeline now for the second half of the year, are we -- should we be expecting a number of high-volume smaller deals? Or you have some mega deals in the pipeline? Or just give us a sense on what you may be cooking up for the second half of the year. Jeffrey Korn: I will let Jon answer that, but I will say, we obviously are always working on large deals. But as I just explained, Josh, those come in at the rate they come in. The smaller deals tend to come in faster. Jon Brinton: Yes. And I would say, Josh, the overall pipeline is strong. We're continuing to win new logos. Obviously, this is clearly forward-looking, but we feel really good about it. And we can't predict the ultimate size that some of these licensees go, but we are talking to some pretty exciting opportunities that we believe will close in the next 6 months. Joshua Reilly: Got it. Last question for me is on the TSD bookings. You gave a metric there. I can't remember the number now off the top of my head. But what drove the strength in the TSD bookings? And is that sustainable? Jeffrey Korn: I don't know, Josh. George would have remembered the number. Doug Gaylor: 39% for the quarter and 42% year-to-date on the TSDs. And I think that's a combination. I think it's one, we're paying a lot of attention to our partnerships with our specific TSDs out there. And I think we just do a better job. We continue to rank #1 in G2.com for customer satisfaction, and that just is leaps and bounds ahead of our competition. So if a TSD has been selling one of our competitors and had some poor customer service experiences, then they're going to be looking for an alternative. And when they find Crexendo and they find that their installations go smooth and our customers love us, they tend to sell more. And so I think the growth that we've seen in the TSDs is primarily associated with the fact that we're giving them a lot of love and attention, and we're doing a great job for their customers, and that tends to give us repeat business over and over again. Jon, any additional color? Jon Brinton: Yes, I'd just add, we have a really solid team that works at specific channel. They've built some good relationships over time. If you remember 3 years ago, this was a relatively new business for us, and they just continue with -- for all the reasons that Doug said and a few more, they just continue to grow, and we have more success with them. Operator: Our next question is coming from Mike Latimore with Northland Capital Markets. Mike Latimore: Congrats on the great results here. I guess you mentioned that the ESI sales were exceeding your expectations. Can you provide a little more context there? I guess, what kind of benefits has the acquisition shown? Sometimes, distractions when acquisitions occur, it sounds like maybe not here. But maybe just a little more context on why they're exceeding your expectations. Jeffrey Korn: Well, as Doug pointed out, in March, they did $2.1 million, and they've averaged $2.3 million per month in quarter 2. We have been working with them and doing additional marketing. We've been expanding things over there, and they just frankly do a damn good job. So we've been very excited with the results. Doug Gaylor: And I think they've got their own reseller channel through the ESI resellers out there. I think our messaging has been great to those resellers. And I think that the reality is that they're a bigger organization now, and they can go out and tell a bigger and better story. ESI had a great story to tell and now the combination with Crexendo just adds to that story. So I think the sales success that we've seen right out of the gates, as you highlighted, a lot of times when you have mergers and acquisitions, you see a little bit of a pause. We haven't seen that because I think the sales team, as Jeff highlighted, does a fantastic job, and they took the acquisition and raised it to a new level. And so from their end user customers and from their resellers, it's been a great message. Jeffrey Korn: Doug and Jon and their management team did a very good job of talking to their channel sellers and convincing them that we were not going to destroy what they already had and they're beginning to expand it. So it's been a very symbiotic relationship, and we've done quite well with it. Mike Latimore: Great. And then on the new software logos, is the subscriber count of the organizations to who you're selling, is it kind of average? Or are they smaller or bigger than average? Just kind of get a sense of the organizational size you're selling to there. Jeffrey Korn: I'm sorry, you were asking about the 11 new logos? Doug Gaylor: And subscriber count Mike Latimore: Correct. And the subscriber count of those licenses yes? Doug Gaylor: Yes. They're not -- they're pretty consistent, although we are continually seeing an increase in the size of the base that people have. I think part of the order sizing we're seeing is just some conservatism over general economic conditions and other things going on in the world. And then you combine that with there is a time frame that people, if they are going to migrate to our platform from another platform, there's a different work stream that's involved there. So what we've just seen is people being a little bit more conservative in the initial order. But the size of the base that they have under management, it isn't our desire to go down market. We're going upmarket and many of these people have larger bases than we've talked to before. Jon Brinton: I think we've explained this before, Mike, we almost never tend to be the first platform somebody uses. Almost all of our customers tend to migrate from somebody else when they've grown to the point where they need additional bells, whistles, tools and support. Mike Latimore: Yes. Makes sense. And then lastly, EBITDA margin was outstanding. Should we think about that -- can you maintain that EBITDA margin? Or should we think about it expanding through year-end? Ron Vincent: Yes. So that 17% is consistent with what we had all of last year. So we had a dip in Q1. And so that was just us regaining around 17% that we experienced all of last year. And so that was our commitment that we could get it back to 17%, and we got it back to 17% within the first quarter after the dip. Mike Latimore: And then -- so that's sort of maintainable or expandable from here? Ron Vincent: Yes. No, we should be able to maintain that. Operator: Our next question is coming from Eric Martinuzzi with Lake Street Capital. Eric Martinuzzi: I was trying to get a feel for the run rate for the product revenue. This was our first full quarter with ESI. And I was just wondering that $2.5 million, is that kind of a safe place to assume -- maybe a $10 million run rate for product? Ron Vincent: Yes, that's a good run rate with the ESI component in there. It's not too accelerated from what our historical rates were, and we think that's very maintainable. Eric Martinuzzi: Okay. And then I know you're not giving formal guidance, but the services line, historically, that's kind of trended higher just sequentially as you add more telco services customers to the base. Any reason why that would take a step back? Or should we assume the historic trend holds? Jeffrey Korn: I would assume a historic trend holds. Eric Martinuzzi: Okay. And then lastly, the -- it was a good cash number that you had that you finished out the quarter at $18.3 million. I do understand we've got the $4.9 million of the term loans, but still the net cash step up there was pretty substantial over $6 million, which leads me to your appetite for M&A. I know we only closed on ESI at the beginning of March, but what are you seeing out there as far as the M&A pipeline? Jeffrey Korn: We have a great pipeline. We have several we are looking at, whether they get closed this year or next year, I can't tell you. But it requires substantial diligence. As you understand, the primary integration team is sitting in this room with me. So we can't do more than one at a time, but ESI was a home run, and we've almost fully integrated it. By the end of next quarter, it will be fully integrated other than moving their customers -- moving their employees on to our payroll, insurance and the 401(k), which can only be done at the end of the year, it will be fully integrated by that point. So I -- depending upon the size, I wouldn't be shocked if we did something in Q4, but I wouldn't be shocked if it extended to Q1 of next year, maybe Q2. Operator: Our next question is coming from Scott Buck with Titan Partners. Scott Buck: I'm curious, selling and marketing expense as a percentage of revenue moved, I don't know, substantially higher, I guess, versus a year ago. I'm wondering if that's by design or just kind of a secondary effect of the integration with ESI. Ron Vincent: So, this is Ron. So one thing you guys mentioned is ESI. So ESI contributed a portion of that number. And so that's the large increase that you speak about. We don't typically have large swings in our sales and marketing from one period to next unless it's related to commissions and the top line revenue growth. So the big increase is primarily related to the ESI contribution, and that's in the MD&A section, we called that out. Jeffrey Korn: Although I will add, we are spending more on marketing because as you see, it gets us great results, particularly on the software solutions side. And I will continue to improve marketing as long as I see an ROI on it as we have continued to see. Scott Buck: Okay. That's helpful, Jeff. Second, I'm curious, is CAIRO margin accretive at the current pricing? Or are you really just seeding adoption at this point? Jeffrey Korn: I'm not sure I understand your question, CAIRO. Doug Gaylor: Was that on CAIRO? Scott Buck: On CAIRO, yes, are you making money off of CAIRO today? Or are you pricing it in a way to accelerate adoption where you might be able to move pricing higher over time? Jeffrey Korn: I don't believe in loss leaders, so we're not going to sell anything we can't make money at, but I'll let Doug give you a little more detail. Doug Gaylor: Yes. Obviously, we designed that product, and we've got great margins on it. So it should be a positive impact on our margins going forward as we continue to sell more revenue there. Scott Buck: Okay. Perfect. That's helpful. And then last question I had, just on your equipment financing receivables. I think you're up above $8 million now, up substantially from year-end '25. How do we think about the equipment financing book? Is it just growing with ESI hardware sales? And at some point, does this eventually need a separate funding facility? Ron Vincent: Definitely doesn't need a different funding facility. It is -- we recognize revenue on a sales-type lease model when we deliver the equipment and install the service. And so we amortize that. The customers pay us over time and they're renting the devices from us over the contract term. And so it's more of a hosted offering versus a product sale upfront. So we've rolled into the pricing on the per device. And so that's what the equipment financing receivable relates to. So as we sell more customers, it's going to continue to grow and then it amortizes off over time. Operator: [Operator Instructions] Our next question is coming from Josh Nichols with B. Riley. Matthew Maus: This is Matthew on for Josh. So I guess to start off, you mentioned about like 15 6-figure opportunities in the telecom pipeline. I was just wondering if you can give a sense of the conversion timing and how many could land in the second half? Jon Brinton: Yes, that wasn't in the pipeline. That was actually sold during the quarter. So that was 15 6-figure opportunities that were sold on the Telecom Services segment during the quarter. So those are sold probably in different stages of implementation. Some of them have been implemented, some of them have been just sold and in the process of being implemented. But that was a nice number for us, and now we continue to see a strong pipeline of bigger and 6-figure opportunities. Matthew Maus: Got it. And just going to the software side. I mean, software margin improved quarter-over-quarter, but I mean it's not back to the low 70s you've historically run at. And with legacy fully off, wondering what's the remaining gap and how you expect to close out? Ron Vincent: Yes. So on the software solutions side of the house, at the end of Q1, we completed the migration of our hosted customers to OCI. And at the end of Q1, we were able to shut down our data centers. And so we had some synergies from that migration that we were to pick up savings from the data center shutdowns as well as just overall operating efficiencies. So it's a solid margin and it's attainable. Matthew Maus: All right. Great. Last question for me is just back on the CAIRO side. I mean, you mentioned it's still early in the retail side. So I'm wondering like as that picks up more in 2027, like how big of a role does that reseller channel play versus direct retail attach? Jon Brinton: Yes. I think overall, if you see not just CAIRO, but in Doug mentioned the EVP program in his comments. I mean, we continue to see solid growth across that entire program, of which CAIRO or the other and other AI applications are a component of it. So I just think as we see more licensee -- any time a licensee takes on a product like that, they have a delay in their time to market to put it through their operational systems to get it ready for sale, to get it out to their sales teams and their partners and to deploy it. So I think we are going to continue to see solid growth within that whole kind of category of what we would consider the EVP program, and there are several AI applications within that portfolio. Operator: Thank you. Ladies and gentlemen, as we have no further questions in the queue at this time, I would like to turn the call back over to Mr. Korn for any closing remarks. Jeffrey Korn: Thank you, Ali, and I want to thank everybody who dialed in to listen and everybody who pays attention to our results. As we have all said, this was a very exciting and strategic quarter for us, and I think only the beginning of continued strong results and continued strong growth. We're very excited. We have our UGM coming up in October, and the palpability and excitement of our licensees continues to grow. I can't wait to get to talk to all of them and show them what we're doing. And I can't wait to sit with all of you and discuss our Q3 results. So until that time, thank you for your attention, and have a good afternoon. Operator: Thank you. Ladies and gentlemen, this concludes today's conference, and you may disconnect your lines at this time. And we thank you for your participation. Before you buy stock in Crexendo, consider this: The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Crexendo wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years. Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $411,427!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $1,335,252!* Now, it’s worth noting Stock Advisor’s total average return is 965% — a market-crushing outperformance compared to 215% for the S&P 500. Don't miss the latest top 10 list, available with Stock Advisor, and join an investing community built by individual investors for individual investors. See the 10 stocks » *Stock Advisor returns as of August 11, 2026. This article is a transcript of this conference call produced for The Motley Fool. While we strive for our Foolish Best, there may be errors, omissions, or inaccuracies in this transcript. As with all our articles, The Motley Fool does not assume any responsibility for your use of this content, and we strongly encourage you to do your own research, including listening to the call yourself and reading the company's SEC filings. Please see our Terms and Conditions for additional details, including our Obligatory Capitalized Disclaimers of Liability. The Motley Fool has positions in and recommends Crexendo. The Motley Fool has a disclosure policy. Crexendo (CXDO) Q2 2026 Earnings Call Transcript was originally published by The Motley Fool

Our analysts just identified a stock with the potential to be the next Nvidia. Tell us how you invest and we'll show you why it's our #1 pick. Tap here. Secured 11 new platform logos in the first half of 2026, a significant increase from 2 in the prior year period, signaling a shift toward Crexendo as the preferred provider for scalable communication solutions. Attributed the surge in new wins to a 'Sessions not Seats' economic model, which management claims can save providers 40% to 50% compared to traditional seat-based pricing. Successfully integrated the ESI acquisition, which contributed $6.9 million in Q2 revenue and exceeded initial sales expectations while maintaining GAAP profitability. Achieved a 500 basis point increase in consolidated gross margin compared to Q1 2026, driven by higher-margin ESI sales and cost savings from decommissioning legacy data centers. Completed the migration to Oracle Cloud Infrastructure (OCI), resulting in operational efficiencies and improved Software Solutions margins. Reported a 97% year-over-year increase in Remaining Performance Obligation (RPO) to $139 million, providing high visibility into future revenue streams over the next 60 months. Reiterated the goal of reaching a $100 million revenue run rate by the end of 2026 through a combination of organic growth and inorganic contributions. Anticipates that AI-related revenue, specifically from the CAIRO receptionist platform, will become a meaningful contributor to the top line starting in 2027. Plans to release software Volume 46 in Q2 2027, featuring a fully redesigned user interface intended to enhance the sales process and user experience. Maintains a disciplined M&A pipeline, with management indicating the potential for another accretive transaction as early as Q4 2026 or early 2027. Expects continued double-digit organic revenue growth for the full year 2026, supported by a strong pipeline of new licensees and upgrade orders. Noted a $700,000 decrease in perpetual license revenue compared to a record Q2 2025, which management attributed to customers opting for smaller initial investments in the current economic climate. Absorbed acquisition-related costs and amortization from the ESI transaction while remaining GAAP profitable for the 12th consecutive quarter. Identified a trend where new licensees start with smaller commitments but typically increase order value by 50% during subsequent upgrades. Reported that the ESI acquisition eliminated approximately $180,000 of revenue that would have been recognized in the prior year quarter due to intercompany eliminations. One stock. Nvidia-level potential. 30M+ investors trust Moby to find it first. Get the pick. Tap here. Management cited a combination of superior technology with open APIs and competitor stagnation, specifically mentioning migrations from Metaswitch and Cisco BroadSoft. The 'cap and grow' strategy allows customers to start with smaller licenses during economic uncertainty, creating a long-term 'annuity' of future upgrades. Initial deployments show an average revenue increase of $120 per account per month, representing a 35% uptick over standard Telecom Services revenue. The product is usage-based, meaning high-volume customers could generate thousands of dollars in overage charges while still saving compared to live staff costs. Management confirmed the 17% adjusted EBITDA margin is maintainable and represents a return to historical levels after a temporary dip in Q1. Strong cash generation and a new Wells Fargo term loan provide the flexibility to pursue M&A without substantial shareholder dilution. TSD sales increased 39% in the quarter, driven by high customer satisfaction rankings and a dedicated channel team building long-term relationships. Management views the TSD channel as a key differentiator where they are winning repeat business from competitors who provide poor service.

PHOENIX, AZ / ACCESS Newswire / August 4, 2026 / Crexendo, Inc. (NASDAQ:CXDO), an award-winning software technology company that is a premier provider of cloud communication platform software and unified communications as a service (UCaaS) offerings, including voice, video, contact center, and managed IT services tailored to businesses of all sizes, today announced financial results for the second quarter ended June 30, 2026. Second Quarter Financial highlights: Total revenue increased 49% year-over-year to $24.6 million GAAP net income of $1.1 million, or $0.03 per basic and diluted common share. Non-GAAP net income of $4.1 million, or $0.12 per basic and diluted common share. Financial Results for the Second Quarter of 2026 Total Revenue: Consolidated total revenue for the second quarter of 2026 increased 49%, or $8.1 million, to $24.6 million compared to $16.6 million for the second quarter of 2025. Service Revenue: Consolidated service revenue for the second quarter of 2026 increased 78%, or $6.5 million, to $14.9 million compared to $8.4 million for the second quarter of 2025. Software Solutions Revenue: Consolidated software solutions revenue for the second quarter of 2026 increased 5%, or $0.4 million, to $7.3 million compared to $7.0 million for the second quarter of 2025. Product Revenue: Consolidated product revenue for the second quarter of 2026 increased 104%, or $1.2 million, to $2.5 million compared to $1.2 million for the second quarter of 2025. Operating Expenses: Consolidated operating expenses for the second quarter of 2026 increased 53%, or $8.1 million, to $23.6 million compared to $15.4 million for the second quarter of 2025. Net Income/(Loss): The Company reported net income of $1.1 million for the second quarter of 2026, or $0.03 per basic and diluted common share, compared to net income of $1.2 million, or $0.04 per basic and diluted common share for the second quarter of 2025. Non-GAAP: Non-GAAP net income of $4.1 million for the second quarter of 2026, or $0.12 per basic and diluted common share, compared to non-GAAP net income of $2.9 million or $0.10 per basic common share and $0.09 per diluted common share for the second quarter of 2025. EBITDA and Adjusted EBITDA: EBITDA for the second quarter of 2026 of $3.0 million compared to $2.0 million for the second quarter of 2025. Adjusted EBITDA for the second quarter of 2026 of $4.1 million compared to $2.8 million for the second quarter of 2025. Financial Results for the six months ended June 30, 2026 Total Revenue: Consolidated total revenue for the six months ended June 30, 2026 increased 39%, or $12.7 million, to $45.4 million compared to $32.6 million for the six months ended June 30, 2025. Service Revenue: Consolidated service revenue for the six months ended June 30, 2026 increased 54%, or $8.9 million, to $25.4 million compared to $16.6 million for the six months ended June 30, 2025. Software Solutions Revenue: Consolidated software solutions revenue for the six months ended June 30, 2026 increased 9%, or $1.2 million, to $15.1 million compared to $13.8 million for the six months ended June 30, 2025. Product Revenue: Consolidated product revenue for the six months ended June 30, 2026 increased 121%, or $2.7 million, to $4.9 million compared to $2.2 million for the six months ended June 30, 2025. Operating Expenses: Consolidated operating expenses for the six months ended June 30, 2026 increased 44%, or $13.5 million, to $43.9 million compared to $30.4 million for the six months ended June 30, 2025. Net Income/(Loss): The Company reported net income of $1.6 million for the six months ended June 30, 2026, or $0.05 per basic and diluted common share, compared to net income of $2.4 million, or $0.08 per basic and diluted common share for the six months ended June 30, 2025. Non-GAAP: Non-GAAP net income of $7.3 million for the six months ended June 30, 2026, or $0.23 per basic common share and $0.22 per diluted common share, compared to non-GAAP net income of $5.5 million or $0.19 per basic common share and $0.18 per diluted common share for the six months ended June 30, 2025. EBITDA and Adjusted EBITDA: EBITDA for the six months ended June 30, 2026 of $4.6 million compared to $3.9 million for the six months ended June 30, 2025. Adjusted EBITDA for the six months ended June 30, 2026 of $7.3 million compared to $5.5 million for the six months ended June 30, 2025. Cash and Cash Equivalents: Total cash and cash equivalents at June 30, 2026 was $18.3 million compared to $31.4 million at December 31, 2025. Cash Flow: Cash provided by operating activities for the six months ended June 30, 2026 was $4.8 million compared to cash provided by operating activities of $2.5 million for the six months ended June 30, 2025. Cash used in investing activities for the six months ended June 30, 2026 was ($26.2) million compared to nill for the six months ended June 30, 2025. Cash provided by financing activities for the six months ended June 30, 2026 was $8.3 million compared to cash provided by financing activities of $2.7 million for the first six months of 2025. Management Commentary "Crexendo delivered another strong quarter, with total revenue increasing 49% year-over-year to $24.6 million and adjusted EBITDA increasing 46% to $4.1 million," said Jeff Korn, Crexendo Chief Executive Officer and Chairman of the Board. "I am particularly pleased and excited that we secured eleven new platform logos through the second quarter of 2026, compared with only two over the same period last year. This substantial increase reinforces our belief that the Crexendo NetSapiens platform is increasingly the platform of choice for providers seeking a new, improved and scalable communications platform. These wins should provide a meaningful recurring revenue opportunity as these customers convert more of their existing subscriber bases to our platform, expand their businesses and purchase additional licenses in the future. In addition, I could not be more pleased with the ESI acquisition and the contributions the ESI team is already making to Crexendo. The integration is progressing exceptionally well, the employees are engaged, sales are exceeding our initial expectations, and we are already realizing the benefits of combining our accounting, legal, marketing, and engineering capabilities. ESI has significantly improved our revenue, strengthened our customer base, and added an experienced team that shares our commitment to innovation and outstanding customer service. The acquisition is performing exactly as we had hoped and further validates our disciplined approach to identifying and integrating strategic, accretive acquisitions." Korn added "I am also very pleased with our continued margin improvement and the substantial expansion in operating cash flow, with cash provided by operating activities increasing 89% to $4.8 million during the first six months of the year compared to the same period of the prior year. This increased cash generation strengthens our balance sheet and provides us with greater flexibility to pursue additional strategic M&A opportunities while seeking to minimize dilution to our shareholders. Our recently released AI offerings, while not yet meaningful contributors to revenue, continue to receive strong praise and market acceptance. I expect adoption to continue expanding and believe AI-related revenue can become meaningful in 2027. With accelerating platform momentum, a highly successful acquisition, improving margins and increasing cash generation, I remain extremely enthusiastic about our ability to deliver profitable growth and enhance long-term shareholder value." Conference Call Crexendo management will hold a conference call today, August 4, 2026, at 4:30 PM Eastern time to discuss these results. Company CEO Jeff Korn, CFO Ron Vincent, and President and COO Doug Gaylor will host the call, followed by a question-and-answer period. Dial-in Numbers:Domestic Participants: 888-506-0062International Participants: 973-528-0011Participant Access Code: 550804 Please dial in five minutes prior to the beginning of the call at 4:30 PM Eastern time and reference participant access code 550804 and the Crexendo earnings call. A replay of the call will be available until August 18, 2026, by dialing toll-free at 877-481-4010 or 919-882-2331 for international callers. The replay passcode is 54291. About Crexendo Crexendo, Inc. is an award-winning software technology company that is a premier provider of cloud communication platform and services, video collaboration and managed IT services tailored to businesses of all sizes. Our solutions currently support over seven million end users globally, through our extensive global network of over 240 cloud communication platform software subscribers and our direct retail offering. 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 Crexendo (i) being pleased and excited that it secured eleven new platform logos through the second quarter of 2026, with that reinforcing the belief that the Crexendo NetSapiens platform is increasingly the platform of choice for providers seeking a new, improved and scalable communications platform; (ii) believing these wins should provide a meaningful recurring revenue opportunity as these customers convert more of their existing subscriber bases to the platform, expand their businesses and purchase additional licenses in the future; (iii) being pleased with the ESI acquisition and the contributions the ESI team is already making with the integration progressing exceptionally well with having the employees engaged and sales are exceeding initial expectations; (iv) already realizing the benefits of combining our accounting, legal, marketing, and engineering capabilities; (v) believing ESI significantly improved revenue, strengthened customer base, and added an experienced team that shares the commitment to innovation and outstanding customer service; (vi) believing the acquisition performing exactly as hoped and further validates the disciplined approach to identifying and integrating strategic, accretive acquisitions; (vii) being pleased with continued margin improvement and the substantial expansion in operating cash flow; (viii) believing that the increased cash generation strengthens the balance sheet and provides greater flexibility to pursue additional strategic M&A opportunities while seeking to minimize dilution to shareholders; (ix) believing that recently released AI offerings receive strong praise and market acceptance and expecting adoption to continue expanding that AI-related revenue can become meaningful in 2027 and (x) believing that with accelerating platform momentum, a highly successful acquisition, improving margins and increasing cash generation being extremely enthusiastic about the ability to deliver profitable growth and enhance long-term shareholder value. 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, 2025, quarterly Form 10-Qs as filed with the SEC. 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. Company Contact Crexendo, Inc.Doug GaylorPresident and Chief Operating [email protected] CREXENDO, INC. AND SUBSIDIARIESCondensed Consolidated Balance Sheets(Unaudited, in thousands, except par value and share data) CREXENDO, INC. AND SUBSIDIARIESCondensed Consolidated Statements of Operations(Unaudited, in thousands, except per share and share data) CREXENDO, INC. AND SUBSIDIARIESCondensed Consolidated Statements of Cash Flows(Unaudited, in thousands) Use of Non-GAAP Financial Measures To evaluate our business, we consider and use non-generally accepted accounting principles ("Non-GAAP") net income 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 to be an important indicator of overall business performance because it allows us to evaluate results without the effects of share-based compensation and related taxes, acquisition related expenses, changes in fair value of contingent consideration, amortization of intangibles, and goodwill and long-lived asset impairment. We define EBITDA as U.S. GAAP net income/(loss) before interest expense, interest income and other expense/(income), the gain/(loss) on the sale of property and equipment, goodwill and long-lived asset impairments, provision/(benefit) 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 acquisition related expenses, changes in fair value of contingent consideration and share-based compensation and related taxes. 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 4, 2026 earnings press release, as furnished on Form 8-K, we included Non-GAAP net income, EBITDA and Adjusted EBITDA. The terms Non-GAAP net income, 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 income, EBITDA, and Adjusted EBITDA should not be considered in isolation, or as a substitute for net income/(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, EBITDA, and Adjusted EBITDA only as supplemental support for management's analysis of business performance. Non-GAAP net income, 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 Income/(Loss) to Non-GAAP Net Income(Unaudited, in thousands, except for per share and share data) Reconciliation of U.S. GAAP Net Income/(Loss) to EBITDA to Adjusted EBITDA(Unaudited, in thousands) (1) For the three months ended June 30, 2026 and 2025, employer payroll tax expense related to share-based compensation was $79 and $63, respectively. For the six months ended June 30, 2026 and 2025, employer payroll tax expense related to share-based compensation was $85 and $135, respectively. SOURCE: Crexendo, Inc. View the original press release on ACCESS Newswire

Interested in Crexendo Inc.? Here are five stocks we like better. Strong Q2 growth: Revenue rose 49% year over year to $24.6 million, supported by telecom growth and the ESI acquisition. GAAP net income reached $1.1 million, while adjusted EBITDA increased 46% to $4.1 million, a 17% margin. Platform momentum accelerated: Crexendo added six NetSapiens customers in Q2 and 11 during the first half, up from two a year earlier. Remaining performance obligations nearly doubled to $139 million, while gross margin improved to 66%. ESI and AI expand future growth: ESI contributed $6.9 million in Q2 revenue, though the acquisition reduced cash to $18.3 million after the company paid $26.2 million in cash consideration. Its CAIRO AI product is generating about $120 in additional monthly revenue per account, but management expects AI revenue to become more meaningful in 2027. Crexendo (NASDAQ:CXDO) reported second-quarter 2026 revenue of $24.6 million, up 49% from the prior-year period, as the company benefited from growth in telecom services and contributions from its acquisition of Estech Systems LLC, or ESI. GAAP net income was $1.1 million, or $0.03 per diluted share, while non-GAAP net income totaled $4.1 million, or $0.12 per diluted share. Adjusted EBITDA rose 46% year over year to $4.1 million, representing a 17% adjusted EBITDA margin. Chief Financial Officer Ron Vincent said the margin returned to the level Crexendo had maintained during the prior year after a first-quarter decline. → SpaceX’s First Earnings Report Could Decide Whether Shorts or Bulls Have Control “These high-level results demonstrate the growth, increasing scale, and operating leverage of the business,” Chairman and CEO Jeff Korn said on the company’s earnings call. He added that Crexendo remained GAAP profitable while absorbing acquisition-related costs and amortization associated with ESI. Service revenue increased 78% to $14.9 million and carried a 67% gross margin. Software solutions revenue rose 5% to $7.3 million, with a 70% gross margin, while product revenue more than doubled to $2.5 million and generated a 44% gross margin. → Financials Hit Record Highs as the AI Trade Unravels—Can They Keep Leading? Vincent said consolidated organic revenue growth was 7% in the quarter, while year-to-date organic growth was 11%, which he said was in line with the company’s target for double-digit organic growth for the full year. He attributed the lower quarterly organic growth rate in part to a $700,000 decline in perpetual-license revenue compared with a record sales quarter a year earlier, when average order size was about three times the company’s typical quarterly average. The ESI acquisition also eliminated about $180,000 of revenue that had been recognized in the year-earlier quarter, Vincent said. Adding that amount back to the current-quarter comparison would have resulted in an approximately 8% growth rate, according to the company. → Why Rare Earth Processing Could Be the Real 2027 Opportunity Crexendo’s consolidated gross margin was 66%, up 500 basis points from the first quarter. The company cited a 400-basis-point sequential improvement in service gross margin, a 1,300-basis-point increase in product gross margin and a 200-basis-point improvement in software solutions gross margin. Doug Gaylor, Crexendo’s president and COO, said software margin improvement was helped by the company’s migration to Oracle Cloud Infrastructure and the decommissioning of legacy data centers at the end of the first quarter. Telecom services margins benefited from higher-margin ESI sales, he said. Crexendo added six new NetSapiens platform customers during the second quarter, bringing first-half new-logo wins to 11, compared with two during the first half of 2025. Two of the six second-quarter customers migrated from Metaswitch, while one migrated from Cisco BroadSoft. Four of the 11 first-half wins were Metaswitch migrations. The company also booked seven upgrade orders from existing licensees. Management said newer customers have tended to make smaller initial commitments amid economic uncertainty, but upgrade orders have averaged roughly 50% more than initial orders. Vincent said typical initial orders were in the range of $250,000, while average upgrade orders were approximately $350,000. Korn said smaller initial licenses can close more quickly than large platform deals and could provide a longer-term stream of upgrades as customers expand. Crexendo’s remaining performance obligation increased 97% year over year to $139 million. Gaylor said the measure includes remaining contract values from telecom services and software solutions customers that are expected to be recognized over the next 60 months. Management attributed platform momentum to the company’s sessions-not-seats pricing model, its product capabilities and uncertainty among some competitors’ customer bases. Korn said the company believes its pricing model can save communications providers 40% to 50% on platform usage costs. ESI contributed $6.9 million of revenue in the second quarter, or an average of $2.3 million per month, compared with $2.1 million during March, its first month under Crexendo ownership. Korn said ESI sales have exceeded initial expectations, while Gaylor pointed to the acquired company’s reseller relationships and expanded sales message following the combination. Operating expenses increased $8.1 million, or 53%, from a year earlier, with ESI accounting for $6.9 million of the increase. Crexendo said it has integrated or begun integrating accounting, legal and marketing functions and expects further operating synergies and cost savings. The company ended the quarter with $18.3 million in cash and cash equivalents, compared with $31.4 million at the end of 2025. Cash from operating activities totaled $4.8 million during the first six months, an 89% increase from the same period last year. Crexendo used $26.2 million in investing cash flow for the cash portion of the ESI purchase price, while financing activities provided $8.4 million, including $4.9 million from a Wells Fargo term loan and $3.6 million in net proceeds from stock-option exercises. Korn said the company is evaluating several potential acquisition opportunities but intends to remain selective. He said a new transaction could occur in the fourth quarter or shift into 2027 depending on size and due diligence requirements. Crexendo launched its CAIRO artificial intelligence receptionist and orchestrator in late January. The product can answer calls, address frequently asked questions, route calls and schedule appointments, according to the company. Gaylor said CAIRO generated an average revenue increase of approximately $120 per account per month during the quarter, about 35% above the average $340 monthly revenue per telecom services account. He said the product carries “great margins” and should be accretive to company margins as adoption grows. CAIRO has been rolled out to licensees and is being marketed to Crexendo’s existing retail customers. Management said AI-related revenue is not yet material but expects AI adoption and related revenue to become more meaningful in 2027. Separately, the company’s ecosystem vendor program grew to 57 vendors, including 13 offering AI-related applications and solutions. The program contributed $400,000 of revenue in the quarter, though management characterized it as still being in the early stages of monetization. Crexendo, Inc (NASDAQ: CXDO) is a provider of cloud-based communications and collaboration solutions tailored to businesses of varying sizes. The company's flagship offering, CXsuite, integrates enterprise-grade voice, video conferencing, instant messaging, presence, and contact center functionality into a single platform delivered over the internet. By leveraging hosted infrastructure and a subscription-based model, Crexendo aims to reduce on-premises hardware costs and simplify management for IT teams and resellers. Crexendo's product portfolio includes a multi-tenant cloud PBX, SIP trunking, session border controllers and an application programming interface (API) suite that allows partners and customers to embed real-time communications into custom workflows. This instant news alert was generated by narrative science technology and financial data from MarketBeat in order to provide readers with the fastest reporting and unbiased coverage. Please send any questions or comments about this story to [email protected]. The article "Crexendo Q2 Earnings Call Highlights" was originally published by MarketBeat. View MarketBeat's top stocks for August 2026.

Crexendo (CXDO) came out with quarterly earnings of $0.1 per share, beating the Zacks Consensus Estimate of $0.08 per share. This compares to earnings of $0.08 per share a year ago. These figures are adjusted for non-recurring items. This quarterly report represents an earnings surprise of +33.33%. A quarter ago, it was expected that this company would post earnings of $0.08 per share when it actually produced earnings of $0.09, delivering a surprise of +12.5%. Over the last four quarters, the company has surpassed consensus EPS estimates four times. Crexendo, which belongs to the Zacks Internet - Services industry, posted revenues of $20.71 million for the quarter ended March 2026, surpassing the Zacks Consensus Estimate by 5.26%. This compares to year-ago revenues of $16.06 million. The company has topped consensus revenue estimates four times over the last four quarters. The sustainability of the stock's immediate price movement based on the recently-released numbers and future earnings expectations will mostly depend on management's commentary on the earnings call. Crexendo shares have added about 26.3% since the beginning of the year versus the S&P 500's gain of 5.2%. While Crexendo has outperformed the market so far this year, the question that comes to investors' minds is: what's next for the stock? There are no easy answers to this key question, but one reliable measure that can help investors address this is the company's earnings outlook. Not only does this include current consensus earnings expectations for the coming quarter(s), but also how these expectations have changed lately. Empirical research shows a strong correlation between near-term stock movements and trends in earnings estimate revisions. Investors can track such revisions by themselves or rely on a tried-and-tested rating tool like the Zacks Rank, which has an impressive track record of harnessing the power of earnings estimate revisions. Ahead of this earnings release, the estimate revisions trend for Crexendo was mixed. While the magnitude and direction of estimate revisions could change following the company's just-released earnings report, the current status translates into a Zacks Rank #3 (Hold) for the stock. So, the shares are expected to perform in line with the market in the near future. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here. It will be interesting to see how estimates for the coming quarters and the current fiscal year change in the days ahead. The current consensus EPS estimate is $0.08 on $24.63 million in revenues for the coming quarter and $0.37 on $97.77 million in revenues for the current fiscal year. Investors should be mindful of the fact that the outlook for the industry can have a material impact on the performance of the stock as well. In terms of the Zacks Industry Rank, Internet - Services is currently in the bottom 22% of the 250 plus Zacks industries. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1. One other stock from the same industry, Sprout Social (SPT), is yet to report results for the quarter ended March 2026. The results are expected to be released on May 7. This developer of cloud software is expected to post quarterly earnings of $0.16 per share in its upcoming report, which represents a year-over-year change of -27.3%. The consensus EPS estimate for the quarter has remained unchanged over the last 30 days. Sprout Social's revenues are expected to be $120.44 million, up 10.2% from the year-ago quarter. Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Crexendo Inc. (CXDO) : Free Stock Analysis Report Sprout Social, Inc. (SPT) : Free Stock Analysis Report This article originally published on Zacks Investment Research (zacks.com). Zacks Investment Research

PHOENIX, AZ / ACCESS Newswire / May 5, 2026 / Crexendo, Inc. (NASDAQ:CXDO), an award-winning software technology company that is a premier provider of cloud communication platform software and unified communications as a service (UCaaS) offerings, including voice, video, contact center, and managed IT services tailored to businesses of all sizes, today announced financial results for the first quarter ended March 31, 2026. First Quarter Financial highlights: Total revenue increased 29% year-over-year to $20.7 million GAAP net income of $0.6 million, or $0.02 per basic and diluted common share. Non-GAAP net income of $3.3 million, or $0.10 per basic and diluted common share. Financial Results for the First Quarter of 2026 Total Revenue: Consolidated total revenue for the first quarter of 2026 increased 29%, or $4.7 million, to $20.7 million compared to $16.1 million for the first quarter of 2025. Service Revenue: Consolidated service revenue for the first quarter of 2026 increased 29%, or $2.4 million, to $10.6 million compared to $8.2 million for the first quarter of 2025. Software Solutions Revenue: Consolidated software solutions revenue for the first quarter of 2026 increased 12%, or $0.9 million, to $7.7 million compared to $6.9 million for the first quarter of 2025. Product Revenue: Consolidated product revenue for the first quarter of 2026 increased 141%, or $1.4 million, to $2.4 million compared to $1.0 million for the first quarter of 2025. Operating Expenses: Consolidated operating expenses for the first quarter of 2026 increased 36%, or $5.4 million, to $20.3 million compared to $14.9 million for the first quarter of 2025. Net Income/(Loss): The Company reported net income of $0.6 million for the first quarter of 2026, or $0.02 per basic and diluted common share, compared to net income of $1.2 million, or $0.04 per basic and diluted common share for the first quarter of 2025. Non-GAAP: Non-GAAP net income of $3.3 million for the first quarter of 2026, or $0.10 per basic and diluted common share, compared to non-GAAP net income of $2.7 million or $0.10 per basic common share and $0.09 per diluted common share for the first quarter of 2025. EBITDA and Adjusted EBITDA: EBITDA for the first quarter of 2026 of $1.6 million compared to $1.9 million for the first quarter of 2025. Adjusted EBITDA for the first quarter of 2026 of $3.2 million compared to $2.7 million for the first quarter of 2025. Cash and Cash Equivalents: Total cash and cash equivalents at March 31, 2026 was $7.2 million compared to $31.4 million at December 31, 2025. Cash Flow: Cash provided by operating activities for the first quarter of 2026 was $2.0 million compared to cash provided by operating activities of $1.2 million for the first quarter of 2025. Cash used in investing activities for the first quarter of 2026 was ($26.2) million compared to nill for the first quarter of 2025. Cash provided by financing activities for the first quarter of 2026 was $0.1 million compared to cash provided by financing activities of $1.8 million for the first quarter of 2025. Management Commentary "Our first quarter results reflect continued strong execution and further validate the scalability of our operating model. Total revenue increased 29% year over year to $20.7 million, and we delivered GAAP net income of $0.6 million alongside non-GAAP net income of $3.3 million. Importantly, we extended our streak of GAAP profitability to 10 consecutive quarters, despite absorbing acquisition related expenses and additional amortization expenses related to the intangible assets recorded in connection with the Estech Systems ("ESI") acquisition, which are fully reflected in our GAAP results." Said Jeff Korn, CEO and Chairman. "The ESI acquisition is performing ahead of our expectations and is already contributing meaningfully to both revenue and operational momentum. Integration is progressing well, with strong alignment across sales, operations, and engineering, and we are beginning to see early synergies that we expect to build on overtime. Our Q1 results only included 1 month of ESI contributions and I am excited about the impact we will see going forward from this significant acquisition." Korn added "From a profitability standpoint, our strong non-GAAP results better reflect the underlying performance of the business by excluding items such as share based compensation, acquisition related expenses, and depreciation and amortization including Acquisition related costs of $839,000 and amortization expense of $1.1 Million. These results highlight the strength of our core operations and our ability to scale efficiently while continuing to invest in growth initiatives. We also continued to enhance our platform during the quarter, improving functionality, user experience, and overall competitiveness. We released our Crexendo AI Receptionist/Orchestrator (CAIRO) during the quarter and are very pleased with the early response in the market, and we will be introducing further AI enhancements. We continue to see increasing traction in our marketplace and broader ecosystem, and we are strengthening our position as a long-term platform provider and expanding our opportunity set. While we remain disciplined given the broader macro environment, our combination of sustained double-digit growth, consistent profitability, and successful integration of acquisitions positions us well as we continue to scale. We believe these dynamics, together with improving operating leverage over time, create a compelling framework for long term value creation. We are clearly on a trajectory toward $100 million in annual revenue and remain confident in our ability to execute against that path while continuing to enhance the quality and durability of our earnings." Conference Call Crexendo management will hold a conference call today, May 5, 2026, at 4:30 PM Eastern time to discuss these results. Company CEO Jeff Korn, CFO Ron Vincent, and President and COO Doug Gaylor will host the call, followed by a question-and-answer period. Dial-in Numbers: Domestic Participants: 877-545-0320 International Participants: 973-528-0002 Participant Access Code: 805100 Please dial in five minutes prior to the beginning of the call at 4:30 PM Eastern time and reference participant access code 805100 and the Crexendo earnings call. A replay of the call will be available until May 19, 2026, by dialing toll-free at 877-481-4010 or 919-882-2331 for international callers. The replay passcode is 53939. About Crexendo Crexendo, Inc. is an award-winning software technology company that is a premier provider of cloud communication platform and services, video collaboration and managed IT services tailored to businesses of all sizes. Our solutions currently support over seven million end users globally, through our extensive global network of over 245 cloud communication platform software subscribers and our direct retail offering. 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 Crexendo (i) believing that the first quarter results reflect continued strong execution and further validate the scalability of the operating model; (ii) believing that it is a positive development that the Company extended the streak of GAAP profitability despite absorbing acquisition related expenses and additional amortization expenses related to the intangible assets recorded in connection with the Estech Systems ("ESI") acquisition; (iii) believing the ESI acquisition is performing ahead of our expectations and is already contributing meaningfully to both revenue and operational momentum and that integration is progressing well, with strong alignment across sales, operations, and engineering; (iv) the Company beginning to see early synergies that it expects to build on overtime; (v) being excited about the impact it will see going forward from this significant acquisition; (vi) believing that from a profitability standpoint, the strong non-GAAP results better reflect the underlying performance of the business by excluding items such as share based compensation, acquisition related expenses, and depreciation and amortization; (vii) being very pleased with the early response in the market of Crexendo AI Receptionist/Orchestrator (CAIRO), with expecting to be introducing further AI enhancements; (viii) believing the results highlight the strength of the core operations and the ability to scale efficiently while continuing to invest in growth initiatives; (ix) having continued to enhance the platform during the quarter, improving functionality, user experience, and overall competitiveness which combined with increasing traction in its marketplace and broader ecosystem strengthening the position as a long-term platform provider and expanding the opportunity set; (x) believing the combination of sustained double-digit growth, consistent profitability, and successful integration of acquisitions positions the Company well as it continues to scale; (xi) believing these dynamics, together with improving operating leverage over time, create a compelling framework for long term value creation; and (xii) clearly being on a trajectory toward $100 million in annual revenue while remaining confident in the ability to execute against that path while continuing to enhance the quality and durability of our earnings. 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, 2025, quarterly Form 10-Qs as filed with the SEC. 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. Company Contact Crexendo, Inc. Doug Gaylor President and Chief Operating Officer 602-732-7990 [email protected] CREXENDO, INC. AND SUBSIDIARIES Condensed Consolidated Balance Sheets (Unaudited, in thousands, except par value and share data) CREXENDO, INC. AND SUBSIDIARIES Condensed Consolidated Statements of Operations (Unaudited, in thousands, except per share and share data) CREXENDO, INC. AND SUBSIDIARIES Condensed Consolidated Statements of Cash Flows (Unaudited, in thousands) Use of Non-GAAP Financial Measures To evaluate our business, we consider and use non-generally accepted accounting principles ("Non-GAAP") net income 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 to be an important indicator of overall business performance because it allows us to evaluate results without the effects of share-based compensation and related taxes, acquisition related expenses, changes in fair value of contingent consideration, amortization of intangibles, and goodwill and long-lived asset impairment. We define EBITDA as U.S. GAAP net income/(loss) before interest expense, interest income and other expense/(income), the gain/(loss) on the sale of property and equipment, goodwill and long-lived asset impairments, provision/(benefit) 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 acquisition related expenses, changes in fair value of contingent consideration and share-based compensation and related taxes. 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 May 5, 2026 earnings press release, as furnished on Form 8-K, we included Non-GAAP net income, EBITDA and Adjusted EBITDA. The terms Non-GAAP net income, 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 income, EBITDA, and Adjusted EBITDA should not be considered in isolation, or as a substitute for net income/(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, EBITDA, and Adjusted EBITDA only as supplemental support for management's analysis of business performance. Non-GAAP net income, 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. (1) For the three months ended March 31, 2026 and 2025, employer payroll tax expense related to share-based compensation was $6 and $72, respectively. SOURCE: Crexendo, Inc. View the original press release on ACCESS Newswire