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Crexendo Reports Fourth Quarter and Year End December 31, 2012 Financial Results

Crexendo Reports Fourth Quarter and Year End December 31, 2012 Financial Results 
PHOENIX, AZ -- (Marketwire) -- 03/13/13 --  Crexendo, Inc. (NYSE MKT:
EXE), a hosted services company that provides web hosting, hosted
telecommunications services, search engine optimization management,
link building, e-commerce software, website development and broadband
internet services for businesses and entrepreneurs, today reported
financial results for its fourth quarter and year ended December 31,
2012.  
Financial highlights for Crexendo's 2012 fourth quarter included:  
Consolidated revenue for the fourth quarter of 2012 decreased 46% to
$3.1 million compared to $5.7 million for the prior year quarter.  
Net loss for the fourth quarter of 2012 was $3.2 million or $(0.30)
per diluted common share, compared to net income of $459,000 or $0.04
per diluted common share for the fourth quarter of 2011.  
Cash used for operations for the fourth quarter of 2012 was $697,000
compared to cash provided by operations of $1.4 million for the
fourth quarter of 2011.  
Financial highlights for Crexendo's year ended December 31, 2012 
Consolidated revenue for the year-ended December 31, 2012 decreased
64% to $17.2 million compared to $48.0 million for the year ended
Decemb
er 31, 2011. 
Net loss for the year-ended December 31, 2012 was $3.9 million or
$(0.37) per diluted common share, compared to net loss of $6.2
million or $(0.59) per diluted common share for the year ended
December 31, 2011.  
As of December 31, 2012, cash and cash equivalents, including
restricted cash were $8.9 million compared to $10.6 million at
December 31, 2011. 
Cash used for operations for the year ended December 31, 2012 was
$446,000 compared to $1.6 million for the year-ended December 31,
2011. Cash used for investing and financing activities for the year
ended December 31, 2012 was $772,000 compared to $3.9 million for the
year-ended December 31, 2011. 
Working capital as of December 31, 2012 was $6.3 million compared to
$8.4 million as of December 31, 2011. Working capital excluding
deferred revenue as of December 31, 2012 was $9.4 million compared to
$17.7 million at December 31, 2011. 
Segment Results 
The Company has three operating segments, which consist of
StoresOnline, Crexendo Web Services and Crexendo Network Services.
Effective October 1, 2012, the Company changed its reporting segments
to reflect the allocation of previously unallocated corporate
expenses to each of the three operating segments. The Company revised
its segment reporting to reflect changes in how the Chief Operating
Decision Maker (CODM) internally measures performance and allocates
resources. Segment operating results for the prior year has been
revised to conform to current year segment operating results
presentation. 
StoresOnline  
Revenue for the fourth quarter of 2012 decreased 54% to $2.3 million
compared to $5.0 million for the prior year quarter. Revenue for the
year ended December 31, 2012 decreased 70% to $13.9 million compared
to $45.6 million for the year ended December 31, 2011.  
Total segment operating expenses decreased 34% to $2.3 million
compared to $3.5 million for the prior year quarter. Total segment
operating expenses decreased 79% to $9.3 million for the year ended
December 31, 2012 compared to $44.3 million for the year ended
December 31, 2011.  
Segment other income, primarily related to interest on the collection
of accounts receivable for the fourth quarter of 2012 decreased 74%
to $259,000 compared to $1.0 million in the prior year quarter.
Segment other income, primarily related to interest on the collection
of accounts receivable for the year-ended December 31, 2012 decreased
59% to $1.9 million compared to $4.7 million for the year ended
December 31, 2011. 
Total segment income before income taxes for the fourth quarter of
2012 decreased 87% to $332,000 compared to $2.5 million in the prior
year quarter. Total segment income before income taxes for the
year-ended December 31, 2012 increased 8% to $6.5 million compared to
$6.0 million for the year ended December 31, 2011. 
Crexendo Web Services 
Revenue for the fourth quarter of 2012 decreased 27% to $468,000,
from $638,000 in the prior year quarter. Revenue for the year-ended
December 31, 2012 increased 8% to $2.5 million, compared to $2.3
million for the year-ended December 31, 2011. Web Services backlog,
which is anticipated to be recognized within the next twelve months,
was $1.1 million at December 31, 2012 and 2011, respectively.  
Total segment operating expenses for the fourth quarter of 2012
increased 5% to $2.2 million compared to $2.1 million in the prior
year quarter. Total segment operating expenses for the year ended
December 31, 2012 increased 5% to $7.8 million compared to $7.4
million for the year ended December 31, 2011. 
Crexendo Network Services 
Revenue for the fourth quarter of 2012 increased 718% to $327,000
compared to $40,000 in the prior year quarter. Revenue for the year
ended December 31, 2012 increased 632% to $805,000 compared to
$110,000 for the year-ended December 31,
 2011. Network Services
backlog, which is anticipated to be recognized within the next
thirty-six months, was $2.4 million at December 31, 2012 compared to
a backlog of $155,000 at December 31, 2011.  
Total Network Services operating expenses for the fourth quarter of
2012 increased 237% to $2.3 million compared to $683,000 in the prior
year quarter. Total Network Services operating expenses for the year
ended December 31, 2012 increased 182% to $6.2 million compared to
$2.2 million for the year-ended December 31, 2011. 
Steven G. Mihaylo, Chief Executive Officer, commented, "I understand
these are not results that are going to excite our shareholders
however, the entire management team and I are working daily to
improve results. We have had some positive trends but I also want to
point out a number of things that are not apparent from the results.
First, this last quarter we completed the transition of the business
from a B2C model to a B2B model. With that, we have continued to
'right size' the business. We have reduced associates whose jobs were
primarily supporting and making sales to the B2C customers. We were
able to make these changes while employing high quality support staff
who can work with the Crexendo customers as well as the legacy
customers. We took great pains to make sure all customers have the
tools they need while continuing to bring our costs in line. We
continue to see improvement in the University Program, it is
currently in 6 schools and we expect to have 120 web sites built from
those students and we will be adding additional schools in the fall
Semester. Excitement for the program is increasing drastically as the
program grows. As I have explained, this will not bring immediate
substantial benefit to our revenue but should be a real benefit in
the future, bringing us excited and sticky customers. It is also
bringing the immediate benefit of having the best and brightest
students using our software and providing feedback to our engineers
which is helping us improve our already world class software." 
Mihaylo continued, "We are on the right track in our Web Services
segment, we have improved our offerings and I am pleased that we have
restored our backlog to historical levels. We regularly update and
improve our top of the line telecom service. We have completed
installation on one of our largest enterprise customers proving we
can provide cost effective superb service to businesses with needs
between 2 and 2,000 phones. Our total sales bookings and average size
of each sale are improving, which have increased sales quarter over
quarter and increased our backlog. These are exciting trends. We will
continue to grow the business organically while we look at strategic
opportunistic acquisitions, which will also help grow the business. I
am as excited about the future as I have ever been; we are in the
right place, with the right products, with the right people, at the
right time." 
Conference Call  
The Company is hosting a conference call today, March 13, 2013 at
5:00 PM EDT. The conference call will be broadcast live over the
Internet at http://www.crexendo.com. If you do not have Internet
access, the telephone dial-in number is 888-510-1786 for domestic
participants and 719-325-2454 for international participants. The
conference ID to join the call is 5504037. Please dial in five to ten
minutes prior to the beginning of the call at 5:00 PM EDT. 
About Crexendo  
Crexendo is a hosted services company that provides web hosting,
hosted telecommunications services, search engine optimization
management, link building, e-commerce software, website development
and broadband internet services for businesses and entrepreneurs. Our
services are designed to make enterprise-class hosting services
available to small and medium-sized businesses at affordable monthly
rates.  
Safe Harbor Statement 
This press release contains forward-looking statements. The Private
Securities Litigation Reform Act of 1995 provides a "safe harbor" for
such forward-looking statements. The words "believe," "expect,"
"anticipate," "estimate," "will" and other similar statements of
expectation identify forward-looking statements. Specific
forward-looking statements in this press release include information
about Crexendo (i) completing the transition of the business from a
B2C model to a B2B model, (ii) continuing to "right size" its
business; (iii) making workforce changes while employing high quality
support staff who can work with the Crexendo customers as well as the
legacy customers; (iv) making sure all customers have the tools they
need while continuing to bring our costs in line; (v) continuing to
see improvement in the University Program with it being a real
benefit in the future bringing excited and sticky customers; (vi) the
University Program providing feedback to engineers which is helping
improve world class software; (vii) being on the right track in our
Web Services segment;(viii) improving web service offerings with
restoring backlog to historical levels; (ix) regularly updating and
improving telecom service;(x) providing cost effect superb service to
businesses with needs between 2 and 2,000 phones; (xi) sales being
exciting trends; (xii) continuing to grow the business organically
while looking at strategic opportunistic acquisitions which will also
help grow the business; (xiii) being as excited about the future and
(xiv) being in the right place, with the right products, with the
right people. 
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, 2011 and Forms 10Q for 2012 as
well as the company's Form 10-K for the year ended December 31, 2012
which will be released subsequent to this press release. These
forward-looking statements speak only as of the date on which such
statements are made, and the company undertakes no obligation to
update such forward-looking statements, except as required by law.  


 
                                                                            
                                                                            
          
             CREXENDO, INC. AND SUBSIDIARIES                      
                         Consolidated Balance Sheets                        
              (In thousands, except par value and share data)               
                                                                            
                                                       December 31,         
                                                    2012           2011     
                                               -------------  ------------- 
Assets                                                                      
                                                                            
Current assets:                                                             
  Cash and cash equivalents                    $       7,440  $       8,658 
  Restricted cash                                      1,444          1,965 
  Trade receivables, net of allowance for                                   
   doubtful accounts of $1,326 as of December                               
   31, 2012 and $3,512 as of December 31, 2011         3,043          9,420 
  Inventories                                            171            232 
  Equipment financing receivables                         28              - 
  Income tax receivable                                  434            552 
  Prepaid expenses and other                             333            725 
                                               -------------  ------------- 
    Total current assets                              12,893         21,552 
                                                                            
Certificate of deposit                                   500            500 
Long-term trade receivables, net of allowance                               
 for doubtful accounts of $196 as December 31,                              
 2012 and $1,949 as of December 31, 2011                 395          6,097 
Long-term equipment financing receivables                 96              - 
Property and equipment, net                            3,172          4,055 
Deferred income tax assets, net                          103            279 
Intangible assets                                          6             79 
Goodwill                                                 265            265 
Other long-term assets                                    97            233 
                                               -------------  ------------- 
  Total Assets                                 $      17,527  $      33,060 
                                               =============  ============= 
                                                                            
Liabilities and Stockholders' Equity                                        
                                                                            
Current liabilities:                                                        
  Accounts payable                             $         418  $       1,153 
  Accrued expenses and other                           3,010          2,240 
  Dividend payable                                         -            211 
  Deferred income tax liability                          103            279 
  Deferred revenue, current portion                    3,052          9,288 
                                               -------------  ------------- 
    Total current liabilities                          6,583         13,171 
                                                                            
Deferred revenue, net of current portion                 399          6,123 
Other long-term liabilities                              253            419 
                                               -------------  ------------- 
    Total liabilities                                  7,235         19,713 
                                               -------------  ------------- 
                                                                            
Stockholders' equity:                                                       
Preferred stock, par value $0.001 per share -                               
 authorized 5,000,000 shares; none issued                  -              - 
Common stock, par value $0.001 per share -                                  
 authorized 100,000,000 shares; 10,669,201                                  
 shares outstanding as of December 31, 2012                                 
 and 10,523,078 shares outstanding as of                                    
 December 31, 2011        
                                11             11 
Additional paid-in capital                            49,824         48,938 
Accumulated deficit                                  (39,543)       (35,602)
                                               -------------  ------------- 
    Total stockholders' equity                        10,292         13,347 
                                               -------------  ------------- 
                                                                            
    Total Liabilities and Stockholders' Equity $      17,527  $      33,060 
                                               =============  ============= 
                                                                            
                                                                            
                       CREXENDO, INC. AND SUBSIDIARIES                      
                    Consolidated Statements of Operations                   
               (In thousands, except per share and share data)              
                                                                            
                                                  Year Ended December 31,   
                                               ---------------------------- 
                                                    2012           2011     
                                               -------------  ------------- 
Revenue                                        $      17,167  $      48,024 
Operating expenses:                                                         
  Cost of revenue                                      5,092         17,729 
  Selling and marketing                                3,977         20,709 
  General and administrative                          12,228         12,215 
  Research and development                             1,985          3,262 
                                               -------------  ------------- 
    Total operating expenses                          23,282         53,915 
                                               -------------  ------------- 
                                                                            
Loss from operations                                  (6,115)        (5,891)
                                               -------------  ------------- 
                                                                            
Other income (expense):                                                     
  Interest income                                      1,907          4,751 
  Interest expense                                         -             (2)
  Other income (expense), net                             55            (36)
                                               -------------  ------------- 
    Total other income, net                            1,962          4,713 
                                               -------------  ------------- 
                                                        
                    
Loss before income tax                                (4,153)        (1,178)
                                                                            
Income tax benefit (provision)                           212         (5,052)
                                               -------------  ------------- 
                                                                            
Net loss                                       $      (3,941) $      (6,230)
                                               =============  ============= 
                                                                            
Net loss per common share:                                                  
  Basic                                        $       (0.37) $       (0.59)
  Diluted                                      $       (0.37) $       (0.59)
                                                                            
Dividends per common share                     $        0.04  $        0.08 
                                                                            
Weighted-average common shares outstanding:                                 
  Basic                                           10,625,530     10,596,231 
  Diluted                                         10,625,530     10,596,231 
                                                                            
                                                                            
                       CREXENDO, INC. AND SUBSIDIARIES                      
               Consolidated Statements of Stockholders' Equity              
             Years Ended December 31, 2012 and December 31, 2011            
                      (In thousands, except share data)                     
                                                                            
                                     Additional                   Total     
                     Common Stock      Paid-in   Accumulated  Stockholders' 
                 -------------------                                        
                    Shares    Amount   Capital     Deficit        Equity    
                 -----------  ------ ----------  -----------  ------------- 
Balance, January                                                            
 1, 2011          10,664,878  $   11 $   49,481  $   (29,372) $      20,120 
  Expense for                                                               
   stock options                                                            
   granted to                                                               
   employees               -       -        919            -            919 
  Stock issued                                                              
   under stock                                                              
   award plans        20,993       -         68            -             68 
  Dividends                                                                 
   declared                -       -       (848)           -           (848)
  Repurchase of                                                             
   common stock     (162,793)      -       (682)           -           (682)
  Net loss                 -       -          -       (6,230)        (6,230)
                 -----------  ------ ----------  -----------  ------------- 
Balance, December                                                           
 31, 2011         10,523,078  $   11 $   48,938  $   (35,602) $      13,347 
  Expense for                                                               
   stock options                                                            
   granted to                                                               
   employees               -       -        812            -            812 
  Stock issued                                                              
   under stock                                                              
   award plans    
   146,123       -        498            -            498 
  Dividends                                                                 
   declared                -       -       (424)           -           (424)
  Net loss                 -       -          -       (3,941)        (3,941)
                 -----------  ------ ----------  -----------  ------------- 
Balance, December                                                           
 31, 2012         10,669,201  $   11 $   49,824  $   (39,543) $      10,292 
                 ===========  ====== ==========  ===========  ============= 
                                                                            
                                                                            
                       CREXENDO, INC. AND SUBSIDIARIES                      
                    Consolidated Statements of Cash Flows                   
                               (In thousands)                               
                                                  Year Ended December 31,   
                                               ---------------------------- 
                                                    2012           2011     
                                               -------------  ------------- 
CASH FLOWS FROM OPERATING ACTIVITIES                                        
Net loss                                       $      (3,941) $      (6,230)
Adjustments to reconcile net loss to net cash                               
 used for operating activities:                                             
  Impairment of inventory, intangible assets,                               
   prepaids and lease cancellation                        35          1,259 
  Lease abondonment                                    1,393              - 
  Loss on Subsidiary                                       -             56 
  Depreciation and amortization                        1,374          1,349 
  Loss on disposal of property and equipment              83              - 
  Expense for stock options issued to                                       
   employees                                             812            919 
Deferred income tax provision                              -          5,082 
Change in uncertain tax positions                       (162)             - 
Changes in assets and liabilities:                                          
  Trade receivables                                   12,079          6,047 
  Inventories                                             26            555 
  Financing receivables                                 (124)             - 
  Income tax receivable                                  118            687 
  Prepaid expenses and other                             392            541 
  Other long-term assets                                 136              6 
  Accounts payable, accrued expenses and other          (709)        (4,019)
  Deferred revenue                                   (11,960)        (7,869)
  Other long-term liabilities                              2            (31)
                                               -------------  ------------- 
    Net cash used for operating activities              (446)        (1,648)
                                               -------------  ------------- 
                                                                            
CASH FLOWS FROM INVESTING ACTIVITIES                                        
  Acquisition of property and equipment               (1,172)        (1,463)
  Proceeds from sale of property and equipment            22              - 
  Decrease in restricted cash                            521           (877)
  Investment in subsidiary                                 -            (56)
                                               -------------  ------------- 
    Net cash used for investing activities              (629)        (2,396)
                                               -------------  ------------- 
                                                                            
CASH FLOWS FROM FINANCING ACTIVITIES                                        
  Repurchase of common stock                               -           (682)
  Proceeds from exercise of options                      498             68 
  Payments made on contingent consideration               (6)           (40)
  Dividend payments                                     (635)          (851)
                                               -------------  ------------- 
    Net cash used for financing activities              (143)        (1,505)
                                               -------------  ------------- 
                                                                            
NET DECREASE IN CASH AND CASH EQUIVALENTS             (1,218)        (5,549)
                                                                            
CASH AND CASH EQUIVALENTS AT THE BEGINNING OF                               
 THE YEAR                                              8,658         14,207 
                                               -------------  ------------- 
                                                                            
CASH AND CASH EQUIVALENTS AT THE END OF THE                                 
 YEAR                                          $       7,440  $       8,658 
                                               =============  ============= 
                                                                            
Supplemental disclosure of cash flow                                        
 information:                                                               
Cash received during the year for:                                          
  Income taxes                                 $         158  $         892 
Supplemental disclosure of non-cash investing                               
 and financing information:                                                 
  Dividends declared and not paid                          -            211 
  Purchase of property and equipment included                               
   in accounts payable                                     6            655 

  
Contact: 
Crexendo, Inc. 
Steven G. Mihaylo
CEO 
602-345-7777 
Smihaylo@crexendo.com
 
 
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