Crexendo Reports Third Quarter 2013 Financial Results

Crexendo Reports Third Quarter 2013 Financial Results 
PHOENIX, AZ -- (Marketwired) -- 11/12/13 --  Crexendo, Inc. (NYSE
MKT: EXE), a hosted services company that provides hosted
telecommunications services, hosted website services, website
development software and broadband internet services for businesses
and entrepreneurs, today reported financial results for its third
quarter of 2013.  
Financial highlights for Crexendo's third quarter of 2013 included:  
Consolidated revenue for the third quarter of 2013 decreased 11% or
$0.3 million to $2.4 million compared to $2.7 million for the second
quarter of 2013 and decreased 37% or $1.5 million compared to $3.9
million for the third quarter of prior year.  
Net loss for the third quarter of 2013 was $(1.6) million or $(0.15)
per diluted common share, compared to net loss of $(806,000) or
$(0.08) per diluted common share for the third quarter of prior year. 
Cash used for operations for the third quarter of 2013 was $(1.5)
million compared to cash used for operations of $(585,000) in second
quarter of 2013 and cash used for operations of $(493,000) for the
third quarter of prior year.  
Segment Results 
The Company has three operating segments, which consist of Crexendo
Network Services, Crexendo Web Services and StoresOnline. Effective
October 1, 2012, the Company changed its reporting segments to
reflect the allocation of previously unallocated corporate expenses
to each of the three operating segments. The Company revised its
segment reporting to reflect changes in how the Chief Operating
Decision Maker (CODM) internally measures performance and allocates
resources. Segment operating results for the prior year has been
revised to conform to current year segment operating results
presentation. 
Crexendo Network Services 
Revenue for the third quarter of 2013 increased 196% to $696,000
compared to $235,000 in the prior year quarter. Network Services
backlog, which is anticipated to be recognized within the next
thirty-six to sixty months, increased to $5.2 million as of September
30, 2013 compared to $2.2 million as of September 30, 2012.  
Total Network Services operating expenses for the third quarter of
2013 increased 34% to $2.1 million compared to $1.5 million for the
prior year quarte
r.  
Total segment loss before income taxes for the third quarter of 2013
increased 5% to $(1.4) million compared to $(1.3) million for the
prior year quarter.  
Crexendo Web Services 
Revenue for the third quarter of 2013 decreased 7% to $533,000 from
$575,000 in the prior year quarter. We anticipate that our revenue
from our web service segment will continue to decline due to our
strategic decision to limit our provision of web services to our
enterprise sized customers. As a result of this shift in focus, our
backlog has decreased $0.4 million to $0.8 million as of September
30, 2013 compared to $1.2 million as of June 30, 2013. This shift in
focus will allow us to focus on our rapidly growing network services
segment.  
Total segment operating expenses for the third quarter of 2013
decreased 22% to $1.3 million compared to $1.6 million for the prior
year quarter. 
Total segment loss before income taxes for the third quarter of 2013
decreased 31% to $(721,000) compared to $(1.0) million for the prior
year quarter.  
StoresOnline 
Revenue for the third quarter of 2013 decreased 61% to $1.2 million
compared to $3.1 million for the prior year quarter.  
Total segment operating expenses decreased 57% to $831,000 compared
to $1.9 million for the prior year quarter.  
Segment other income, primarily related to interest on the collection
of accounts receivable for the third quarter of 2013 decreased 79% to
$86,000 compared to $409,000 for the prior year quarter. 
Total segment income before income taxes for the third quarter of
2013 decreased 71% to $454,000 compared to $1.5 million for the prior
year quarter. 
Steven G. Mihaylo, Chief Executive Officer, commented, "I am very
pleased with the progress of the business; our results continue to be
in line with our internal expectations and our plan for growing the
business. I am also encouraged by the improving rate of decline in
the cash balance we saw this quarter. I believe this shows that our
cost reductions are having a positive impact on the business. While I
am not certain this will continue since our EPTA's continue to
decline and will no longer add to our cash balance, what we saw this
quarter is a good metric. We continue to see improvements in our
sales force results and the growth from sales and partners in our
dealer channel. These are also very positive trends. We are holding
our first Business Partners' Conference (BPC) this week in Phoenix,
which demonstrates the growth, excitement, and support for this
channel." 
Mihaylo continued, "We continue to consolidate our focus and
resources. We have determined that we will no longer be providing SEO
services to customers other than enterprise and national accounts.
This allows us to both reduce our work force and to fully concentrate
on our 'sweet spot,' our business cloud based telephony as well as
our soon to be released new web builder software platform. We also
continue to look at our liquidity and I am discussing with the Board
various debt and equity options. We expect to have clarity on that by
year's end. We continue to monitor costs, sales and operations
carefully. I continue to believe we are in the right space with the
right products and people. I am very confident in our future."  
Conference Call  
The Company is hosting a conference call today, November 12, 2013 at
5:00 PM EST. The conference call will be broadcast live over the
Internet at http://www.crexendo.com/investor. If you do not have
Internet access, the telephone dial-in number is 800-723-6498 for
domestic participants and 785-830-7989 for international
participants. The conference ID to join the call is 3216093. Please
dial in five to ten minutes prior to the beginning of the call at
5:00 PM EST.  
About Crexendo 
Crexendo is a hosted services company that provides hosted
telecommunications services, hosted website services, website
development software and broadband internet services for businesses
and entrepreneurs. Our services are designed to make enterprise-class
hosting services available to small, medium-sized and
enterprise-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) being very pleased with the progress of the
business; (ii) results continue to be in line with  internal
expectations and plan; (iii) being encouraged by the improving rate
of decline in the cash balance this quarter which has a positive
impact on the business and is a good metric; (iv) continuing to see
improvements in sales force results and the growth from sales and
partners in the dealer channel; (v) seeing growth, excitement and
support for dealer channel; (vi) continuing to consolidate focus and
resources; (vii) discontinuing non-enterprise SEO allows reduction to
the work force and allows the Company to concentrate on cloud based
telephony as well as the soon to be released new 
web builder software
platform; (viii) continuing  to look at its liquidity and discussing
with the Board various debt and equity options and (ix) continuing to
believe the Company is in the right space with the right products and
people with management being very confident in the Company's future. 
For a more detailed discussion of risk factors that may affect
Crexendo's operations and results, please refer to the company's Form
10-K for the year ended December 31, 2012, and Form 10Q's for the
periods ending June 30 and September 30, 2013. These forward-looking
statements speak only as of the date on which such statements are
made, and the company undertakes no obligation to update such
forward-looking statements, except as required by law. 


 
                                                                            
                      CREXENDO, INC. AND SUBSIDIARIES                       
                   Condensed Consolidated Balance Sheets                    
              (In thousands, except par value and share data)               
                                (Unaudited)                                 
                                                                            
                                              September 30,    December 31, 
                                                   2013            2012     
                                              -------------   ------------- 
Assets                                                                      
                                                                            
Current Assets:                                                             
  Cash and cash equivalents                   $       3,506   $       7,440 
  Restricted cash                                     1,444           1,444 
  Trade receivables, net of allowance of                                    
   doubtful accounts of $396 as of September                                
   30, 2013 and $1,326 as of December 31,                                   
   2012                                               1,131           3,043 
  Inventories                                           150             171 
  Equipment financing receivables                        68              28 
  Income taxes receivable                                50             434 
  Prepaid expenses and other                            565             333 
                                              -------------   ------------- 
    Total Current Assets                              6,914          12,893 
                                                                            
Certificate of deposit                                  250             500 
Long-term trade receivables, net of                                         
 allowance of doubtful accounts of $92 as of                                
 September 30, 2013 and $196 as of December                                 
 31, 2012                                               103             395 
Long-term equipment financing receivables               277              96 
Property and equipment, net                           2,417           3,172 
Deferred income tax assets, net                         105             103 
Intangible assets                                       621               6 
Goodwill                                                 75             265 
Other long-term assets                                  114              97 
                                              -------------   ------------- 
    Total Assets                              $      10,876   $      17,527 
                                              =============   ============= 
                                                                            
Liabilities and Stockholders' Equity                                        
                                                                            
Current Liabilities:                                                        
  Accounts payable                            $          85   $         418 
  Accrued expenses and other                          1,139           3,010 
  Deferred income tax liability                         105             103 
  Deferred revenue, current portion                   1,099           3,052 
  Contingent consideration                               87               - 
                                              -------------   ------------- 
    Total Current Liabilities                         2,515           6,583 
                                                                            
Deferred revenue, net of current portion                103             399 
Other long-term liabilities                               -             253 
                                              -------------   ------------- 
    Total Liabilities                                 2,618           7,235 
                                              -------------   ------------- 
                                                                            
Stockholders' Equity:                                                       
  Preferred stock, par value $0.001 per                                     
   share - authorized 5,000,000 shares; none                                
   issued                                                 -               - 
  Common stock, par value $0.001 per share -                                
   authorized 100,000,000 shares; 10,741,343                                
   shares outstanding as of September 30,                                   
   2013 and 10,669,201 shares outstanding as                                
   of December 31, 2012                                  11              11 
  Additional paid-in capital                         50,641          49,824 
  Contingent consideration                              276               - 
  Accumulated deficit                               (42,670)        (39,543)
                                              -------------   ------------- 
    Total Stockholders' Equity                        8,258          10,292 
                                              -------------   ------------- 
    Total Liabilities and Stockholders'                                     
     Equity                                   $      10,876   $      17,527 
                                              =============   ============= 
                                                                            
                                                                            
                                                                            
                      CREXENDO, INC. AND SUBSIDIARIES                       
              Condensed Consolidated Statements of Operations               
              (In thousands, except per share and share data)               
                                (Unaudited)                                 
                                                                            
                          Three Months Ended          Nine Months Ended     
                            September 30,               September 30,       
                      -------------------------   ------------------------- 
                          2013          2012          2013          2012    
                      -----------   -----------   -----------   ----------- 
                                                                            
Revenue               $     2,428   $     3,865   $     8,187   $    14,034 
                                                                            
Operating expenses:                                                         
  Cost of revenue           1,044         1,233         3,056         3,952 
  Selling and                                                               
   marketing                  712           987         2,337         2,904 
  General and                                                               
   administrative           1,745         2,440         5,035         8,214 
  Research and                                                              
   development                396           420         1,291         1,519 
  Goodwill                                        
                          
   impairment                 265             -           265             - 
                      -----------   -----------   -----------   ----------- 
    Total operating                                                         
     expenses               4,162         5,080        11,984        16,589 
                      -----------   -----------   -----------   ----------- 
                                                                            
Loss from operations       (1,734)       (1,215)       (3,797)       (2,555)
                      -----------   -----------   -----------   ----------- 
                                                                            
Other income                                                                
 (expense):                                                                 
  Interest income              78           383           443         1,649 
  Other income                                                              
   (expense), net              20            36           (13)           50 
                      -----------   -----------   -----------   ----------- 
    Total other                                                             
     income, net               98           419           430         1,699 
                      -----------   -----------   -----------   ----------- 
                                                                            
Loss before income                                                          
 tax provision             (1,636)         (796)       (3,367)         (856)
                                                                            
Income tax                                                                  
 (provision) benefit          (23)          (10)          240           130 
                      -----------   -----------   -----------   ----------- 
Net loss                   (1,659)         (806)       (3,127)         (726)
                      -----------   -----------   -----------   ----------- 
                                                                            
Net loss per common                                                         
 share:                                                                     
  Basic               $     (0.15)  $     (0.08)  $     (0.29)  $     (0.07)
  Diluted             $     (0.15)  $     (0.08)  $     (0.29)  $     (0.07)
                                                                            
Dividends per common                                                        
 share:               $         -   $      0.02   $         -   $      0.04 
                                                                            
Weighted average common shares                                              
 outstanding:                                                               
  Basic                10,713,961    10,666,816    10,688,786    10,610,813 
  Diluted              10,713,961    10,666,816    10,688,786    10,610,813 
                                                                            
                                                                            
                                                                            
                      CREXENDO, INC. AND SUBSIDIARIES                       
         Condensed Consolidated Statements of Stockholders' Equity          
                    Nine Months Ended September 30, 2013                    
                     (In thousands, except share data)                      
                                (Unaudited)                                 
                                                                            
                                                 Contin-           Total
                       Common Stock    Additional gent     Accu-   Stock-       
  
                   ------------------- Paid-in   Consid-  mulated  holders'   
                     Shares    Amount  Capital   eration  Deficit   Equity
                   ---------- -------- -------- -------- --------  --------
Balance, January                                                            
 1, 2013           10,669,201 $     11 $ 49,824 $      - $(39,543) $ 10,292 
  Expense for                                                               
   stock options                                                            
   granted to                                                               
   employees                -        -      622        -        -       622 
  Common stock                                                              
   issued upon                                                              
   exercise of                                                              
   options             33,626        -       88        -        -        88 
  Contingent                                                                
   consideration            -        -        -      276        -       276 
  Issuance of                                                               
   common stock                                                             
   for business                                                             
   acquisition         38,516        -      107        -        -       107 
  Net loss                  -        -        -        -   (3,127)   (3,127)
                   ---------- -------- -------- -------- --------  -------- 
Balance, September                                                          
 30, 2013          10,741,343 $     11 $ 50,641 $    276 $(42,670) $  8,258 
                   ========== ======== ======== ======== ========  ======== 
                                                                            
                                                                            
                                                                            
                      CREXENDO, INC. AND SUBSIDIARIES                       
              Condensed Consolidated Statements of Cash Flows               
                               (In thousands)                               
                                (Unaudited)                                 
                                                                            
                                                      Nine Months Ended     
                                                        September 30,       
                                                  ------------------------- 
                                                      2013          2012    
                                                  -----------   ----------- 
CASH FLOWS FROM OPERATING ACTIVITIES                                        
Net loss                                          $    (3,127)  $      (726)
Adjustments to reconcile net loss to net cash                               
 (used for) provided by operating activities:                               
  Goodwill impairment                                     265             - 
  Lease abandonment                                      (606)            - 
  Depreciation and amortization                           873         1,042 
  Expense for stock options issued to employees           622           617 
  Loss on disposal of property and equipment               11             - 
  Change in uncertain tax positions                      (253)         (165)
Changes in assets and liabilities:                                          
  Trade receivables                                     2,204        10,471 
  Equipment financing receivables                        (221)          (59)
  Inventories                                              21            47 
  Income taxes receivable                                 384           213 
  Prepaid expenses and other                             (232)          (96)
  Other long-term assets                                  (17)           45 
  Accounts payable, accrued expenses and other         (1,592)         (696)
  Deferred revenue                                     (2,249)      (10,449)
  Other long-term liabilities                               -             4 
                                                  -----------   ----------- 
Net cash (used for) provided by operating                                   
 activities                                            (3,917)          248 
                                                  -----------   ----------- 
CASH FLOWS FROM INVESTING ACTIVITIES                                        
  Redemption of certificate of deposit                    250             - 
  Acquisition of property and equipment                   (62)       (1,124)
  Sale of property and equipment                            7             - 
  Acquisition of PBX Central                             (300)            - 
                                                  -----------   ----------- 
Net cash used for investing activities                   (105)       (1,124)
                                                  -----------   ----------- 
CASH FLOWS FROM FINANCING ACTIVITIES                                        
  Proceeds from exercise of stock options                  88           498 
  Payments made on contingent consideration                 -            (6)
  Dividend payments                                         -          (635)
                                                  -----------   ----------- 
Net cash provided by (used in) financing                                    
 activities                                                88          (143)
                                                  -----------   ----------- 
                                                                            
NET DECREASE IN CASH AND CASH EQUIVALENTS              (3,934)       (1,019)
                                                  -----------   -------
---- 
                                                                            
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD          7,440         8,658 
                                                  -----------   ----------- 
CASH AND CASH EQUIVALENTS, END OF PERIOD          $     3,506   $     7,639 
                                                  ===========   =========== 
                                                                            
Supplemental disclosure of cash flow                                        
 information:                                                               
Cash received during the period:                                            
  Income taxes                                    $       371   $       178 
Supplemental disclosure of non-cash investing                               
 and financing information:                                                 
  Purchases of property and equipment included                              
   in accounts payable                            $         -   $        31 
  Business acquisition with stock (Note 9)        $       107   $         - 
  Contingent consideration related to                                       
   acquisition (Note 9)                           $       363   $         - 
  Exchange of property and equipment for                                    
   services rendered                              $         4   $         - 

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