CXDO Q2 Results
Firing on all cylinders
Headline Results
Crexendo (NASDAQ: CXDO) grew 53% quarter over quarter in their last “easy comp” quarter, as Q2 2021 only had one month of NetSapiens. More importantly, CXDO had 8% sequential growth, while competitors' sequential growth was 0-4% in their most recent quarter. As Crexendo is scaling into these results with consistent non-GAAP earnings and firing on all cylinders, competitors across the industry including RingCentral, Avaya, and Mitel are struggling and laying off employees.
Firing on All Cylinders - Business
Backlog stands at $42.2 million, up 54% from the comp period
Churn is down to 0.75% monthly
Over 2.5 million end users globally
Taking business away from Microsoft (in addition to Cisco)
Mavenir CCaaS solution launching in Q3
Mavenir launched Crexendo’s UCaaS solution already and they are a platform customer in the software solutions division
Master agent partnerships from Telecom Consulting Group and OTG Consulting gaining traction, continuing to add new agent partners
Acquisition in the Pipeline - InfoArb on the Conference Call
If anyone has followed Crexendo management, they know they’ve talked about their “stocked fishing pond” for accretive roll-up acquisitions. Rather than belabor the point, I’ll direct you to a couple excerpts from the conference call transcript below:
The call ended with Mihaylo, in typical foreshadowing fashion stating:
“And just hang in there. Nobody is falling asleep on the job, and we’re not going to either. With that, I’m going to wish you all a good evening and hope that everyone is here for the next call because it will be better.” (emphasis added)
Misc. Bits and Pieces
Software solutions gross margins increasing is paired directly with the large increase in R&D expense. At the time of the acquisition, there were no accounting measures in place to measure employee time spent on R&D versus employee time spent on platform support. The 67.8% gross margin is closely in line with the Service Revenue 68% gross margin and marks a huge increase in gross margin, up from 49% in Q1 2022. I’m guessing now that the software solutions gross margin issue is sorted out, the company is going to focus on improving overall gross margin. As a non sequitur, I’m impressed with Crexendo’s accounting team. For a while it was a bit of a joke when Mihaylo constantly praised them on calls, but when NetSapiens was acquired, they were using cash accounting and Crexendo’s accounting team had to get every single one of their customers onto ASC 606. It looks like the team wasn’t resting on their laurels and since then has already developed better controls to improve gross margins.