Notes from a conversation with CXDO Chief Revenue Officer Jon Brinton

Introduction

Following Crexendo’s (NASDAQ: CXDO) 2021 earnings, I spoke with Jon Brinton, Crexendo’s Chief Revenue Officer on the phone for an hour yesterday. We discussed his background, the Mavenir partnership, the sales strategy at Crexendo, and international expansion. Jon encouraged me to share my notes with other interested investors.

I’ve wanted to speak with Brinton for a while now because of what I’ve viewed as the impressive “layering” of diversified revenue streams since he joined Crexendo in November 2020. Since joining the company Crexendo has added NetSapiens resellers, master agents, and unique opportunities like the Mavenir partnership to its already existing direct and partner (indirect) sales.  

Background

Brinton previously worked with CEO Steve Mihaylo and COO Doug Gaylor at Inter-tel before it was sold to Mitel for over $700 million in 2007. After Inter-tel, Brinton stayed at Mitel for over a decade. Once private equity bought Mitel and started disassembling it, Brinton (and others) didn’t want to stick around. When reflecting on his career, Steve Mihalo and former Mitel CEO Rich McBee had been two of his most influential mentors. Brinton shared the most fun he’s had in his career was working with Mihaylo and Gaylor, and with the NetSapiens deal in the works, he had a great opportunity to come and help Crexendo grow.   

At Inter-tel, a key growth lever was implementing a disciplined acquisition strategy. At the commencement of the roll-up strategy at Inter-tel, the company had acquired 3 dealers and ended with 61 before the Mitel sale. Presently, Crexendo has the opportunity to execute a substantially similar strategy with their “stocked fishing pond” of 200 NetSapiens resellers. In a previous Little Grapevine call with Doug Gaylor, the strategy was discussed with three important pieces of information: 1) these 200 resellers represent approximately $350-$400 million in revenue opportunities, 2) these roll-up acquisitions would likely occur at 1-2X revenue multiples, and 3) these acquisitions would integrate easily and be immediately accretive because the resellers are already using the NetSapien’s platform. With this in mind, you could argue Crexendo’s real growth opportunity hasn’t even started.  

Mavenir

On March 10, 2022, Crexendo announced its partnership with Mavenir to expand each company’s business offerings. With the agreement, Mavenir will integrate Crexendo’s UCaaS solutions with their Mavenir Connect brand, and Crexendo will integrate Mavenir’s Contact Center as a Service (CCaaS) platform.  

Interestingly, Mitel previously acquired Mavenir and subsequently sold it off to Siris Capital, in part because investors didn’t under the Mobile Network Operator (MNO) part of the business. MNOs are communications providers that own and control its radio network license and typically have access to physical requirements and office services. In English, three well known MNOs are Verizon, AT&T, and T-Mobile. On the Q4 2021 conference call, Brinton shared that Mavenir supports 4 billion subscribers on wireless networks globally. 

Verizon and AT&T provide two examples of how an MNO integrates UCaaS services and what that could mean for Crexendo. Verizon has a UCaaS platform, One Talk, that is built on Cisco’s Broadsoft platform. AT&T has a similar solution called AT&T Office@Hand built on RingCentral. Many MNOs established their solutions with Metaswitch and BroadSoft 5-10 years ago, before those companies were purchased 3-5 years ago by Microsoft/Cisco. Now, those companies are starting to look around to partner with dedicated UCaaS providers to meet their needs.

NetSapiens does not have MNOs in their reseller community. MNOs have been tough to penetrate because of behemoths like AT&T, T-Mobile, and Deutsche Telekom. It was emphasized in the Q4 conference call, this deal would not have happened if Crexendo did not have the NetSapiens platform. Although this deal lengthens sales cycles due to the complexities of selling to a major carrier, these opportunities are significant for Crexendo. Mavenir is quickly getting to work and spotlighting Crexendo’s UCaaS solution this week at Enterprise Connect in Florida. 

Sales

Brinton provided a vision of a  “Company Store” - Crexendo sells directly to end customers and channel partners buy technology and sell to end users. 

Presently, Crexendo is under-distributed with regards to sales opportunities, but I gained insight into some of the layers of sales:

• Crexendo Classic partners contract with the company and sell Crexendo as agents

• Master agents are higher volume UCaaS sellers

• Crexendo has a direct sales force

Crexendo’s direct sales team sounds like they embody management’s same dedication to building Crexendo and winning as a company. The team is highly collaborative and enjoys working together with a strong retention rate in a competitive industry. An example provided was that team members will refer sales to the other of the business (Crexendo to NetSapiens and vice versa) when the opportunity is better served by a different solution, rather than poaching a colleague’s sale. 

International Opportunities 

With the NetSapiens acquisition, Crexendo gained access to international opportunities that were quietly mentioned in a September 2021 Investor Presentation. Although international revenue remains at less than 1%, it is important to keep in mind that Crexendo’s overall revenue has grown rapidly - meaning international opportunities are quietly growing but not broken out separately. Led by Scott Goodwin, Crexendo is actively selling in Western Europe, primarily in the United Kingdom. Crexendo has three sales employees in the UK and is looking to expand. 

Conclusion

Brinton is clearly a thoughtful, motivated executive who wants to grow and win at Crexendo. I believe a lot of management teams talk a big game about shareholders as an important constituency, but Crexendo embodies it. He generously gave me his time and at the end of our conversation, asked me my thoughts about how to communicate the story better to investors.  

Crexendo today is significantly better than a year ago - they are on a $36M revenue run rate versus $16 million in 2020, pay a dividend, have clearly communicated their plan with investors, and executed on everything they have told investors they’d do. 

Disclosure: Long.