Crexendo, Inc. Q1 FY2025 earnings call

Key Points

• Total revenue grew 12% YOY to $16.1M, with software solutions revenue up 33%. Software solutions platform surpassed 6M users.
• Strong GAAP profitability, cash flow, and margin expansion in software solutions (gross margins up 500 basis points Q1 2024).
• Disruption in the market from competitors like Metaswitch and Cisco BroadSoft working to Crexendo's advantage.
• Focus on strategic customer acquisitions, not publicizing every conversion. Telecom division focused on profitable growth via best customer service and VIP platform bundle.
• Ongoing initiatives: end classic migration to VIP system, migrate to Oracle cloud infrastructure, evaluate strategic acquisitions.

Consolidated revenue for the quarter increased 12% to $16.1 million compared to $14.3 million in Q1 2024. Service revenue was $8.2 million, up 4% YOY. Software solutions revenue was $6.9 million, up 33% YOY. Product revenue was $1.1 million, down 22% YOY. Gross margins: Service revenue gross margin 57%, software solutions gross margin 78% (up 500 basis points Q1 2024 and 1,000 basis points from Q4 2024), product revenue gross margin 41%. Consolidated gross margin was 65%.

• Jeff Korn confident in minimum double-digit year-over-year growth.
• Ron Vincent stated full-year software gross margin target in mid-70s to 75%.

• Forward-looking statements subject to risks and uncertainties in SEC filings.
• Competitors' unsustainable practices (aggressive spits, incentives) impacting market dynamics.
• Macro-economic uncertainties potentially affecting demand.

Q: Eric Martinuzzi asked if double-digit growth is sustainable for 2025.

A: Jeff Korn said guidance is year over year, confident in minimum double-digit growth.

Q: Mike Latimore inquired about software gross margin improvement.

A: Ron Vincent said driven by higher top-line revenue in software solutions, target mid-70s to 75% full year.

Q: Matthew Maus asked about telecom growth driver.

A: Jon Brinton and Jeff Korn said differentiated customer service, bundle of services, and unsustainable competitor pricing.

Q: Analyst asked about average revenue per user.

A: Ron Vincent said retail revenue per user around $20 per user, $351 per account; no seven-figure contracts specified for software solutions.