Crexendo, Inc. (
Q3 2011 Earnings Call
November 7, 2011 4:30 pm ET
Steven G. Mihaylo – Chairman and Chief Executive Officer
Clint Sanderson – President and Chief Operating Officer
David Krietzberg – Chief Administrative Officer
Jonathan R. Erickson – Chief Financial Officer
Jeffrey Korn – Chief Legal Officer
Robin Lochner – Deutsche Bank
James J. Dowling – Jefferies Capital Partners LLC
Neal Goldman – Goldman Capital Management
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Good day, everyone. Welcome to the Crexendo, Incorporated Third Quarter 2011 Earnings Call. Today’s call is being recorded. At this time, I would like to turn things over to Mr. Steve Mihaylo, Chief Executive Officer. Please go ahead, sir.
Steven G. Mihaylo
Thank you, and good afternoon everyone. This is the Crexendo third quarter 2011 conference call and earnings report. With me today, I’ve got Clint Sanderson, our Chief Operating Officer; Dave Krietzberg, our Chief Administrative Officer; Jon Erickson, our Chief Financial Officer; and Jeff Korn, our Senior Vice President of Legal and General Counsel.
Before I get started with a few remarks, I’d like Jeff to go ahead and read our Safe Harbor statement. And that, after he reads that, I’m going to have a few remarks, and then I’ll turn it over to Jon Erickson for more granularity.
Can you go ahead, Jeff?
Thank you, Steve. I want to take this opportunity to remind listeners that this call will contain forward-looking statements within the meaning of the Securities Act of 1933 and the Securities Exchange Act of 1934. The Private Securities Litigation Reform Act of 1995 provides a Safe Harbor for such forward-looking statements. All statements made in this conference call other than statements of historical facts are forward-looking statements.
Forward-looking statements include, but are not limited to words like, belief, expect, anticipate, estimate, will, and other similar statements of expectations identifying forward-looking statements. Investors should be aware that any forward-looking statements are based on assumptions, and are subject to risks and uncertainties that could cause actual results to differ materially from those discussed here today.
The risk factors are explained in detail in the company’s filings with the Securities and Exchange Commission including the Form 10-K for the fiscal year ended December 31, 2010 and the Form 10-Qs for the periods ending March 31, 2011, June 30 2011 and September 30, 2011. Crexendo does not undertake any obligation to publicly update or revise any forward-looking statements whether as a result of new information, future events or otherwise.
I’d now like to turn the call back to Steve. Steve?
Steven G. Mihaylo
Thank you, Jeff. I’m just going to have a few remarks and I’ll turn this over to Jon Erickson. Net income for the third quarter of 2011 was $4,507,000 or $0.42 per diluted common share, compared to a net loss of $79,000 or $0.01 per diluted common share in the prior year quarter.
Income before income tax provisions for the third quarter of 2011 was $4,546,000, which included $209,000 in restructuring related charges related to office space impairments and other one-time charges associated with the announced restructuring of our StoresOnline division, compared to a loss of $455,000 in the prior year quarter.
Cash used in operating activities for the third quarter of 2011 was $320,000, compared to $601,000 for the prior year quarter. As of September 30, 2011, cash and cash equivalents was $10,096,000, which included $1,088,000 of restricted cash, working capital was $8,376,000, and working capital excluding deferred revenue was $19,809,000. Total current and long-term receivables were $19,348,000 as of September 30, 2011 and this is net of reserves.
At this time, I’m going to turn this over to John Erickson to give me the granularity and then we will open it up for questions. Jon?
Jonathan R. Erickson
Thank you, Steve. So I wanted to keep with theme of last earnings call and provide clarity on what you can expect from our revenue and operations in future quarters based upon this quarter.
This quarter was the first transition quarter without seminar sales with the exception of two days of sales in July. The quarter for the most part went as we expected. From a revenue perspective, we had approximately $10.25 million in revenue for Q3, which is broken down as follows. Crexendo Web Services revenue was $648,000, which grew at a quarter-over-quarter rate of 18% from $550,000 and a year-over-year rate of 105% from $315,000 last year. Our future rate of growth in this segment will be dependent upon our ability to hire sufficient qualified sales reps and increase the productivity of our current sales reps.
Today, we have 28 sales reps and we continue to hire an additional three to four reps per month. Crexendo Network Services revenue was $52,000, which grew at a quarter-over-quarter rate of 188% from $18,000 in the second quarter of this year. We have no revenue from Crexendo Web Services in the prior year.
As of Crexendo Web Services, this segment is primarily a direct sales segment, and the future growth will be depended upon our ability to hire sufficient number of qualified sales reps and get them up to quota as quickly as possible. We anticipate that while our direct reps will have the ability to sell both web services and network services, the sales reps will have a focus on other network services or web services.