Crexendo, Inc. Q4 FY2025 earnings call

• Jeff Korn highlighted 2025 performance: profitable double-digit organic growth, revenue grew by over $15M, user base grew from ~4M to over 7M, stock price increased. Committed to various goals and kept them. Announced acquisition of ESI, which is strategic, complimentary, expected to increase revenue, earnings, cash flow. - Ron Vincent walked through financials: Q4 2025 consolidated revenue $18.1M, up 11%; operating expenses $16.9M, up 8%; net income $1.2M. Full-year 2025 total revenue $68.2M, up 12%; net income $5.1M. - Doug Gaylor discussed operations: 10th consecutive GAAP profitable quarter, 29th consecutive non-GAAP net income. Completed migration of legacy hosted infrastructure to OCI. Software solutions segment grew 18% Q4 2025, 28% full-year 2025. Telecom services segment grew 5% Q4 2025. Remaining performance obligation at 89.1M. AI initiatives advancing, Cairo AI receptionist showing promise. Ecosystem vendor partner program has 41 partners.

Consolidated revenue for Q4 2025 was $18.1 million, up 11% y-o-y. Service revenue was $8.6 million, up 8% y-o-y with 60% gross margin (up 300bps y-o-y). Software solutions revenue was $8.3 million, up 18% y-o-y with 63% gross margin (down 500bps y-o-y). Product revenue was $1.1 million, down 6% y-o-y with no change in gross margin. Full-year 2025 total revenue was $68.2 million, up 12% y-o-y. Service revenue was $33.8 million, up 6% y-o-y with 58% gross margin (down 1% y-o-y). Software solutions revenue was $29.7 million, up 27% y-o-y with 72% gross margin (up 1% y-o-y). Product revenue was $4.7 million, down 16% y-o-y with 40% gross margin (down 3% y-o-y). Consolidated gross margin was 63% for full-year 2025 (up 1% y-o-y).

• Jeff Korn intends to continue with double-digit organic growth even with necessary investments. - Anticipates ESI acquisition to help reach $100 million revenue run rate, hopefully by end of 2026. - Expects organic growth in double-digit range profitably in 2026.

Q: How should we think about the impact of the ESI acquisition, scale and customer acquisition cost for retail business and EBITDA margin benefit?

A: Can't discuss EBITDA margins until audit completed. Customer acquisition costs: acquisition generates similar or slightly lower than organic, no material impact on go-forward.

Q: One-time items in 2026 from acquisition impacting free cash flow conversion?

A: No anticipated large capital improvements, should generate more free cash flow.

Q: Demand environment and key points from potential new licensees converting from legacy platform?

A: High partner interest, many new opportunities, see definitive roadmap to modernize solutions.

Q: Strong services bookings in quarter driven by?

A: Good contribution across board, direct sales and TSDs had great quarter.

Q: Sustainability of service growth margin?

A: Sustainable at current revenue growth rate.

Q: Percent of customer base applicable to AI receptionist?

A: Cairo applicable to almost all customers, early feedback top-notch.

Q: 2026 organic growth goal?

A: Intends for double-digit organic growth.

Q: Operational improvements when acquiring ESI?

A: Coordinate licensing, move to Oracle Cloud, coordinate back office functions, cross-sell opportunities.

Q: Timeline for facilities consolidation and OCI migration savings?

A: Need to work with ESI team, hope done this year.

Q: What excites about combined company setup?

A: Enthusiasm of ESI employees, tenured group, known entity, people excited about growth.

Q: Organic growth pace for software solutions?

A: Hopes to remain at same level, deals will come in but can't specify quarter, Q4 number skewed by user group meeting.