Crexendo Inc (CXDO) 2022 Q1 法說會逐字稿

Good afternoon, ladies and gentlemen, and welcome to the Crexendo First Quarter 2022 Earnings Call. (Operator Instructions) It is now my pleasure to turn the floor over to your host, Steve Mihaylo, CEO. Sir, the floor is yours.

Okay. Thank you, John. Good afternoon, everyone. I'm Steve Mihaylo, Chairman and CEO of Crexendo, and I want to welcome all of you to the Crexendo Q1 2022 Conference Call. On the call with me today are Doug Gaylor, our President and COO; Ron Vincent, our CFO, Anand Buch, our CSO; and Jeff Korn, our General Counsel.

I'm going to ask Jeff to read the safe harbor statement. After that, I will give some brief comments. Ron will provide more detail on the numbers. Doug will provide a business and sales update, and then we will open the call up for questions. Jeff, would you please read the safe harbor statement?

Yes, sir. 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 fact are in fact forward-looking statements. Forward-looking statements may include terms like expect, believe, anticipate, estimate, will and other similar statements of expectation identifying forward-looking statements. So if (inaudible) add those statements, however, it does not prevent them from being forward-looking.

Investors should be aware that any forward-looking statements are based on assumptions that are subject to risks and uncertainties that could cause actual and material results to differ from those discussed here today. 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, 2021, and the Forms 10-Q as filed. 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?

Thank you, Jeff. As everyone is aware, these are challenging for most companies, challenging times for most companies, our country, our competitors and the world. We want to -- and we went from dealing with lockdowns, COVID spikes and inflation, interest rate uncertainty, business slowdowns, employment difficulty, stock market corrections and supply chain issues.

Considering all of these issues, I am pleased that we were able to manage a non-GAAP net income of $405,000 for the first quarter of 2022 or $0.02 per basic and diluted common share. I am also pleased that we were able to grow the business 81% year-over-year to $8.2 million for the quarter. These are solid numbers considering the issues which we were faced with, which also included customers that contracted or closed their business, customers and potential customers spending less and delaying certain capital expectations due to uncertainty surrounding the economy.

The good news is that even with these issues, we managed the non-GAAP profit. And the better news is that we believe that these issues affecting buying decisions appear to be subsiding. We continue to do a good job of integrating the 2 teams, and both our software solutions team and our telecom team are working together with one common goal providing the top UCaaS services in the market. We see good trends, and we believe that people who deferred purchase options or purchases are now going to back and -- are now coming back and making the expenditures necessary.

In addition, the companies that have deferred moving to the cloud are now reengaging that process. I'm confident that most -- everyone will be moving to the cloud due to the substantial efficiencies, the ability to work from anywhere on the planet and cost savings. Our solution -- our software solutions and telecom divisions are geared to take advantage of the migration and provide the best features and products that are available anywhere.

Speaking of our software solutions division, our growth continues. I expect within the next couple of weeks that we will be announcing that we reached 2.5 million end users. Our award-winning platform and the continued growth of end users is very dynamic metric. This is a very exciting time for us. And our potential is unlimited. I monitor the company very carefully, and I mean very carefully. And even with the headwinds that I described earlier, I've not changed my expectations of growing the business by 40% to 50% annually.

I am convinced we will continue to grow organically, and we will look for appropriate accretive acquisitions. I am as optimistic about the future as I've ever been. As always, I put my money where my mouth is. And I intend to enter into a new 10b5-1 plan once we are out of the current no trade period.

With that, I will turn the call over Ron, would you give us a little granularity on the numbers?

Thank you, Steve. Good afternoon, everyone. Total revenue for the quarter increased 81% or $3.7 million to $8.2 million as compared to $4.5 million reported for the first quarter of the prior year. Our service revenue for the quarter increased 6% or $259,000 to $4.4 million compared to $4.1 million.

Our software solutions revenue for the quarter was $3.3 million. Our product revenue for the quarter increased 34% or $124,000 to $492,000 compared to $368,000 for the first quarter of the prior year. Consolidated operating expenses for the quarter increased $4.2 million or 79% to $9.6 million compared to $5.3 million for the first quarter of the prior year. The software solutions segment, with no comparable expenses in the prior period, contributed $3.6 million of the increase in operating expenses. The remaining increases were directly related to higher cost of sales and increased spend on sales and marketing.

Net loss of $1.2 million or $0.05 loss per basic and diluted common share as compared to a net loss of $715,000 or $0.04 per basic and diluted common share for the first quarter of the prior year.

On a non-GAAP basis, as Steve mentioned, we reported net income for the quarter of $405,000 or $0.02 per basic and diluted common share. That's compared to non-GAAP net income of $308,000 or $0.02 per basic and diluted common share for the same period in the prior year.

EBITDA for the quarter was a loss of $774,000 compared to a loss of $721,000 for the same period of the prior year. Our adjusted EBITDA for the quarter was $302,000 as compared to earnings of $245,000 for the same period of the prior year. Our cash, cash equivalents at March 31 was $5.7 million compared to $7.5 million at December 31, 2021. We used $1.7 million for operating activities for the quarter primarily resulting from increases in our accounts receivable of $525,000, contract cost increases of $243,000 and $691,000 reduction in our accounts payable and accrued expenses during the period. We used $34,000 for investing activities, and financing activities provided $3,000 of cash, cash equivalents.

I will now turn it over to Doug Gaylor, our President and COO, for additional comments on sales and operations.

Thanks, Ron. Our first quarter results continue the trend of non-GAAP earnings and substantial potential, which shows the benefit of our acquisition of NetSapiens. With 81% year-over-year growth and non-GAAP income of $405,000 or $0.02 a share, we are positioned nicely to continue that growth. Our organic growth of nearly 10%, combined with our software solutions addition, helped us get close to the 2.5 million end user milestone on our award-winning platform.

Our backlog continues to grow and is now north of $43.7 million at the end of Q1. Our backlog number now includes the software solutions backlog amounts as well as our Crexendo direct customers and represents a 58% increase of our backlog number from Q1 2021. And our backlog increased over $2 million from our backlog number reported at the end of 2021.

We continue to add new UCaaS licensees that utilize our platform to run their businesses, and our pipeline for new licensees is very strong. Our Crexendo licensees are growing with the rapid migration to the cloud, and we benefit from that with additional session purchases as they grow. We continue to develop new applications and new solutions to further monetize these additional services from Crexendo to help drive even more organic growth in the software solutions segment.

One of these exciting new offerings is our new Crexendo Contact Center as a Service, which is also called CCaaS, with omnichannel, customer engagement, chatbots and automations that are perfectly designed for larger call center applications. We'll be releasing this offering shortly in conjunction with our recently announced partnership with Mavenir and are very excited about the increased revenue opportunities that could be recognized.

Mavenir partnership is very exciting and sets us up for further growth, and we also believe we can enter into similar partnerships, which will both increase what we offer to our customers and add additional future revenues.

Our Sessions Not Seats pricing model continues to differentiate ourselves from our 2 largest competitors, Cisco's BroadSoft and Microsoft Metaswitch platforms offerings which are significantly higher priced based on their cost per seat models.

We now have over 210 licensees using our platform and are excited about the prospects we have in front of us with our funnel and continue to add new licensees. We continue to see pipeline and sales growth from our Crexendo agent program that has multiple strong master agent partnerships with groups like Telecom Consulting Group, TCG, as well as other groups like OTG Consulting, and we are very optimistic about the sales growth projections from these partnerships.

Our agent programs highlight our Crexendo VIP offering that has a 100% uptime guarantee along with a lifetime warranty on our Crexendo phones. And we continue to add new and larger agent partners to the program and are excited about the opportunities in the funnel that these new agent partners are bringing to the table.

I continue to be pleased with the integrations of our 2 organizations and the operational benefits and synergies we are seeing and will continue to see and they are coming together extremely nicely. Our combined engineering teams are focused on releasing our version 43 software at the end of Q2. Our customer support teams are working in unison. And I'm extremely pleased that Crexendo is ranked #1 on the world's largest and most trusted tech marketplace website, which is G2.com, and overall customer satisfaction for high-performer VoIP providers. We have a score of 4.8 out of 5 for high-performer VoIP providers. And this is very important because this is a ranking that is by end user customers and verified at their end user to customers.

Our sales teams continue to benefit from the exceptional industry knowledge and experience, and we have great momentum building. We have consolidated all of our accounting personnel and are executing on our plans to maximize efficiencies, productivity and costs. I'm very pleased with how our 2 organizations have come together, and I'm very excited about our go-forward plans to continue to grow the organization.

As we have previously mentioned, the acquisition costs associated with the merger and amortization of intangible assets have us managing the business based on our non-GAAP earnings. In addition to the acquisition cost and the amortization, stock comp expense increased during the quarter as we invest in our employee retention programs to help ensure that we can keep what I feel is the most talented team in the sector.

I'm very pleased that we are able to generate non-GAAP earnings of $0.02 per basic common share for the quarter and feel this is a strong proof that our combined organization has been able to quickly leverage the power and opportunity we have to grow and succeed together. I'm very thankful to our fantastic Crexendo team that have come together with a tremendous amount of hard work and effort to make this a successful combination. We believe we will continue to see more efficiencies and cost synergies as we continue our growth.

And finally, as we head into the second half of 2022, I couldn't be more excited about the future direction and opportunity for Crexendo. We have tremendous demand for our product offerings along with great solutions and a disruptive pricing model combined with an amazing talented workforce that has positioned us perfectly for the future. We will continue delivering the best UCaaS offering in the industry to our customers, to our licensees and to our partners and are committed to delivering the best returns for our shareholders.

With that, I'll turn it back over to Steve for any further comments.

Thank you, Doug. I think the only comment I have is based on non-GAAP earnings. I expect GAAP earnings within the fourth quarter or first quarter of next year. Other than that, I agree with you. At this time, John, we'll open it up to questions, and I will be the moderator and I'll have the appropriate person answer the questions.

(Operator Instructions) And the first question is coming from Josh Nichols with B. Riley.

Great to see the continued backlog growth. I was wondering if you could kind of help provide a little bit more detail on what's going on, on the software solutions side of the business. That was down, but when is that going to flip to growth given that the backlog continues to grow?

Well, first of all, I'm going to let our guys handle that. But I would like to make one comment. Our software solutions division is going to see more choppiness in their numbers for the next 3 or 4 quarters. But what we're doing is 2 things. We're going to improve margins there, and we're going to improve the subscription. In other words, the continuing revenue there so that we can better forecast where we're at. As you know, they were a private company and the way were doing was it perfectly acceptable. But now we're a public company and our public shareholders expect to have a little bit more clarity, if you will, in what they see. I'm going to have all 3 of our guys talk about that, Doug, and Jon Brinton and Anand Buch. Doug, would you like to add some color to that?

Yes. I'll start with a little bit of color. So Josh, as we've talked about in the past, one of the things that we're excited with our platform offering through the software solutions division is the fact that we're offering subscription services. Subscription services means that instead of a lot of upfront cost for somebody to buy into the platform, they have a higher monthly recurring and a very low cost of entry. That obviously gives us a little bit of the choppiness that Steve talked about because when we look at historical numbers, most folks that have invested in our software solutions platform had to come out of pocket with a fairly large nonrecurring onetime upfront costs, and then they'd have a lower monthly.

And so to get more people involved in the platform and more people onboarding the platform, the subscription services has had great, great response. And so we're seeing a lot of new logos coming on board with subscription services. The only challenge with that is that you don't have the onetime upfront cost. And so you will see a little bit of choppiness as we migrate from all in our C-type sales to more of a subscription service type sales to bring new platform logos on board. I'll have Jon Brinton give a little bit more color on that.

Yes. So Josh, I'd just expand on that, that we're really excited about the progress with the platform and the new wins with new logos within our customer base, as Doug said, to kind of quantify for bookings in the Q1 period. We saw about a $750,000 increase in subscription revenue. So what you're going to see with that is as opposed to CapEx. So what you're going to see with that is that continued growth in the backlog. But as Doug said, we won't be recognizing that onetime CapEx revenue upfront. The great thing about that for this business is it takes and it transitions more of the revenue to a predictable revenue stream over time. And that's where Steve's color on a few quarters to get to that run rate is what we're expecting because there -- it will be at a longer-term higher percentage of revenue on a quarterly basis that's already on the books and will be amortized and subscription revenue over the time.

Yes. And just to reiterate that number, again, $43.75 million in backlog. It's a $2 million increase just from the end of last year. So in 3 months, we increased backlog by $2 million. And so that's a really, really encouraging sign as we bring more of these subscription models on board. It's going to increase that ongoing backlog number. Anand, any further color?

Yes, sure. So I mean, I think, Josh, great question. I think just to echo the sentiment of the team and just to give you a little bit of background there as well. This is kind of the third full quarter, if you will, post transaction from a standpoint of getting the accounting piece in line so we can be more predictable, as Steve pointed out. But just to get to your -- the first quarter, typically, some lumpiness from a nonrecurring standpoint. But again, as we've expanded also sell product offering, which is an infrastructure-as-a-service solution, we're continuing to see more adoption in that area. And again, that's kind of the challenge between -- we're seeing more and more folks that, in essence, are saying, okay, you know what, you handle the plumbing, you handle the infrastructure, we want you to manage the service for us as we continue to build.

So we've seen a lot of that operation, which fundamentally is very, very strong, but obviously will impact this (inaudible) from more of a choppy NRC model to a recurring revenue model. But in general, it's promising in terms of the types of logos and the types of folks that we see. And then in general, the migration away from what's going on in the industry with respect to folks like BroadSoft and Microsoft and the wins that we're seeing in that category.

And then just to clarify for -- of the $3.3 million, how much of that was nonrecurring versus more traditional subscription revenue in the quarter? And then is this like a fair baseline or maybe it will take another quarter or 2 to really see the pivot in that model before it starts to grow on a sequential basis?

Well, before Doug or one of the other fellas answer that, Josh, what we would -- first of all, it's going to take a little bit longer. Instead of taking 2 or 3 quarters, it's probably going to take 4 or 5 to totally turn the ship around. But my expectations are that we'll be on a mostly recurring revenue model within the next 3 or 4 quarters. And did you want to add something there, Doug -- Ron?

Yes. Josh, yes, approximately $843,000 of the $3.3 million was a onetime revenue.

Great. And then last question for me is I think just regarding the gross margins, I think net-net, they came in a little bit under 60%. Is that going to improve throughout the year moving forward as you kind of transition more of these customers? What's the thought process?

I expect that to improve gradually for a long time. I want to get it up to at least the margins of the telecom division, which were 70%, 71%. And I'd like to see the blended rate go to as high as 75%. That means probably most of it is going to come from the software solutions division. And I see Anand shaking his head. Did you have some comments on it?

I was just going to echo that same thing. I think -- I mean Ron can comment on this, too. I think part of the exercise, as Steve pointed out earlier, was the notion of making sure that we are putting our systems in place so that we can understand the metrics associated with capitalized costs and things like that. So I'll let Ron touch on the specifics there from a financial perspective. But part of the exercise that we're going through is exactly that. We're now 3 quarters into the integration. And so part of the exercise is making sure that we put the systems in place so that we are allocating things in the right place from a financial perspective. So Ron, I don't know if you want to touch on that?

Yes. I'll just add that we're continuing to work on the process and the rigor of tracking the engineering time between maintenance and support type services and the R&D of the platform itself, future functionality and then continue to develop the product. And so as we put the right accounting, tracking, processes in place, we're going to be able to properly report R&D versus combining it with the rest of the cost of service revenue or cost.

Last question for me, and then I'll let someone else take a turn out. So whenever you move these customers over right to a more traditional subscription business, are you -- is there a significant, I guess, for a lack of a better word, call it like an ARPU lift, even though it's not priced on a per user basis? Like are you getting more subscription revenue? Or how are the terms different relative to the upfront? I'm just curious if you'll wind up being a net positive once you've gotten through this transition over the next several...

We haven't made that decision completely yet, Josh, but we will make it in the next 4 or 5 days. I'm going to let Anand talk about that.

Yes. Josh, fundamentally, as you start looking at, again, as we start developing more and more of the models so that we can report it appropriately out to you guys, what you will notice is that effectively, the effective per seat price contribution from an ARPU standpoint effectively is actually increasing, given that most of these additional subscription services that are coming on are not just licensed, but they're managed services with a pretty high margin. So it's -- typically, we're seeing an effective average selling price going up over time. So does that answer your question?

It does.

(Operator Instructions) Up next, we have Chris Sakai with Singular Research.

I had a question on the Mavenir partnership. Just want to know, do you guys break that out as far as new business from them? How are things going there this quarter?

So as Doug said, it's going very well, but we don't expect to start selling that until probably the end of this quarter. So currently, the sales are going to be very small, but I'm going to let Doug and Jon Brinton talk about that so you know exactly where we stand.

Yes. There's 2 portions of that relationship because it's a very symbiotic relationship. So Mavenir is going to be selling our UCaaS platform as their own platform to their end users. So they're deploying that as we speak. So we'll start seeing revenue stream coming in off of that. But that's just going to be another licensee relationship to (inaudible) way, shape or form. On the CCaaS, it's exciting because as we roll out the CCaaS (inaudible) at the end of this quarter, beginning of Q3, we'll see a real nice monetization on that. So I'll have Jon explain how we'll start seeing a nice uptick on that because contact centers really got a much, much higher price per seat type revenue.

Thanks, Doug. So Chris, as Doug stated, if you -- once Mavenir begins to sell and propose our UCaaS that would be reflected in our software solutions revenue along with other clients. For the CCaaS opportunity, the exciting thing about that is that while contact center or customer experience workers are a small percentage of the overall workforce, the average revenue per user in our retail offering under the Crexendo VIP brand would be about 4x the revenue that we would get from a UCaaS user. So there's a lot of opportunity for expenditure wallet there. And then our intent with that partnership for CCaaS is also to offer that to our NetSapiens platform licensees so that they can incorporate that into their offers as well. And then that would be a substantial increase in the average revenue per user we received there. So it's a great opportunity to expand share wallet. It's also a great opportunity to bring capabilities and functionality to our customers that otherwise, we wouldn't be able to deliver.

Great. Okay. And then -- was there something else there?

Well, no, I was just going to ask if that answered your question, Chris.

Yes. Yes, that helps. That helps. Also, I just wanted to ask about the backlog. It seems like a good growing number. Just for -- how much of that is for 2022? And how much is that for 2023, if you have that number?

Well, if you know the way our backlog works, it's on a 36- to 60-month contract. So part of it is going to be immediately recognized and the rest of it will only be over a blended rate of 40, 42 months.

Yes. We do break that down in the 10-Q. And so Ron is pulling it up right now. So it will be a kind of an idea, but we break that down on an annual basis so that you can see that snapshot. So we're just pulling it up right now, and we'll have that for you momentarily. But the backlog increase is exciting. Because, again, as Steve highlighted, yes, that's a revenue stream that's locked and loaded. So just to reiterate, that's contracted revenue that we haven't recognized yet. And in our Q, we break that out as to how much of that backlog revenue is in this year, next year, the following year and so on. So that $43.75 million breaks down in this format.

Yes. So for 2022, the remainder, it's approximately $16.9 million. 2023 is $13.4 million. There's a table in our footnote too that breaks it down by year for a 5-year schedule.

In other words, I think it's kind of like a diminishing lease. As time goes by, it's front loaded. And as time goes by, a little bit lower on the back down. But as you know, the backlog has been increasing.

The next question is coming from [Ronald Saul], investor.

I was just wondering if the company is considering giving any earnings guidance going forward? And then also a little more insight on the net GAAP earnings by the fourth quarter or first quarter of next year?

Well, let me tell you something. It's a 2-edge sword to give out guidance, if you will. If you make it or beat it, it's positive. If you miss it and there's a lot of reasons why you might miss it, it's negative. But one thing that I have said is we expect or I expect that our sales will increase 40% to 50%. If you just look at that, based on where we are, we should hit north of $40 million this year. And I expect -- I'll be disappointed if it's just $40 million. But right now, that's higher than any analyst hasn't said. I think that there might be a couple that are right at $40 million.

But think about it. If you take the current quarter and just put normal growth on that, we're going to have about $34 million to $35 million in revenue. And you take the fact that we're going to be charging a little bit more for our products. So we can do more for our customers, and these are mostly our licensees, but that should have $2.5 million to $3 million in revenue. Now you're up to $34 million, $36 million, $37 million in revenue. And we are continuing to kick the bushes real hard.

And one of the reasons why we wanted to bring NetSapiens into the fold is because of all of their licensees, their potential acquisitions. So I'd be surprised if we don't have an acquisition by the end of this year. Let's just use $10 million as a number that they're doing. That's $5 million for the second half of the year. Now you're up to about $42 million, $43 million in revenue. And we are continuing to work on expenses, we measure everything around here. We're continuing to get our revenue a little more streamlined, so it's more predictable. And all of that is going to get us GAAP earnings. But if people don't agree with that, they can move their money. If they agree with it, they can buy more. And I'm not soliciting anybody to do anything here. I'm just pointing this out to you [Ronald]. And I hope you agree with me.

Yes. No, no, I agree with you, but this path to GAAP earnings seems to have stretched out a little longer in respect to NetSapiens merger?

I've told you -- and I agree, and that's one of the reasons why I've been looking at and putting most of my efforts on the software division. We -- and Anand agrees with me, we need to get less expenses, more margins and higher predictable revenue stream there.

And I would highlight, Ronald, that if you look at our numbers, I mean, for the quarter, we had over $1 million worth of stock comp expense and $600,000 of intangible asset amortization. So those are big numbers. And so when you think about the size of our organization in those 2 numbers or if there's headwinds to get the GAAP, so that's why we've been highlighting non-GAAP profitability because when you take those numbers out, we're in a much stronger position, but that'll be -- the amortization of intangible assets, and that will be on the books for some time.

Let me just tell you the headwinds one more time. We've had lockdowns. We've had COVID spikes. We've had inflation. We've had interest rate uncertainty. We've had business slowdowns, employment difficulties and the stock market is in a mess right now. And we've had supply chain issues. And who knows maybe next quarter, we'll be in a recession, I hope not, but we could be. You take all of that, and I'm very proud of our managers for managing in spite of everything that I've said. I'm sorry to get a little excited here, [Ronald].

Any follow-up, [Ronald]?

No, that's -- I think the stock in the market is looking for net GAAP earnings, and I think that's what's going to really drive the stock.

Agreed.

Well, in this market, you're probably right. The days of emotional stock purchases are -- based on top line are probably behind us. The marketplace as it becomes more and more rational, right now, you're seeing irrational further on the downside. But I think in the next quarter or so, it's going to be more rational and people are looking for GAAP earnings. Absolutely.

Up next, we have [Chris Sam] with Alpine Capital.

Maybe just a follow-up on the acquisition strategy and maybe more detail on the pipeline and then also maybe -- because of the current environment, are you seeing any need to change the strategy on the acquisition front, multiples paid, things like that, based on what's going on or no?

First of all, we're going to get revenue, at least half of it of the 40% to 50% from acquisitions and half of it approximately from organic growth. But I'm going to let Doug, who's a little closer to that than I am, answer that question.

Obviously, [Chris], there's lots of opportunities out there. We're very selective in what we're looking for that is going to be a good fit. Obviously, it's going to be accretive in anything that we look at doing. And so I think with the current market environments, there are lots of opportunities out there. We have lots of opportunities that we're considering. And as Steve said, I mean, I wouldn't be surprised if we have an opportunity to close before the end of the year. So when we look at our acquisition strategy, it's revenue, it's accretive revenue and synergies. And so we've really got a lot of opportunities that I think fit the bill, and we'll be excited to get the next one under our belt.

And by the way, this goes back to [Ronald's] question, [Chris]. They've got to be cash flow positive or -- with that in mind, they need to have a plan to get to cash flow and preferably GAAP positive.

Next we have Damon Finaldi with Telecloud.

My question was on backlog. You already answered it earlier.

We have Rafe Quinn with Barc Partners.

I have a few questions, if you don't mind. So starting with the software solutions segment, NetSapiens. So you just reported $3.3 million in the quarter. And it sounds like somewhat of sort of the shortfall versus where our expectations were was because really more of an accounting change where you guys are pushing more of the SaaS approach versus the traditional perpetual. We saw, if you look back in the business, I don't know, 10 years ago and beyond when a lot of software companies made that transition. One of the things that they did was provide a bookings metric sort of for the previous period and in the current period. So in this case, it would be the first quarter of last year versus what you guys just reported. I realize NetSapiens was private back then, you didn't know them yet. So I'm not sure what the data looks like. But I guess the point being that a lot of the negative response from the market sort of you can look through that and just focus instead on the underlying economics of what's happening. So I was wondering if you guys can sort of share any metric around what bookings look like this quarter versus a year ago for that specific division?

Well, let me answer that, and then I'm going to have both Jeff Korn and Anand and Doug Gaylor and all the rest of the guys answer it. But first of all, if we have a metrics, that's going to be forward-looking. And it's probably guessing at what we're doing, and I don't like to guess at anything. I'd like to have information that we can feel, touch, smell, measure, measure, and measure. And if we get there, Rafe, you'll be the first one to know.

With everybody else, by the way. Just to be clear.

Yes. We don't want to give you insider information. But we want to get to a point where our business is more predictable so that everyone understands where we've been and where we're going. And that includes you, Rafe. And I like the idea of a matrix. That's a good point. But we're not in a position to do that just yet.

Yes. I would tell you, Rafe, that if we look at it from the information that we do have, bookings are up. But again, when we look at the bookings, subscription services bookings are probably almost double or 100% of what they were previously because we weren't doing subscription services in January of last year. So I'll have Anand give a little bit more color on that. But I think that we've traditionally, quarter over quarter, have seen increase after increase after increase in the software solution bookings.

Yes. Right. I think that's a great question. And I think one of the things that we're doing on the software solutions side, we're working very closely with Ron and also working very closely here with Jon on the revenue side to actually figure out exactly what metrics we want to provide to you for that reason to make things that much more predictable. We can dig in historically. Ron made a very good point in terms of how the measurements were being done as a private organization versus the public organization are very different. And so giving you this kind of some ballpark number would probably be inaccurate or not appropriate. But as we develop those, we absolutely want to -- because we need those to obviously manage the business as well. And so what we're seeing is significant increases in kind of total contract value on the subscription side. But as we dig into the model, sort of have a model of business as we go forward, we'll be happy to share those with you.

Ron, I don't know you want to add to that.

Go ahead, Ron. I didn't mean talk over you.

No, you're fine. He covered it, so I didn't really need to add anything in addition.

Yes. And I guess the point is just trying to understand the noise from accounting versus the underlying economics. And so to the extent that the market gets that, it can reduce sort of the response here from what happened. And then I guess the second question on a related point is you had mentioned that about $800,000 of the software solutions business was onetime, which would imply about $2.5 million was sort of the recurring. Is that some sort of a decent baseline that we should go off of for sort of a quarterly basis going forward there, a bit of a reset to that line item? And then just kind of layer on top of that?

Yes. You're using history as a proxy for the future, yes. I would say that that's a fair assessment with growth on top of that.

Okay. Excellent. And then just with respect to, I guess, the final point here on the M&A side, which is great if you guys could find opportunities. Looking at cash on the balance sheet, it looked like you guys had about $6 million at the end of the quarter. Would you plan to finance that through sort of stock deals combined with cash? Or how would you think about that in the current environment?

Yes. As I said, Rafe, we've got lots of deals in the (inaudible). And so all of them have different components that make up how we would do those acquisitions. But I would say that probably all considerations are on the table depending on the opportunity. But the combination of cash stock and financing are probably all on the table for any of the deals that we're looking at, at the moment.

There's -- basically, there's no set formula.

Up next, we have [Michael Kaufman], an investor.

I want to congratulate you and Doug and the team for very good progress in spite of the economic headwinds that everybody is facing.

Well, thank you, and -- it was my management team. I do very little except from (inaudible) everything around here.

One of the things that really excites me about the opportunity is you basically have an exciting low-cost pricing strategy where you can go after the larger players, the entrenched players, and offer a much better cost because they have a large installed base. So if they try to equal you in terms of pricing, they have a huge hit and they have a very large infrastructure with high salaries and big corporate overhead. So there's a real opportunity to get very big, very fast with competitive pricing.

That's true. And we're winning deals against the BroadSoft and Metaswitch and others out there. So all of what you're saying is true. And let's face that they have to be competitive in the marketplace. So they're going to charge so much for their -- to the end user. But it's all about cost in this business. If they can get the cost down, that's money in their pockets or more money they can pay their employees with, et cetera, et cetera.

And the market is so huge that if you offer a compelling...

We think it's at least $500 trillion market worldwide.

So for [orgs] of activity, if you offer a compelling price point, you can go under their umbrella, which is hard to lower because they have big corporate overheads. And so that's...

Bingo. You hit the nail on the head.

So that -- in addition to great product and everything else you do, there's a real opportunity that the market may not know about. And I know that it's no longer a foo-foo game like we had in the past were people like RingCentral was -- maybe 30x revenue of some coocoo number. Those days may be behind us for a while, and it's real blocking and tackling which you guys are used to. And I think...

Well, getting back to [Ronald's] question or his comments, I think the market is going to be more rational and they're going to look at metrics versus a pie in the sky.

And one of the things that you had spoken of at the last meeting is that because it's going to take longer to do this really strategically and blow this out as a big profitable company, you are thinking of allowing patient investors to have some small reward with a small dividend. Is that still on the table? Or because of all the other issues, you're moving away from that?

I'm going to let Jeff Korn answer that.

Well, there's a couple of moving parts, [Michael]. First of all, we have to announce through NASDAQ before we announce a dividend, so I wouldn't do it on the call anyway. But we have a Board meeting to discuss that a little later in the week. We wanted to see some additional numbers. So I expect you'll hear something from us next week.

Okay. And I guess the other thing is that because the market has, in general, collapsed for a smaller technology companies, it's harder for people to buy the stock that is below $3 a share. So hopefully, that's going to quickly get resolved because I think you have a really promising long-term business opportunity and I've been a continued supporter and I believe the team will do very good.

(Operator Instructions) Up next, we have [Ron Samat], private investor.

I was just wondering, Doug, how you -- your virtual conference with Oppenheimer went the other day, what was the flavor of that in general?

It went extremely well. We had, I think, 6 individual one-on-one meetings, and -- [all of them] with a fairly decent size, institutional or family offices. And so I think we had, overall, just great comments on our growth and the potential. I think the institutions and the investors that we met with feel as we do that our stock is very undervalued and feel like it's a tremendous opportunity based on where we have the opportunity to take this. And so when we highlight the opportunities ahead, we highlight where we are from a growth perspective. We highlight the opportunities in the sector. We highlight the opportunities from an acquisition perspective. And we highlight the fact that this isn't our first rodeo. And the fact that we've done this in our previous history, and we know what we're trying to accomplish. And so they like the fact that we are very diligent and that we've met all of the commitments that we've made in the past.

So when we do these investor presentations, we're highlighting on the fact that we have been successful in the fact that we stated we were going to uplist to the NASDAQ, we did that. We stated that we were going to do a successful raise, we did that. We stated we were going to get the GAAP profitability, we did that. We stated that we were going to go do an acquisition, we did that. We stated we were going to get on one of the major indexes with the Russell Microcap funds, we did that. And so we continue to execute on that. And so we're going to continue to execute on all the things that we've committed to on this call. And the bankers and the institutions and the family offices that we've talked to love that message. What they do with that is yet to be seen, but we feel like there's tremendous opportunity where we sit today.

We have no further questions in queue at this time. I'd like to turn the floor back to Steve Mihaylo for closing remarks.

My closing remarks are everyone is working very, very hard here at Crexendo and we'll continue to work hard. This is not like a one and it's done. It's a process, and we're going to work hard to make sure the process delivers a nice return to our shareholders. Everyone in this room is a shareholder and we've all got a lot of skin in the game, either spread equity, actual dollars or just the fact that we hate losing. We want to win and we will win.

And with that, I'm going to wish everyone a good summer and we'll be back after we have Q2 numbers, and we're going to see a little bit of improvement in the Q2 numbers.

Thank you, everybody.

Thank you, ladies and gentlemen. This does conclude today's conference call. You may disconnect your phone lines at this time, and have a wonderful day. Thank you for your participation.