Q4 2024 Crexendo Inc Earnings Call

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Please continue to hold ladies and gentlemen, your conference will begin in a couple of minutes. Please continue to hold thank you for your patience.

[music].

Unknown Executive: Greetings.

Unknown Executive: Welcome to the Crescendo fourth quarter and year end 2024 earnings call. At this time, all participants are in a listen only mode.

Greetings and welcome to the Crescendo of fourth quarter and year end 2024 earnings call. At this time all participants are in a listen only mode. A question and answer session will follow the formula presentation. If anyone should require operator assistance during the conference. Please press star zero on your telephone keypad. Please.

Operator: A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad.

Operator: Please note this conference is being recorded.

This conference is being recorded.

Jon Brinton: I will now turn the conference over to your host, Jeff Korn. Please proceed.

Jeff corn: I'll now turn the conference over to your host Jeff corn.

Please proceed.

Jeffrey Korn: Thank you, Jon, and good afternoon, everyone.

Jeff corn: Thank you John and good afternoon, everyone welcome to the Crescendo Q4, 2024 and year end conference call.

Jeffrey Korn: Welcome to the Crescendo Q4 2024 and year-end conference call. I'm Jeff Korn, Chairman of the Board and CEO. On the call with me today are Doug Gaylor, our president and COO, and Ron Vincent, our CFO. In the room with us are Jon Brinton, our CRO, and Anand Buch, our CSO.

Jeff corn: I'm, Jeff <unk> chairman of the board and CEO.

Doug: On the call with me today are Doug <unk>, our president and CFO.

Speaker Change: And Ron <unk>, our CFO in the room with us are Jon Brinton, our CRO and <unk> our CSO.

Jon Brinton: In a moment, Jon will read our Safe Harbor statement. After that, I will give some brief comments on our performance for Q4 and the year.

Speaker Change: A moment John will read our safe Harbor statement after that I will give some brief comments on our performance for Q4 and the year. Ron will then provide more detail on the numbers before handing the call over to Doug to provide a business and sales update after that we'll open the call for questions. John would you. Please read the safe Harbor.

Jeffrey Korn: Ron will then provide more detail on the numbers before handing the call over to Doug to provide a business and sales update. After that, we'll open the call for questions.

Jon Brinton: Jon, would you please read the Safe Harbor? Thank you, Jeff. 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 forward-looking statements. Forward-looking statements include, but are not limited to, words like believe, expect, anticipate, estimate, will, and other similar statements of expectation 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.

Speaker Change: Thank you, Jeff I wanted 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 $19 30 for the private Securities Litigation Reform Act of $19 95 provides a safe harbor.

Speaker Change: Such forward looking statements.

Speaker Change: All statements made in this conference call other than statements of historical fact are forward looking statements forward. Looking statements include but are not limited to words like believe expect anticipate estimate will and other similar statements of expectation identify forward looking statements.

Speaker Change: 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.

Jon Brinton: These risk factors are explained in detail in the company's filings with the Securities and Exchange Commission, including the Form 10-K for fiscal year ended December 31, 2024, and the Form 10-Q as filed.

Speaker Change: These risk factors are explained in detail in the company's filings with the Securities and Exchange Commission.

Speaker Change: The Form 10-K for fiscal year ended December 31 2024.

Speaker Change: <unk> 10-Q S y <unk>.

Jon Brinton: 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.

Speaker Change: Crescendo 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.

Jeffrey Korn: I'd now like to turn the call back to Jeff.

Jeff corn: I would now like to turn the call back to Jeff Jeff.

Jeffrey Korn: Thank you, Jon. I'm incredibly pleased with our results and could not be more excited about the direction Crexendo is heading. We continue to execute our strategic vision, delivering strong performance while making meaningful investments into the business. Our ability to grow, our remaining profitable is a testament to the strength of our team, our competitive advantages, and the immense opportunities ahead. While the UCAS market is highly competitive, we continue to grow at more than twice the rate of our publicly held competitors. And in the case of our software segment, the software solution segment, at nearly four times the rate of our.

Jeff corn: Thank you John.

Jeff corn: Incredibly pleased with our results and could not be more excited about the direction crescendo as Ed.

Jeff corn: We continue to execute our strategic vision, delivering strong performance, while making meaningful investments into the business.

Jeff corn: Our ability to grow our remaining profitable is a testament to the strength of our team our competitive advantages and the immense opportunities ahead.

Jeff corn: While the Ucas market is highly competitive we continue to grow at more than twice the rate of our publicly held and editors.

Jeff corn: And in the case of our software segment. The software solutions segment at nearly four times the rate of our editors.

Jeffrey Korn: We remain committed to expanding our market share in a disciplined and profitable manner. We do not engage in price wars that erode profitability simply to gain short term market share. Instead, we leverage our superior service and support as key differentiators. Our aggressive efforts are yielding results, and we fully expect continued growth in our UCAS business. I am particularly pleased with the continued strong growth in our software solutions business. And I fully expect that vote to continue. is currently the third largest UCAS platform provider behind Cisco's BlotSoft and Microsoft's In December, Microsoft announced that they are selling off the Metaswitch division, creating a lot of fear and concern with Metaswitch licensees and creating substantial opportunity for Crexendo to take advantage of this disruption in the market.

Jeff corn: We remain committed to expanding our market share in a disciplined and profitable manner.

Jeff corn: We do not engage in price wars that erode profitability simply to gain short term market share is.

We leverage our superior service and support as key Differentiators are.

Jeff corn: Our aggressive efforts are yielding results and we fully expect continued growth in Oregon Cas business.

Jeff corn: I am, particularly pleased with the continued strong growth in our software solutions business and I fully expect that growth to continue.

Jeff corn: Crescendo is currently the third largest new task black oil provider behind Cisco's, Broadsoft and Microsoft net switch.

Jeff corn: In December Microsoft announced that they are selling off the medicine, which division, creating a lot of theory concerned with message licensees and creating substantial opportunities for crescendo to take advantage of this disruption in the market.

Jeffrey Korn: I am absolutely convinced that with the disruption. We, across all platforms, play to our strengths and our advantages. I am convinced we will win a substantial share of the market because we offer substantial competitive advantages that position us for long-term success. Our model, our people, and our products drive our success. We retain significant advantages over our competitors, including our sessions versus seat adaptions. A Sessions-Based Pricing Model offers customers the flexibility to migrate at their own pace without committing to rigid seat-based licensing structures. This is a clear advantage over Microsoft Metaswitch and Cisco Broadsoft customers looking for a cost effective and scalable transition strategy.

Jeff corn: I am absolutely convinced that with the disruption.

Jeff corn: So across all platforms play to our strengths and our advantages.

Jeff corn: Eric convinced we will win a substantial share of the market because we offer substantial competitive advantages that position us for long term success.

Jeff corn: Our model, our people and our products drive our success.

Jeff corn: We retain significant advantages over our competitors, including our sessions versus ceded passage on SaaS based pricing model offers cost to bill customers the flexibility to migrate the whole pace without committing to Richard seat based licensing structures.

Jeff corn: This is a clear advantage over Microsoft meta switch and Cisco Broadsoft customers looking for a cost effective and scalable transition strategy. The savings we provide a compelling are compelling and our product is second to none.

Jeffrey Korn: The savings we provide and compelling are compelling, and our product is second to none. We also have price advantages. Our pricing remains highly competitive, yet we provide superior value to our service, support, and product differentiation. And we are focused on attracting customers who appreciate value. We give choice in our deployment, our ability to offer both facilities-based and cloud-based solutions, excuse me, give customers the flexibility to choose what best fits their needs. This becomes even more important as Metaswitch customers face a cloud migration decision. We are uniquely positioned to serve them with a solution tailored to their requirements.

Jeff corn: We also have price advantages our pricing remains highly competitive yet we provide superior value to our service support and product differentiation and we are focused on attracting customers who appreciate that.

Jeff corn: We get choice in our deployment.

Jeff corn: Our ability to offer both facilities based and cloud based solutions.

Speaker Change: Susan give customers the flexibility to choose what best fits their needs. This becomes even more important as medicine, which customers basic cloud migration decision.

Speaker Change: We are uniquely positioned to serve them with the solutions tailored to their requirements.

Jeffrey Korn: We have flexible contract terms, we offer both perpetual and monthly MRC contracts, providing an edge of negotiation. While we are shifting toward an MRC heavy model, the flexibility we provide continues to be a key selling point. Additionally, our MRC supports requirements for professional contracts strengthens our recurring revenue. We have OpenAPI and vendor programs. Our OpenAPIs give our licensees the ability to build customized applications, similar to how the Apple App Store enhances the iPhones, for example. To fully capitalize on this advantage, we are committed to making further investments in software development, UX enhancement, and business development efforts.

Speaker Change: We are flexible contract terms.

Speaker Change: We offer both perpetual and monthly MRC contracts, providing an exit negotiations.

While we are shifting toward an MRC heavy model the flexibility. We provide continues to be a key selling point. Additionally, our MRC supports requirements for perpetual contracts strengthens our recurring revenue base, we have open API and vendor programs. Our open API has given us.

Speaker Change: Licensees abilities to cost to build customized application similar to how the Apple App store it passes the iPhone experience to <unk>.

Speaker Change: Fully capitalize on this bid on this advantage we are committed to making further investments in software development, you extra advancements and business development efforts. Our recently saw launched ecosystem vendor partner program or EVP for short has gained traction and we are very excited about the potential growth.

Jeffrey Korn: Our recently launched Ecosystem Vendor Partner Program, or EVP for short, has gained traction, and we are very excited about the potential growth. Our community of licensees and software developers design and develop strategic applications, which are sometimes broad-based and other times targeted to specific market segments. By adding these third-party developed solutions to our EVP program, we gain revenue from a revenue share, and our customers get a wide variety of options to make the platform their own. I am convinced this will become a substantial revenue driver for us and a continued competitive advantage. Our results are particularly compelling because we are achieving growth while simultaneously investing in our business.

Speaker Change: Our community of licensees and software developers to design and develop strategic applications, which are sometimes broad base and other times targeted to specific market segments.

Speaker Change: Adding these third party develop solutions to our MVP program, we gained revenue for more revenue share and our customers get a wide variety of options to make the platform. They are all <unk>.

Mitch: Mitch I am convinced this will become a substantial revenue driver for us and our continued competitive advantage.

Mitch: <unk> are particularly compelling because we are achieving growth while simultaneously investing in our business. We continue to enhance our product offerings and implement cost saving initiatives that drive long term profitability.

Jeffrey Korn: We continue to enhance our product offerings and implement cost saving initiatives that drive long term profitability. One major milestone was a recent move out of our old building and the transition to the servers that were located there, which are now hosted in a co-location facility. Additionally, we are progressing well on migrating our remaining Crexendo class of customers to the state-of-the-art SAPIEN VIP customers with completed expectation by Q3, which will allow us to close the COLA. We are in the process of closing data centers and migrating to the Oracle Cloud Infrastructure, OCI, a transition we expect to complete by year-end.

Mitch: One major milestone was our recent move to have a whole building and the transition to the servers that were located there which are now posted a co location facility.

Mitch: Additionally, we are progressing well on migrating our amending our remaining call center classic customers to the state of our SAPIEN VIP customers with complete an expectation by Q3, which will allow us to close the call.

Mitch: We are in the process of closing data centers and migrating migrating to the Oracle cloud infrastructure OCI My transition, we expect to complete by year end. These actions will generate substantial cost savings and free up resources that allow us to reinvest in our business for continued profitable growth.

Jeffrey Korn: These actions will generate substantial cost savings, free up resources, and allow us to reinvest in our business for continued profitable growth. I am proud to report that we maintained our streak of gap profitability for now the sixth consecutive quarter and non-gap net income for the 25th consecutive quarter. We continue to be ranked number one in customer satisfaction categories in G2 reports, continuing our streak of leading in multiple satisfaction categories. This is a significant competitive advantage, and our superior customer support remains a key driver for growth. We remain focused on delivering profitable growth and creating value for our shareholders.

Mitch: I am proud to report that we maintained our streak of GAAP profitability for now the sixth consecutive quarter and non-GAAP net income for the 25th consecutive quarter.

Mitch: We continue to be ranked number one in customer satisfaction categories in GTO reports, continuing our streak of bleeding in multiple satisfaction categories. This is a significant competitive advantage and our superior customer support remains a key driver for growth.

Mitch: We remain focused on delivering profitable growth and creating value for our shareholders. Our results were excellent highlighted by our net income for the year of one 7 million and non-GAAP net income up $7.7 million.

Jeffrey Korn: Our results were excellent, highlighted by our net income for the year of $1.7 million and non-GAAP net income of $7.7 million. Our revenue increase of 14% for the year to $60.8 million and our fourth quarter revenue increase of 15% to $16.2 million give me great optimism for the future growth of Crescendo. Looking ahead, we continue to reinvest to drive future growth and efficiency. Our increased investment in engineering service and support, along with our strong partnership with OCI, gives us a significant competitive edge, particularly in Europe, where we are experiencing strong demand. We are also making strategic investments in automation and financial systems to improve operational efficiencies, ensuring we can continue to make data-driven decisions quickly and effectively.

Mitch: Our revenue increase of 14% for the year to $60 8 million and our fourth quarter revenue increase of 15% to $16 2 million give me great optimism for the future growth of <unk>.

Mitch: Looking ahead, we continue to reinvest to drive future growth and efficiency, our increased investment in engineering service and support with along with our strong partnership with OCI gives us a significant competitive edge, particularly in Europe, where we are experiencing strong demand. We also we are also making.

Mitch: Strategic investments in automation and financial systems to improve operational efficiencies, ensuring we can continue to make data driven decisions quickly and effectively.

Jeffrey Korn: I have never been more confident or proud heart. Over the past two years since I became CEO, our entire team has transformed Crexendo into a profitable, high-growth company. As the telecom software sector continues to evolve, we are positioned better than ever to capitalize on industry shifts and customer needs. We will remain laser focused on our core strengths. continue to execute our strategic vision and drive substantial growth in the years ahead. I am incredibly excited about what the future holds. And I want to thank our entire team for their dedication and heart. I am. Confident in our continued growth and expect to continue to see at least double digit growth over the next year and beyond.

Mitch: I have never been more confident and are proud of our T O.

Mitch: Over the past two years since I became CEO, our entire team has transformed <unk> into a profitable high growth company.

Mitch: As the telecom software sector continues to evolve we are positioned better than ever to capitalize on industry shifts shifts in customer needs.

Mitch: We'll remain laser focused on our core strengths.

Mitch: Continuing to execute our strategic vision and drive substantial growth in the years ahead.

Mitch: I am incredibly excited about the future holds and I want to thank our entire team for their dedication and hard work.

Mitch: I am.

Mitch: Confidence in our continued growth and expect to continue to see at least double digit growth over the next year and beyond.

Jeffrey Korn: With that, I'll turn the call over to Ron to provide additional details and commentary on the numbers.

Mitch: With that I'll turn the call over to Ron to provide additional details and commentary on the numbers one.

Ronald Vincent: Ron? Thank you, Jeff. Good afternoon, everyone. We had a great fourth quarter and year ended December 31st, 2024, and I'm happy to share the results with you here today.

Ron: Thank you Jeff Good afternoon, everyone. We had a great fourth quarter and year ended December 31, 2024, and I am happy to share the results with you here today.

Ronald Vincent: Our financial results for the fourth quarter are as follows. We reported total revenue for the quarter increased 15% to $16.2 million compared to $14.2 million for the fourth quarter of the prior year. Our service revenue for the quarter increased 4% to $8 million compared to $7.7 million for the fourth quarter of the prior year. Our software solutions revenue for the quarter increased 32% to $7 million compared to $5.3 million for the fourth quarter of the prior year. Product revenue for the quarter increased 4% to $1.2 million compared to $1.2 million for the fourth quarter of the prior year.

Speaker Change: Our financial results for the fourth quarter or fall.

Speaker Change: We reported total revenue for the quarter.

Speaker Change: Increased 15% to $16 2 million compared to $14 2 million for the fourth quarter of the prior year, our service revenue for the quarter increased 4% to $8 million compared to $7 7 million for the fourth quarter of the prior year.

Speaker Change: Our software solutions revenue for the quarter increased 32% to $7 million compared to $5 3 million for the fourth quarter of the prior year.

Speaker Change: Revenue for the quarter increased 4% to $1 2 million compared to $1 2 million for the fourth quarter of the prior year.

Ronald Vincent: Our growth margins for the fourth quarter compared to the fourth quarter of the prior year are as follows. Service revenue gross margin was 57%, consistent with the fourth quarter of the prior year. Our software solutions revenue gross margin increased by 2% to 68%. Our product revenue gross margin increased by 1% to 42%. And our consolidated revenue gross margin increased by 2% to 61%.

Speaker Change: Our gross margins for the fourth quarter compared to the fourth quarter of the prior year are as follows.

Service revenue gross margin was 57% consistent with the fourth quarter of the prior year, our software solutions revenue gross margin increased by 2% to 68% our product revenue gross margin increased by 1% to 42% and our consolidated revenue gross margin increased by two.

Speaker Change: Sent to 61%.

Ronald Vincent: Net income of $507,000 for the quarter, that's $0.02 per basic and diluted common share compared to net income of $61,000 or $0.00 per basic and diluted common share for the fourth quarter of the prior year. non-GAAP net income of $2 million for the quarter, that's $0.07 per basic common share and $0.06 per diluted common share compared to non-GAAP net income of $1.6 million or $0.06 per basic and diluted common share for the fourth quarter of the prior year.

Speaker Change: Net income of 507000 for the quarter, that's two cents per basic and diluted common share compared to net income of 61000 or zero cents per basic and diluted common share for the fourth quarter of the prior year.

Speaker Change: non-GAAP net income of $2 million for the quarter at seven per basic common share and <unk> <unk> per diluted common share compared to non-GAAP net income of $1 6 million or <unk> <unk> per basic and diluted common share for the fourth quarter of the prior year.

Ronald Vincent: EBITDA for the quarter was $1.5 million compared to $916,000 for the prior quarter. Adjusted EBITDA for the quarter came in at $2.2 million, compared to $1.7 million for the fourth quarter of the prior year.

Speaker Change: EBITDA for the quarter was $1 5 million compared to 916000 for the prior quarter.

Speaker Change: Adjusted EBITDA for the quarter came in at $2 2 million.

Speaker Change: Compared to $1 7 million for the fourth quarter of the prior year.

Ronald Vincent: Now I'll highlight the highlights for the full year ended December 31st. We reported total revenue for the year, which increased 14% to $60.8 million compared to $53.2 million for the prior year. Service revenue for the year increased 7% to $31.8 million compared to $29.7 million. Software Solutions revenue for the year increased 30% to $23.4 million compared to $18 million reported for the prior year. Product revenue for the year increased 2% to $5.6 million. Our growth margins for the full year are as follows, service revenue growth margin increased by 1% to 59%. Software Solutions Revenue Gross Margin increased by 2% to 71%.

Speaker Change: Now I'll highlight.

Speaker Change: The highlights for the full year ended December 31.

Speaker Change: We reported total revenue for the year.

Speaker Change: Which increased 14% to $60 8 million compared to $53 2 million for the prior year.

Speaker Change: Service revenue for the year increased 7% to $31 8 million compared to $29 7 million.

Speaker Change: Software solutions revenue for the year increased 30% to $23 4 million compared to $18 million reported for the prior year.

Speaker Change: Revenue for the year increased 2% to five 6%.

Speaker Change: Our gross margins for the full year <unk> service revenue gross margin increased by 1% to 59%.

Speaker Change: Software solutions revenue gross margin increased by 2% to 71%.

Ronald Vincent: Product Revenue Gross Margin increased by 4% to 43% and our Consolidated Revenue Gross Margin increased by 3% to 62%. Net income for the year was $1.7 million. That's $0.06 per basic and diluted common share compared to a net loss of $362,000 or $0.01 loss per basic and diluted common share reported for the prior year. excluding the $1.5 million gain on the sale of our building recognized in the prior year, net income increased approximately $3.5 million from the prior year. non-gap net income of $7.7 million for the year. That's $0.29 per basic common share and $0.26 per diluted common share.

Speaker Change: <unk> revenue gross margin increased by 4% to 43% and our consolidated revenue gross margin increased by 3% to 62%.

Speaker Change: Net income for the year was $1 7 million that <unk> <unk> per basic and diluted common share compared to a net loss of 362000 or <unk> <unk> loss per basic and diluted common share reported for the prior year.

Speaker Change: Excluding the $1 5 million gain on the sale of our ability recognized in the prior year net income net income increased approximately $3 5 million from the prior year.

Speaker Change: non-GAAP net income of $7 7 million for the year that 29 per basic common share and 26 per diluted common share.

Ronald Vincent: compared to non-GAAP net income of $6.7 million or $0.26 per basic and $0.24 per diluted common share reported for the prior year. EBITDA for the year was $5.2 million. That's compared to $1.9 million for the prior year. Adjusted EBITDA for the year was $8.2 million compared to $5.7 million reported for the prior year.

Speaker Change: Compared to non-GAAP net income of $6 7 million or <unk> 26 cents per basic and <unk> 24 cents per diluted common share reported for the prior year EBITDA for the year was $5 2 million as compared to $1 9 million for the prior year.

Speaker Change: Adjusted EBITDA for the year was $8 2 million compared to $5 7 million reported for the prior year.

Ronald Vincent: Our cash and cash equivalents at December 31st, 2024 was $18.2 million compared to $10.3 million reported at December 31st, 2023. Cash provided by operating activities for the year was $6.3 million. Cash used for investing activities for the year was $27,000. and cash providable financing activities for the year. There's 1.6 million.

Speaker Change: Our cash and cash equivalents at December 31.

Speaker Change: Four was $18 2 million compared to $10 3 million reported at December 31, 2023.

Speaker Change: Cash provided by operating activities for the year was $6 3 million.

Speaker Change: Cash used for investing activities for the year was 27000.

Speaker Change: And cash provided by financing activities for the year.

Speaker Change: Is $1 6 million.

Douglas Gaylor: With that, I will turn it over to Doug Gaylor, President and COO, for additional comments on sales and operations. Thanks, Ron. I'm extremely pleased with our record Q4 and year-end numbers and very excited about our strong momentum as we start 2025. Our 15% year-over-year increase in Q4 revenue, along with our 14% year-over-year increase in annual revenue, were the direct result of our focus on growing organically and profitably. Our top line growth, combined with our dedication to managing costs, allowed us to achieve gap profitability for our sixth consecutive quarter, as Jeff mentioned, and exceeded both our internal and our external targets for the year.

Speaker Change: With that I will turn it over to Doug <unk>, our president and COO for additional comments on sales and operations.

Doug: Thanks, Ron I am extremely pleased with our record Q4 and year end numbers and very excited about our strong momentum as we start 2025 or 50% year over year increase in Q4 revenue along with our 14% year over year increase in annual revenue with a direct result of our focus on growing organically and profitably.

Doug: Our topline growth combined with our dedication to managing costs allowed us to achieve GAAP profitability for our sixth consecutive quarter as Jeff mentioned and exceeded both our internal and our external targets for the year.

Douglas Gaylor: We had gap net income of $507,000 for the quarter and gap net income of $1.7 million for the year, and we had very strong non-gap net income of $2 million for the quarter and $7.7 million or $0.29 for the year. Our results for the quarter and for the year continue to highlight our success in managing the fundamentals of the business and making a strong effort to maximize and recognize synergies within the business. Our entire team is continually working to improve business processes and make our company more efficient, and we believe we'll continue to see more efficiencies and cost synergies as we continue our growth.

Doug: We had GAAP net income of 507000 for the quarter and GAAP net income of $1 7 million for the year and we had very strong non-GAAP net income of two made for the quarter at $7 7 million or 29 cents for the year are.

Doug: Our results for the quarter and for the year continue to highlight our success in managing the fundamentals of the business and making a strong effort to maximize and recognize synergies within the business.

Doug: Our entire team is continually working to improve business processes and make our company more efficient and we believe we will continue to see more efficiencies and cost synergies as we continue our growth.

Douglas Gaylor: We are very honored that we have been recognized by leading firms like Frost & Sullivan and Deloitte in recognizing our success. The tremendous demand in the UCAS industry has propelled Crexendo's growth past 5 million end-users. Our efforts have earned Crexendo Frost & Sullivan's 2024 North American Strategy Leadership Award, which highlighted Crexendo as the fastest growing UCAS platform provider in the country. In addition, Deloitte recently pronounced Crexendo is one of the fastest growing companies in North America in their highly acclaimed 2024 Deloitte Technology Fast 500 report that was released in We saw tremendous organic growth of 30% from our software solution segment.

Doug: We're very honored that we have been recognized by leading firms like Frost, <unk> Sullivan, and Deloitte and recognizing our success.

Doug: Tremendous demand in the U S industry has fulfilled crescendo growth past 5 million end users.

Doug: In our effort to earn Crescendo Frost <unk> Sullivan's 2024, North American strategy leadership Award, which highlighted crescendo was the fastest growing ucas platform provider in the country.

Doug: In addition, Deloitte recently pronounced crescendo is one of the fastest growing companies in North America and their highly acclaimed 2024, Deloitte technology Fast 500 report that was released in November.

Doug: We saw tremendous organic growth of 30% from our software solutions segment fueled.

Douglas Gaylor: Fueled by uncertainties created by our two largest software solutions competitors, Cisco and Microsoft, we continue to see very strong demand for our UCAS platform offerings. Cisco has increased pricing, decreased support, slowed future development on their BroadSoft platform, while Microsoft announced end of life of their Metaswitch Max-QC offering before deciding to completely divest that division of their business, as they announced in December a planned sale of the Metaswitch division. These disruptive actions helped convince seven Microsoft Metaswitch licensees and three Cisco Broadsoft licensees to make the move to Crescendo in 2024, and the pipeline of additional Microsoft and Cisco licensees is very strong.

Doug: Fueled by uncertainties created by our two largest software solutions competitors, Cisco and Microsoft We continued to see very strong demand for our ucas platform offering.

Doug: Cisco has increased increase pricing decreased support slowed future development on their broadsoft platform, while Microsoft announced end of life of their medicine, which Max UC offering before deciding to completely divest that division of their business as they announced in December the planned sale of the meta switch division.

These disruptive actions helped convince seven Microsoft <unk> licensees and three Cisco Broadsoft licensees to make the move to crescendo in 2024, and the pipeline of additional Microsoft and Cisco licensees is very strong are.

Douglas Gaylor: Our unique pricing and support model for our software solutions platform, combined with our robust feature set, allows us to differentiate ourselves from the rest of our competition. We had great success in the year in adding 17 total new licensees in 2024 and expect strong new logo acquisitions in the year ahead. The software solution segment of the business also continued to see strong traction in our international efforts, as well, where we saw a 39% organic increase in our international revenues, mainly concentrated in the European Union, Australia, and our first new licensee in Africa. Our telecom services retail segment grew at 7% organically.

Doug: Our unique pricing and support model for our software solutions platform combined with our robust feature set it allows us to differentiate ourselves from the rest of our competition.

Doug: Had great success in the year, and adding 17 total new license fees in 2024, and expect strong new logo acquisitions in the year ahead.

Doug: The software solutions segment of the business also continued to see strong traction in our international effort as well, where we saw a 39% organic increase in our international revenues, mainly concentrated in the European Union, Australia, and our first new licensee in Africa.

Doug: Our telecom services retail segment grew at 7% organically, we saw strong growth demand for our offerings from our channel partners and saw 18% growth in our sales for the year from our Master agent technology services distributors.

Douglas Gaylor: We saw strong growth demand for our offerings from our channel partners and saw an 18% growth in our sales for the year from our master agent technology services. General partner resellers sell our services to their prospects and customers on a revenue share basis, and we saw exciting growth from our existing general partners. In addition, we successfully added 24 new resellers to the program over the course of the year. These channel partner resellers and agents have great confidence representing our Crescendo VIP offering because of our 100% uptime guarantee, combined with our best in class customer service, customer satisfaction results, which Crescendo consistently ranks number one.

Doug: I will partner reseller seller services to their prospects and customers on a revenue share basis, and we saw exciting growth from our existing channel partners. In addition, we successfully added 24, new resellers to the program over the course of the year. These.

These general partner of resellers and agents have great confidence, representing our crescendo VIP offering because of our 100% uptime guarantee combined with our best in class customer service and customer satisfaction results, which crescendo consistently ranks number one.

Douglas Gaylor: 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. Our remaining performance obligation, also referred to as backlog, continues to grow and at the end of the year is now at 85.6 million, and that's an increase of 34% from the end of 2023. Our remaining performance obligation, or backlog, is the sum of the remaining contract values of our telecom services and software solutions customers that will be recognized on a sliding scale over the next 60 months, and it's a very strong indicator of our future revenue stream.

Doug: 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.

Doug: Our remaining performance obligation also referred to as backlog continues to grow and at the end of the year is now at $85 6 million and Thats, an increase of 34% from the end of 2023.

Doug: Our remaining performance obligation or backlog is the some of the remaining contract values of our telecom services and software solutions customers that will be recognized on a sliding scale over the next 60 months and it's a very strong indicator of our future revenue stream.

Douglas Gaylor: Of that 85 million that's still in our remaining performance obligation, 38.5 million is currently slated to be recognized in 2025. We continue to focus on improving our gross margins, as Ron mentioned, which is beginning to show success as we saw increases across the board. Those consolidated gross margins increasing from 59 to 62% is a great increase for us. Our software solution segment margins improved from 69% to 71% for the year, and our telecom service segment gross margins improved to 59%, which continue to be affected by lower margins from our acquired MSP offerings. We're confident that we will continue to see gross margin improvements in the year ahead.

Doug: Of that $85 million is still in our remaining performance obligation $38 5 million is currently slated to be recognized in 2025.

Doug: We continue to focus on improving our gross margins as Ron mentioned, which is beginning to show success as we saw increases across the board those consolidated gross margins increasing from 59% to 62%.

Doug: Great to increase for US our software solutions segment margins improved from 69% to 71% for the year and our Telecom service segment gross margins improved to 59%, which continue to be affected by lower margins from our acquired MSP offerings. We're confident that we will continue to see gross margin improvements in the year ahead.

Douglas Gaylor: Crexendo's amazing engineering team continues to add to and improve our award-winning technology. We were ranked by G2.com, which is the premier business software and services review site, as the number one easiest-to-use solution in the hosted telecom sector for the winter of 2025 category. Crexendo was also honored in 2024 with the Unified Communications Excellence Award, the Generative AI Expo Product of the Year Award, and Internet Telephony's Product of the Year Award, further highlighting the strength of our platform and of our products. In addition, we recently released our version 44.2 software to great reviews. Our new software offering introduces a suite of groundbreaking AI features at its core, enabling users to create, engage, and analyze business communications effectively, efficiently, and affordably using artificial intelligence.

Speaker Change: Crescendo is amazing engineering team continues to add to and improve our award winning technology. We were ranked by <unk> Dot Com, which is the premier business software and services review site as the number one easiest to use solution in the hosted telecom sector for the winter of 2025 category.

Speaker Change: Crescendo was also honored in 2024 with the Unified Communications Excellence Award the generative AI Expo product of the year Award and Internet telephony product of the year Award further highlighting the strength of our platform and have our products. In addition, we recently released our version of $44 two software to great reviews.

Speaker Change: Our new software offerings introduces a sweep of groundbreaking AI features at its core enabling users to create engaged and analyze this is communications effectively efficiently and affordably using artificial intelligence.

Douglas Gaylor: We currently have a variety of AI solutions available for end users, including our contact center AI that's powered by chat and GPT that enables the system to interact and answer commonly posed questions using AI without the need for a live body. We also have AI powered call recording solutions with summary analysis and sentiment analysis that not only records conversations, but can provide summaries and sentiment analysis immediately with any and all calls. And our new NetSapiens video AI studio that offers service providers and advanced AI driven video conferencing solution with call summation and analytics.

Speaker Change: We currently have a variety of AI solutions available for end users, including our contact center AI. That's powered by jet GPT that enables the system to interact and answered commonly pose questions using AI without the need for a live body. We also have AI powered call recording solutions with summary analysis.

Speaker Change: And sentiment analysis did not when we recorded conversations.

Speaker Change: But can provide summary, and sentiment analysis immediately with any and all.

Speaker Change: <unk> and our new net sapiens video AI studio that offers service providers and advanced AI, driven video conferencing solution with call summation and analytics.

Douglas Gaylor: As we start 2025, I couldn't be more excited about the future direction and opportunity for Crexendo. Over the past three years, we have more than doubled our revenue while improving our bottom line significantly. and have now posted six consecutive quarters of Gap Profitability. We are positioned perfectly with the combination of strong demand for our product offerings, along with great solutions and a very disruptive pricing model and the best and most talented workforce in the industry to continue our strong growth and our success. We are committed to delivering the best UCAS, CCAS and CPAS offerings in the sector to our customers and our partners and the best returns for our shareholders.

Speaker Change: As we start 2025, I couldnt be more excited about the future direction and opportunity for crescendo over the past three years, we have more than doubled our revenue while improving our bottom line significantly and have now posted six consecutive quarters of GAAP profitability, we're positioned perfectly with the combination of strong demand for our product offerings along with <unk>.

Speaker Change: <unk> solutions and <unk>.

Speaker Change: Very disruptive pricing model and the best and most talented workforce in the industry to continue our strong growth and our success, we are committed to delivering the best Ucas.

Speaker Change: And C pass offerings in the sector to our customers and our partners and the best returns to our shareholders as the fastest growing platform solution in the country supporting over 5 million end users. We are focused on enhancing our solutions, improving our efficiencies and continuing to return strong results with that I'll now turn it back over to <unk>.

Douglas Gaylor: As the fastest growing platform solution in the country, supporting over five million end users, we are focused on enhancing our solutions, improving our efficiencies, and continuing to return strong results.

Jeffrey Korn: With that, I'll now turn it back over to Jeff for any further comments. Thank you, Doug.

Speaker Change: <unk> for any further comments.

Speaker Change: Thank you Doug I actually don't have any further comments at this time, so John we will open the call up to questions.

Jon Brinton: I actually don't have any further comments at this time, so Jon, we'll open the call up to questions. Absolutely.

Operator: At this time, we will be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.

Speaker Change: Absolutely at this time, we will be conducting a question and answer session. If you would like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question queue. You May press star two to remove your question from the queue for participants using speaker equipment. It may be necessary to pick up your handset before pressing the star keys.

Operator: One moment, please, while we poll for questions. Once again, please press star 1 if you have a question or a comment.

Speaker Change: One moment, please while we poll for questions. Once again, please press star one if you have a question or comment.

Jesse Sobelson: The first question comes from Jesse Sobelson with The Boro Capital. Please proceed. Jesse, how are you doing today? Hey, guys, I'm good. But I think you guys might be doing better. Great quarter. Good to see the success here. Yeah, um, you know, I wanted to point out and highlight, you know, I see cash reserves here, you know, they've almost doubled versus last year at 18 million or so.

First question comes from Jesse <unk> with <unk> capital. Please proceed hi, Jeremy how are you doing today.

Speaker Change: Hey, guys I'm good.

Jesse: I think you guys might be doing better great quarter.

Speaker Change: Good to see the success here.

Speaker Change: Yes.

Speaker Change: As you point out and highlight.

Speaker Change: I assume cash reserves here, they've almost doubled versus last year at $18 million or so.

Jeffrey Korn: What are the priorities for capital allocation right now is Crescendo evaluating acquisitions to bolster its AI capabilities? Or are you still just focused on expanding your telecom services footprint? And, you know, alternatively, I'm just curious, you know, will capital be more directed towards R&D or potentially, you know, you can give that back to shareholders through maybe share repurchase? and Jesse. All of those things are on the table, to be perfectly honest. We look at acquisitions regularly, primarily in our state. Over the last year to year and a half, there has been a very wide delta between what sellers and buyers believe UCAS companies are worth.

Speaker Change: What are the priorities for capital allocation right now is a crescendo evaluating acquisitions to bolster its AI capabilities are you.

Speaker Change: Still just focused on expanding your telecom services footprint and Alternatively I'm just curious.

Speaker Change: Capital be more directed towards R&D or potentially.

Speaker Change: If you can give it back to shareholders through maybe share repurchases. Thanks.

Speaker Change: Adjusting for all of them all.

Speaker Change: All of those things are on the table to be perfectly honest.

Speaker Change: We look at acquisitions regularly primarily in our in our space.

Speaker Change: Over the last year to year, and a half where has been a very wide delta between what sellers and buyers believe ucas companies all work.

Speaker Change: Tom.

Jeffrey Korn: on the smaller companies. On the larger ones, it makes some sense. The Delta seems to be moderating and is getting closer to the value that we believe it is compared to the value that we get on Wall Street. So that is on the table. An AI company, if the right one came along and was small enough to be on the table, we would not invest. We probably would not buy a huge AI Share repurchase if the market begins to deteriorate would be something we're interested in because we know the value of this company. We think it's undervalued at current and if the market were to continue to be under pressure that would be something we would look at swaddling.

Speaker Change: On the smaller companies on the larger ones.

Speaker Change: Some says the delta seems to be moderating and is getting closer to the value that we believe it is compared to the value that we get on wall Street. So that is on the table and AI company. If the right. One came along there are small enough to be on the table, we would not invest.

Speaker Change: We probably would not have huge AI company.

Speaker Change: Share repurchase as the market begins to.

Speaker Change: Deteriorate would be something we're interested in because we know the value of this company. We think it's undervalued at current and if the market were to continue to be under pressure that will be something we would look at swaddling.

Jesse Sobelson: But all of those uses are on the table, Jesse. Great, great. And then, great to hear it.

Speaker Change: But all of those users are on the table Jesse.

Jesse: Alright, great and then.

Jesse Sobelson: And just switching gears slightly, and then I'll talk back into Q, but one big one for me is just, you know, you highlighted Cisco, Microsoft's, you know, reduced focus on certain cloud communication segments for their strategies.

Jesse: Great to hear and then just switching gears slightly.

Jesse: And then I will hop back in the queue, but one big one for me is just you highlighted Cisco, Microsoft and a reduced focus on certain cloud communications segments for further.

Jeffrey Korn: Could you potentially quantify the number of clients that migrated from these competitors in the quarter, or at least elaborate on what the onboarding process has been like? And that's it for me.

Jesse: Strategies could you potentially quantify the number of clients that migrated from these competitors in the quarter or at least I'll elaborate on what the Onboarding process has been like.

Jesse: Yes.

Jesse: Thats It from me.

Douglas Gaylor: Do you want to take that? Sure. As I mentioned, for the year, we brought over seven Microsoft Metaswitch licensees and three Cisco Broadsoft licensees. The evaluation timeframe for these licensees to switch platforms, you know, sometimes can be a matter of months, sometimes can be a matter of years. It just depends on where they're at in their evaluation cycle. But we see a very, very full pipeline of opportunities. And as I mentioned, it's mainly because the two largest performers in that area, Cisco that bought Broadsoft six years ago, and Microsoft that bought Metaswitch four years ago, have been pretty disruptive in not being able to fulfill the needs of their licensees out there.

Jesse: Yes.

Speaker Change: Sure as I mentioned for the year, we brought over seven Microsoft meta switch licensees and three Cisco Broadsoft licensees. The evaluation time frame for these licensees to switch platforms.

Speaker Change: Sometimes can be a matter of months, sometimes can be a matter of years. It just depends on where they're at their evaluation cycle, but we see a very very full pipeline of opportunities and as I mentioned, it's mainly because the two largest performers in that area of Cisco that by Broadsoft six years ago, and Microsoft about minus which four years ago.

Speaker Change: Pretty disruptive and not being able to fulfill the needs of their licensees out there.

Douglas Gaylor: So, those licensees, and we estimate that between Cisco and Microsoft, there's probably close to about 2,000 licensees out there using either platform. And so, we estimate that, you know, over time, if those licensees are looking for another alternative, Crescendo is the best alternative for them. So, we're extremely excited about the disruption that they're creating, and that's creating a tremendous opportunity for us. In terms of what those licensees are worth to us, I think for the year, the average software solutions licensee came in close to half a million dollars, about $475,000 per licensee in what total contract value capability they've got with us.

Speaker Change: So those licensees and we estimate that between Cisco and Microsoft There is probably close to about 2000 licensees out there using either platform and so we estimate that over time.

Speaker Change: Those licensees are looking for another alternative crescendo is the best alternative for them. So we're extremely excited about the disruption that they're creating and thats, creating a tremendous opportunity for us in terms of what those licensees are worth to us I think for the year. The average software solutions licensee came in close to <unk>.

Speaker Change: $7 million about $475000 per licensee.

Speaker Change: Total contract value capability, they've got with us, but some of these are smaller in some of these are larger so as we look at the opportunities out there I don't have the exact numbers for each Microsoft <unk> licensee or Cisco licensee, but these are very large opportunities for us and when we see them coming over they are very sticky customers our churn on the software.

Douglas Gaylor: But some of these are smaller, and some of these are larger. So, as we look at the opportunities out there, I don't have an exact number for each Microsoft Metaswitch licensee or Cisco licensee, but these are very large opportunities for us. And when we see them coming over, they're very sticky customers. Our churn on the software solution side is negligible. So, when we look at these licensees, when they come over to us, they're typically with us forever and ever.

Speaker Change: <unk> side. It is negligible. So when we look at these licensees when they come over to us theyre typically with us forever and ever.

Jesse Sobelson: Great. Thanks for the detail there. And congrats on your quote again. Thank you.

Speaker Change: Great. Thanks for the detail there.

Speaker Change: And congrats on the quarter them.

Speaker Change: Thank you Jesse.

Mike Latimore: The next question comes from Mike Latimore with Northwind Capital. Please proceed. Hi Mike, how are you doing this afternoon? Hey, great, great. How are you? We're great. Thank you.

The next question comes from Mike Latimore with Northland Capital. Please proceed.

Mike: Hi, Mike how are you doing this afternoon.

Speaker Change: Hey, great Great how are you.

Speaker Change: Great. Thank you.

Mike Latimore: Congrats on the strong quarter and a year here. That's good. I guess just sticking with the Metaswitch topic, you know, that announced acquisition occurred. Did you see any change in, you know, sales cycles because of that, you know, as it relates to Microsoft Metaswitch, you know, customers? You know, did they, you know, maybe accelerate the sessions with you? Do they, you know, extend it a little bit because, you know, they're just trying to figure things out here? Or like, how's that sales cycle looking for Microsoft?

Speaker Change: Congrats on the strong.

Speaker Change: At quarter end, a year and that's good.

Speaker Change: I guess just sticking with the <unk>.

Speaker Change: <unk> topic.

Sure.

Speaker Change: <unk> announced acquisition occurred did you see any change in.

Speaker Change: Sales cycles.

Speaker Change: As it relates to Microstat meta switch.

Speaker Change: <unk>.

Speaker Change: Yes, it did.

Speaker Change: Maybe to accelerate discussions with you.

Speaker Change: <unk> extended a little bit because.

Speaker Change: They're just trying to figure things out here.

Speaker Change: Or was that sales cycle looking for Microsoft partners.

Jeffrey Korn: Mike, it's all over the place. Some people are looking a little more quickly because they're concerned. Some people are taking a little more time to see what's going to happen. But as both Doug and I mentioned in our prepared remarks, disruption in the industry plays to our advantage, and this is a huge disruption. So we think even the people who are sitting and waiting to see what will happen will still take a good, hard look at us, and we are convinced that we will win our good and substantial share of these customers. Yeah, I think the reality is the platform hasn't been improved or worked on much.

Speaker Change: Mike It's all over the place some people are looking a little more quickly, let's say are concerned some people are taking a little more time to see what's going to happen, but as both Doug and I mentioned in our prepared remarks.

Speaker Change: Disruption in the industry plays to our advantage and this is is a huge disruption.

Speaker Change: So we think even the people who are sitting and waiting to see what will happen will still take a good hard look at us and we are convinced that we will win our.

Speaker Change: <unk> substantial share of these customers yeah, I think the reality is.

Speaker Change: Our platform hasn't been <unk>.

Speaker Change: Proved or worked out much Microsoft two laid up almost half of the minister of staff over the course of the last year and a half and so the fact that it was announced as end of life. They reel that back when they announced the sale of the division, but when you start developing a product in the <unk> end of life of product in the to bring it back to life and as you sell it up.

Douglas Gaylor: Microsoft had laid off almost half of the Metaswitch staff over the course of the last year and a half. And so the fact that it was announced as end of life, they reeled that back when they announced the sale of the division. But when you stop developing a product and you end of life a product and then you bring it back to life and then you sell it off, that creates a lot of fear, uncertainty and doubt in the licensees minds out there. And as Jeff said, that just creates opportunity for us. So as Jeff said, it is all across the board, but we're anticipating a lot of traffic and a lot of opportunity created from that activity.

Speaker Change: Creates a lot of fear uncertainty and doubt and the licensees mindset, there and as Jeff said that just creates opportunity for us.

Speaker Change: As Jeff said it is all across the board, but we're anticipating a lot of traffic and a lot of opportunity created from that acquisition.

Mike Latimore: Very great.

Speaker Change: Okay great.

Mike Latimore: And in terms of I know you've added some tools to improve that. Can you talk a little bit about just kind of, you know, that Onboarding process, and if you can quantify, you know, how that's changed over the past year, that'd be interesting too. Our scripts continue to improve, Mike, and we have scripts to move various types of customers. I mean, every customer is a little bit different, and we have a really great engineering team that can work on it. And as we discussed earlier, our model of sessions, not seats, really allows us an advantage because it's a great way to cap and grow and move onto our platform as you wish to progress at your own speed.

Speaker Change: And in terms of.

Speaker Change: Yes.

Speaker Change: Hi, migrating customers you won meta switch broadsoft too.

Speaker Change: I know you've added some tools to improve that can you talk a little bit about just kind of that.

Speaker Change: Onboarding process and if you can quantify.

Speaker Change: How that's changed over the past year that'd be interesting too.

Speaker Change: Our hearts are our scripts continue to improve Mike and we have scripts to move.

Speaker Change: <unk> customers every customer is a little bit different and we have a really great engineering team that.

Speaker Change: Can work on it and as we discussed earlier our model of.

Speaker Change: Sessions not seats really allows us an advantage because it is a great way to cap and grow and move onto our platform.

Speaker Change: If you wish to progress at your own speed. So all of that plays to our advantage.

Eric Martinuzzi: So all of that plays to our advantage. Yeah, yeah, that's good. Okay. Great. Thanks a lot. Looks good. Thank you all. Thanks, Eric.

Speaker Change: Yes, yes, okay.

Great. Thanks, so looks good.

Speaker Change: Thanks Peter.

Eric Martinuzzi: The next question comes from Eric Martinuzzi with Lake Street. Please proceed. Good afternoon, Eric. Yeah, the software solutions business there being up 30% just really on fire this year. I was curious to know if there were any 7-figure transactions in the year for software solutions. I know you said the average deal was around $475,000.

Speaker Change: The next question comes from Eric Martin Newsy with Lake Street. Please proceed.

Eric Martin: Good afternoon, Eric software.

Eric Martin: Software solutions business being up 30% just really on fire this year.

Eric Martin: <unk>.

Speaker Change: Was curious to know if there were any seven figure transactions in the year for software solutions. I know you said the average deal was around 475000.

Eric Martinuzzi: I don't believe so, but I'll defer to Ronald on that. This is Jon, and we did have some when you look at the total contract value over the life of the licensee that were seven-figure transactions, so that is a little bit more of an outlier, but there were a couple of those in the year, and that generally is true every year, so that's not materially debatable. Gotcha. All right.

Speaker Change: I don't believe southern ill defer to Ron on that.

John: Yes. This is John and ill, though we did have some when you look at the total contract value over the life of the license fee.

John: We're seven figure transactions so that's there.

John: It's a little bit more of an outlier, but there were a couple of those in the year and then generally is through every year. So it's not materially different than the past.

Speaker Change: Gotcha Alright.

Eric Martinuzzi: And then, as I look out to my own model, the expectations for this year, you know, you guys had talked about a double-digit growth trajectory for 2025. That's kind of where the street is right now. What do you expect as far as what you do with that 10% growth? Are we talking about relatively flat on the adjusted EBITDA versus the $8 million or so that you did in 2024? Or would you look to increase the profit? Yeah, we've always talked about reinvesting, but we also like to grow the bottom line at the same time. And so we expect some improvement to continue on the adjusted EBITDA margins as well.

Speaker Change: Alright, and then as I look out to my own model the expectations for this year.

Speaker Change: You guys had talked about a double digit growth trajectory for 2025.

Speaker Change: That's kind of where the street is right now.

Speaker Change: What do you expect as far as what you do with that 10% growth that we're talking about relatively flat on the adjusted EBITDA versus the eight 8 million or so that you did in 2024 or would you look to increase the profit.

Speaker Change: Ron.

Speaker Change: Yes, we've always talked about reinvesting that we also like to grow the bottom line at the same time until we expect.

Speaker Change: The improvement to continue on the adjusted EBITDA margins as well.

Speaker Change: Okay.

Eric Martinuzzi: I did see the Metaswitch acquisition actually closed today. Alianza, as far as them as a competitor, it looks like they're talking about offering a quote-unquote modernized service to the 1,000 service providers that they now have access to in that Metaswitch install base. Have you heard any chatter about whether that means kind of a forced migration or is it they're going to support legacy as well as the more modern? Eric, we've heard some rumors that there's going to be a forced migration, but you know as much as we do. Okay, well, congrats on the year.

Speaker Change: Great and then.

Speaker Change: It did save the meta switch acquisition actually closed today.

Speaker Change: Ali.

Speaker Change: As far as them as a competitor it looks like Theyre talking about offering a quote unquote modernized service to the 1000 service providers that they now have access to medicine, which installed base.

Have you heard any chatter about whether that means kind of a forced migration or is it theyre going to support legacy as well as.

Speaker Change: The more modern.

Speaker Change: Okay. So Eric we heard some rumors that there's going to be a forced migration that you know as much as we did.

Speaker Change: Got it.

Speaker Change: Okay, well congrats on the year.

Speaker Change: Thanks, Eric.

Tim Horan: The next question comes from Tim Horan with Oppenheimer. Please proceed. Hi guys.

Speaker Change: The next question comes from Tim Horan with Oppenheimer. Please proceed.

Tim Horan: Good afternoon Scott.

Tim Horan: Alonzo, how does your product kind of compare to theirs, you know, the full suite of offerings or any kind of color on that would be great. I'm going to let Anand answer that. I'm going to tell you ours is better, but I know you're going to expect me to say that, but I'll let Anand get to the work he did. Thanks, Jeff. Yeah, so let me touch on it a couple different ways. Allianz's focus historically has been on the residential markets and not necessarily kind of next-generation UCAS. As Jeff has said before, too, certainly not one to kind of bash on the competition, if you will, but I think that's an area that they have focused on historically because we saw them head-to-head in some of these markets where for next-generation business applications, even over the last 10, 15 years, that's actually where the big disparity comes, right?

Hi, guys.

Tim Horan: Alejandro.

Tim Horan: You caught up on a compared to their full suite of offerings or any kind of color on that would be great.

Tim Horan: I'll go on and answer that I'm going to tell you ours is better, but I know youre going to expect me to say that but all in all it gets worthy desks.

Tim Horan: Thanks, Jeff Yes, so so let me touch on a couple of different ways all around us focus historically.

Tim Horan: He has been on our residential mortgage and.

Speaker Change: You are kind of next generation Ucas.

Speaker Change: And as Jeff has said before to certainly not wanted to cut back on the competition. If you will.

Speaker Change: But I think thats an area that they had focused on historically because we saw then.

Speaker Change: Head to head in some of these markets where for next generation business applications, even over the last 10 15 years.

Speaker Change: That's actually where.

Speaker Change: The big disparity cards right. So we don't see an overlap in that respect.

Anand Buch: So we don't see an overlap in that respect. And then like Doug and Jeff spoke about, I think the Metaswitch acquisition for them, because it was done when it was done, I think there's a lot of catch-up to be done. So I think we don't know, as Jeff pointed out, we know as much as you guys know about that, but in terms of the markets we plan, we're very much more focused on the business and the enterprise market relative to that. And, Tim, I will add that I can tell you from personal experience, it is very expensive and difficult to maintain multiple platforms. And at some point, you probably have to zigger that.

Mike: And then Mike.

Mike: Like Doug and Jeff spoke about I think the Medisoft acquisition.

Mike: For them.

Speaker Change: Because it was done when it was done I think there's a lot of catch up to be done. So I think we don't know as Jeff pointed out we know as much as you guys know about that but in terms of the mortgage we plan. We're very much more focused on the business in the enterprise market relative to the.

Speaker Change: I will add that I can tell you from personal experience it is very expensive.

Speaker Change: And it's difficult to maintain multiple platforms and at some point, we probably have more vigorous at.

Anand Buch: and maybe just the relative size. of where you're at now versus Alianza on a legacy basis. Do you have a sense of that? We honestly don't have a point of comparison. As you understand, Alianza is private, so it doesn't have to release results. Metaswitch was not material to Microsoft, so we don't have any actual numbers. We have some estimates, which I'll let Doug talk to, if he knows. It's not. We'll just go on. Yeah, I'm not comfortable. Again, as we described, we just don't know, all we know is it was private and that switch was not material to Microsoft.

Speaker Change: And maybe just relative size.

Speaker Change: Where are you at now versus Ali Hamzah on a legacy basis.

Speaker Change: <unk>.

Speaker Change: We honestly don't have a point of comparison as you understand Alibaba as private so it doesn't have to release results.

Speaker Change: Meta switch was not material.

Speaker Change: Material to Microsoft So we don't have any actual numbers, we have some estimates, which I'll, let Doug talk to us he knows it's not.

Speaker Change: We will just gone yes.

Speaker Change: Im not comfortable.

So again as we described we just don't help us Ali Agha, private and Medicare, which was not material Microsoft So we'd just be guessing.

Anand Buch: So we'll just be guessing.

Tim Horan: And can you maybe just at a high level, you know, what percentage of legacy service provider lines, you think have kind of, you know, moved over to offerings like yourself and cloudware, where do you think we're in the process? And related to that, do you have a sense of what's going on with ARPU, both at the end user level and at the wholesale level? I know you said Cisco's raising prices. You know, any trends on both of those would be great. Yeah, so on the legacy, was that a question on the retail side? Or is that more on the wholesale?

Speaker Change: And can you maybe just at a high level what percentage of.

Speaker Change: Okay.

Speaker Change: Legacy service provider lines, you think you've kind of moved over to offerings like yourself.

Speaker Change: Where do you think we are in the process and.

Speaker Change: And related to that do you have a sense of what's going on with <unk> bolt on all that.

Speaker Change: The end user level and at the wholesale level I know you said fiscal is raising prices.

Speaker Change: Any trends on both of those would be great.

Speaker Change: Yes. So on the legacy was had a question on the retail side or is it more on the wholesale side.

Douglas Gaylor: On the retail side, the estimates still show that probably around 40% of the businesses out there are not on the cloud for their communications today. And that number is fast shrinking. And so if you look at Gartner's reports and other reports out there, it shows that within the next two to three years, that number will be down probably close to the single digit. So we still see great adoption. My comment is always that if you're not on the cloud today, it's not a matter of if you move, it's when you move. And so those businesses are still migrating over.

Speaker Change: On both.

Speaker Change: Okay on the retail side, the estimates still show that probably around 40% of the business is out there and not on the cloud for their communications today and that number is fast shrinking and so if you look at Gartner reports and other reports out there. It shows that within the next two to three years that number will be down probably closer to single digits.

Speaker Change: We still see great adoption might.

Speaker Change: My comments there is always that if youre not on the cloud today, it's not a matter of AC move it's when you move and so those businesses are still migrating over Avaya, just announced that they're going to basically abandoned the SME market didn't really concentrate on the enterprise market. So thats going to give more emphasis for the small and midsize folks that are hanging on to their leg.

Douglas Gaylor: Avaya just announced that they're going to basically abandon the SME market and really concentrate on the enterprise market. So that's going to give more emphasis for these small and mid-sized folks that are hanging on to their legacy systems to move over. Mitel continues to have challenges out there. So those are the two largest legacy platform or premise-based providers out there. And so we still see there's tremendous opportunity on the retail side for these legacy customers to move to the cloud. And we're going to be the ones to take advantage of that. You want to talk about it?

Speaker Change: <unk> system to move over Mitel continues to have challenges out there. So those are the two largest legacy platform.

Speaker Change: Premise based providers out there and so we still see that there is tremendous opportunity on the retail side for these legacy customers to move to the cloud and we're going to be the ones to take advantage of that.

Speaker Change: When we talk about.

Douglas Gaylor: Yeah, I mean pricing of the ARPU, you know, side both of wholesale and at the end user. Yeah. So, on the retail side, on revenue per user, you know, our revenue per user has been pretty consistent around that $20 range. I don't know if Ron's got the exact updated number, but, you know, it's been pretty consistent around $20 per user. And it's because we continue to add more features and enhancements and capabilities into that price point. So, instead of lowering the price and then charging extra for feature enhancements, we just continue to add those features into our standard offering license.

Speaker Change: Yes on the pricing of the ERP side, both at wholesale and at the end user level.

Speaker Change: Yes, so on the on the retail side on the revenue per user or <unk>.

Speaker Change: The per user has been.

Speaker Change: Pretty consistent around that $20 range of Ron's got the exact updated number but it's been pretty consistent around $20 per user and it's because we continue to add more features and enhancements and capabilities into that price point. So instead of lowering the price and then charging extra for feature enhancements.

Speaker Change: Continue to add those features into our standard offering license. So for example.

Douglas Gaylor: So, for example, AI Studio is one of the applications that we've got today. We offer that as a standard offering. and at the wholesale level. On the wholesale level, we do that on more of an average revenue per session as opposed to an average revenue per user, but our average licensee today is paying us almost $6,000 a month on a consistent basis. And so when we look at that, that's our average revenue per account on the licensee side. On the user side, it's more of an average price per session as opposed to an average price per user because our licensees aggregate that.

Speaker Change: AI studio is one of the applications that we've got today, we offer that as a standard offering.

Speaker Change: <unk>.

Speaker Change: And at the wholesale level.

Speaker Change: On the wholesale level or average.

Speaker Change: We do that as more of a average revenue per session as opposed to an average revenue per user, but our average licensee today is paying us almost $6000 a month on a consistent basis and so when we look at that that's our average revenue per account on the licensees.

Speaker Change: Syed on the user side, it's more of a average price per session as opposed to an average price per user because our licensees aggregate that they buy from us on a session basis and then they may charge the end user on a seat basis, but our pricing to the licensees is <unk>.

Douglas Gaylor: They buy it from us on a session basis, and then they may charge the end user on a seat basis, but our pricing to the licensees is based on concurrent calls or sessions, not on actual seats. And so it's hard for us to get an actual average revenue per user on the wholesale side, but we can give you the average revenue per user for the licensees, and that's upwards of about $57,000 to $6,000. $6,200. $6,200 per licensee. With Cisco raising prices, I mean, can you raise prices also? Yeah, so we've, you know, when we see Cisco and Microsoft raising their prices out there, you know, that puts those licensees in a bind.

Speaker Change: <unk> concurrent calls our sessions not on actual seats and so it's hard for us to get it.

Speaker Change: Average revenue per user on the wholesale side, but we can give you the average revenue per user for the licensees and thats upwards of about.

Speaker Change: 57% to 6066 to 200 6200 per license.

Speaker Change: Got it.

Speaker Change: With Cisco raising prices I mean can you raise prices also.

Speaker Change: Yes, so when.

Speaker Change: When we see Cisco and Microsoft raising their prices out there that puts those licensees in a bind we have had price increases, but we've got a very tight community of licensees out there they have they have contracts and those contracts.

Douglas Gaylor: We have had price increases, but, you know, we've got a very tight community of licensees out there. They have contracts, and those contracts, you know, we can't raise those contracts when they're under a set fee. But we have had some additional cost increases over the last year or two. And so that is something that's fairly consistent. So I think we're keeping track of that. And, you know, we know that as we need to reinvest back in the platform and put more money into research and development, you know, our licensees understand that that's going to come at a cost.

Speaker Change: We can't raise those contracts and they are under under a fixed fee, but we have had some additional cost increases over the last year or two and so that is something thats fairly consistent so I think we're keeping track of that.

Speaker Change: We know that we need to reinvest back into the platform and put more money into research and development. Our licensees understand that that's going to come at a cost and so when we do have a cost increase it's always be put back into the platform.

Anand Buch: And so when we do have a cost increase, it's always being put back into the platform.

Anand Buch: Thank you. Yeah, and actually to add to Doug, Tim, this is on, and I think one of the key points here that was mentioned as well, and I think Doug brought this up, is the business model that we go to our wholesale providers is actually a big differentiator. And I think Jeff has pointed this out as well. That's actually what drives the underlying growth, extensibility of the platform so that providers can actually build products in their own image and differentiate in the space. That's a clear advantage against the likes of Alianza and Microsoft in the past, and Cisco, for example, who are really trying to drive towards their own brand.

Speaker Change: Thank you.

Speaker Change: Actually it doesn't add to Doug.

Tim Horan: Tim This is on and I think one of the key points here that was.

Tim Horan: It was mentioned as well and I think Doug brought this up is the business model as we go to our wholesale providers.

Tim Horan: Actually a big differentiator and I think Jeff has pointed out.

Tim Horan: Well, that's actually what's driving the underlying growth extensibility of the platform. So that providers can actually build products in their own niche and differentiate in the space.

Tim Horan: That's a clear advantage.

Tim Horan: <unk>.

Tim Horan: And Microsoft in the past and Cisco for example, or really trying to drive towards their own brands. So as the market to what Jeff is saying in terms of expanding market share.

Anand Buch: So in the market, to what Jeff is saying in terms of expanding market share, those are the biggest differentiating drivers as well as an extensible platform that folks can actually build in their own image that also can be deployed based on their choice, whether it's in their facility, whether it's in the cloud.

Tim Horan: Those are the biggest differentiating drivers as well as an extensible platform that folks can actually build in their own image that also can be deployed.

Tim Horan: Based on their choice, whether it's in their facility whether it's in the cloud.

Tim Horan: Well, and it sounds like you're really well positioned to gain market share. So sounds like the time to do that. And thank Thank you. Bye. Once again, if there are any remaining questions, please press star 1 on your touchtone phone.

Speaker Change: And it sounds like you're really well positioned to gain market share. So it sounds like the time to do that thank you.

Kevin: Thank you Kevin.

Speaker Change: Once again, if there are any remaining questions. Please press star one on your Touchtone phone. The next question comes from Matthew Moss from B Riley Securities. Please proceed hi.

Matthew Maas: The next question comes from Matthew Maas from B Riley Securities. Please proceed. Hi Matthew, how are you doing this afternoon? Hi, hi, I'm great. I'm filling in for Josh Nichols.

Speaker Change: Matthew how are you doing this afternoon.

Matthew Moss: Hi, Hi, I'm, great I'm filling in for Josh Nichols.

Matthew Maas: So in terms of my, yeah, in terms of my first question, I was just wondering, you know, given the strong software growth, I was wondering how much of that you credit to the sun setting of Metaswitch versus international growth and how you see that momentum playing out for this year and beyond. International growth has been strong, Matthew. It's still just barely material to us. I think it's just about 5% run. I see the growth internationally continuing to grow because there's frankly less competition and there was a distrust of Microsoft quite a bit in Europe. How that will play with Alianza, I don't know, but I think it will continue to play to our we will be fighting for every single service provider in the United States.

Speaker Change: So in terms of life.

Speaker Change: So this is my first question I was just wondering.

Speaker Change: Given the strong software growth.

Speaker Change: I was wondering how much of that you credit to the sunsetting of managed switch versus international growth and how you see that momentum play out for this year and beyond.

Matthew Moss: International growth has been strong Matthew.

Matthew Moss: Still just barely material to us I think it's just about 5%.

Matthew Moss: Sure.

I think the growth internationally continuing to grow because there's frankly less competition and there is a there was a distrust that Microsoft quite a bit in Europe.

Matthew Moss: How that will play with the only answer I don't know, but I think it will continue to play to our advantage and so.

Matthew Moss: Continued substantial growth in Europe.

Matthew Moss: Wow.

Matthew Moss: We'll be fighting for every single service provider in the United States.

Matthew Maas: Got it.

Matthew Moss: Got it. Thank you and then you mentioned that for the legacy.

Matthew Maas: Thank you.

Matthew Maas: And then you mentioned that for the legacy, for the data center closing, I think you mentioned that being for the year end. And I'm pretty sure previously you mentioned you were expecting about 100 to 150 basis points of savings on that. So I'm wondering, do you think most of that will offset some of the new hires you've been deferring? Or what do you expect that net effect to be going into the end of 2025 and 2026? Well, it's bifurcated, Matthew. I mean, some of that will be reinvested in the business as we regularly reinvested over the last six quarters while remaining profitable.

Matthew Moss: So the data center closing I think you mentioned that being for the year end and I'm pretty sure. Previously you mentioned you were expecting about 100 to 150 basis points of savings on that so I'm wondering do you think most of that will offset some of the new hires you've been differing or what do you expect that net effect to be going into the end of <unk>.

Matthew Moss: Slide 25 and 26.

Matthew Moss: Its bifurcated Matthew I mean, some of that will be reinvested in the business as we regularly reinvest every regularly reinvested over the last six quarters, while remaining profitable.

Jeffrey Korn: Many of those savings will go to the bottom line. And we'll have the advantage of having engineers and other support people who are working on those things who we can then move to other departments where we won't have to do additional hires. So I expect to see some substantial improvement from the savings showing into 2026.

Matthew Moss: Many of those savings will go to the bottom line.

Matthew Moss: And we will have the advantage of having.

Matthew Moss: Engineers and other support people, who are working on those things, but we can then move to other departments, where we won't have to do additional hires so.

Matthew Moss: Expect to see some substantial improvement from.

Matthew Moss: From the savings showing into 2020.

Matthew Maas: Awesome, great.

Speaker Change: Awesome, Great and then just last one for me.

Ronald Vincent: And then just last one for me. I think you guys mentioned the $85 million backlog. I'm wondering how that, how the mix of that has evolved, if at all, since last year? Yeah, that backlog number, as I said, was up 34%. So I mean, that's pretty significant. And that backlog number just continues to grow. So as we sell new contracts, you know, we take the revenue as we offer the service. And so that backlog numbers continue to grow because of bookings.

Speaker Change: I think you guys mentioned the $85 million backlog I'm wondering how that how the mix of that has evolved if at all since last year.

Speaker Change: Yes that backlog number as I said was up 34%. So I mean, that's pretty significant in that backlog number just continues to grow and so as we sell new contracts.

Speaker Change: We take the revenue as we offer the service and so the backlog numbers continue to grow because of the bookings numbers.

Matthew Maas: Yeah, so there was a 24% increase in the telecom services backlog of $10.6 million and $11.1 million increase over the prior year, or 58% was from our software solutions division. Got it. Yeah. Thank you. That's all I was looking for since the queue isn't up yet. Yep. That was all for me. Thank you. Thank you, Matthew.

Speaker Change: Yes so.

Speaker Change: There was a 24% increase in telecom services backlog up $10 6 million and $11 $1 million of increase over the prior year.

Speaker Change: 58% was from our software solutions Division.

Speaker Change: Got it yes, yes. Thanks. Thank you that's what I was looking forward.

Speaker Change: Yes that was all for me. Thank you.

Patrick: Thank you Patrick.

Mike Kaufman: Okay, up next we have Mike Kaufman with MK Investments, please proceed. Hi, guys. I want to thank the team for providing an incredible quarter.

Mike Kaufman: Okay next we have Mike Kaufman with MK investments. Please proceed.

Mike Kaufman: Hi, guys good afternoon.

Mike Kaufman: Thanks.

Mike Kaufman: For providing an incredible quarter.

Jeffrey Korn: And I guess one question is, with the huge disruption in the Microsoft-Cisco world, possibly 2,000 licenses, eventually up for grabs. Is there anything we could do in terms of our resources or engineering talent to accelerate the movement of those people at risk? Mike, we look at all those on a regular basis. We pay very competitively to both our salespeople and agents for bringing people in. We always look at potentially hiring new salespeople or bringing in new agents. And if SIS loyal, we'll look at SIS. Right now, it's the uncertainty of the market that's driving people to look.

Mike Kaufman: I guess one question is with the huge disruption.

Speaker Change: Microsoft Cisco World.

Speaker Change: Possibly 2000 licenses eventually up for grabs.

Speaker Change: Is there anything we could do in terms of our resources our staffs are.

Speaker Change: And Jim Irwin talent to accelerate the movement of those people at risk.

Speaker Change: Platform.

Mike Kaufman: Mike when you look at all of those on a regular basis.

Mike Kaufman: Very competitively to both our salespeople and agents, we're bringing people in we always look at potentially hiring new salespeople or bringing in new agents.

Mike Kaufman: If this whilst we will look at FES.

Mike Kaufman: Right now it's the uncertainty of the market, that's driving people to look and.

Mike Kaufman: You know, that is that is working, but we will continue to monitor the situation and adjust as we need to. Okay, I think you guys are doing a great job. Keep it up.

Mike Kaufman: That is that is working but we will continue to monitor the situation and adjust as we need to do.

Speaker Change: Okay. I think you guys are doing a great job keep it up and I, particularly like the fact that you kind of did a podcast, explaining where we're going to the outside world, which might help bring investors towards this best kept secret.

Mike Kaufman: And I particularly like the fact that you kind of did a podcast explaining where we're going to the outside world, which might help bring investors towards this best kept secret kind of a jewel in the rough diamond in the rough. I may have to send you out on the road by 4 o'clock. I may have to send you out on the road for us, Mike, you're one of our best evangelists. Well, I've been with the company for a long time, so I'm very satisfied. Keep up the good work. Well, thank you. I appreciate that, Mike, and I appreciate your support.

Speaker Change: Jewel in the rough diamond on the RF.

Speaker Change: I'm going to have to send you out on the road bike for us.

Speaker Change: Excuse me.

Speaker Change: And I may have to send you out on the road for Us Mike.

Speaker Change: One of our best Evangelists, well I've been in the.

Speaker Change: With the company for a long time, so I'm very satisfied so Keith I appreciate that Mike and I appreciate your support.

Operator: Take care.

Speaker Change: Take care.

Unknown Executive: Okay, we have no further questions in queue.

Speaker Change: Okay. We have no further questions in queue I would like to turn the floor back to management for any closing remarks.

Unknown Executive: I'd like to turn the floor back to management for any closing remarks. I just want to thank everybody for their time and attention. We're very pleased to bring you these results, and we'll be back with you in May when we bring Q1 results. So until then, Have a great afternoon and we look forward to speaking to you again.

Speaker Change: I just wanted to thank everybody for their time and attention.

Speaker Change: We were very pleased to bring you these results.

Speaker Change: We will be back with you in May when we bring in Q1 results. So until then.

Speaker Change: Have a great afternoon, and we look forward to speaking to you again.

Operator: This concludes today's conference, and you may disconnect your lines at this time. Thank you for your participation.

Speaker Change: This concludes today's conference and you may disconnect. Your lines at this time. Thank you for your participation.

Speaker Change: Sure.