Q1 2025 Crexendo Inc Earnings Call
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Critics
Welcome to the Koshendo First Quarter 2025 earnings call.
At this time, all participants are in a listen only mode.
Speaker Change: A question and answer session will follow the formal presentation. But if one should require operator assistance during the conference, please press star zero on your telephone keypad. Please note, this conference is being recorded. I will now turn the conference over to your host, Jeff Korn, Chairman of the Board. You may begin. Thank you very much.
Thank you, John .
Jeff Korn: And good afternoon, everyone. Welcome to the Gershendo Q1 2025 Year-End Conference call. I'm Jeff Korn, CEO and Chairman of the board. On the call of me today are Doug Gaylor, our president and COO, Ron Vincent, our CFO , and in the room with us is John Brinton, our CRO, and Anand Buch, our CSO.
Jeff Korn: In a moment, John will read our Safe Harbor statement. After that, I will give some brief comments on our performance for Q1 and for Q1. Ron will then provide more details on the numbers before handing over the call to Doug to provide a business and sales update. After that, we will open the call up to questions.
John , would you please read the Safe Harper statement? [inaudible]
Jeff Korn: 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.
Jeff Korn: The Private Security's Litigation Reform Act of 1995 provides a safe harbor for such forward-looking statements.
Jeff Korn: All statements made in this conference call, other than statements of historical fact, are forward-looking statements. [inaudible]
Jeff Korn: 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. So, let's go to the next slide.
Jeff Korn: 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.
Jeff Korn: These risk factors are explained in detail in the company's filings with the Securities and Exchange Commission, including the Form 10K for fiscal year ending December 31, 2024, and the Forms 10Q as file.
Jeff Korn: 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.
Jeff Korn: I'd now like to turn the call back to Jeff. Jeff? Thank you, John .
Jeff Korn: I am incredibly pleased with our first quarter results and remain more excited than ever about the direction Crexendo was having.
Jeff Korn: We continue to execute our strategic vision, delivering storm performance while making meaningful meaningful and disciplined investments in our business.
Jeff Korn: Our ability to grow while remaining profitable is a testament to the strength of our team, our differential model, and the significant opportunities ahead.
Let me highlight a few key points from the quarter. [inaudible]
Jeff Korn: Our first quarter results once again validate our strategy and business model.
We grew total revenue by 12% year-over-year to $16.1 million.
Jeff Korn: Fueled by a 33 percent increase in software solutions revenue while delivering strong gap profitability and generating substantial cashflow.
Jeff Korn: Our ability to invest meaningfully in innovation, infrastructure, and talent while maintaining strong profitability underscores the strength of our disciplined approach.
Jeff Korn: Our software solutions platforms have passed 6 million users during the quarter, a major milestone that reflects the growing demand for our award-winning offerings.
Jeff Korn: The 33% growth in software revenue was accomplished by significant margin expansion with gross margins in the segment increasing 500 basis points to 78% compared to Q1 2024 and 1000 basis points higher than Q4 2024.
Jeff Korn: These results clearly demonstrate the scalability and operating leverage of our platform.
Jeff Korn: I am particularly excited by the continued momentum in our software solutions division. This reinforces not only the power of our platform, but also the strength of our licensees and partner ecosystem.
Jeff Korn: We have believed the disruption in the market, particularly with Metaswitch and Cisco Brotsoff, continues to work to our advantage. And we have been and continue to meticulously target new logos as a result.
Jeff Korn: We have one more than our fair share of logos and I am convinced we will continue to win more.
Jeff Korn: Our differentiated software model, with session-based pricing instead of seat-based, our open APIs, and our flexible deployment options, whether cloud, facilities, or hybrid, our critical factors and why companies are choosing Crexendo.
Jeff Korn: We are building a platform for the future, giving customers flexibility and the control they both demand and need.
Jeff Korn: You may have noticed we've become more strategic about publicizing customer acquisitions.
Jeff Korn: We believe it's not in our best interest to put out our battle plans and plane view from our competitors.
Jeff Korn: We are focused on execution and winning our share of the market, quietly and effectively.
Jeff Korn: We will announce customer wins when it's strategically appropriate, but we will not issue press releases for every conversion.
Jeff Korn: On the telecom side with the UCAS market remaining highly competitive, I want to be clear we are committed to growing our telecom division but we will do so profitably.
Jeff Korn: UCAS sales across the industry are extremely competitive with some competitors engaging in unsustainable practices including aggressive spits and incentives that are making sales unprofitable.
That is not something I am willing to do.
Jeff Korn: Acquiring customers in a loss is a zero sum game, a strategy that has driven many of our competitors into debt and significant financial instability.
We believe in a better way.
Jeff Korn: Prioritizing, Sustainable Growth, Profitability, and Deliving Real Value to our customers.
Jeff Korn: Our secret sauce in UCAS is our industry best customer service, as independently verified by G2, and our award-winning DIT platform bundle, which remains unmatched in the market.
We lead with differentiated service and superior products.
Not desperate pricing.
and we will continue to grow the telecom division profitably.
Jeff Korn: We report a strong net income on a gap and non-GAAP basis of $1.2 million and $2.6 million respectively for the quarter, and adjusted EBITDA of $2.6 million. Driven by our discipline focused...
Approach to growth.
How We Manage The Business
Jeff Korn: While many CEOs are pulling back guidance due to macroeconomic uncertainty, we have not seen a measurable weakening in demand for our offerings.
Jeff Korn: I remain confident that we will continue to deliver double-digit revenue growth moving forward.
Jeff Korn: We will continue to invest in innovation, expanding our engineering, service, and support teams.
Jeff Korn: and making strategic investments in automation, financial systems and product development to drive even greater operation, operating leverage in the future.
Jeff Korn: This is important to maintain and grow our position in the industry [inaudible]
Jeff Korn: By investing in our open API architecture and empowering our developer and licensing community, we are setting the stage for EVP to become a significant revenue driver in the years ahead.
Jeff Korn: We are very excited about the improvements and benefits we expect to see from two major current initiatives. First, the end of our classic migration to our VIP system is close to completion and will free up internal resources, improve overall margins and reduce operational drag.
Second.
Jeff Korn: Our goal to close our current hosted data centers and fully migrate to Oracle Cloud Infrastructure, OCI, by the end of 2025, will drive substantial cost savings and allow us to focus resources on innovation and customer success rather than infrastructure managed.
We expect these actions to contribute significantly to margin expansion .
and Groove.
We're also evaluating strategic acquisition opportunities.
Jeff Korn: We believe the market has become more rational regarding business valuations from non-public companies and we are currently engaged in discussions. If we identify acquisition targets where we can be competent of making the acquisition accretive within two quarters, we will selectively pursue those opportunities. [inaudible]
Jeff Korn: I have never been more confident in our path forward. Over the past two years we have transformed Crecendo into a profitable, high growth software leader.
Jeff Korn: As the telecom and software sectors continue to evolve, Crexendo is better positioned than ever to capitalize on industry disruption, customer to needs, and emerging opportunities.
Jeff Korn: Our mission remains the same, to provide the best software solutions, the best customer service, and the most flexible and customer-centric platform in the market.
Jeff Korn: We will continue to focus on customer acquisition, customer retention, sustainable growth, market expansion, and strategic innovations.
Jeff Korn: With that, I'll turn the call over to Ron to walk you through the financial results for the court. Ron?
Ron: Thank you, Jeff, and good afternoon, everyone. We had a strong first quarter as Jeff highlight it, and I am happy to share the results with you today.
Ron: Consolidate a revenue for the quarter, increased 12% to 16.1 million. That's compared to 14.3 million for the first quarter of their prior year. Our service revenue increased 4% to 8.2 million compared to 7.8 million for the first quarter of the prior year.
Ron: Our software solutions revenue for the quarter increased 33% to 6.9 million compared to 5.1 million for the first quarter of the prior year. Product revenue for the quarter declined 22% to 1.1 million compared to 1.3 million for the first quarter of the prior year.
Ron: Gross margins for the first quarter, compared to the first quarter of their prior year. Service revenue gross margin decreased 3%.
Ron: Quarter over quarter to 57%, and no change from the fourth quarter of 2024. Software Solutions revenue, growth margins, increased by 5%, quarter over quarter to 78%.
Ron: Up and up 10% from the fourth quarter of 24, product revenue, gross margin, decrease by 3%, quarter of quarter to 41%.
Ron: and down 1% from the fourth quarter of 2024. Consolidated revenue gross margin increased by 2% quarter over quarter to 65% and up 4% from the fourth quarter of 2024.
and many more. Thank you. Thank you.
Ron: Operating expenses for the quarter increased 8% to 14.9 million compared to 13.8 million for the first quarter of the prior year.
Ron: The operating margin for the quarter was 7.2%, compared to 3.4% for the same period of the prior year, at 112% increase.
Ron: Net income of 1.2 million for the quarter, that's 4 cents per basic and diluted common share compared to net income of 400,000 or 2 cents per basic and 1 cent per diluted common share reported for the first quarter of the prior year.
Ron: non-GAAP net income was 2.6 million for the quarter. That's 9 cents per basic and 8 cents per diluted comment share.
Ron: Compared to non-GAAP at income of $1.9 million, or $0.7 per basic and $0.6 per diluted common share reported for the first quarter of the prior year.
Ron: EBITDA for the quarter was $1.9 million, as compared to $1.3 million for the first quarter of the prior year and adjusted EBITDA for the quarter was $2.6 million, compared to $2.1 million for the first quarter of the prior year. [inaudible]
Ron: R. Cash and Cash Equivalence at March 31, 2025, was 21.2 million, compared to 18.2 million at December 31, 2024. Cash provided by operating activities for three months.
Ron: 1.2 million. That's compared to 200,000 used for operating activities in the first quarter of the prior year.
Ron: Cash provided by Finance Activities for the three-month period was 1.8 million. That's compared to 900,000 provided for the first quarter of the prior year.
Ron: I will now turn it over to Doug Gaylor, our president and COO for additional comments on sales and operations.
Thanks, Ron.
Speaker Change: I'm extremely pleased with our strong Q1 results to start 2025.
Ron: Our 12% year-over-year increase in Q1 revenues, along with our 300% year-over-year increase in gap profitability, with the direct results 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 7th consecutive quarter, and achieve both our internal and external targets for the quarter.
Ron: Our Gatnet income of 1.2 million for the quarter, and non-Gatnet income of 2.6 million for the quarter, were a direct result of our success in managing the fundamentals of the business, and making a strong effort to maximize and recognize synergies within the business.
Ron: 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 energies as we continue our growth and continue our data center migrations that will show additional meaningful cost savings over the next 12 months.
Ron: We saw tremendous organic growth of 33% from our software solution segment of the business during the quarter, and that was fueled by uncertainties created by our two largest software solutions competitors, Cisco and Metaswitch, and we continue to see very strong demand for our UCAS platform offering.
Ron: Cisco has increased pricing, decreased support, and slowed future development on their broad soft platform, while Microsoft recently sold their meta-switch dimension to a company that already has their own proprietary platform, creating a lot of uncertainty amongst their licensees.
Ron: These destructive actions continue to help build our pipeline of prospects for our software platform.
Ron: Are you meeting 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?
Ron: Our telecom services retail segment grew at 1% organically as we have proactively substantially reduced selling some lower margin opportunities to maintain margin. We continue to see strong demand for our offerings, for our channel partners and our master agent, technology service distributors, and expect that growth number to rebound.
Ron: Our Channel Partner, resellers sell our services to their prospects and customers on a revenue share basis, and these Channel Partner and reseller agents have great confidence representing our crescendo of VIP offering because there are 100% uptime guarantee, a mine with our best in class customer service and customer satisfaction, which consistently ranks number
Ron: As Jeff previously mentioned, we are focused on profitably growing this segment and we are not pursuing low margin or unprofitable retail opportunities.
Ron: Our Remaining Performance Obligation, also referred to as Backlog, is now 82 million increase of 22% from Q1 of 2024. Our Remaining Performance Obligation number is the sum of the remaining contract values for our telecom services and our software solutions customers that will be recognized on a sliding scale over the next 60 months. And it's a strong indicator of our future revenue stream. And it's a strong indicator of our future revenue stream. And it's a strong indicator of our future revenue stream.
Ron: of the 82 million in remaining performance obligation, over 30 million is currently slated to be recognized over the remainder of 2025.
Ron: We continue to focus on improving our gross margins and saw a strong increase in overall gross margins in the quarter consolidated gross margin increased 61% at the end of 2024 to 65% in Q1
Ron: The increase in consolidated gross margin was primarily due to the significant improvement in our software solution segment gross margins, which improved from 72% at the end of last year to 78% in Q1, highlighting the scalability and operating leverage we have on the software segment of the business. [inaudible]
Ron: Artelecom Services, Gross margins for services, remained at 57% consistent with Q4. We are confident that we will continue to see gross margin improvements in both segments of the business and the future.
Ron: Crescendo was also honored during the quarters of 2025 product of the year as well as receiving the hosted Voip Excellence Award from entered Internet telephony magazine, highlighting the strength of our platform and our products. Both awards highlighted our groundbreaking AI features that enable users to create engaged and analyze.
Business communications effectively efficiently and affordably using artificial intelligence. We currently have a variety of AI solutions available for end users, including our video AI studio, our voice AI studio AI call recording and our contact center AI powered by chat GPT.
Ron: After starting 2025 with a strong Q1, 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 seven consecutive quarters of GAAP profitability and 26 consecutive quarters with non.
Ron: GAAP net income we're positioned perfectly with the combination of strong demand for our product offerings, along with great solutions with a disruptive pricing model and the best and most talented workforce in the industry to continue our strong growth and our strong success. We are committed to delivering the best Ucas Sea gas and C pass offerings in the sector.
Ron: <unk> to our customers and our partners and the best return for our shareholders as the fastest growing platform solution in the country now supporting over 6 million end users. We are focused on enhancing our solutions, improving our efficiencies and continuing to return strong results.
Jeff Korn: With that I will now turn it over to Jeff for any further guidance.
Jeff Korn: I don't have any further comments at this time, so John let's open the call up to questions.
Speaker Change: Certainly 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 if you would like 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: One moment, please while we poll for questions. Once again, please press star one if you have a question or a comment.
Moderator: The first question comes from Eric Martin Nunez, I'm, sorry, Martin Newsy with Lake Street Capital. Please proceed.
Speaker Change: Yes, congratulations on the terrific start to the year I had a question regarding your comment about the double digit growth, Jeff you talked about yes, so double digit growth is sustainable.
Speaker Change: But I know that you in some cases, there is puts and takes in any given quarter. So I assume that comment was relevant to 2025 or was it perhaps specifically for Q2 do we see that double digit is that anticipated for the current quarter.
Eric: Eric the guidance Ive given has been year over year, because youre right there can be quarterly <unk>.
Eric: Variances, which depend upon upgrades or new logos, which we're confident will come in over the year, but it is hard to gauge quarter to quarter and I see nothing in our future, which makes me want to change our guidance of 10% year over year, a minimum double digit growth year over year.
Eric: Got it and then you've talked about.
Eric: Unnatural behaviors by competitors regarding.
Eric: Spits and master distributor relationships.
Speaker Change: I'm just wondering if there is any change there with the.
Speaker Change: Turning of the calendar year or would you just describe it as similar to 2024.
Speaker Change: Thus far it seems to be similar to 2024 as I mentioned in my comments I believe it's unsustainable and if you look at some of our competitors with the deep that they have and the other organic problems. They have I think it makes it clear it's unsustainable. So we will continue to pursue and grow at a profitable basis, which is what we've always done as of <unk>.
Speaker Change: I said in my comments, we differentiate ourselves not buy.
Speaker Change: <unk> buying customers at a loss, but by delivering better service and better customer service.
Speaker Change: Got it thanks for taking my questions.
Speaker Change: My pleasure Thank you Sir.
Mike Latimore: The next question comes from Mike Latimore with Northland Capital market. Please proceed.
Good afternoon.
Mike Latimore: Good afternoon, good afternoon, great results awesome to see.
Mike Latimore: Okay.
Mike Latimore: On the <unk>.
Mike Latimore: Software gross margin really impressive improvement there can you just give a little bit more detail.
Mike Latimore: What that drove what drove that improvement and also does that.
Mike Latimore: Sustainable email I think you said, maybe even some are driven from there, but just a little bit color on where we might go from here.
Mike Latimore: Hey, Mike.
Mike Latimore: Obviously the <unk>.
Mike Latimore: Increase in the margin is driven by the higher increase in and.
Mike Latimore: Quarter over quarter top line revenue and our software solutions Division and so it is evident as we continue to grow at a rapid pace our margins will improve.
Mike Latimore: We still for the year.
Mike Latimore: Or still in that viewpoint.
Mike Latimore: Viewpoint is.
Mike Latimore: Mid mid 70% to 73% to 75 is our target for the full year, we had a great quarter. So we had significant improvement in the quarter, but I'm not going to guide to 78% and higher from this point forward, but.
Mike Latimore: And I would say in that does that 73% to 75% range is where we like to target.
Speaker Change: Yes, Okay got it.
Mike Latimore: And then.
Mike Latimore: I guess, it's been a few months now since the meadows switch acquisition by Oems.
Mike Latimore: Can you provide a little bit more color on what youre seeing there in terms of just are they getting more or less aggressive in the market.
Mike Latimore: You clearly are winning a lot of business here, but any color.
Mike Latimore: Change in what Youre seeing out of medicine since that acquisition.
Mike Latimore: We haven't seen a lot of change yet people are still asking for sand boxes and are looking at our platform.
Mike Latimore: It wouldn't shock us if <unk>.
Mike Latimore: Decisions took a little bit longer as people were looking at what <unk> was doing but we are highly confident due to our differentiated model due to the level of service. We provide due to the fact that you can you can create your own system using our open Apis that you can choose a hybrid system you can use it.
Mike Latimore: Our cloud system or you can use a facility based system that we will continue to win more than our fair share of.
Mike Latimore: All of these licensees, we believe we provide a better product better service and better pricing with more flexibility and we believe that's what will drive the market.
Mike Latimore: Great Great and just last on your I know you called the EVEP, but basically the.
Mike Latimore: Op ecosystem here, how many are sort of fully integrated now and.
Mike Latimore: The group you have are there are a couple that are.
Mike Latimore: Giving the best amount of interest.
Mike Latimore: I'm going to let <unk> answer that because.
Mike Latimore: He he deals with a far more than the rest of US sure. Thanks, Jeff Yeah, I mean I think.
Mike Latimore: As Jeff pointed out we're continuing to see growth there.
Mike Latimore: You know are constantly looking at kind of an inflow of partners that want to add.
Mike Latimore: Into the ecosystem.
Mike Latimore: On a regular clip trying to onboard 10 to 12, others. Other suspicious of specific ones that are in there varies depending on what the customer needs are at that given time. So there's just kind of a constant inflow ecosystem partners. So there's no one specific area, if you will but obviously.
Mike Latimore: Recently, a big uptick in folks that want to leverage AI type of applications and also customer service type applications, that's where most of the interest lies in quite a few pumps replacement sales over the last quarter. So absolutely actually let's start with a question that we should we thought that's one of the ones that we actually on boarded.
Mike Latimore: Probably within the last year or so, but we've seen that actually take a big uplift more recently.
As customers get their hands on this stuff and it gets on boarded and put out to the field.
Mike Latimore: Yes, great great.
Speaker Change: Thanks, a lot congratulations.
Mike Latimore: Thank you Mike.
Mike Latimore: Up next is George Sutton with Craig Hallum. Please proceed.
Speaker Change: Hi, George how are you great I'm doing great great results.
Joe: Joe You had mentioned the term meticulously targets.
Joe: And Keith I am curious if you could just give us a sense of how exactly you are targeting what seems to be a very big open ended market.
Joe: And there was no Voip lead discussion on the call I'm curious if you can give us any more details there that looks like a great win.
Speaker Change: Well I'm not going to give you our marketing plans publicly George because I sure Ali answer and Cisco would love that so, but I am going to tell you that we obviously know who most of the customers are in the field.
Speaker Change: We reach out to them.
Speaker Change: We have our salespeople reach out to them, we target them with marketing and blogs and we have found it quite effective thus far.
Speaker Change: John do you want to give a little color on the Berkeley.
John: Yes, just if you look at Doug mentioned, the Voip, we opportunity, which we run recently they have 25000 customers that.
John: They're currently have that theyre looking to potentially move over to us with some of the other partners in our value proposition is well defined for them, Jeff talked about some of those points to the.
John: This session is not seats model the flexibility of deployment that they can deploy it in their cloud or in our cloud.
John: Just several of the Differentiators, we talked about the eight.
John: The API and what we've been able to do with AI applications and some of the other items, we still support perpetual license or subscription based pricing. So no matter, who we're competing against that value proposition appeals to a lot of partners and we're reaching out to them, we're working with them and when they come in and they are.
John: We're going through an evaluation with our platform versus the competitors. Some of those things are just the key indicators of whether theyre going to move forward in much of the competition is walking away from several components of that or they just don't supported anymore. So we do give a differentiated value that's easy for us to communicate.
John: In a kind of a defined confined market of company centered the prospects we're going after.
John: Great.
Speaker Change: What are you seeing judgment, you certainly sounded more optimistic about M&A.
John: I'd say when you have prior.
John: Sure.
John: Quarters, and I think you sounded somewhat frustrated about expectations.
Speaker Change: On behalf of the sellers and now you sounded a little bit more optimistic can you just give us a little bit better.
John: Since there.
George Sutton: Yes, George It obviously, you don't want to give numbers out over the phone but.
John: <unk>.
John: A lot of private companies were looking.
John: With an eye toward even COVID-19 and believe multiples still belonged to there obviously COVID-19 multiples made no sense as you look at current multiples and public company multiples don't necessarily make sense for private companies.
John: That message is beginning to be realized in the people. We've spoken with are getting to a more rational and realistic value proposition there still it still a difference between what they think they may be worth that we think they may be worth but thats a bridge, we can now cross.
Speaker Change: So just one other question as to your advantage and John being on the call.
John: With.
John: Mitel announcing or filing for bankruptcy can you just talk about what you see as potential opportunities from that.
John: Yes, I would just say George with some of the legacy providers.
Speaker Change: We've seen an ongoing interest from their channel that you know as you know they had a hosted offer one point in time had the partnership with ring central and over over the last three years. There has been a trend of both mitel on Avaya and I would say other legacy soft switch providers partners looking to for alternatives in the market. So we.
Speaker Change: We continue to sell and onboard partners that had built a business with them at one point in time and they currently frankly today I don't think Thats the best place for their customers to live for the next five years or 10 years and so the positive benefit to that as they continue to look at the net sapiens platform and value the history.
Speaker Change: That we have of being very friendly with our partners and our channel and really having a channel focus go to market and many of them have chosen deploy our platform as an alternative to those legacy platforms.
Speaker Change: Perfect. Thanks, guys.
Speaker Change: Thank you George.
Once again, if you have a question or a comment please indicate so by pressing star one on your Touchtone phone up next is Matthew boss with B Riley. Please proceed Matthew.
Matthew: Hi, This is Matthew on for Josh Nichols, Thanks for taking my questions.
Speaker Change: Thank you Mac and good afternoon.
Speaker Change: Yeah. Good afternoon, I guess to start off I was wondering what drove the large <unk>.
Speaker Change: And then to a drop in software Cogs was it mainly because there was about $1 million of lower margin is that revenue in Q4, or what is sort of the explanation for that.
Speaker Change: Yeah, so primarily driven by the higher growth in sales and revenue.
Speaker Change: And.
Speaker Change: Uh huh.
Speaker Change: Thanks.
Speaker Change: 667000, a reduction in cost.
Alright, Thank you and I guess on the telecom side I'm wondering what do you see as a driver of growth for telecom and what the trajectory on that.
Speaker Change: In the current environment, where the competitors are pricing aggressively.
Speaker Change: Well again as we discussed we believe that our customer service as a differentiation.
Speaker Change: Our bundle of services included in Ucas, as a differentiation and as I said the burnt.
Speaker Change: Purchasing of customers at a loss is probably not sustainable which should put everybody on a more equal footing, but we will continue to work hard to increase <unk> sales, but only do so profitably.
Speaker Change: And Matthew as John highlighted on that previous question.
Speaker Change: The two largest premise providers out there and the estimates are that there's still probably 40% of the businesses in the U S that are still on premise based equipment. The two largest premise providers in the country are avaya and Mitel Avaya just came out of bankruptcy for the second time in five years really concentrated and announced their car.
Speaker Change: Centralia on just their largest enterprise level customers. So that leaves a lot of small and midsized business avaya customers out there looking for an alternative and.
Speaker Change: And the same as John highlighted with Mitel Mitel has got a significant amount of small and mid size customers out there using the mitel platform and if they are uncertain about the future of that product direction and support they're going to be looking for alternatives. So on the telecom services on the retail side of the house, we still see a tremendous amount of opportunity there for growth.
Speaker Change: Just as with the platform disruption in the industry is to our advantage because we have better service better products and.
Speaker Change: Top of the line pricing.
Speaker Change: Got it that was really helpful. I guess I just have one last question and that was just in terms of international growth.
Speaker Change: Last call you mentioned Europe being a big growth opportunity you are fighting for so is there any update on the progress on that front and international growth in general.
Speaker Change: We continue to see strong demand in Europe.
Speaker Change: Obviously.
Speaker Change: Some of the tariff and trade wars and European indifference to Americans may start to have an impact we have not seen that yet.
Speaker Change: But the demand seems to be strong.
Speaker Change: Got it that was it for me. Thank you so much.
Speaker Change: Thank you.
Speaker Change: Next question is from Jesse <unk> with <unk> capital. Please proceed.
Speaker Change: Hi, everyone, so a quarter here.
Speaker Change: I was just looking at the numbers here a bit of a modeling question, but so I think gross backlog was $89 million, which is up from 86 last quarter and then over the next 12 month revenue from those contracts. This quarter. I think you guys mentioned $30 million, plus which I think was down somewhat from the $39 million can you just explain the dichotomy here and if this is a sign of the shift in contract length or if there's some.
Speaker Change: Seasonality here that we should consider thank you.
Speaker Change: Boy it a little bit of seasonality, we typically have a lower sales bookings in the first quarter of the year almost most companies are run out their capital expenditures at the end of the year and so.
Speaker Change: Q1 is typically a slower year for us slower period for us.
Speaker Change: And so that is the recognition of our revenue all of our existing customers and then offset by the deals we booked during the quarter until obviously Q1, if you look back over the last couple of years Q1's, usually the lower of the four quarters in the year for the last couple of years.
Speaker Change: Okay great.
Speaker Change: Your stand there.
Speaker Change: And then just I was curious if you guys might be able to just give a little bit more color on average revenue per user someone last quarter asked if there was any seven figure contract signs I'm curious on that myself and then what underlying average revenue per user trends are today. Thank you.
Speaker Change: Yes revenue per user I think is a pretty stable I think revenue per user on the retail side was right at $20 in Q4.
Speaker Change: An updated number for Q1 so.
Speaker Change: Yeah.
Speaker Change: 64 25.
Speaker Change: $64 25.
Speaker Change: 64, 25 was where the software solutions customer no on the retail side and the revenue per user on the retail side, our retail so retail was.
Speaker Change: $3 51.
Speaker Change: 351.
Speaker Change: Per account so that's that.
Speaker Change: Our average sized customers about exiting stadiums et cetera, almost $40 per user.
Destiny: What was the second part of that question Destiny.
Destiny: Just on the larger trends I think the customers coming over from Madison, which are considerably larger than the average user and there is some dynamic there I think someone asked last quarter. If there were any seven figure contracts signed I was kind of curious about that myself.
Destiny: Yes, so I think that we always have a seven figure tower six figure type contracts on the software solutions side I don't know if we have any huge ones in Q1 that would probably just that we did not have a seven figure contract now.
Destiny: Okay, well thanks for the details.
Destiny: Good luck with the rest of the year.
Speaker Change: Thank you Sir.
Speaker Change: If there are any remaining questions. Please indicate so now by pressing star one.
Speaker Change: Okay. We have no further questions in the queue I'd like to turn the floor back over to Jeff corn for any closing remarks.
Speaker Change: Thank you John and thank all of you for your attention and calling in and we look forward to sharing with you. Our Q2 results in August. So until then thank you and have a great day.
Speaker Change: This concludes today's conference and you may disconnect. Your lines at this time. Thank you for your participation.