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    CXDO
    Earnings call· Jun 2026(Q2 FY26)

    Crexendo Q2 FY26 earnings call CXDO

    Aug 4, 2026 Source

    Executive summary

    Crexendo Q2 FY26 — Strong Revenue Growth and ESI Integration Success

    Crexendo delivered a robust second quarter, marked by significant revenue growth driven by the successful integration of the ESI acquisition and a substantial increase in new platform customer wins. The company maintained GAAP profitability and improved margins while generating strong operating cash flow, providing strategic flexibility for future growth initiatives. Management is optimistic about AI offerings and continued expansion, with a focus on smaller, faster-closing deals that promise future annuity revenue.

    Highlights

    5

    • Revenue increased 49% year-over-year to $24.6 million.

    • GAAP net income reached $1.1 million or $0.03 per diluted share.

    • Adjusted EBITDA grew 46% from the prior year quarter to $4.1 million.

    • Operating cash flow for the first six months of 2026 increased 89% to $4.8 million.

    • Secured 11 new platform logos in H1 2026, significantly up from 2 in H1 2025.

    Concerns

    2

    • Consolidated organic revenue growth was 7% year-over-year, slightly light for the quarter.

    • Perpetual license revenue decreased by $700,000 compared to the prior year quarter.

    Guidance & targets

    2
    CategoryTargetConfidence
    Revenue run rate
    $100 million
    high materiality
    High
    AI-related revenue contribution
    meaningful
    medium materiality
    Medium

    Segment performance

    3
    SegmentRevenueYoYQoQMargin
    Software Solutions
    Gross margin improved by 200 basis points compared to Q1 FY26, largely attributable to cost savings recognized from decommissioning legacy data centers at the end of Q1 and migrating to Oracle Cloud Infrastructure (OCI). Perpetual license revenue was down $700,000 YoY, impacting organic growth.
    6 new logos booked7 upgrade orders from existing customers
    		$7.3 million5%—70%
    Telecom Services
    Gross margin improved by 400 basis points compared to Q1 FY26, driven by the strength of higher-margin sales from the ESI acquisition. Sales from technology service distributors (TSDs) increased by 39% for the quarter and 42% year-to-date over 2025.
    15 6-figure opportunities sold
    		$14.9 million78%—67%
    Product
    Gross margin improved by 1,300 basis points compared to Q1 FY26, with ESI's product contributions helping to improve overall product gross margins. This run rate is considered maintainable with the ESI component.
    		$2.5 million104%—44%

    Operational metrics

    24
    Non-GAAP net income
    $4.1 million
    Q2 FY26

    200 basis points higher than analyst expectations.

    Adjusted EBITDA
    $4.1 million46% from the prior year quarter
    Q2 FY26
    Adjusted EBITDA margin
    17%200 basis points increase compared to the first quarter this year
    Q2 FY26
    Cash and investments balance
    $18.3 millioncompared to $31.4 million at the end of the prior year
    Q2 FY26

    after using $26.2 million for the ESI acquisition

    Term loan proceeds
    $4.9 million
    6-month period

    from Wells Fargo

    Stock option exercise proceeds
    $3.6 million
    6-month period

    net proceeds

    Organic revenue growth
    7%over the prior year
    Q2 FY26

    Consolidated organic revenue came in a little light this quarter

    Year-to-date organic revenue growth
    11%
    YTD FY26

    in line with our guidance of delivering double-digit organic growth for the year

    New platform logos
    11compared with only 2 at the same point last year
    H1 FY26

    6 new logos in Q2; 4 of the 11 new logos were Metaswitch migrations

    Average upgrade order value
    50% higherthan our initial orders
    Q2 FY26
    TSD sales increase
    39%
    Q2 FY26

    for the quarter

    TSD sales increase
    42%over the same periods for 2025
    YTD FY26

    year-to-date

    ESI revenue contribution
    $6.9 millionfrom $2.1 million in March of Q1
    Q2 FY26

    total for Q2

    ESI average monthly revenue
    $2.3 million
    Q2 FY26
    CAIRO average revenue increase per account
    $12035% over the average revenue per account of $340
    Q2 FY26

    per account per month

    EVP program vendors
    57
    Q2 FY26

    13 of them are providing AI-related applications and solutions

    EVP program revenue contribution
    $400,000
    Q2 FY26

    during the quarter

    Operating margins
    4%200 basis point increase from the first quarter this year
    Q2 FY26
    Consolidated revenue gross margin
    66%500 basis points increase compared to the first quarter this year
    Q2 FY26
    Perpetual license revenue decrease
    $700,000compared to the prior year quarter
    Q2 FY26

    primarily the reason for the decrease in organic growth percentage year-over-year

    ESI eliminated revenue
    $180,000
    Q2 FY26

    of revenue recognized in the prior year quarter due to acquisition

    Average initial order size (new logos)
    $250,000
    Q2 FY26

    smaller than average deal booked in prior year quarter, which was 3x this amount

    Average upgrade order size
    $350,0_00
    Q2 FY26

    significant increase over initial order

    Equipment financing receivables
    up above $8 millionup substantially from year-end '25
    Q2 FY26

    recognized on a sales-type lease model, amortized over contract term

    Industry KPIs

    4
    MetricValueDetails
    Rpo current rpo$139 millionUSD
    Customer logo metrics11logos
    Genai ai book of businessmeaningful
    Ai agentic channel product adoptionstrong customer interest and success

    Orderbook & backlog

    1
    Remaining Performance Obligation (RPO)$139 millionQ2 FY26

    97% increase over Q2 of 2025

    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

    Product announcements

    2
    ProductTypeDetails
    Volume 46 (software version)update
    CAIRO (Crexendo's AI receptionist/orchestrator)launch

    Deals & partnerships

    1
    ESIAcquisition of ESI, which significantly increased revenue, strengthened the customer base, and added an experienced team.$26.2 million

    Integration is progressing exceptionally well, exceeding initial sales expectations. Accounting, legal, and marketing functions are integrated, and engineering teams are collaborating. ESI integration is expected to be fully completed by the end of next quarter.

    Risks & headwinds

    2
    Impact of perpetual license revenue decline on organic growthQ2 FY26

    Perpetual license revenue is down $700,000 compared to the prior year quarter, which is primarily the reason for the decrease in organic growth percentage year-over-year.

    Mitigation: Focus on smaller initial subscription licenses with lower upfront costs, which are easier to close and lead to future upgrade orders as customers expand.

    Uncertain economic environment driving conservative customer behaviorCurrent

    I believe the economy's financial climate is driving new licensees to launch with a smaller initial investment of sessions and subscription.

    Mitigation: The "Sessions not Seats" model allows for a "cap and grow" strategy, making smaller initial licenses more attractive and leading to future upgrades and expansion over time.

    What to watch in Q3 FY26

    5

    New platform logo wins

    Next quarter (Q3 FY26)
    Current11 new logos in H1 FY26 (6 in Q2)
    TargetContinued acceleration of new logo wins

    Why it matters

    Indicates continued market share gains and future revenue growth from the "cap and grow" strategy.

    We secured 11 new platform logos through the first 2 quarters of 2026 compared with only 2 at the same point last year.

    Q&A highlights

    5

    Why are platform wins accelerating now, and what is the expected timing of their impact on the business?

    Management attributes the acceleration to their "Sessions not Seats" model, which offers significant economic advantages, especially in uncertain economic times, and the lack of development from competitors. They emphasize the platform's superior technology, open APIs, and EVP program. Smaller initial licenses are seen as a "cap and grow" strategy, leading to future upgrades and continued expansion.

    “our model of 'Sessions not Seats' is a compelling model. It could save you 40% to 50% for what you're paying for platform usage.”

    asked by George Sutton · answered by Jeffrey Korn

    2 min read5 chapters

    Detailed Narrative

    01

    ESI Acquisition Integration

    The ESI acquisition is progressing exceptionally well, exceeding initial sales expectations. Accounting, legal, and marketing functions are integrated, and engineering teams are collaborating effectively. ESI significantly increased revenue, strengthened the customer base, and added an experienced team, validating Crexendo's disciplined M&A approach. The company expects ESI to be fully integrated by the end of the next quarter, excluding payroll and benefits which will align at year-end.

    02

    Platform Customer Growth

    Crexendo secured 11 new platform logos in the first half of 2026, a substantial increase from 2 in the same period last year. This momentum is attributed to the "Sessions not Seats" model offering economic advantages, particularly in uncertain economic times, and the platform's superior functionality, scalability, and flexibility. The company views these smaller initial licenses as a "cap and grow" strategy, leading to future upgrades and continued expansion.

    03

    Software Development and User Interface

    The company plans to release Volume 46 of its software in Q2 2027, featuring a fully redesigned user interface and product improvements. These updates are expected to enhance both the sales process and the day-to-day user experience. Crexendo genuinely looks forward to showcasing these platform updates, ecosystem, and product roadmap at its upcoming October user group meeting, which is on track to be the largest in its history.

    04

    AI Offerings and CAIRO

    Crexendo's AI offerings, particularly CAIRO (Crexendo's AI receptionist/orchestrator), are receiving strong praise and market acceptance. While not yet a significant revenue contributor, CAIRO has shown an average revenue increase of $120 per account per month, representing a 35% increase over typical Telecom Services customers. The company is rolling out CAIRO to licensees and retail customers, expecting meaningful AI-related revenue by 2027, driven by its usage-based model.

    05

    Financial Flexibility and M&A Strategy

    Strong cash generation, with $18.3 million in cash and cash equivalents and $4.8 million in operating cash flow for the first six months, provides strategic flexibility. Crexendo continues to evaluate accretive acquisition opportunities, maintaining a disciplined approach to ensure financial, operational, and strategic merits support any transaction. The company has a strong M&A pipeline and may pursue additional deals in Q4 or early next year once ESI is fully integrated.

    AI-generated summary of the company’s earnings call. Not investment advice.