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Crexendo (CXDO) Q2 FY26 earnings call: guidance and Q&A

Earnings call· Jun 2026 (Q2 FY26)· Communication Services· Aug 4, 2026

Source: earnings call transcript

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

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

Segment performance

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%

Orderbook & backlog

Remaining Performance Obligation (RPO) $139 million Q2 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

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

Deals & partnerships

ESI Acquisition 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

Impact of perpetual license revenue decline on organic growth Q2 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 behavior Current

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

New platform logo wins

Next quarter (Q3 FY26)
Current 11 new logos in H1 FY26 (6 in Q2)
Target Continued 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.

Find out whether CXDO delivers this. Inve re-checks your case every morning.

Q&A highlights

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 read 5 chapters

Detailed narrative

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.

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.

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.

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.

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.

Summary of the company's earnings call; see how call summaries are prepared. Not investment advice.