10-K: Crexendo Reports Strong 2025 Growth, Strategic Acquisition

Crexendo, Inc. announced significant revenue and profit growth in its 2025 annual report, driven by strong performance in software solutions and a strategic post-period acquisition of Estech Systems, LLC.

Summary

• Total revenue increased 12% to $68.167 million in 2025 from $60.838 million in 2024.
• Net income increased 202% to $5.071 million in 2025 from $1.677 million in 2024.
• Adjusted EBITDA increased 37.37% to $11.205 million in 2025 from $8.157 million in 2024.
• Software solutions revenue grew 27% to $29.664 million in 2025.
• Cloud telecommunications service revenue grew 6% to $33.782 million in 2025.
• Annualized Exit Monthly Recurring Subscriptions (AERR) increased to $57.529 million at December 31, 2025, from $51.568 million at December 31, 2024.
• The consolidated Net Monthly Subscription Dollar Retention Rate was 100% for 2025, with Software Solutions at 102% and Cloud Telecommunications at 98%.
• Crexendo acquired Estech Systems, LLC for $35.0 million ($27.3 million cash, 1,159,638 shares) on March 1, 2026.
• Cash and cash equivalents increased to $31.378 million at December 31, 2025, from $18.193 million at December 31, 2024.
• Basic earnings per share increased to $0.17 in 2025 from $0.06 in 2024, and diluted earnings per share increased to $0.16 from $0.06.

Sentiment

Score: 8

Explanation: StockSavvy.ai views this as a strong performance, with significant growth in revenue and profitability, healthy cash generation, and a strategic acquisition positioning the company for future expansion, despite some operational cost increases and competitive pressures.

Positives

• Total revenue increased by 12% year-over-year, demonstrating strong overall business growth.
• Net income surged by 202% and Adjusted EBITDA increased by 37.37%, indicating improved profitability and operational efficiency.
• The Software Solutions segment showed robust growth with a 27% revenue increase and a healthy 102% net dollar subscription retention rate.
• The consolidated Net Monthly Subscription Dollar Retention Rate of 100% reflects strong customer retention across the business.
• Cash and cash equivalents significantly increased by $13.185 million, enhancing the company's liquidity position.
• The strategic acquisition of Estech Systems, LLC is expected to expand product offerings and customer base, contributing to future growth.
• Ongoing migration efforts to the Oracle Cloud Infrastructure (OCI) are anticipated to improve long-term operational efficiency, scalability, and cost-effectiveness.
• Cash flow from operating activities increased by 48% to $9.297 million, reflecting strong cash generation from core operations.

Negatives

• Product revenue decreased by 16% in 2025, indicating a decline in equipment sales.
• The Cloud Telecommunications Services segment had a Net Monthly Subscription Dollar Retention Rate of 98%, slightly below the consolidated average and indicating some customer churn.
• Operating expenses increased by $4.463 million, primarily due to higher salaries, commissions, contract labor, and third-party charges, impacting overall margins.
• An additional valuation allowance of $2.270 million was recorded for deferred tax assets in 2025, suggesting management's uncertainty about the full realization of these assets in the future.
• Remaining Performance Obligations (RPOs) for the Software Solutions segment decreased by 6% to $28.372 million, which could imply a slower growth in future contracted revenue for this segment.
• The company stopped paying a quarterly dividend in April 2023, which may be a concern for income-focused investors.

Risks

• Public health crises could materially adversely affect business, financial condition, and results of operations.
• Adverse macroeconomic conditions, including inflation, interest rate volatility, and recessionary pressures, could negatively impact business, especially with fixed multiyear contract pricing.
• Quarterly and annual results of operations have fluctuated in the past and may continue to do so, potentially causing stock price volatility.
• The company's growth and the evolving markets make it difficult to evaluate current business and future prospects.
• Business may be affected by global economic conditions, including relations between the United States and foreign countries, and geopolitical destabilization.
• Regulatory risks in international expansion, such as differing telecommunications laws, tax regulations, and political risks, could result in fines or operational restrictions.
• Risks related to U.S. and foreign sanctions, export controls, and trade restrictions could expose the company to fines and reputational damage.
• The company is subject to lawful intercept obligations (CALEA compliance), and failure to comply could lead to enforcement actions.
• Uncertainty about achieving or maintaining operating profitability in the future due to significant investments in sales, marketing, engineering, and data center migration.
• Future acquisitions, mergers, or changes to capital structure may pose risks and dilute existing stockholders.
• Incurring debt to fund acquisitions could strain cash flows and impact the ability to service debt.
• Inability to secure financing on favorable terms could limit business growth and response to challenges.
• Acquisitions may divert management's attention, increase expenses, disrupt operations, and harm results.
• The ability to use net operating loss carry-forwards may be reduced in the event of an ownership change (Section 382 of the Internal Revenue Code).
• The telecommunications industry is highly competitive, with larger, better-capitalized competitors.
• Service Level Agreement (SLA) and 100% uptime guarantee risks, dependent on third-party providers, could lead to customer credits or terminations.
• Revenue concentration and enterprise contract renegotiation risk with a limited number of large customers and service provider partners.
• Dependence on APIs, integrations, and third-party applications could lead to service disruptions or reduced platform attractiveness if these fail or are discontinued.
• Feature parity and innovation velocity risk, especially with rapid advancements in generative AI, could make products less competitive or obsolete.
• Risks associated with licensees' self-hosted deployments of the NetSapiens platform, including service outages or security incidents.
• Usage-based pricing and revenue volatility in the software solutions division due to fluctuations in customer usage patterns and economic conditions.
• Risks related to robocalls, spoofing, and STIR/SHAKEN compliance could lead to regulatory enforcement, fines, or reputational harm.
• The impact of AI and automation on core business could render certain products redundant or lead to service disruptions.
• Limited patents and intellectual property protection may make the company vulnerable to imitation by competitors.
• Pricing pressure from competitors in the telecommunications industry could affect margins and revenues.
• Competition from other third-party UCaaS platform vendors and hosted platforms for software solutions.
• A pronounced shift to a subscription model may initially reduce quarterly revenue during the transition period.
• The Managed Service Provider (MSP) industry is highly competitive, with lower margins compared to UCaaS and software solutions.
• Cyber-attacks impacting networks or systems, including SIP-based attacks, ransomware, and eavesdropping, could lead to significant expenses, data loss, and reputational damage.
• Risks related to data localization and cross-border transfers could require infrastructure redesign and increased compliance costs.
• Natural disasters, extreme weather conditions, acts of war, or terrorist acts could cause damage to infrastructure and disrupt operations.
• Errors in technology or technological issues outside the company's control could cause delays or interruptions to customers.
• Inability to scale the business efficiently or quickly enough to meet customers' growing needs could harm operating results.
• Dependence on several third-party providers for network infrastructure and customer service, with potential for service interruptions or degradation.
• Risks related to number portability and carrier dependency could result in lost customers or contract disputes.
• Risks related to E911 and emergency call failures could expose the company to significant liability and regulatory actions.
• Dependence on industry standard protocols, best practices, solutions, and open-source software carries risks of additional royalties or license infringement costs.
• Potential regulatory reclassification of VoIP services could increase compliance costs and reduce profitability.
• Changes to rates by suppliers and increasing regulatory charges or tariffs may require price increases, impacting competitiveness.
• Vendor concentration risks for critical services could disrupt operations and require costly adjustments.
• Changes in laws and regulations and their interpretation and enforcement could adversely impact financial results or ability to conduct business.
• Taxing authorities may successfully assert that the company should have collected sales and use, value-added, or similar taxes, leading to assessments and penalties.
• Increased costs and demands on management as a result of compliance with laws and regulations applicable to public companies.
• Past governmental inquiries and investigations related to discontinued seminar sales model could require refunds, damages, or fines.
• Substantial expenses may be incurred in defending against third-party patent and trademark infringement claims.
• The company's stock price may be volatile and could decline due to numerous factors beyond its control.
• An active trading market in equity securities may cease to exist, adversely affecting market price and liquidity.
• Future offerings, acquisitions, or mergers could cause substantial dilution of ownership interest.
• Steven G. Mihaylo, a former CEO and Chairman, owns approximately 36.9% of outstanding common stock and could exercise substantial corporate control.
• Sales of a significant number of shares by stockholders who received shares in acquisitions (e.g., NetSapiens employees) could depress the stock price.
• There is no guarantee that Crexendo and recently acquired companies will fully integrate operations or realize anticipated benefits.
• Challenges in migrating Crexendo customers to the Crexendo Software Solutions communication platform could cause service issues and revenue loss.
• Difficulty attracting, motivating, and retaining executives and other key employees could hinder growth and innovation.
• Business relationships, including customer relationships, may be subject to disruption due to acquisitions.
• The market price of common stock after recent and future acquisitions may be affected by factors different from those currently affecting the independent results of operations.

Future Outlook

The company anticipates continued investment in sales, marketing, engineering, and research and development. The ongoing migration to Oracle Cloud Infrastructure is expected to enhance operational efficiency, scalability, and cost-effectiveness in the long term. Future acquisitions are a key part of the growth strategy. The Board may consider reinstating a dividend in 2026 if accretive acquisition opportunities are not identified.

Management Comments

• Our cloud communications software solutions currently support over seven million end users globally.
• Our solution was recently recognized as the fastest growing UCaaS platform in the United States.
• Crexendo continues to invest and develop its technology and CPaaS offerings to make them more competitive and profitable.
• We expect to invest in sales and marketing, engineering, design, and research and development, among other areas of our business.
• The investments we have made and will continue to make may not generate the returns that we anticipate, which could adversely impact our financial condition and make it more difficult for us to grow revenue and/or maintain GAAP profitability.
• The Board may consider a dividend if it appears unlikely the Company will make accretive acquisitions in 2026.
• We are in the process of migrating from our own physical data centers to the Oracle Cloud Infrastructure (OCI) which we expect will enable us to more successfully compete for the business of companies that are transitioning to cloud communications and otherwise position ourselves to take advantage of long-term revenue-generating opportunities.
• We are continuing the process of moving certain Crexendo customers to the Crexendo Software Solutions VIP communication platform while retaining some customers on the Crexendo Ride the Cloud classic system. There can be significant cost savings associated with consolidating all customers on one communication platform.

Industry Context

StockSavvy.ai notes that Crexendo operates in a highly competitive and rapidly evolving cloud communications and software solutions market. The company's focus on UCaaS and SaaS, coupled with its migration to Oracle Cloud Infrastructure, positions it to capitalize on the growing demand for cloud-based services. The industry is characterized by significant competition from both traditional telecom providers and large tech companies, as well as rapid technological changes driven by AI. Crexendo's strategy of offering flexible licensing (perpetual vs. subscription) and investing in CPaaS offerings is a response to these dynamics. The acquisition of Estech Systems, LLC further indicates a strategy of consolidation and expansion in a fragmented market.

Comparison to Industry Standards

• Crexendo's UCaaS platform was recognized as the fastest growing in the United States, suggesting strong market penetration relative to competitors like 8x8, Inc., RingCentral, Inc., and Microsoft Teams.
• The company's Net Monthly Subscription Dollar Retention Rate of 100% (consolidated) is a solid performance indicator, comparable to healthy SaaS companies, though the 98% for Cloud Telecommunications Services suggests some churn, which is common in competitive telecom markets.
• The shift towards a subscription model for software solutions aligns with broader industry trends seen in companies like Salesforce.com, Inc. and Adobe Inc., moving away from one-time license sales to more predictable recurring revenue.
• The migration to Oracle Cloud Infrastructure (OCI) reflects a common strategy among technology companies to leverage hyperscale cloud providers for improved scalability, reliability, and cost efficiency, similar to how many enterprises utilize AWS, Azure, or Google Cloud.

Management Changes

Corporate Governance

Legal Proceedings

• The company is involved in various claims, lawsuits, investigations, and other proceedings in the ordinary course of business, including patent infringement, employment litigation, regulatory compliance, and contractual disputes.
• Historically, inquiries from government officials related to discontinued seminar operations have been addressed without formal complaints, though there is no assurance of future outcomes.
• Customer complaints and inquiries from governmental and non-governmental bodies have sometimes led to civil court cases.
• As of December 31, 2025, there is no recorded liability for estimated losses from legal proceedings.

Related Party Transactions

• A promissory note with Bryan Dancer (seller of Allegiant Networks, LLC and a greater than 5% shareholder) had an outstanding balance of $98,000 as of December 31, 2025. Principal payments of $380,000 and interest of $12,000 were made in 2025.
• A consulting agreement with Steven G. Mihaylo (Chairman Emeritus and a greater than 5% shareholder) provides for monthly consideration of $14,000 ($168,000 annually). Payments of $168,000 were made in 2025.

Stakeholder Impact

• Shareholders: Positive impact from increased revenue, net income, and EPS. Potential dilution from future equity offerings for acquisitions. Risk of stock price volatility due to market factors and competitive landscape. Steven G. Mihaylo's significant ownership could influence corporate control.
• Employees: Benefit from the annual employee bonus plan based on performance targets. Potential for stock options and RSUs as part of compensation. Risk of job cuts due to over-reliance on automation (AI risk).
• Customers: Benefit from expanded cloud communication platform, UCaaS, and managed IT services. Risks of service interruptions due to technology errors, cyber-attacks, or third-party provider failures. Potential for increased prices due to rising costs or regulatory changes.
• Suppliers/Vendors: Dependence on a limited number of vendors for critical services (VoIP hardware, telecom infrastructure, software components) creates vendor concentration risk.
• Creditors: Improved financial health and cash position reduce credit risk. Potential for increased debt if future acquisitions are debt-financed.

Next Steps

• Continue investing in sales and marketing, engineering, design, and research and development.
• Manage the migration of physical data centers to Oracle Cloud Infrastructure (OCI).
• Integrate Estech Systems, LLC business and operations.
• Migrate Crexendo customers to the Crexendo Software Solutions VIP communication platform.
• Consider a dividend in 2026 if accretive acquisitions are unlikely.
• Request a new equity incentive plan to accommodate additional stock options for mergers or acquisitions.
• Monitor and adapt to rapid generative AI innovation.
• Evaluate ASU 2025-12, ASU 2025-11, ASU 2025-05 for impact on financial statements.
• Early adopt ASU 2025-08 and ASU 2025-06 prospectively, effective January 1, 2026.

Key Dates

Recommendation

The company demonstrated exceptional financial performance in 2025 with substantial growth in revenue, net income, and Adjusted EBITDA, indicating strong operational execution and market demand for its cloud communication and software solutions. The strategic acquisition of Estech Systems, LLC, coupled with ongoing migration to Oracle Cloud Infrastructure, positions Crexendo for continued expansion and efficiency gains. While competitive and macroeconomic risks exist, the current financial trajectory and strategic initiatives suggest significant upside potential for investors.

Keywords

Cloud Communications, UCaaS, Software Solutions, Telecommunications, Managed IT Services, SaaS, VoIP, SEC Filing, 10-K, Financial Report, Crexendo, CXDO, Enterprise Solutions, Business Communications, Cloud Platform, Oracle Cloud Infrastructure, Acquisition, Estech Systems