CXDO - NASDAQ

Greetings. Welcome to the Crexendo Third Quarter 2023 Earnings Call. [Operator Instructions] Please note, this conference is being recorded. I will now turn the conference over to your host, Jeff Korn. You may begin.

Thank you, Mike, and good afternoon, everybody. Welcome to Crexendo Q3 2023 conference call. On the call with me today are Doug Gaylor, our President and COO; Ron Vincent, our CFO; Jon Brinton, our CRO; and Anand Buch, our CSO. In a moment, Jon will read our safe harbor statement. After that, I'll give some brief comments on our performance for the quarter. Ron will provide more detail on the numbers, before handing over the call to Doug to provide a business and sales update. After that, we'll open the call up to questions. Jon, would you please read the safe harbor?

Yes, 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. 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, 2022, and the Forms 10-Q as filed. 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. Back to you, Jeff.

Thank you, Jon. I think by now most of I'm pretty direct, and I don't intend to change that, but this is one of the times where it works very well. This was an excellent quarter across the board. We exceeded my expectations. We exceeded the team's expectations, and we exceeded external expectations. As a matter of fact, last quarter I was asked if I thought we might reach GAAP profitability anytime during 2023, and I said, I did not believe so. I've never been happier to be wrong. In the third quarter, we continue to drive strong growth, with a sustained focus on executing against our long-term strategic roadmap. Consolidated total revenue for the quarter was $13.9 million, a 52% increase over the prior year period. Year-to-date, our revenues have increased 49% to $39 million compared to $26.1 million in the same nine-month period last year. This is really an amazing turnaround from how we started the year. In addition to the increases in revenue, we importantly achieved GAAP profitability in the third quarter. This has been a key focus of ours for a long time, and is a significant milestone for the organization. For several quarters, we have discussed our growth strategy, cost management initiatives, and operational efficiencies, and this achievement serves as validation to much of the work and strategy that we have put together. Furthermore, we now stand on an increasingly sound financial footing, especially after the successful sale of our building. As we have previously discussed, we're not bogged down by debt on our balance sheet, which allows us to remain opportunistic in the capital markets, rather than being forced into transactions out of necessity. This prudent approach not only sets us apart from most of our competitors, but also ensures that we make decisions that align with our long-term goals and maximizes value for our shareholders. Organizationally, in the third quarter, we continued to make remarkable progress in reorganizing, integrating, and streamlining our companies to more efficiently operate as one cohesive unit. Additionally, throughout the integration process, we've remained committed to installing a company culture that enhances the collective spirit amongst our team members, and we continue to prioritize employee satisfaction as our teams join forces. On the sales front, we continue to see significant growth from our dealer and partner channels, which has increased the scope of our sales opportunities and our network of resellers. Anecdotally, we recently held our annual user group meeting, which included our licensees and vendors from five continents and was the largest and most dynamic partner gathering in the history of the platform user group meetings. It was great to see our ecosystem come together in person, and we're already looking forward to next year's event. In a similar vein, during the third quarter, we also continued with the accelerated migration of customers off our Crexendo Classic System, to our industry-leading VIP platform. I'm happy to say the end is now in sight for this consolidation, which will ensure that our customers are hosted on one single, superior platform, in turn reducing costs substantially on our end as we sunset the legacy platform and transition valuable engineer and support staff to other parts of the business. With our teams now functioning properly, our top and bottom-line results delivering on levels that we expect, and our balance sheet continuing to provide us with increased operating leverage, our focus will remain on three key items moving forward. First, aggressively driving organic growth through securing larger SMB and certain enterprise deals. Secondly, more intensely evaluating potentially accretive acquisition targets. And third, transitioning a significant portion of our Software Solutions revenue to MRC rather than perpetual license. In conclusion, we are very encouraged by the third quarter results. We acknowledge that our vision of what this organization can do, and it's still a far cry from where we are today. We will continue to work hard on our targets and look forward to what future quarters will hold. With that, I'll turn the call over to Ron for more details on our numbers. Ron?

Thank you, Jeff. Good afternoon, everyone. Financial highlights for the third quarter are as follows. Total revenue for the third quarter increased 52% to $13.8 million, compared to $9.1 million for the third quarter of the prior year. Service revenue for third quarter increased 68% to $7.5 million, compared to $4.5 million for the prior year. Software Solutions revenue for third quarter increased 21% to $4.7 million, compared to $3.9 million for the third quarter of the prior year. And our product revenue increased 119% to $1.6 million compared to $760,000 for the third quarter of the prior year. We also had strong margins for the quarter. Telecom Services came in flat with the prior quarter Q2 of this year at 58%. Software Solutions margins expanded from 67% in Q2 2023 to 72% for the third quarter. And our product margins improved from 38% in Q2 of 2023 to 45% for the third quarter of this year. Overall, gross margin expansion to 61% from 58% in Q2 of this year. Operating expenses for the third quarter increased 40% or $3.8 million to $13.5 million compared to $9.7 million for the prior year. The company reported net income of $1.7 million for the quarter or $0.07 per basic and $0.06 per diluted common share, compared to a net loss of $696,000 or $0.03 loss per basic and diluted share for the third quarter of the prior year. Non-GAAP net income for the quarter of $3.3 million, that's $0.13 per basic and $0.12 per diluted share, compared to non-GAAP net income of $713,000 or $0.03 per basic and diluted common share for the third quarter of the prior year. EBITDA for the third quarter came in at $1.2 million compared to $79,000 for the third quarter of the prior year. And adjusted EBITDA increased to $2.1 million compared to $938,000 for the third quarter of the prior year. A few highlights on the nine months ended September 30. Year-to-date, total revenue increased 49% to $12.9 million, or from $12.9 million to $39 million compared to $26.1 million. Service revenue increased 64% to $21.9 million compared to $13.4 million. Software Solutions revenue increased 19% to $12.7 million compared to $10.7 million, and product revenue increased 122% to $4.3 million compared to $1.9 million. Operating expenses for the nine-month period increased 42% to $40.8 million compared to $28.9 million in the prior year. Year-to-date, the company reported a net loss of only $423,000 for the nine-month period, or $0.02 loss per basic and diluted common share, compared to a net loss of $2.8 million or $0.13 loss per basic and diluted common share for the same period of the prior year. Year-to-date, non-GAAP net income was $5.1 million. That's $0.20 per basic and $0.18 per diluted common share, compared to non-GAAP net income of $1.6 million or $0.07 per basic and $0.06 cents per diluted common share for the same period of the prior year, Year-to-date, EBITDA of $968,000 compared to a loss of $927,000 for the same period of the prior year. And adjusted EBITDA for the nine-month period of $4.1 million compared to $1.9 million for the same period of the prior year. Our cash balance at September 30 was $7.7 million compared to $5.5 million at December 31, 2022. Our cash provided by operating activities for the nine-month period was $887,000 compared to $2.7 million used for the same period of the prior year. The third quarter had positive operating cash flows of $1,560,000 compared to negative cash flows of $673,000 for the first two quarters of 2023. Cash provided by investing activities for the nine-month period of $3.7 million compared to $192,000 used for the same period the prior year. As we mentioned on the last earnings call, we sold our building in August of this year, and we received $3,792,000 in proceeds from the sale of the building, net of commissions. That's compared to $92,000 used for the purchase of property and equipment for the first two quarters. So, that's how we get to the $3.7 million for the nine-month period. Cash used for financing activities for the nine-month period of $2.3 million compared to cash used of $36,000 for the same period of the prior year. During the quarter, we utilized $1,838,000 for financing activities. $1,000,872 of that was for the repayment of the no payable on our building. I've used up my voice, so I'm going to turn it over to Doug for some highlights on business and sales.

Thanks, Ron. It was a great quarter for Crexendo. As both Jeff and Ron have discussed, our 52% revenue increased to $13.87 million for the quarter was driven by impressive performances throughout several segments of the business, all of which I will discuss in further detail. First, I'd like to start by highlighting the organic growth of our Telecom Services segment, which saw an impressive 11% increase year-over-year, and that growth was fueled by a record number of installations generated by our partner and direct channels. Similarly, our Software Solutions segment for platform sales demonstrated exceptional results, with organic growth of 21%, driven by new logos, as well as upgrades from our growing licensee community. Our Software Solutions segment also witnessed nice improvements in gross margins, as Ron highlighted, which increased from 67% to 72% quarter-over-quarter, as we continue to manage cost and optimize our offerings. Gross margins on the combined Telecom Services segment for service remained relatively flat at 58%, and includes our Allegiant acquisition. And taking out the Allegiant revenue contribution, our classic Crexendo Telecom Services gross margin was 68% for the quarter. We also saw a nice improvement on the Telecom Services product gross margin increasing from 38% in Q2 to 45% in Q3, as we put more focus on the product offering margins for our Allegiant group and our product offerings. Our Allegiant acquisition just celebrated its one-year anniversary last week, and we continue to see nice growth from that group as we saw organic growth in that division of 17% over their standalone third quarter last year. Echoing Jeff's commentary, we have successfully integrated Allegiant into our legacy business, creating synergies that have opened up a wide range of exciting cross utilization and cross-selling opportunities. Our backlog number, which to remind you, is the sum of the remaining contract values of our Telecom Services and our Software Solutions customers that will be recognized on a sliding scale over the next 60 months, increased by a whopping 46% to $63.4 million year-over-year, and that's a 24% increase from just last quarter. The backlog number includes the Allegiant customer contracts as well. Our backlog number provides a locked in robust future revenue stream and solidifies our confidence and reliable future growth. As it relates to sales updates for the quarter, we continue to receive outstanding contributions from our resellers and witnessed impressive growth through our master agent channels, which saw 25% increase in sales orders from last quarter. And we continue to see great momentum from this sector of the channel. These partnerships have played a pivotal role in expanding our market reach and driving growth. Our reseller channel is continuing to perform nicely as we are seeing strong contributions from our partners and seeing large size sales opportunities coming through the process. We continue to build on our roster of reseller partners and look forward to working with a growing number of companies as the program continues to scale. We're also continuing to see record elevated demand for our Software Solutions platform, and are seeing strong momentum in that segment of the business. Last quarter, we talked about a large Cisco BroadSoft licensee that is leaving Cisco to launch their Crexendo platform, and this quarter we just landed a large Microsoft Metaswitch platform licensee to move over to Crexendo. So, we're seeing great opportunities to move licensees from the number one and number two platform providers, respectively, to Crexendo's platform, which is number three, and also the fastest growing platform in the US. Some of our competitors have talked of slowing sales due to economic headwinds, yet we have seen strong demand in both segments of our business, and it shows in our results. As an aside that we have previously mentioned in the past, in the event of a significant downturn economically, I believe that recessionary times actually benefit our industry as businesses look for ways to cut costs and improve efficiencies and productivity, and that's exactly what our solutions offer. As we've previously mentioned, the majority of business customers in the US still have not migrated over to the cloud, and it's not a matter of if they move, but when they move and make that migration, and we see that continued momentum happening with our customers and our prospects out there, and that shows in our numbers. Internationally, our sales efforts have continued to gain traction as we address the growing demands of overseas markets, and our commitment to the international expansion is driven by our belief in the transformative power of our solutions on a global scale, and we'll continue to execute both domestically and internationally in future quarters. Operationally, we have achieved yet another quarter of record installations, which demonstrates our ability to efficiently meet growing customer demands at higher levels of volume. Furthermore, our focus on customer satisfaction continues to yield positive results and customer satisfaction remains at an all-time high, with continued strong reviews on G2.com, which is the technology industry's leading independent review website. On top of the great customer reviews that we continue to get, we were also blessed with multiple customer-selected industry awards that we received for our VoIP solutions, our UCaaS solutions, and our CCaaS offerings during the quarter, including the product of the year, presented by Internet Telephony. From a product and software standpoint, we have made significant strides in enhancing our offerings. At our recent user group meeting, which Jeff referenced, which had record attendance and tremendous energy and electricity at the conference, we unveiled new CPaaS, which is programmable communication capabilities on a call-processing-as-a-service type platform. We announced new capabilities via our API 2.0 release to empower our customers with advanced features and functionalities. We also introduced new generative AI technology features that are powered by ChatGPT and the company's contact center solution that will lead us and our partners into new opportunities and solutions for our customers. These investments set the stage for future releases, ensuring that we remain at the forefront of technological innovation within the industry. So, in summary, this quarter has been an exceptional step in the right direction for our company, as we hit record levels across the board. We've experienced remarkable organic growth. Our sales efforts have been fruitful both domestically and internationally, and we continue to witness increased demand for our solutions. As we look to the future, we're eager to continue building on our momentum to realize future success within the organization. I'll now turn it over back to Jeff for any future comments.

Thank you, Doug. And I don't have anything more to say at this point. So, Mike, why don't you turn this open to questions.

[Operator Instructions] Our first questioner is Vivek Palani from Northland Capital.

Hi. Vivek on for Mike Latimore. Yes, I'm great. How about you?

We are wonderful. Thank you.

Yes. I'm on for Mike Latimore of Northland Capital. So, I have a couple of questions here. The first one is, do you typically see seasonality in the fourth quarter? If so, is it positive or negative?

We've seen some seasonality in the fourth quarter, and frankly I'll let Doug give a little more detail, but it depends on the year. We've seen certain years when buying decisions are deferred from Q4 to Q1 as people are trying to keep money in their year-end balance. But we've seen that a couple of years and we've seen that with years where it doesn't happen. So, it's not completely seasonable, but Doug may be able to give you a little more detail on sales.

Yes, I like to always use the reference that every business has got a phone system and most of them need our services out there. And so, it's not as seasonal as you would see in other industries. So, we're fairly consistent. We do see a little bit of a bump in Q4 typically because we have our user group meeting, which adds to a little bit of a revenue pop. That is a one-time event that we have each year in the fourth quarter. But aside from that, our business is fairly consistent across the board.

Great. My next question is, what about the levels of cross sales you are seeing with Allegiant?

Yes. So, Allegiant is a great component of our business today. And so, they have their UCaaS offering, which is very similar to what we have on the Telecom Services side of the house. But they also have managed services offerings and data services offerings that are unique to that division of our company. And we're expanding that and cross-selling opportunities to our direct sales team as we speak. So, that initiative is just getting underway, and we anticipate that having a nice impact on our direct sales offerings across the board.

Yes, that's it. Thank you. Have a nice day.

Thank you, sir. You have a great day too.

We now hear from Tony Felling with Lake Street Capital.

Hey guys, congratulations on a great quarter.

Thank you, Tony.

Good to hear from you. So, filling in for Eric Martinuzzi here, but was there anything kind of one-time in the quarter where - or is this kind of just the new run rate we should think about going forward? I know you guys aren't giving guidance, but you've taken a nice steer step-up here.

I won't promise you that this is the run rate. I certainly hope it will be, and we're going to steer for that to be, but there were no onetime events here. This was just business as usual, and we just hit - we fired on all cylinders.

Yes, I think it was good execution on all sides of the equation. So, as I mentioned in my comments, we saw strong increases organically from all divisions of the business. So, I think when you have a good product and customers need that solution, it's a perfect fit for what we're offering out there right now.

That's great. And I know you talked about obviously for the future accretive M&A targets. Is there anything near-term M&A that you can talk about or give us some insights on what you're looking at?

As you may recall, when I took over, I put the brakes on looking at acquisitions because I thought it was imperative that we fix what we have, get all the synergies out of the business and stop the burn, which we were having at the beginning of the year. We've righted the ship and we're now in a position where we're going to start to look. So, we don't have anything immediately on the horizon. But as Doug likes to talk about, we have the integrated fishing pond where we could first start looking, and we have other people who reach out to us from time to time. But nothing specific immediately on target, but we're now ready to start looking again.

Got you. That's great. Well, congrats again. Appreciate you taking my call.

Thank you, sir.

Our next questioner is Chris Sakai with Singular Research.

Hi, good afternoon. Just a question. Let's see. What was this 1.459 gain on sale of property and equipment in the quarter?

Yes, so last quarter, we announced that we had a contract to sell our building, and we sold it the day before the earnings call last quarter. We sold our corporate headquarters building for $4 million. It generated $1,459,000 gain on the sale.

Okay. And what - looks like service revenue gross margin lowered from about 70% to 58% year-over-year. What was the reason for that?

Yes, so when we made the acquisition of Allegiant in November of last year, so it wasn't in our first nine months of the year. So, our traditional Telecom Services gross margins were typically between 68% and 71%, depending on which quarter you were looking at. If you were to carve out - we did the acquisition of Allegiant, so that's skewing the numbers because they have lower margins given our service offerings bundled in with all their additional IT services. And so, if you look at independently, our gross margins for the quarter for the Crexendo Business Solutions, Telecom Services is 68% for the quarter. And last quarter was 69%. So, if you carve out that, but Allegiant came in at 42% for the quarter. So, that was a drag on our margins.

Okay. Can you talk about your international opportunity? What were your best performing regions?

You want to take that on it?

Sure. I mean, yes, I think a lot of the growth that's coming out as a percentage is actually coming out of the Australia region. Obviously, we have numerous partners in the UK, but our biggest partner acquisition here over the last couple of quarters has been in Australia, as we talked about at the last earnings call.

Okay. And then I guess last for me, would you guys ever consider reinstituting the dividend?

That is very low on my list of things I would consider, but I'll never say never.

Yes. Right now, we're looking at reinvesting back into the business, Chris, and I mean, I think that you can see that over the last couple of quarters is that by reinvesting back into the business, you're seeing a nice spike in the revenue growth and the bottom line. And so, that's really our focus right now is to reinvest back in the business.

We simply have better uses of the money by investing and doing acquisitions.

Okay. Great. Well, thanks.

Our next questioner is Maj Soueidan with GeoInvesting.

Hi Jeff, how are you doing? Hi, Doug. I’ve got a quick question and it's kind of on the acquisition front, really. I'm just curious what you're seeing out there in terms of pricing of some of maybe some candidates you might be looking for and what areas you might be looking to kind of acquire companies into. And I noticed that Ooma I recently made an acquisition here on October 23. They bought a company, I guess called 2600H

Well, Maj, let me answer your second question first. And there is a lot of a similarity in that they are a platform provider, as are we. And I obviously am very excited that a platform provider with falling revenues and not nearly as fast growing as we are, we are the fastest growing platform in the country, the third largest, which is feature rich and best of breed, so if a falling revenue platform provider can get four times, five revenue, it's obviously exciting to me. Nonetheless, obviously we're not sitting here licking our chops. We're here doing our best job every day to go ahead, but if that's a precursor of what our value would be, that would be very exciting. But at this point, we really don't know if it's one off or that's what the value of the platform is. But again, our job here is to continue to make this company best every day, continue to improve the platform, continue to improve the revenues, and continue to keep it the fastest growing. And that obviously will increase our value no matter what outside values are. And to your first, I'm sorry, go ahead, sir.

I'm sorry. Go ahead. I just remembered, on your first conference call, you talked about - I think someone asked you what would not make you sleep at night, and you had said someone coming and acquiring you for a price you think you're much less than you're worth at, right? So, I thought that was interesting.

It is interesting and that until the stock reaches a level that we all think it believes to, that still does keep me up at night. But the 4.5 times revenue on the platform reward does - will probably let me get a little better sleep this coming quarter.

Yes, I think if you saw that press release, Maj, it highlighted that 2600H

With that said, Maj, valuation depends upon what we're looking at, what technology they may have, and what the value of the customers are. So, it's hard to give a straight answer, but obviously, we don't want to pay more than market value, but we want to acquire good customers and good technology, and some of that and maybe worth a premium. But we don't have anything on the table at the moment, so it's hard for me to give you a serious answer as to what we would pay for something.

Okay. And can I ask two more questions or should I go back in the queue?

Go ahead. No, go ahead.

Yes. So, I think you've also talked about, both you and Doug in the past about how some of the bigger competitors like RingCentral, for example, have to change the way that they compete in terms of how they comp their sales reps, where they were paying them aggressive sales comps when we had a low rate environment. I mean, and then they levered up to do that, which - and there was a long ROI on some of that investment. And I'm wondering, are you seeing that change now where they can't do that anymore? Because as it's maybe harder to borrow money to do that and finance those kind of costs. So, are you seeing any of that benefit, any of that going on? Is it benefiting you guys at all?

I'll let Doug answer, but it is helping us some. And I wouldn't - can't wouldn't be the verb I would've used. I would've used shouldn't because some of our competitors were paying spiffs that made it unprofitable to take the business, but they had dreams of acquiring revenue and they paid an unreasonable amount for it thinking it was going to get a multiple of 5, 6, 7 at multiples of one or two on valuation. It doesn't make sense. So, I think the market has rationalized and stabilized, but I'll let Doug give a little more detail on that

Yes. No, we still see a lot of those extremely unprofitable spits out there from our competitors. And sometimes it just boggles the mind at what some of these guys are offering to try to gain a new customer. I think our model has been very consistent and I think our partners appreciate that and the fact that we do a good job for the customer and our customers are extremely happy after the fact. So, I think a lot of the competitive challenges out there are still there. But I think it's making a lot of our bigger competitors reevaluate. RingCentral in their most recent comments said that they're going to start focusing on the SMB market as opposed to the enterprise market. That's where our sweet spot has always been. So, I think we're doing things right out there and people are starting to take notice.

Okay, that's all I got. Thanks.

Our next questionnaire is Kate Knop with B. Riley.

Hi there. On for Josh today. So, I just want to go back to the international expansion a little bit here. So, I know on the last call, last quarter’s call, you talked about having maybe 20 or so international service providers. Has that number improved at all? And if you could talk a little bit more about maybe some more tangible data points you're seeing from the international expansion?

Sure. I'm going to let Anand answer that.

Yes, so let me speak to that. I think as a function, I think Doug has mentioned, if you look at all of our licensees as a whole, we're at 220 plus. And so, if you look at the international market as a percentage, and as we're growing, it's obviously a market that we started expanding into only a couple of years ago. So, to answer your question, yes do we see the increase of one or two additional every quarter? That's typically kind of where we see, and you can kind of look at the numbers. Now specifically, if you look at what's happening in a lot of the international markets, if I speak from a macro perspective, is they are actually behind the curve when it comes to, or in their evolution to convert to the cloud. But the way business is done in those markets is a little bit different from the types of channels that we have. And so, what we're doing is we're grabbing partnerships just like the one in Australia, for example, of additional players that are taking a channel strategy to market. So, we can leverage that given the size of our team. But in general, you'll kind of continue to see that ebb and flow, but keep in mind that relative to obviously when we started the original footprint in North America, the evolution of the customer journey is kind of trailing that path.

Okay. Helpful there. Thank you. And then can you - so I know one of your new focus, probably existing, but also you, you highlighted it early on in today's call, focus on winning larger businesses and larger enterprises here. So, can you just share a little bit more about what you've seen in the quarter in terms of winning larger business and kind of a roadmap for the future?

Sure. I'll pass that on to Jon. Jon?

Sure. Hi Kat. So, on the - in the two parts of the business, we're seeing a larger customer, a larger potential licensee. So, I'll take the Telecom Services side of the business first, where we have seen growth overall continuing to trend up on our average customer size. And part of that is we - a few months ago, we introduced an omnichannel CaaS offer, which helps us expand better into a medium and large size market. Part of it is the growth in our distribution through master agents, as Doug mentioned earlier, which is helping us also speak to a larger customer. And we continue to see really good growth in that funnel. Sometimes those opportunities take a little longer to close than the pure SMB stuff. So, we're working those through the funnel as they close, but we're continuing to see good expansion there across our retail offers. On the licensee side of the business for Software Solutions, we are seeing larger service providers turning to us than we would've seen before, partly because of things - trends we've talked about before with the Cisco BroadSoft acquisition now being several years old, and Microsoft's Metaswitch acquisition being several years old, and beginning to - we're getting converts from people that have been in their larger service providers that have been in their partner base that are licensing our platform to deploy it as part of their UCaaS offers as a competitive alternative to the offers from Cisco and Microsoft. And we've had - we've talked a bit about some of the key wins publicly. Last quarter, we also had a nice new add from a Microsoft Metaswitch partner who chose to license our platform for their UCaaS offering. So, in that part of the business as well, we’re continuing to see growth into a market segment that we hadn't worked in before.

Okay, great. That was helpful. And then just one more from me. So, I know in the past, you've talked about renegotiating rates with vendors and suppliers to reduce costs further as a part of like you guys' greater plan. Can you talk about any updates you've seen on that front?

Yes, Kat, that's an ongoing process. We look at all of the contracts from the individual companies, well, or individual companies, and we combine them and renegotiate prices with one vendor to get a lower price. I can't give you - I don't want to give you specific examples, but it's an ongoing process and we do it regularly, and we look at every expense every quarter, and where we sue duplication, we seek to avoid it.

Okay, great. Thanks.

Our next questioner is Michael Kaufman with MK Investments

Hi Michael, how are you, sir?

[Operator instructions].

Congratulations on an incredible quarter.

Thank you, Michael.

More importantly, the fact that you're cashflow positive when many of your major competitors are drowning in debt. So, I believe you are truly a diamond in the rough, and I guess a mention was made of the Ooma acquisition. And I believe that you'll start seeing more coverage on the company and that the valuations will start to improve commensurate with the good work that you guys are doing. So, just keep up the great work and stay with the basic fundamental finance propositions, and you'll be going to the diamond in the sky.

Well, thank, thank you, Michael. And I guarantee you, there's nobody in this room who does not believe that the business should be managed based upon fundamental business principles. We all do that. We're doing that carefully, and I think the results we have seen since Q1 reflect that. But your support is greatly appreciated, and I certainly hope the analysts who are listening to you will start to agree and we'll see the valuations go up. But thank you, Michael.

Take care.

We have reached the end of our question-and-answer session. Do our hosts have any closing remarks?

No, sir. Mike, I appreciate you taking the call, and I genuinely appreciate everybody who called in and listened and asked questions. As I said before, we're very, very excited about the future, and I'm excited for us all to speak with you again in March when we disclose Q4 results. So, until then, take good care. Bye.

Thanks, everybody.