All right. Hello, everyone, and welcome to the Crexendo Fireside Chat. My name is Robert Blum, managing partner here at Lytham Partners, and up next, I will be moderating a Q&A discussion with Doug Gaylor, Crexendo's President and Chief Operating Officer. A reminder, Crexendo trades under ticker symbol CXDO on the Nasdaq. All right, let's get started. Doug, welcome. Thanks, Robert. Great to be here, and thanks for having me. Fantastic. To begin, can you provide an overview of Crexendo, and tell us about your background as well? Yeah, great. I appreciate it. Crexendo is a Unified Communications as a Service company, so we basically do cloud communications, listed on the Nasdaq under the symbol CXDO. This year, we are on a run rate of right at about $100 million. We just finished the last quarter with $24.6 million in revenue for the quarter, so right at that $100 million run mark right now. And we do cloud communications. We do it in two different flavors. We offer it through a software platform that we offer to other telecom companies on a wholesale basis, that they can now use our platform as the foundation for their telecom services. And we also offer it on a retail basis, that we sell direct to small and mid-size businesses. And so those two segments combine for the whole organization. About 70% of our revenue comes from the retail side, and about 30% comes from the wholesale side. Tremendous business, lots of opportunity. A lot of catalysts going on in the industry that we will talk about through the conversation today, and I am real pleased to be leading the charge here. I have been with Crexendo now for 16 years. Been in the telecom industry for 36 years. I started with a company called Inter-Tel way back in the day and worked there for 20 years, and it was acquired by Mitel. I stayed on with Mitel as Senior VP of Sales for two years, and then came over to Crexendo in 2010 before we even had our first customer on the platform. Put our first customer on the Crexendo platform in 2012, and now we support, just announced last week, 8 million users on our platform. We have gone from one user on the platform, that was our first user in 2012, to now supporting 8 million users across the Crexendo family. Well, fantastic. Congratulations on the success and progress there. Let us dive in. You mentioned a little bit, you operate both the NetSapiens software platform and a direct cloud communications business. How do those two sides of the company sort of complement one another? Yeah, great question. The NetSapiens platform is our platform that I was mentioning that we sell on the wholesale basis. We currently have 250 licensees that use that platform to run their business. We are the third-largest platform provider in the country. We are the fastest-growing platform provider in the country. The number one and number two platform providers are Cisco, that owns BroadSoft. They have got about 1,200 licensees on their platform. Metaswitch, that was previously owned by Microsoft and sold off about 1.5 year ago to a company called Alianza. Metaswitch has got about 800 licensees on their platform. And we are the third largest, with 250+ licensees on our platform. Fastest-growing because we are taking market share away from number one and two. Just in the first six months of this year, we have added 11 new logos to the platform. That means 11 new companies that have invested in the Crexendo platform to be the foundation for their business. That part of the business is doing extremely well. The platform, extremely robust, extremely reliable, and very feature-rich. That same platform is what we use on the retail side of the house. Not only do we sell our platform to those 250 licensees out there, but we use the same platform in-house for our Crexendo VIP offering. Our Crexendo VIP offering is our retail offering that we sell to small and mid-size businesses, and that is a growing part of our business as well. We continue to grow the retail side of the house through organic growth and through acquisitions, and we will talk about one of those acquisitions coming up here in a little bit. All right, very good. From your perspective, you have been around since the beginning, as you mentioned, what most clearly differentiates Crexendo's technology, your service model, and really your overall value proposition from the competition? Yeah, so I will answer that on two ways because we have got the two different segments. When we look at our platform and our technology, our technology is extremely robust, as I mentioned earlier. The platform that we sell to all of our wholesale licensees, they buy that platform because of the feature-rich capabilities and because of the open architecture that we have designed around the platform. What the open architecture means is that the system has got APIs that allow anybody to write code and build applications for the platform. We have an EVP program, which is our ecosystem vendor program. We currently have 57 vendors that have joined into that program. It is kind of like the App Store for Apple. These vendors, these developers can develop applications and software solutions for our system, and it integrates through our open APIs. When we look at the development of the platform, the platform has got just about every application, every feature that you would want. A lot of the features that are being developed now are AI related, so we are going to talk a lot about artificial intelligence and what it is doing for our future and for our offerings. That is what really sets ourselves apart from the platform perspective, is that our platform is very open and very constantly being developed. If you look at that compared to number 1 and number 2, Cisco bought BroadSoft, as I mentioned, six years ago. They really have not done much with the platform. Cisco is a huge company. BroadSoft is just a very small part of the organization. They have really kind of ignored that part of their business. There is not a lot of future development going on. There's not a great roadmap for future development, and that's kind of alienated a lot of the licensees on the Cisco BroadSoft platform. Metaswitch, as I mentioned, was owned by Microsoft. Microsoft end-of-lifed the product two years ago, and then did a complete 180 and decided, "Well, instead of end-of-lifing it, we'll just go ahead and sell off that division." They sold off the division 1.5 year ago to Alianza, and that announcement of end of life created a lot of uncertainty with the licensees out there. Here's a platform that's been around for 15 years, end-of-lifed and stopped developed two years ago, and there really hasn't been much development and much of a resurrection to the platform. Again, creating a lot of fear, uncertainty, and doubt with their licensees. That's driving a lot of opportunity. Not only do we have a strong platform, but we've got tremendous customer service. We continually rank number one from a customer service and support perspective, and that's really what's driving the growth and the differential on the wholesale side of the house. On the retail side of the house, we use that same NetSapiens platform, as I mentioned, as our Crexendo VIP offering for retail. On the retail side, we compete against companies like your RingCentral and 8x8 and Vonage and others. In that respect, we compete primarily on the aspect that we've got the best customer service out there in the industry. That's not just a biased opinion that we tout out there, but it's actually a verified opinion out there. G2.com is the industry leader, third-party independently verified review site for technology companies and software companies. We continually rank number one as the leading provider for customer service and support among telecom companies. So much so in that last quarter, we were number one in 18 different cloud communication categories. Competitors like the RingCentrals and 8x8s are down in the 30 and 40 range. That's really where we hang our hat, is that we feel like we've got a fantastic solution with the best customer service and support, white glove service and customer support. Our pricing model is very competitive out there. We bring a lot of the business in on the retail side from our resellers and our agents out there. We currently have over 260 resellers and agents selling our solutions on the direct side of the house, and they typically have great relationships with their customers and their prospects, and they bring us in on these opportunities, and it's a win-win situation. They've got the relationship. They bring in a great solution from Crexendo, and we win that customer, and we keep that customer for a long time. Okay. Very good. Many, I think, new licensees begin with relatively modest commitments, and then they expand as they migrate customers onto the platform here. Discuss that land and expand model and the long-term value of a typical licensee relationship. Yeah. If you look at our licensees, again, 250-plus licensees out there, and they are all different sizes. We have got some licensees that are doing a couple of million dollars in revenue. We have got some licensees that are actually bigger than Crexendo. When we look at the scale and the breadth of our licensees out there, all different size and shapes. What we are most excited about is that, as I mentioned earlier, 11 new logos so far this year. For the first six months of the year, 11 new logos. The first six months of last year, we had two new logos. That shows us two things. One, there is a lot of movement in the industry. Of the 11 new logos, four of them came from number two, Metaswitch, and one of them came from number one, Cisco. Almost half of our new logos are coming from the top two providers out there. That number is similar to last year. Last year, we had 14 new logos for the whole year. Of those 14 new logos, I think six of them came from Metaswitch, and three or four of them came from BroadSoft. Again, more than half of our licensees that we are bringing onto the platform are coming from the larger number one and two players out there. Sure. Tremendous opportunity there. When we look at what we are faced with in the industry, those new logos come on. What we announced on the earnings call recently is that those new logos, when they come on, the average size transaction that we saw in the first six months of the year was a little bit smaller than our average. We think that might be just a little bit of economic headwinds that somebody loves the platform, they want to start it out for their business, but they start with maybe a smaller commitment. But over time, that small commitment grows into add-on orders. If we look at Q2 had six new logos, and the average new logo size for us was a $250,000 total contract value. But we had seven upgrade orders during the quarter, and those seven upgrade orders averaged almost 50% more, averaged about $350,000 for an upgrade order. So what that tells us is that all of these new licensees that are coming on board, some of them are starting a little bit smaller, knowing that they're going to grow into the platform, and that's just ongoing assurance for future revenue streams. So, the one nice thing about our revenue, is that we track our revenue on a recognized basis, but we also track our remaining performance obligation. Our remaining performance obligation right now is $139 million. And so that's the combination of all of our licensees and their full-term contracts and the unrecognized revenue that is still to come, plus all of our direct customers and their long-term contracts. So as we look at these add-on orders, these add-on orders are very instrumental. So, we love the fact that we're bringing on more and more licensees, and we love the fact that our licensees continue to grow because as they continue to grow, they buy additional sessions from us, which equates to a lot of big add-on orders. You just mentioned that there, you often highlight the economics of sessions, not seats model, right? Why is that model attractive to the service providers, and how does it strengthen your competitive position? Yeah, that's really our biggest differentiator on the wholesale side of the house, Robert, is that we offer our platform on a concurrent use basis, and we call it sessions, not seats, because Cisco's BroadSoft and formerly Microsoft's Metaswitch, now Alianza's Metaswitch, and most of the other competitors out there sell their platforms on a per-seat basis. And our big differentiating factor is that we sell on a sessions or a utilization, not a seats-based model. And what does that mean? That means that if Robert wanted to have Robert's Telephone Company here in Phoenix, and you had 30,000 end users that you wanted to put on your platform. If you were with BroadSoft or if you were with Metaswitch, you'd have to pay them 30,000 seat licenses, because you've got 30,000 customers. You've got to pay 30,000 seat licenses each and every month. As we all know, if you look at a typical business out there, they might have 20 phones, and of those 20 phones, one or two are in the conference room and the front desk and the kitchen, so you might have some phones that never, rarely get used. When we came out with our platform, we decided to be disruptive with our pricing model. So we charge on a usage basis, a concurrent use basis. If you think about our utilization, the average business out there is probably a 20 to 1 ratio, which means that for 20 phones, at any given time, one or two people are on the phone call at any given time. If we take an example of a school, a school might have 200 phones, but 150 of those phones are in the classrooms. Those classroom phones don't get used very often. They're there for 911 purposes. They're there when the teacher's on a break, but they're not getting used very often. So in a Cisco or a Metaswitch environment, those phones are being paid for on a seat basis each and every month. Our licensees love our sessions, not seat model, and a lot of the reasons that somebody would leave a BroadSoft or a Metaswitch, not only are they unhappy with the roadmap and the support, but from a pricing perspective, moving from a seat model to a concurrent use model can save these licensees upwards of 35%-50% on what they're currently paying for their infrastructure. So that's a huge differential for them. All right. Very good. You mentioned acquisitions earlier. The ESI acquisition has significantly increased your scale and appears to be performing ahead of expectations. What has ESI brought to the company, and where do you see the greatest integration and cross-selling opportunities? Yeah. If you think about where we are today, I mentioned that we're on a $100 million run rate with our $24.6 million that we just announced on our recent earnings. Robert, you've known me for a long time. We talked about 2.5 years ago being at a $100 million run rate by the end of 2026. At that time, we were probably doing $45 million or $50 million. If we look at where we are today, that number is pretty significant, because we're going to hit that $100 million run rate. We're right there on target right now. If we look at where we are today, we've got a tremendous amount of opportunity for organic growth. We've seen double-digit organic growth. But what we've always touted is that part of our growth strategy is organic growth and inorganic acquisitions. Those 250 licensees that we have that use our platform, I commonly refer to them as our stocked fishing pond because those licensees are part of our community. They know us. We know them. Many of them have been using our platform for, in some cases, 5, 10, 15 years. On March 1st, we announced an acquisition of one of our licensees, ESI. ESI was a 38-year-old telecom company down in Dallas. They've been a licensee of ours for over 14 years. They were one of our larger licensees. They were doing about $26 million in revenue. We did that acquisition in March. We paid 1.35 trailing revenues, about 1.25 forward-looking revenues for the acquisition. We paid $35 million for the acquisition. Excuse me. Great acquisition for us. Very accretive actually in our first full quarter. We got one month of revenue out of ESI in Q1, but we got a full quarter's contribution in Q2. In Q1, they did $2.1 million in March. In Q2, they averaged $2.3 million per month, so $6.9 million for the whole quarter. Even after we take out intangible amortization, even after we take out acquisition costs, they were accretive and profitable for us in the first full quarter. Great acquisition for us. That's part of our growth strategy. ESI was a perfect acquisition target for us. They knew us. We knew them. We actually looked at them three years ago, and three years ago, it wasn't the perfect timing for us to do the acquisition. They were a little top-heavy. They weren't profitable, and they weren't growing. We gave them some marching orders and said, "Hey, we'd love to do an acquisition. We'd love to put the two companies together. But in order to do that, we've got to trim the headcount. You've got to get to a profitable status, and you've got to have some organic growth." Three years later, when they came back, they had taken those marching orders and done a great job of rightsizing the business and getting it profitable. We put the deal together, and it's going to be a tremendous growth opportunity for us. They were growing last year in 2025. They grew about 8% organically. To buy a company that's growing organically and putting money to the bottom line and being able to integrate it, for what we considered a great valuation, is a home run for us. What that acquisition did for us, Robert, is it triggered a lot of our community to say, "Hey, that was a great deal." If they're looking for an exit strategy, they know that they can come to us. Within probably two days of announcing the ESI acquisition, I probably had a dozen calls where licensees were calling me saying, "Hey, great acquisition. When you're ready to do the next one, we'd like to talk." We think we can do one, potentially two, depending on the size, on an annual basis. ESI was a pretty good-sized acquisition. We've got to get all the synergies and all the cost-saving measures out of it. We probably think that six or nine months from now, we'll be ready to go after the next acquisition. Probably not likely before the end of the year, but maybe right after the 1st of the year, hopefully we'll have the next acquisition in the boat. All right, excellent. AI is becoming increasingly important across really all business communication here. Where does Crexendo have the clearest opportunity to create value through offerings such as CAIRO? When could AI become a meaningful revenue contributor? Yeah. I've been in the industry for 36 years, and in 36 years in the telecom industry, I've seen a lot of change. I mean it when I say I think artificial intelligence is the biggest game changer yet in our telecom industry. That's a big statement because when I started out, everything was analog. You didn't have Caller ID. Then Caller ID came about, and digital came about. With the onset of the internet back in the late '90s and early 2000s, all of a sudden everything was moving to the cloud. Then we had voice over IP, and then mobility came around with cell phones, and now all of a sudden you had COVID came around, and collaboration and video conferences became the norm. All of those changes have been pretty revolutionary for the telecom industry. AI tops the cake because it's really the biggest game changer yet. To give you an example, of those 57 vendors that we have writing applications and solutions for our platform, 13 of them are developing AI-type applications. One of the most exciting applications that we released earlier this year is what we call CAIRO. CAIRO stands for Crexendo's AI Receptionist and Orchestrator. What CAIRO does is CAIRO takes AI to the next level for small and mid-sized businesses. If we think about most businesses, when a call comes into their business, they're either answering with a live body or they're answering with an auto attendant. Live body is expensive. A live body can only handle one call at a time. Auto attendants are pretty impersonable and give you options: "For sales, press one, for this, press two, for this, press three." When I press two for sales, I sit and I wait for five minutes for somebody to pick me up. All I wanted to do is ask, "Hey, do you guys sell this widget?" Or, "Do you guys support this application?" Now with an AI receptionist, an AI receptionist allows those small and mid-sized businesses to use an AI agent or application to answer all of those calls 24 by 7. The nice part is that the AI agent can answer those calls, answer frequently asked questions, set appointments, change appointments, get me to a live body if I need to. An example of one that we sold here recently in Phoenix is a great example. In Phoenix, Robert, since we're both here in the valley, it's not very cool right now. It's extremely warm. When Phoenix hits June and we start seeing triple digits for four months at a time, if your air conditioning breaks when it's 110 degrees out, you need to get that replaced immediately. You need to get a service technician out there immediately. If your AC goes out at 7:00 in the evening and you need somebody out there immediately, you call the first AC company, and if nobody answers or nobody can respond back quickly, you go to the next one, and you go to the next one until somebody can say, "We'll get somebody out there immediately." We sold an AC company here in town, about a 15-employee AC company. Of those 15 employees, 10 of them are techs that are out in the field all the time doing all the work. They had four or five people in the office doing accounting. Those four or five people in the office were also the people that answered the phone calls. The call would come into the air conditioning company, somebody would answer it, stop what they were doing. If they were doing accounting or billing, they'd stop what they were doing, and they would take the customer's information down and see if they could dispatch a technician. Very time-consuming. If five calls came in at the same time and four people were on a call, the fifth call would probably ring and ring and ring or just put on hold indefinitely. If people were on lunch break and a call came in, maybe they missed that opportunity. Now with an AI receptionist, the call can come in and say, "Hey, thanks for calling Robert's AC Company. How can we help you?" "Yeah, my AC's not working." The AI receptionist can say, "Great, Robert," because it got your name from Caller ID. "Hey, great, Robert. We can help you. Is your AC not running any air at all? Is it running warm air? What's it doing?" "It's not working at all." "That's too bad. What kind of air conditioning unit do you have, Robert?" You tell me you've got a Trane unit. "Great. Hey, we handle Trane. Would you like us to schedule a technician to come out as soon as possible?" "Yeah, that would be great. How quickly can somebody come in?" The AI receptionist can look at the calendar application and say, "Hey, I can get somebody out there at 2:00 today. Will that work for you?" Great. Get the information, and everything is done automated. If I still need to speak to a live body, I can get to a live body. When I told that to the business owner and sold the application to the business owner, he's like, "This is phenomenal. It can do that 24 by 7, so I don't have to have somebody on call at night. I don't have to have an answering service that I pay $300 a month for." That application, Robert, costs about $150 a month on our solution. Our average customer today pays us about $340 a month. So for an extra 35% on their monthly bill, they're getting an application that makes them way more efficient, way more productive. We just rolled that out, and started seeing revenue streams in Q2. Extremely excited about the take rate on it, and extremely excited about where it's going to take us because it's a huge home run for businesses. I would anticipate the take rate on this is going to be through the roof over the course of the next year. All right. Fantastic. Doug, I wish we had another 30 minutes to go here, but we're running up on time. Final takeaways here. As investors look over the next 12-24 months or so, what are the milestones they should look for, and what is it that you believe the market maybe still underappreciates about Crexendo and the investment opportunity? Yeah. If you look at Crexendo, not only are we growing the top line, Robert, we're growing it profitably. We've had 12 consecutive GAAP profitable quarters. That's unheard of in this industry. If you look at our growth rate, we're growing, but we're growing profitably. We've got tremendous free cash flow. We did $27 million of that acquisition of Estech Systems. It was cash on hand, and we had no debt at the time. That depleted our cash balance pretty heavily, but just in the last one quarter, we added another $6 million back to the bottom line. So, if you look at the cash flow today, we've got $18.3 million cash on the balance sheet. Extremely strong balance sheet. As you look at our growth, our growth is going to continue to be double-digit organic growth combined with inorganic acquisitions. Just as I mentioned, we told you a few years ago that we would get to the $100 million run rate. Now I feel very confident we will get to $150 million run rate by the end of 2028. We will get to that $150 million run rate by organic growth and inorganic acquisitions from our stock fishing pond. We think that we have got just the perfect recipe for success. As we continue to scale, our gross margins continue to improve. If you looked at our most recent earnings call from a few weeks ago, you will see gross margin improvement across the board on every part of our sector. As those gross margins continue to improve, more cash flow to the bottom line. We think that we are a diamond in the rough out there. Not a lot of people know the Crexendo story, but once they hear the story and once they do the research and see what is going on out there, they fall in love with us. We currently have seven analysts that cover us, and all of us are very bullish on where they see Crexendo going over the course of the next two years. I greatly appreciate the opportunity to talk to your audience here and tell them the Crexendo story, and hopefully they see the diamond in the rough that I highlighted and realize that Crexendo is a great company for them to take a look at. So appreciate the opportunity. Absolutely. Thank you, Doug, very much. Thank you, everybody, for watching. As Doug just mentioned, reach out to the IR team there. If there is anything I can do to help coordinate an introduction, happy to do so. I have additional presentation and fireside chats coming right up, so please stick around. Thanks so much, Doug. Appreciate it. Thanks, Robert. Greatly appreciate it.