Crexendo Inc
For the period ended Jun 30, 2024. Filed Aug 6, 2024.
View on SEC.govAbout this filing
A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Jun 30, 2024 · Filed Aug 6, 2024
CXDO$5.07+2.2%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-03-31; filed 2024-05-07.
0001654954-24-005696
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2024-06-30; filed 2024-08-06.
0001654954-24-010039
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 105 previous paragraphs and 148 current paragraphs.
54 unchanged; 34 reworded; 41 added; 17 removed; 0 previous and 19 current paragraphs rearranged.
Tables are not compared: 29 previous and 49 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (41)
Current report
The increase in total revenue is due to an increase in software solutions revenue of $1,395, an increase in service revenue of $759, offset by a decrease in product revenue of $139.
Current report
Income/(Loss) Before Income Tax
Current report
The following table reflects our income/(loss) before income tax for the three months ended June 30, 2024, compared to the three months ended June 30, 2023:
Current report
Income Tax (Provision)/Benefit
Current report
The following table reflects our income tax (provision)/benefit for the three months ended June 30, 2024, compared to the three months ended June 30, 2023:
Current report
We had an income tax provision of $(27) for the three months ended June 30, 2024 compared to an income tax provision of $(24) for the three months ended June 30, 2023. We had income before income taxes of $615 for the three months ended June 30, 2024, compared to a loss before income taxes of $(521) for the three months ended June 30, 2023. The income tax provision for the three months ended June 30, 2024 and 2023, is related to minimum state tax payments.
Current report
Six months ended June 30, 2024 compared to six months ended June 30, 2023
Current report
Total Revenue
Current report
Income/(Loss) Before Income Tax
Current report
The following table reflects our income/(loss) before income tax for the six months ended June 30, 2024, compared to the six months ended June 30, 2023:
Current report
The increase in income before income tax is primarily related to an increase in revenue of $3,810 and a net increase in other income/(expense) of $1, offset by an increase in operating expenses of $656. The increase in revenue is related to organic growth from new and existing customers. The increase in operating expenses is primarily related to an increase in commission expenses of $626, an increase in contract labor and outsourced engineering services of $336, an increase in hosting service fees of $125, and an increase in accounting software costs of $54, offset by a decrease in salaries, benefits, bonuses and share-based compensation of $480 due to a decrease in share-based compensation offset by company-wide salary increases. The increase in other income/(expenses) is primarily related to an increase in interest income of $58, a decrease in interest expense of $51 resulting from the sale of our corporate office building during the third quarter of 2023, and a decrease in other income of $108.
Current report
Income Tax (Provision)/Benefit
Current report
The following table reflects our income tax (provision)/benefit for the six months ended June 30, 2024, compared to the six months ended June 30, 2023:
Current report
We had an income tax provision of $(54) for the six months ended June 30, 2024 compared to an income tax provision of $(48) for the six months ended June 30, 2023. We had income before income taxes of $1,076 for the six months ended June 30, 2024, compared to a loss before income taxes of $(2,079) for the three months ended June 30, 2023. The income tax provision for the six months ended June 30, 2024 and 2023, is related to minimum state tax payments.
Current report
Backlog represents the total contract value of all contracts signed, less revenue recognized from those contracts as of June 30, 2024 and 2023. Backlog increased 45%, or $15,932 to $51,684 as of June 30, 2024 as compared to $35,752 as of June 30, 2023. Below is a table which displays the Cloud Telecommunications segment revenue backlog as of April 1, 2024 and 2023, and June 30, 2024 and 2023, which we expect to recognize as revenue within the next five years (in thousands):
Current report
The increase in general and administrative expenses is primarily related to an increase in rent expense of $81 due to the leaseback of our previously sold corporate headquarters land and building, an increase in legal fees of $56 related to the filing of our Form S-3 and an increase in accounting software costs of $27 associated with service contract fees for our new accounting system, offset by a decrease in executive and administrative salaries, benefits, bonuses, and share-based compensation of $99 and an decrease in other general and administrative expenses of $8.
Current report
The change in other income/(expense) is primarily related to an increase in interest income of $53, a decrease in interest expense of $22, and a decrease in other income of $4.
Current report
Six months ended****June 30, 2024 compared to six months ended June 30, 2023
Current report
Service Revenue
Current report
Product Revenue
Current report
Cost of Service Revenue
Current report
Cost of Product Revenue
Current report
The decrease in cost of product revenue is primarily related to the decrease in product revenue due to eliminating the sale of low margin products.
Current report
The increase in selling and marketing expense is primarily related to an increase in commission expense of $566 directly related to the increase in revenue and an increase in other sales and marketing expense of $17, offset by a decrease in salaries, benefits, bonuses, and share-based compensation of $79.
Current report
The decrease in general and administrative expenses is primarily related to a decrease in executive and administrative salaries, benefits, bonuses, and share-based compensation of $682 and a decrease in other general and administrative expenses of $51, offset by an increase of rent expense of $81 due to the leaseback of our previously sold corporate headquarters land and building, an increase in legal fees of $56 related to the filing of our Form S-3, and an increase in accounting software costs of $27 associated with service contract fees for our new accounting system.
Current report
The change in other income/(expense) is primarily related to an increase in interest income of $53, a decrease in interest expense of $51, and an increase in other income of $1.
Current report
The increase in cost of software solutions revenue is primarily related to an increase in third-party hosting service costs of $125 and an increase in other cost of software solutions revenue of $27.
Current report
The increase in selling and marketing expense is primarily related to an increase in marketing materials and trade shows of $60 and an increase in commission expense of $33 directly related to the increase in revenue, offset by a decrease in salaries, benefits, bonuses, and share-based compensation of $39 and a decrease in other selling and marketing costs of $13.
Current report
Other income/(expense) primarily relates to interest expense, net foreign exchange gains or losses, and other income and expenses. The following table reflects our other expense for the three months ended June 30, 2024, compared to the three months ended June 30, 2023:
Current report
The change in other income/(expense) is primarily related to a decrease in other income of $33 and a decrease in foreign exchange losses of $1.
Current report
Six months ended****June 30, 2024 compared to six months ended June 30, 2023
Current report
Software Solutions Revenue
Current report
Backlog represents the total contract value of all contracts signed, less revenue recognized from those contracts as of June 30, 2024 and 2023. Backlog increased 26%, or $4,009 to $19,478 as of June 30, 2024 as compared to $15,469 as of June 30, 2023. Below is a table which displays the software solutions segment revenue backlog as of January 1, 2024 and 2023, and June 30, 2024 and 2023, which we expect to recognize as revenue within the next thirty-six to sixty months (in thousands):
Current report
Cost of Software Solutions Revenue
Current report
The increase in cost of software solutions revenue is primarily related to an increase in salaries, benefits, bonuses, and share-based compensation of $131, an increase in third-party hosting service costs of $125, an increase in software costs of $91, and an increase in other cost of software solutions revenue of $12.
Current report
General and administrative expenses consist of salaries and benefits for executives, administrative personnel, amortization of trademark and trade name intangible asset, legal, rent, equipment, accounting and other professional services, and other administrative corporate expenses. The following table reflects our general and administrative expenses for the six months ended June 30, 2024, compared to the six months ended June 30, 2023:
Current report
The increase in general and administrative expenses is primarily related to increase in salaries, benefits, bonuses, and share-based compensation of $129 and an increase in accounting software costs of $27 associated with the service contract fees for our new accounting system, offset by a decrease in other general and administrative expenses of $23.
Current report
Other income/(expense) primarily relates to interest expense, net foreign exchange gains or losses, and other income and expenses. The following table reflects our other expense for the six months ended June 30, 2024, compared to the six months ended June 30, 2023:
Current report
The change in other income/(expense) is primarily related to a decrease in other income of $102 and an increase in foreign exchange losses of $2.
Current report
Net cash used in investing activities in the six months ended June 30, 2023, primarily relates to the purchase of property and equipment.
Showing the first 40 of 41 passages. Open the source sections for the rest.
Removed paragraphs (17)
Previous report
Income/(loss) Before Income Taxes
Previous report
The following table reflects our income/(loss) before income taxes for the three months ended March 31, 2024, compared to the three months ended March 31, 2023:
Previous report
Income Tax Benefit/(Provision)
Previous report
The following table reflects our income tax benefit/(provision) for the three months ended March 31, 2024, compared to the three months ended March 31, 2023:
Previous report
The increase in income tax provision is due to minimum state tax increases as a result of increased revenue.
Previous report
Backlog
Previous report
Selling and Marketing
Previous report
General and Administrative
Previous report
The decrease in general and administrative expenses is primarily related to a decrease in administrative salaries, benefits, bonuses, and share-based compensation of $583 due to a decrease in share-based compensation and a decrease in other general and administrative expenses of $43.
Previous report
Research and Development
Previous report
Other Income/(Expense)
Previous report
The change in other income/(expense) is primarily related to a decrease in interest expense of $29 and an increase in interest income of $5.
Previous report
Backlog
Previous report
The increase in cost of service revenue is primarily related to an increase in software costs of $89, an increase in salaries, benefits, bonuses, and share-based compensation of $85, and an increase in other cost of software solutions revenue of $33.
Previous report
Selling and Marketing
Previous report
General and Administrative
Previous report
Research and Development
Reworded paragraphs (34)
Previous wording
The increase in income before income taxes is primarily related to an increase in revenue of $1,795 and a decrease in operating expenses of $262, offset by an increase in other expenses of $38. The increase in revenue is related to organic growth from existing customers and new customers. The decrease in operating expenses is primarily related to a decrease in share-based compensation of $684, offset by an increase in commission expenses of $284, and an increase in salaries, benefits, bonuses of $97. The increase in other expenses is primarily related to an increase in foreign currency losses, offset by a decrease in interest expense and an increase in interest income.
Current wording
The increase in income/(loss) before income tax is primarily related to an increase in revenue of $2,015 and an increase in other income/(expense) of $39, offset by an increase in operating expenses of $918. The increase in revenue is related to organic growth from new and existing customers. The increase in operating expenses is primarily related to an increase in commission expense of $342, an increase in contract labor and outsourced engineering services of $209, an increase in hosting service fees of $125, and an increase in accounting software costs of $54. The increase in other income/(expense) is primarily related to an increase in interest income and a decrease in interest expense.
Previous wording
The increase in total revenue is due to an increase in software solutions revenue of $1,038, an increase in service revenue of $687, and an increase in product revenue of $70.
Current wording
The increase in total revenue is due to an increase in software solutions revenue of $2,433 and an increase in service revenue of $1,446, offset by a decrease in product revenue of $69.
Previous wording
To evaluate our business, we consider and use non-generally accepted accounting principles (“Non-GAAP”) net income and Adjusted EBITDA as a supplemental measure of operating performance. These measures include the same adjustments that management takes into account when it reviews and assesses operating performance on a period-to-period basis. We consider Non-GAAP net income to be an important indicator of overall business performance because it allows us to evaluate results without the effects of share-based compensation, acquisition related expenses, changes in fair value of contingent consideration, amortization of intangibles, and goodwill and long-lived asset impairment. We define EBITDA as U.S. GAAP net income/(loss) before interest expense, interest income and other expense/(income), the gain/(loss) on the sale of property and equipment, goodwill and long-lived asset impairments, provision/(benefit) for income taxes, and depreciation and amortization. We believe EBITDA provides a useful metric to investors to compare us with other companies within our industry and across industries. We define Adjusted EBITDA as EBITDA adjusted for acquisition related expenses, changes in fair value of contingent consideration and share-based compensation. We use Adjusted EBITDA as a supplemental measure to review and assess operating performance. We also believe use of Adjusted EBITDA facilitates investors’ use of operating performance comparisons from period to period, as well as across companies.
Current wording
To evaluate our business, we consider and use non-generally accepted accounting principles (“Non-GAAP”) net income, EBITDA, and Adjusted EBITDA as a supplemental measure of operating performance. These measures include the same adjustments that management takes into account when it reviews and assesses operating performance on a period-to-period basis. We consider Non-GAAP net income to be an important indicator of overall business performance because it allows us to evaluate results without the effects of share-based compensation, acquisition related expenses, changes in fair value of contingent consideration, amortization of intangibles, and goodwill and long-lived asset impairment. We define EBITDA as U.S. GAAP net income/(loss) before interest expense, interest income and other expense/(income), the gain/(loss) on the sale of property and equipment, goodwill and long-lived asset impairments, provision/(benefit) for income taxes, and depreciation and amortization. We believe EBITDA provides a useful metric to investors to compare us with other companies within our industry and across industries. We define Adjusted EBITDA as EBITDA adjusted for acquisition related expenses, changes in fair value of contingent consideration and share-based compensation. We use Adjusted EBITDA as a supplemental measure to review and assess operating performance. We also believe use of Adjusted EBITDA facilitates investors’ use of operating performance comparisons from period to period, as well as across companies.
Previous wording
The Company has two operating segments, which consist of Cloud Telecommunications Services and Software Solutions. The information below is organized in accordance with our two reportable segments. Segment operating income is equal to segment net revenue less segment cost of service revenue, cost of software solution revenue, cost of product revenue, sales and marketing, research and development, and general and administrative expenses.
Current wording
The Company has two operating segments, which consist of Cloud Telecommunications Services and Software Solutions. The information below is organized in accordance with our two reportable segments. Segment operating income is equal to segment net revenue less segment cost of service revenue, cost of software solution revenue, cost of product revenue, selling and marketing, general and administrative expenses, and research and development.
Previous wording
The increase in service revenue is due to an increase in telecommunications services fees of $571, an increase in fees, commissions, and other, recognized over time of $64, an increase in sales-type lease interest of $47, an increase in one-time fees, commissions and other of $5. A substantial portion of Cloud Telecommunications service revenue is generated through thirty-six to sixty month service contracts.
Current wording
The increase in service revenue is due to an increase in telecommunications services fees of $517, an increase in one-time fees, commissions and other of $156, an increase in sales-type lease interest of $44, and an increase in fees, commissions, and other, recognized over time of $42.
Previous wording
Product revenue fluctuates from one period to the next based on timing of installations. Our typical customer installation is complete within 30-60 days. However, larger enterprise customers can take multiple months, depending on size and the number of locations. Product revenue is recognized when products have been installed and services commence. Additionally, product revenue can fluctuate due to the allocation of discounts or sales promotions across the performance obligations. The increase in product revenue is primarily due to our organic growth.
Current wording
Product revenue fluctuates from one period to the next based on timing of installations. Our typical customer installation is complete within 30-60 days. However, larger enterprise customers can take multiple months, depending on size and the number of locations. Product revenue is recognized when products have been installed and services commence. Additionally, product revenue can fluctuate due to the allocation of discounts or sales promotions across the performance obligations.
Previous wording
The decrease is primarily related to a higher margin product mix by eliminating the sale of low margin products.
Current wording
The decrease in cost of product revenue is primarily related to the decrease in product revenue due to eliminating the sale of low margin products.
Previous wording
Selling and marketing expenses consist primarily of direct and channel sales representative salaries, benefits, bonuses, and share-based compensation, partner channel commissions, amortization of costs to acquire contracts, travel expenses, lead generation services, trade shows, internal and third-party marketing costs, the production of marketing materials, and sales support software. The following table reflects our selling and marketing expenses for the three months ended March 31, 2024, compared to the three months ended March 31, 2023:
Current wording
Selling and marketing expenses consist primarily of direct and channel sales representative salaries, benefits, bonuses, and share-based compensation, partner channel commissions, amortization of costs to acquire contracts, travel expenses, lead generation services, trade shows, internal and third-party marketing costs, amortization of customer relationship intangible assets, the production of marketing materials, and sales support software. The following table reflects our selling and marketing expenses for the three months ended June 30, 2024, compared to the three months ended June 30, 2023:
Previous wording
The increase in selling and marketing expense is primarily due to an increase in commission expense of $257 directly related to the increase in revenue and an increase in other sales and marketing expense of $10, offset by a decrease in salaries, benefits, bonuses, and share-based compensation of $67.
Current wording
The increase in selling and marketing expense is primarily related to an increase in commission expense of $309 directly related to the increase in revenue and an increase in other sales and marketing expense of $7, offset by a decrease in salaries, benefits, bonuses, and share-based compensation of $12.
Previous wording
General and administrative expenses consist of salaries, benefits, bonuses and share-based compensation for executives, administrative personnel, legal, rent, equipment, accounting and other professional services, investor relations, depreciation, amortization of intangibles, and other administrative corporate expenses. The following table reflects our general and administrative expenses for the three months ended March 31, 2024, compared to the three months ended March 31, 2023:
Current wording
General and administrative expenses consist of salaries, benefits, bonuses and share-based compensation for executives, administrative personnel, legal, rent, equipment, accounting and other professional services, investor relations, depreciation, amortization of intangible assets, and other administrative corporate expenses. The following table reflects our general and administrative expenses for the three months ended June 30, 2024, compared to the three months ended June 30, 2023:
Previous wording
Other income/(expense) primarily relates to interest expense and net foreign exchange gains or losses, offset by credit card cash back rewards. The following table reflects our other expense for the three months ended March 31, 2024, compared to the three months ended March 31, 2023:
Current wording
Other income/(expense) primarily relates to interest income, interest expense, net foreign exchange gains or losses, and credit card cash back rewards. The following table reflects our other income/(expense) for the three months ended June 30, 2024, compared to the three months ended June 30, 2023:
Previous wording
Backlog represents the total contract value of all contracts signed, less revenue recognized from those contracts as of March 31, 2024 and 2023. Backlog increased 43%, or $14,401 to $48,082 as of March 31, 2024 as compared to $33,679 as of March 31, 2023. Below is a table which displays the Cloud Telecommunications segment revenue backlog as of January 1, 2024 and 2023, and March 31, 2024 and 2023, which we expect to recognize as revenue within the next thirty-six to sixty months (in thousands):
Current wording
Backlog represents the total contract value of all contracts signed, less revenue recognized from those contracts as of June 30, 2024 and 2023. Backlog increased 45%, or $15,932 to $51,684 as of June 30, 2024 as compared to $35,752 as of June 30, 2023. Below is a table which displays the Cloud Telecommunications segment revenue backlog as of January 1, 2024 and 2023, and June 30, 2024 and 2023, which we expect to recognize as revenue within the next thirty-six to sixty months (in thousands):
Previous wording
The increase in cost of service revenue was primarily related to a $51 increase in contract labor costs to assist with the migration of our customers to our new VIP platform and a $30 increase in salaries, benefits, bonuses, and share-based compensation related to increases in headcount related to the increase in service revenue, offset by a decrease in other cost of service revenue of $16.
Current wording
The increase in cost of service revenue is primarily related to an increase in contract labor costs to assist with the migration of our customers to our new VIP platform of $132, an increase in salaries, benefits, bonuses, and share-based compensation of $65, and an increase in other cost of service revenue of $19.
Previous wording
The decrease in research and development expenses is primarily related to a decrease in salaries, benefits, bonuses, and share-based compensation of $38, offset by an increase in other research and development costs of $8.
Current wording
The decrease in research and development expenses is primarily related to a decrease in salaries, benefits, bonuses, and share-based compensation of $70 offset by an increase in other research and development costs of $7.
Previous wording
Operating Results of our Software Solutions segment (in thousands):
Current wording
Operating Results of Software Solutions segment (in thousands):
Previous wording
Software solutions revenue consists primarily of software license fees, subscription maintenance and support, professional services, and annual user group meeting fees. Software licenses are billed by the number of concurrent sessions a Partner has purchased or subscribes to. Subscription maintenance and support is ongoing and provides for software updates and improvements, support for add-on modules, bug fixes, and other general maintenance items. Professional services and other revenues consist of professional services such as the installation of software and integration of other modules, training and implementation as well as custom mobile branding. The following table reflects our service revenue for the three months ended March 31, 2024, compared to the three months ended March 31, 2023:
Current wording
Software solutions revenue consists primarily of software license fees, subscription maintenance and support, professional services, and annual user group meeting fees. Software licenses are billed by the number of concurrent sessions a customer has purchased or subscribes to. Subscription maintenance and support is ongoing and provides for software updates and improvements, support for add-on modules, bug fixes, and other general maintenance items. Professional services and other revenues consist of professional services such as the installation of software and integration of other modules, training and implementation as well as custom mobile branding. The following table reflects our service revenue for the three months ended June 30, 2024, compared to the three months ended June 30, 2023:
Previous wording
The increase is primarily related to a $1,001 increase in recurring software license and maintenance and support subscriptions and an increase in professional services and other revenue of $179, offset by a decrease in perpetual software license revenue of $142.
Current wording
The increase in software solutions revenue is primarily related to an increase in recurring software license and maintenance and support subscriptions of $877, an increase in in perpetual software license revenue of $488, and an increase in professional services and other revenue of $30.
Previous wording
Backlog represents the total contract value of all contracts signed, less revenue recognized from those contracts as of March 31, 2024 and 2023. Backlog increased 36%, or $5,110 to $19,295 as of March 31, 2024, as compared to $14,185 as of March 31, 2023. Below is a table which displays the Software solutions segment revenue backlog as of January 1, 2024 and 2023, and March 31, 2024 and 2023, which we expect to recognize as revenue within the next thirty-six to sixty-months (in thousands):
Current wording
Backlog represents the total contract value of all contracts signed, less revenue recognized from those contracts as of June 30, 2024 and 2023. Backlog increased 26%, or $4,009 to $19,478 as of June 30, 2024 as compared to $15,469 as of June 30, 2023. Below is a table which displays the software solutions segment revenue backlog as of April 1, 2024 and 2023, and June 30, 2024 and 2023, which we expect to recognize as revenue within the next thirty-six to sixty months (in thousands):
Previous wording
Cost of software solutions revenue consists primarily of salaries, benefits, bonuses, and amortization expense related to the technology, cost of data center hosting, third-party software modules, annual user group meeting costs, and outsourced services required to install and support software solutions. The following table reflects our cost of service revenue for the three months ended March 31, 2024, compared to the three months ended March 31, 2023:
Current wording
Cost of software solutions revenue consists primarily of salaries, benefits, bonuses, and share-based compensation, amortization expense for developed technologies intangible assets, cost of data center hosting, third-party software, annual user group meeting costs, and outsourced services required to install and support software solutions. The following table reflects our cost of service revenue for the three months ended June 30, 2024, compared to the three months ended June 30, 2023:
Previous wording
Selling and marketing expenses consist primarily of sales and marketing salaries, benefits, bonuses, commissions, share-based compensation, travel expenses, lead generation services, trade shows, third-party marketing services, the production of marketing materials, UGM costs, and sales support software. The following table reflects our selling and marketing expenses for the three months ended March 31, 2024, compared to the three months ended March 31, 2023:
Current wording
Selling and marketing expenses consist primarily of sales and marketing salaries, benefits, bonuses, commissions, share-based compensation, travel expenses, lead generation services, trade shows, third-party marketing services, the production of marketing materials, annual user group meeting costs, and sales support software. The following table reflects our selling and marketing expenses for the three months ended June 30, 2024, compared to the three months ended June 30, 2023:
Previous wording
General and administrative expenses consist of salaries and benefits for executives, administrative personnel, amortization of intangible asset related to customer lists, legal, rent, equipment, accounting and other professional services, and other administrative corporate expenses. The following table reflects our general and administrative expenses for the three months ended March 31, 2024, compared to the three months ended March 31, 2023:
Current wording
General and administrative expenses consist of salaries and benefits for executives, administrative personnel, amortization of trademark and trade name intangible assets, legal, rent, equipment, accounting and other professional services, and other administrative corporate expenses. The following table reflects our general and administrative expenses for the three months ended June 30, 2024, compared to the three months ended June 30, 2023:
Previous wording
The decrease in general and administrative expenses is primarily related to a decrease in professional service fees of $70 and a decrease in other general and administrative expenses of $19, offset by an increase in salaries, benefits, bonuses, and share-based compensation of $14.
Current wording
The increase in general and administrative expenses is primarily related to an increase in salaries, benefits, bonuses, and share-based compensation of $115, an increase in professional service fees of $54, an increase in accounting software costs of $27 associated with service contract fees for our new accounting system, and an increase in other general and administrative expenses of $12.
Previous wording
Research and development expenses primarily consists of salaries, benefits, bonuses, share-based compensation, and outsourcing engineering services related to the development of our software solutions. The following table reflects our research and development expense for the year end March 31, 2024, compared to the year ended March 31, 2023:
Current wording
Research and development expenses primarily consists of salaries, benefits, bonuses, share-based compensation, and outsourcing engineering services related to the development of our software solutions. The following table reflects our research and development expenses for the three months ended June 30, 2024, compared to the three months ended June 30, 2023:
Previous wording
The increase in research and development expenses is primarily related to an increase in outsourced engineering services expenses of $76, primarily related to the development of our platform and an increase in other research and development expenses of $12.
Current wording
The increase in research and development expenses is primarily related to an increase in outsourced engineering services expenses of $128, an increase in salaries, benefits, bonuses, and share-based compensation of $92, and an increase in other research and development expenses of $3.
Previous wording
The increase in selling and marketing expense is primarily related to an increase in commission expense of $27 directly related to the increase in revenue and an increase in other selling and marketing costs of $20, offset by a decrease in salaries, benefits, bonuses, and share-based compensation of $29.
Current wording
The increase in selling and marketing expense is primarily related to an increase in marketing materials and trade shows of $60, an increase in commission expense of $60 directly related to the increase in revenue, and an increase in other selling and marketing costs of $7, offset by a decrease in salaries, benefits, bonuses, and share-based compensation of $68.
Previous wording
Liquidity is a measure of our ability to access sufficient cash flows to meet the short-term and long-term cash requirements of our business operations. We finance our operations primarily through services, software solutions, and product sales to our customers. As of March 31, 2024 and December 31, 2023, we had cash and cash equivalents of $11,041 and $10,347, respectively. Changes in cash and cash equivalents are dependent upon changes in, among other things, working capital items such as contract liabilities, contract costs, accounts payable, accounts receivable, prepaid expenses, and various accrued expenses, as well as purchases of property and equipment, asset acquisitions, business combinations, and changes in our capital and financial structure due to debt repayments and issuances, stock option exercises, sales of equity investments and similar events. We believe that our operations along with existing liquidity sources will satisfy our cash requirements for at least the next 12 months.
Current wording
Liquidity is a measure of our ability to access sufficient cash flows to meet the short-term and long-term cash requirements of our business operations. We finance our operations primarily through services, software solutions, and product sales to our customers. As of June 30, 2024 and December 31, 2023, we had cash and cash equivalents of $13,611 and $10,347, respectively. Changes in cash and cash equivalents are dependent upon changes in, among other things, working capital items such as contract liabilities, contract costs, accounts payable, accounts receivable, prepaid expenses, and various accrued expenses, as well as purchases of property and equipment, asset acquisitions, business combinations, and changes in our capital and financial structure due to debt repayments and issuances, stock option exercises, sales of equity investments and similar events. We believe that our operations along with existing liquidity sources will satisfy our cash requirements for at least the next 12 months.
Previous wording
Cash provided by or used in operating activities is driven by our net income/(loss), adjustments to reconcile to net cash provided by or used in operating activities, the timing of customer collections, as well as the amount and timing of disbursements to our vendors, the amount of cash we invest in personnel, marketing, and infrastructure costs to support the anticipated growth of our business. The following table reflects our net cash provided by/(used in) operating activities for the three months ended March 31, 2024, compared to the three months ended March 31, 2023:
Current wording
Cash provided by or used in operating activities is driven by our net income/(loss), adjustments to reconcile to net cash provided by or used in operating activities, the timing of customer collections, as well as the amount and timing of disbursements to our vendors, the amount of cash we invest in personnel, marketing, and infrastructure costs to support the anticipated growth of our business. The following table reflects our net cash provided by/(used in) operating activities for the six months ended June 30, 2024, compared to the six months ended June 30, 2023:
Previous wording
The net cash used in operations for the three months ended March 31, 2024 was primarily driven by an increase in trade receivables of $740, an increase in equipment financing receivables of $137, an increase in contract costs of $379, an increase in prepaid expense of $391, and a decrease in accounts payable and accrued expenses of $1,099, offset by non-cash expenses for depreciation and amortization of $840 and share-based compensation of $728, our net income for the three months ended March 31, 2024 of $434 and an increase in contract liabilities of $508.
Current wording
The net cash provided by operating activities for the six months ended June 30, 2024 was primarily driven by non-cash expenses for depreciation and amortization of $1,676, share-based compensation of $1,512, our net income for the six months ended June 30, 2024 of $1,022, an increase in contract liabilities of $417, and an increase in accounts payable and accrued expenses of $104, offset by an increase in contract costs of $574, an increase in prepaid expense of $534, an increase in trade receivables of $516, an increase in equipment financing receivables of $321, and an increase in inventories of $172.
Previous wording
The net cash used in operations for the three months ended March 31, 2023 was primarily driven by our net loss for the three months ended March 31, 2023 of $1,582, an increase in accounts receivable of $548, an increase in equipment financing receivables of $239, an increase in contract costs of $268, an increase in prepaid expenses of $190, a decrease in accounts payable and accrued expenses of $1,110, and a decrease in contract liabilities of $215, offset by non-cash expenses for depreciation of $508 and amortization and share-based compensation of $1,414 and a decrease in other assets of $163.
Current wording
The net cash used in operating activities was primarily driven by our net loss for the six months ended June 30, 2023 of $2,127, an increase in contract costs of $600, an increase in prepaid expenses of $582, an increase in equipment financing receivables of $528, an increase in trade receivables of $265, a decrease in accounts payable and accrued expenses of $631, and a decrease in contract liabilities of $180, offset by non-cash expenses for depreciation and amortization of $1,808 and share-based compensation of $2,269 and a decrease in other assets of $165.
Previous wording
Cash provided by or used in investing activities is driven by the purchase of property and equipment, business combinations, and asset acquisitions. The following table reflects our net cash provided by/(used in) investing activities for the three months ended March 31, 2024, compared to the three months ended March 31, 2023:
Current wording
Cash provided by or used in investing activities is driven by the purchase of property and equipment, business combinations, and asset acquisitions. The following table reflects our net cash provided by/(used in) investing activities for the six months ended June 30, 2024, compared to the six months ended June 30, 2023:
Previous wording
Cash provided by or used in financing activities is driven by the proceeds from the exercise of options, taxes paid on the net settlement of stock options and RSUs, payments of contingent consideration, proceeds from finance leases and notes payable, repayments made on finance leases and notes payable, proceeds and repayments on line of credit, and proceeds from the issuance of common stock in connection with an offering. The following table reflects our net cash provided by financing activities for the three months ended March 31, 2024, compared to the three months ended March 31, 2023:
Current wording
Cash provided by or used in financing activities is driven by the proceeds from the exercise of options, taxes paid on the net settlement of stock options and RSUs, payments of contingent consideration, proceeds from finance leases and notes payable, repayments made on finance leases and notes payable, proceeds and repayments on line of credit, and proceeds from the issuance of common stock in connection with an offering. The following table reflects our net cash provided by/(used in) financing activities for the six months ended June 30, 2024, compared to the six months ended June 30, 2023:
Previous wording
Net cash provided by financing activities for the three months ended March 31, 2024, primarily relates to cash received from the exercise of options of $1,049, offset by repayments made on finance leases of $18, repayments made on notes payable of $112, and tax payments for the net settlement of stock options and RSUs of $60.
Current wording
Net cash provided by financing activities for the six months ended June 30, 2024 primarily relates to cash received from the exercise of stock options of $1,113, offset by repayments made on notes payable of $226, the payments of employee tax withholdings from the net settlement of stock options and RSUs of $92, and repayments made on finance leases of $37.
Previous wording
Net cash used in financing activities in the three months ended March 31, 2023, primarily relates to the payments of employee tax withholdings from the net settlement of stock options and RSUs of $257, repayments made on notes payable of $152, repayments made on a line of credit of $82, and repayments made on finance leases of $30, offset by proceeds from notes payable of $278 and cash received from the exercise of stock options of $40.
Current wording
Net cash used in financing activities for the six months ended June 30, 2023 primarily relates to the payments of employee tax withholdings from the net settlement of stock options and RSUs of $264, repayments made on notes payable of $271, dividend payments of $130, repayments made on a line of credit of $82, and repayments made on finance leases of $57, offset by proceeds from notes payable of $278 and cash received from the exercise of stock options of $40.
Previous wording
On November 1, 2022, the Company completed the acquisition of Allegiant Networks, LLC, a Kansas limited liability company (the “Allegiant Networks”) to acquire from Seller one hundred percent (100%) of the issued and outstanding shares of Allegiant Networks in exchange for (i) a cash payment at closing in the amount of $2.0 million, (ii) a three-year promissory note by the Company in favor of Seller in the amount of $1.1 million, and (iii) 2,461,538 shares of the Company’s common stock, par value $0.001 per share. In connection with this transaction, the seller Bryan Dancer, became a greater than five percent shareholder of the Company. Therefore, the three-year promissory note in the amount of $1.1 million, is considered a related party transaction. The loan agreement has a term of three (3) years with quarterly payments of Ninety-Eight Thousand Three Hundred Eighty-one Dollars ($98,381), including interest at 4.00%, beginning on April 1, 2023. As of March 31, 2024 and December 31, 2023, the outstanding balance of the related party note payable was $753 and $843, respectively. During the three months ended March 31, 2024 and 2023, the Company paid principal of $90 and $0, respectively and interest of $8 and $0, respectively.
Current wording
On November 1, 2022, the Company completed the acquisition of Allegiant Networks, LLC, a Kansas limited liability company (the “Allegiant Networks”) to acquire from Seller one hundred percent (100%) of the issued and outstanding shares of Allegiant Networks in exchange for (i) a cash payment at closing in the amount of $2.0 million, (ii) a three-year promissory note by the Company in favor of Seller in the amount of $1.1 million, and (iii) 2,461,538 shares of the Company’s common stock, par value $0.001 per share. In connection with this transaction, the seller Bryan Dancer, became a greater than five percent shareholder of the Company. Therefore, the three-year promissory note in the amount of $1.1 million, is considered a related party transaction. The loan agreement has a term of three (3) years with quarterly payments of Ninety-Eight Thousand Three Hundred Eighty-one Dollars ($98,381), including interest at 4.00%, beginning on April 1, 2023. As of June 30, 2024 and December 31, 2023, the outstanding balance of the related party note payable was $662 and $843, respectively. During the three months ended June 30, 2024 and 2023, the Company paid principal of $91 and $80, respectively, and interest of $7 and $18, respectively. During the six months ended June 30, 2024 and 2023, the Company paid principal of $181 and $80, respectively, and interest of $16 and $18, respectively.
Rearranged current paragraphs (19)
Current report — wording carried from elsewhere
Total revenue consists of service revenue, software solutions revenue and product revenue. The following table reflects our service revenue for the six months ended June 30, 2024, compared to the six months ended June 30, 2023:
Current report — wording carried from elsewhere
The increase in cost of service revenue was primarily related to an increase in contract labor costs to assist with the migration of our customers to our new VIP platform of $81, an increase in salaries, benefits, bonuses, and share-based compensation of $35, an increase in third-party telecommunication charges of $23, and an increase in other cost of service revenue of $12.
Current report — wording carried from elsewhere
The decrease in research and development expenses is primarily related to a decrease in salaries, benefits, bonuses, and share-based compensation of $32 and a decrease in other research and development costs of $1.
Current report — wording carried from elsewhere
Cloud telecommunications service revenue consists primarily of fees collected for cloud telecommunications services, professional services, interest from sales-type leases, reselling broadband Internet services, managed IT service, and administrative fees. The following table reflects our service revenue for the six months ended June 30, 2024, compared to the six months ended June 30, 2023:
Current report — wording carried from elsewhere
The increase in service revenue is due to an increase in telecommunications services fees of $1,088, an increase in one-time fees, commissions and other of $161, an increase in fees, commissions, and other, recognized over time of $106, and an increase in sales-type lease interest of $91.
Current report — wording carried from elsewhere
Product revenue consists primarily of fees collected from the sale of desktop phone devices, third-party equipment, and device as a service. The following table reflects our product revenue for the six months ended June 30, 2024, compared to the six months ended June 30, 2023:
Current report — wording carried from elsewhere
Product revenue fluctuates from one period to the next based on timing of installations. Our typical customer installation is complete within 30-60 days. However, larger enterprise customers can take multiple months, depending on size and the number of locations. Product revenue is recognized when products have been installed and services commence. Additionally, product revenue can fluctuate due to the allocation of discounts or sales promotions across the performance obligations.
Current report — wording carried from elsewhere
Cost of service revenue consists primarily of fees we pay to third-party telecommunications carriers, broadband Internet providers, software providers, costs related to installations, contract labor costs, customer support salaries, benefits, bonuses, and share-based compensation. The following table reflects our cost of service revenue for the six months ended June 30, 2024, compared to the six months ended June 30, 2023:
Current report — wording carried from elsewhere
Cost of product revenue consists of the costs associated with desktop phone devices and third-party equipment. The following table reflects our cost of product revenue for the six months ended June 30, 2024, compared to the six months ended June 30, 2023:
Current report — wording carried from elsewhere
Selling and marketing expenses consist primarily of direct and channel sales representative salaries, benefits, bonuses, and share-based compensation, partner channel commissions, amortization of costs to acquire contracts, travel expenses, lead generation services, trade shows, internal and third-party marketing costs, amortization of customer relationship intangible assets, the production of marketing materials, and sales support software. The following table reflects our selling and marketing expenses for the six months ended June 30, 2024, compared to the six months ended June 30, 2023:
Current report — wording carried from elsewhere
General and administrative expenses consist of salaries, benefits, bonuses and share-based compensation for executives, administrative personnel, legal, rent, equipment, accounting and other professional services, investor relations, depreciation, amortization of intangible assets, and other administrative corporate expenses. The following table reflects our general and administrative expenses for the six months ended June 30, 2024, compared to the six months ended June 30, 2023:
Current report — wording carried from elsewhere
Research and development expenses primarily consist of salaries, benefits, bonuses, and share-based compensation, outsourced engineering services related to the development of new cloud telecommunications features and products. The following table reflects our research and development expenses for the six months ended June 30, 2024, compared to the six months ended June 30, 2023:
Current report — wording carried from elsewhere
Other income/(expense) primarily relates to interest expense and net foreign exchange gains or losses, offset by credit card cash back rewards. The following table reflects our other income/(expense) for the six months ended June 30, 2024, compared to the six months ended June 30, 2023:
Current report — wording carried from elsewhere
Software solutions revenue consists primarily of software license fees, subscription maintenance and support, professional services, and annual user group meeting fees. Software licenses are billed by the number of concurrent sessions a customer has purchased or subscribes to. Subscription maintenance and support is ongoing and provides for software updates and improvements, support for add-on modules, bug fixes, and other general maintenance items. Professional services and other revenues consist of professional services such as the installation of software and integration of other modules, training and implementation as well as custom mobile branding. The following table reflects our service revenue for the six months ended June 30, 2024, compared to the six months ended June 30, 2023:
Current report — wording carried from elsewhere
The increase in software solutions revenue is primarily related to an increase in recurring software license and maintenance and support subscriptions of $1,822, an increase in in perpetual software license revenue of $402, and an increase in professional services and other revenue of $209.
Current report — wording carried from elsewhere
Cost of software solutions revenue consists primarily of salaries, benefits, bonuses, and share-based compensation, amortization expense for developed technologies intangible assets, cost of data center hosting, third-party software, annual user group meeting costs, and outsourced services required to install and support software solutions. The following table reflects our cost of service revenue for the six months ended June 30, 2024, compared to the six months ended June 30, 2023:
Current report — wording carried from elsewhere
Selling and marketing expenses consist primarily of sales and marketing salaries, benefits, bonuses, commissions, share-based compensation, travel expenses, lead generation services, trade shows, third-party marketing services, the production of marketing materials, annual user group meeting costs, and sales support software. The following table reflects our selling and marketing expenses for the six months ended June 30, 2024, compared to the six months ended June 30, 2023:
Current report — wording carried from elsewhere
Research and development expenses primarily consists of salaries, benefits, bonuses, share-based compensation, and outsourcing engineering services related to the development of our software solutions. The following table reflects our research and development expenses for the six months ended June 30, 2024, compared to the six months ended June 30, 2023:
Current report — wording carried from elsewhere
The increase in research and development expenses is primarily related to an increase in outsourced engineering services expenses of $204, an increase in salaries, benefits, bonuses, and share-based compensation of $94, and an increase in other research and development expenses of $13.