Good day, ladies and gentlemen and welcome to your Crexendo Second Quarter 2020 Earnings Call. All lines have been placed on a listen-only mode and the floor will be open for your questions and comment following the presentation. [Operator Instructions] At this time, it is my pleasure to turn the floor over to CEO and Chairman of the Board, Steve Mihaylo. Sir, the floor is yours.

Thank you, Karen. Good afternoon, everyone. I’m Steve Mihaylo, Chairman and CEO of Crexendo. I want to welcome all of you to Crexendo’s second quarter 2020 conference call. With me today are Doug Gaylor, our President and COO, Ron Vincent, our CFO and Jeff Korn, our General Counsel. The call today is completely virtual, as Crexendo is following CDC’s guidelines. I’m going to ask Jeff to read the Safe Harbor statement. After that, I will give some brief general comments about the quarter. Ron will then provide more detail on the numbers. Doug will provide a business and sales update, and then we will open the call up to questions. Jeff, would you please give the Safe Harbor statement.

Thank you, Steve and thank you. 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 the fiscal year ended December 31, 2019 and the Form 10-Q’s as filed. Crexendo does not undertake any obligation to publicly update or revise any forward-looking statements, whether as a result of new information, further events or any other reason. I would now like to turn the call back to Steve. Steve.

Thank Jeff. Welcome, everyone. This is now our second conference call under the new COVID-19 normal and the digital transformation that is taking place throughout the world, especially in the developed world. We hope [audio gap] everyone healthy and safe our company and our customers have been adapting to doing business in this environment. And I have always talked about the functionality of our phone service. We built the Crexendo, right, the clouds, [audio gap] adaptable, to move from the office to a remote location and back again. And while making the move, seamless, our functionality is one of the core parts of our business. And that functionality has literally been a lifesaver for [audio gap] our customers have been able to continue their business, moving their telephones and apps, while not skipping a beat. While, we did not build a service with COVID-19 in mind, we built it knowing that this was to have adaptability to allow business to work from remote locations. Business has been transitioning to the cloud. And this digital transformation COVID-19 has just accelerated the process - aimed at customers who are on legacy systems are going to need to move to the cloud to survive the new world of business. We also believe that Crexendo is the perfect solution for almost all businesses. We have won many awards for our service, including recently receiving the TMC Communication Solutions Service of the Year award. in addition to our core award winning service, we work with our customers to tailor specific solutions to their needs. And we are convinced that our solutions products, people and service are the best in the industry. I’m very pleased with the results of the second quarter. It shows our steady growth - service and increased 16% year-over-year to 3.5 million,…

Thanks, Steve. Financial highlights for the second quarter of 2020 are as follows. Consolidated revenue for the second quarter increased 12% to 4.1 million, compared to 3.6 million for the second quarter of the prior year. Our service revenue for the second quarter increased 15% to 3.6 million compared to 3.1 million reported for the second quarter the prior year. Our Cloud-telecommunications segment service revenue for the quarter increased 16% or 487,000 to 3.5 million compared to 3 million reported for the second quarter of the prior year, offset by 18% decrease or 29,000 decrease in our web service segment revenue for the quarter. Product revenue for the second quarter decreased 4% or 18,000 to 449,000, compared to 467,000 for the second quarter of the prior year. Our gross margin for the second quarter increased 2% to 71% compared to 69% for the second quarter of the prior year. Our consolidated operating expenses for the second quarter increased 8% to 3.5 million compared to 3.3 million for the second quarter of the prior year. Net income for the second quarter was 508,000 or $0.03 per basic and diluted common share compared to 338,000 or $0.02 per basic and diluted common share for the second quarter of the prior year,. Our non-GAAP net income for the second quarter 660,000 or $0.04 per basic and diluted common share, as compared to 447,000, or $0.03 per basic and diluted common share for the same period of the prior year. EBITDA for the second quarter was 568,000 compared to 362,000 for the same period of the prior year. Adjusted EBITDA for the second quarter was 704,000 compared to 457,000 for the same period of the prior year. So, highlights for the six months ended June 30th are as follows. The six month period consolidated…

Thanks, Ron. I’m extremely pleased with our results for Q2 and how Crexendo was able to quickly react and adapt to the changes brought about by the COVID-19 pandemic. I will give a quick recap on the quarter from a sales perspective, and what impact we saw from COVID, I will also provide an update on our marketing efforts as well as our research and development efforts and finish with an overall assessment on our current environment. At the beginning of the quarter, we saw a dramatic slowdown in sales bookings as businesses struggled with adapting to the stay at home orders initiated in most of the country. Since our award winning technology allows businesses to quickly migrate to a remote worker environment. We started seeing sales rebound quickly in April and May and June, and so much higher sense of urgency and customers needing our technology during the digital transformation that the world is currently experiencing. Crexendo immediately rolled out programs for new customers to rapidly migrate to our platform with no activation fees, deferred payments and free collaboration tools to assist in their transition to remote workers. The migration of businesses from premise based equipment to the cloud was already in full swing prior to the pandemic. And the new normal businesses now find themselves in will only hasten that migration in the future. Even with the dramatic slowdown that we witnessed in April, we saw a rapid rebound that helped us increase our Unified Communications As a Service or UCaaS service revenue by 16% year-over-year, increase in revenue along with cost management led to GAAP net income of 508,000 or $0.03 per share for the quarter. This is our sixth consecutive quarter posting positive GAAP net income. And I’m very pleased that we are continuing that trend,…

Thank you, Doug. Karen, I think we are in a position to open this up to questions.

Thank you. [Operator instructions] We will take our first question from Andrew King with [Dougherty & Company] (Ph). Please go ahead.

Hey guys, thanks for taking my question good quarter. Just want to dig into the operating expenses a little bit. It looks like you had serve a declining quarter-over-quarter and operating expenses. I want to get an idea of how much that was driven by COVID versus fundamental [indiscernible] due to the quarter? And then I have a follow-up as well. Thanks.

Ron Vincent is going to take that.

Thanks Andrew for the question, I appreciate that. We have definitely continue to run our business as smart as we possibly can with laser focus on our expenses. And so as we continue to see some increases year-over-year, consecutive quarter-over-quarter, or actually have less operating expenses in Q1 of this year. Some of that was related to some one-time expenses in the first quarter. But overall, it is just our continued, focus on managing our business and expenses.

Alright, great. And then could also dig into a little bit into the changes that you saw in the selling motion or sales cycle through the quarter as you start to see demand return? That would be great. Thanks.

Yes, absolutely. Thank you, Andrew. So obviously we saw April had a very big slowdown from a sales perspective, with businesses shutting down and the stay at home orders kicking in, but we saw a very strong rebound in May and June. I think that was because twofold, one is businesses realize that their infrastructure was weak and not able to conform to the remote work environment. They were looking for alternatives. So we were getting a lot of inquiries from businesses that we had been courting, to fast track their implementation. And we also saw quite a bit of success with our promos that we ran. So we put out some really significant promotions for businesses to be able to adapt the cloud technology quickly and efficiently with very little out of pocket expenses.

Got it. Thanks.

We will take our next question from Josh Nichols with B. Riley. Please go ahead.

Yes, thanks for taking my question. I think we have noted before the company was looking to potentially increase some marketing spend a little bit more as you continue to have this improving profitability trend. Can you talk a little bit about specifically what areas marketing you think with would give you potentially the best ROI? And is it fair to assume that you think that you can accelerate the company’s like UCaaS service revenue growth above this kind of mid teens level if you reinvest a little bit more?

Absolutely, Josh, thanks for the question. And so, obviously, we do feel like investing in our marketing efforts will help return a healthy return and help us get out of the teens and into the low 20s. And so we anticipate seeing more and more spend going through those marketing efforts, as you are well aware of those marketing efforts tend to take a little bit of time to begin. So currently with email campaigns, marketing campaigns, digital marketing spend, that is all going to take a little bit of time to bake in but we anticipate that will be money well spent, and with the messaging that we have got with a very structured messaging front with our new director of marketing. You will see that with changes to our website and see those changes to our presentation material will have a very consistent look and feel. So yes, we do feel like that increase in marketing spend will have a very positive return for us.

Great. And then I know the company has typically had over like 21 stations per client, historically. Are you going after the same type of market? Are there any opportunities you mentioned in the second half where you think you start to scale that up? Or what would you think the biggest opportunities for the company is in the back half of this year?

Yes, so the average number of stations has remained fairly consistent for us for the last couple of quarters. So I think still today about 21 stations with average revenue per account of roughly about $450 revenue per account. So we are trying to push that number higher, obviously since we have about 70% of our sales coming from our partner channel and actually a little bit of an increase in Q2 that we saw a nice spike with our partner channel sales. We anticipate that we will start seeing a little bit more of that. But again, our partners are working with their customer bases out there. And so as we see bigger customers coming on board with bigger clientele, we are starting to see some nicer size transaction. So I’m encouraged by the funnel that we see out there for bigger transactions, and hope that we can start seeing that average size account push up.

Great. And then a last question for me, since you mentioned it, like, what is the concentration you are seeing, as far as your partner channel sales that fairly well distributed there? I assume one or two that account for maybe a larger disproportionate percentage of revenue. And are there any big opportunities to continue to expand that partner channel that can accelerate your sales growth.

Yes. Obviously, we are always looking for more partners. But, to me it is always about quality not quantity. So we are obviously focused on how do we get more out of our existing partner relationships? And how do we continue to build on that? I think that we have a challenge that most sales organization tab with they get the high majority of their sales from the minority, their partners. And that is consistent with Crexendo. So I think we have, some very high performing partners that are very consistent. And then we have a lot of partners that we get an occasional sale from. So we are trying to increase those efforts with our partners that don’t perform consistently to get them on a little bit more consistent cadence. And then we are obviously spending a lot of time with the partners that have continued success to raise the bar with them and continue to see greater success with them. Some of our larger partners had tremendous quarters for us in Q2.

That is great to hear and always good to see the company’s continued progress as you continue to execute. I will hop back in the queue. Thanks.

Okay. Thanks, Jeff.

Thank you.

We will take our next question from Kevin Dede with H.C. Wainwright. Please go ahead.

Afternoon, Steve. Doug. Ron. I was hoping that you gentlemen could chime in, as you saw fit on sort of the consistency of revenue and the consistency that you have posted in growth. Maybe talk a little bit to seasonality. I know you haven’t formally offered guidance for the year but it seems to me given the results you have posted. It shouldn’t be too hard for you to offer some suggestions on what you think happens in the second half.

Well, Doug already mentioned that he expects with our marketing app for us to get into the low 20s organically. And as you know, from my dissertation in the press release, we also now have a stock price that is because of up listing to the NASDAQ, that shouldn’t allow us to do more acquisitions. So, if history says anything at all, I think we will see about half of our increase to come from the organic sale that come from the acquisitions accretive acquisitions. Furthermore, I think Josh Nichols pointed out that we should grow our channel. There is approximately 100,000 companies in the United States that are capable of selling our platform, and only about 250 of them are currently selling it. So, we have a lot of head space. And Doug, would you like to add anything?

Yes. Steve. So, Kevin, obviously, as we look at, seasonality. Our industry is not really an industry that sees a lot of seasonality. Now, COVID obviously threw a curveball for everybody with the slowdown from a business perspective. But from our perspective, the migration to cloud communications has always been very rapid over the last few years, and I anticipated that momentum will continue, as more and more businesses realize that their premise based platforms are unable to take them to the next level. So, I anticipate that, that the technology is going to require these businesses to move more to a UCaaS type platform that allows him to work remotely. And we are perfectly situated for that.

Okay, so Josh did mention partnerships. Steve, I caught that. But it isn’t really clear how. And I mean, this applies to the M&A pipeline too. So, maybe you could offer some insight on that as well. It didn’t really talk about how that environment has changed. Right? I know. And Doug mentioned this in his prepared remarks that competitors haven’t been unsuccessful. So, I was wondering if you could talk to maybe how the environment in partnerships and M&A has changed in light of other businesses struggling and not being, not driving a profit as you guys have?

Well, let me add to this a little bit and then I’m going to let Doug fill in the color. So, on the acquisition side, we are seeing a lot more companies that realize they need to be bigger and part of a more substantial company. And those analyst that listed company, we are getting a lot more exposure. We are more exposure because of our marketing efforts. So, in that regard, we are starting to see a lot more activity else for the adding partners part. Obviously, we can’t travel right now, because it is probably safe to do so. But once COVID is over, we are going to start beating the bushes, as Doug said for bigger dealers and partners, folks that will be more in a position to sell bigger systems. And Doug, would you like to add anything to that.

Yes, Steve. So Kevin, the merger and acquisition opportunities are seem to be a little bit more plentiful at the moment. I think COVID has definitely changed the way a lot of smaller businesses are looking at their future. And as Steve said, this industry is really going at full speed right now. And so the combined efforts of, of a larger company obviously bode well for us. And so that is the message that we are looking to take forward is that, hey, by combining with Crexendo, there is a much bigger platform and a much bigger opportunity going forward. And so I really think that the M&A opportunity is going to continue to increase and we are excited with some of the opportunities that we are talking to.

Last question for me Doug, it is really on your marketing efforts, specifically, I’m wondering if you might consider offering us maybe KPIs on how to monitor your product, I mean, aside from just watching sales grow, are you going to be able to give us production by headcount or some other quantifiable measure that we can monitor progress on?

Yes, so to answer your question, in the short answer, yes, we will be doing that. We don’t have those metrics today, but Ron and I have talked about putting additional metrics into future presentations, so that we can give you those guidance for productivity per employee, customer acquisition cost, etcetera. So, those are details that we will have for you in the future.

Alright, sounds good. Thank you very much, gentlemen. And congrats on the nice job.

Thank you.

Thank you, Kevin.

We will take our next question from Arham Khan with Eden Capital Investment Group. Please go ahead.

Good to always hear from you, Rob, Doug, and Steve. And then its 40 years apart and you are doing again, it is pretty incredible. I think some people grasp over the fact that management owns nearly 80% of the company. And that is why people said amid the NASDAQ up list. I was hoping that you guys could throw some color into what happened before COVID and through COVID with your churn rates?

Doug, why don’t you handle that one?

Okay, thanks Steve. Yes Arham great question. So, we have been historically tracking our churn rates. And so we have historically had very low churn rates. And we did actually see a little bit of a spike in Q2 due to COVID I will have Ron give maybe a little bit more color on that. The fact that the majority of our customers are in the SMB space, and our advertised customer account today is 21 stations, as we mentioned earlier, puts us in a little bit of a vulnerable category in the fact that we do have smaller customers out there. But the nice part is that our customer concentration doesn’t have any high exposure and industries that are really getting hurt very hard, for example, restaurants etcetera. So I will have Ron add a little bit more color on the churn and give you a little bit more detail there.

Thanks Doug. Yes, so for, prior to COVID, for historical quarters, we were averaging somewhere around four-tenths of 1% on a monthly basis from a seat count churn. And [Technical difficulty] COVID we were ranging around six-tenths of a percent. So that is a 50% increase in our churn rate from one quarter to the next, we anticipate that is going to settle back down but as our small businesses are still struggling, and depending on what happens with COVID, always that we may sustain that for another quarter or two. But it is not alarming to us. It is not that material will increase but that we had a very low churn rate going into COVID. But six-tenths of percent on the seat basis, month-over-month, and then around the 1% on customer churn.

Okay, okay, got that. Final question for me, is and I might have missed this because I came in late. Where does the backlog stand now?

Yes, backlog had a nice increase of $750,000 for the quarter. And that puts it at let me give you the exact number $27.4 million.

Okay, well, excellent. I didn’t expect to be like that. Always good to hear from guys. Thanks for taking my question.

Thanks Arham.

Thanks.

We will take our next question from Edward Gilmore with Little Grapevine. Please go ahead.

Hey, Steve, Doug and Ron. Thanks for taking my question. And congrats on a solid order. Question on gross margin. I was wondering how much are the promotions that are being offered impacting the gross margins now? And then how long do you think you are going to need to continue offering these incentives. Thank you.

Yes, I would say that our gross margins have been very stable and very consistent. The promotions that we are offering I don’t think we are going to have a dramatic impact on our gross margins, because many of the promotions we are offering are deferred payments. So just allowing customers to use the services and actually start their payments at a later date. So that doesn’t have a dramatic effect on the gross margin. And then additionally, we have given some incentives with no free items like collaboration tools and our mobile applications, that, again, doesn’t have a dramatic effect on gross margin. So I think we are very well positioned that we can continue these incentives without affecting gross margins negatively. And as far as how long we anticipate keeping those incentives, as long as long as it is driving the business, I don’t anticipate any we might change the messaging a little bit, I would anticipate that we would continue having promotions at least until the end of the year.

Great. Thanks, Doug.

And Edward I would like to add a little bit to that. As you know, our gross margins improved above two - quarter-over-quarter. And I would expect that as we get larger, our gross margins will increase, not decrease. Now they are not going to increase as much probably, but a - percent or a 1% increase per quarter is possible because our fixed expenses are pretty known. And as we get larger, more of that falls to the bottom line and more of that will be in the form - margins.

Okay, great. Thank you Steve.

You bet.

We will take our next question from [Indiscernible] private investor. Please go ahead.

Thanks for taking the time to do these calls. I would like to just talk a little bit more about your comments about acquisitions. You have always said consistently through these calls that you would only consider acquisitions that are accretive. And in the past that has always seemed to me kind of an aspirational stance, because the currency that you had at the time was cash and cash was very tight at the company. Now all of a sudden, the stock is trading better. And I’m actually more interested in the daily trading volume. Because as a business owner, I’m thinking of selling the business that they thought there was some liquidity that might be better. So my question is, what is the landscape that you are looking at in that? I’m not really sure I understand what is the gross margins is your 70% plus gross margins significantly above competitors? Is your accretiveness going to come from being able to buy creditors and make them more efficient? Is it going to come from taking small companies that you don’t need any of their infrastructure and you can just onboard their clients? Can you talk a little bit about that and what the size of the acquisition revenue basis that are out there that you are talking to kind of in general terms?

Yes. Well, I’m going to give you a little bit of color. And then I’m sure Doug and Ron will want to chime in a little bit, but a smaller acquisition. We do that over in a two step process. We pay about anywhere from 40% to 60% up front, and then we adjust it for the amount of revenue over a period of six to 12 months. So, it requires less cash - and usually we adjust that either up and most of the time down a little bit. And it allows us to help some seller financing, and I would expect that any acquisition - $3 million will be done with cash. Larger acquisitions of four million or five million up to maybe 20 million or 30 million will be done with stock and cash. And of course, we are generating a lot of cash - allow for us to do more and more acquisitions with cash, smaller acquisitions. Doug or Ron, would you like to add to that?

No, I think we are well positioned. Steve, I think that again, again came with, if we think about accretive acquisitions, one of the synergies that we look at is, is platform so if we can migrate customers to our platform, obviously there is cost synergies there that that helps tremendous. So, when we look at the acquisition targets out there, it is really how does that acquisition fit in with our short and our long-term goals for Crexendo. So, obviously, customer acquisition, revenue acquisition is critical for us. But then once we get that customer acquisition, revenue acquisition, what do we do with it to continue growing the company and so I think the acquisitions that we are talking to, that are in that range that Steve just highlighted, are all are all fitting the picture. I mean, we, we used to joke around here that we got to kiss a lot of frogs, and we do, but when we find a good opportunity, then we try and figure out how that is going to be a very seamless type integration for us going forward. So, we are excited about some of the opportunities that we are talking to and we will see where they where they lead us.

Let me just clarify something. So, you said you wouldn’t consider an acquisition that didn’t move on to your platform you wouldn’t start with another platform will get you in want to go into learning a new business?

So I wouldn’t I want to learn a new business. But obviously, if there is technology that that we are lacking, that would obviously be a good acquisition opportunity for us. So, when we talk about customer acquisition, a customer acquisition allows us to migrate those customers onto our platform. If we talk about a technology acquisition, that is also got revenue stream, that is a, that is a whole different picture. Because obviously, we feel like we have got a very robust platform today for the SMB market, but there are areas that the technology enhancement could even benefit our product in our offering even more greatly so.

Yes. And would also like to add, that the larger the more opportunity they have, if they were to go with one of our competitors, there is very, very little opportunity for them if they are in the $10 million to $20 million range, they have got all head space and opportunity with Crexendo.

What is the gross margins for most of the industry, it feels is at 70. Is that average or above average?

No, we are actually on the low side of average. Some of our competitors - above 80% and we will eventually get there as we get larger.

So, I’m waiting for that. Thank you. Thank you for your answers.

You bet.

[Operator Instructions] We will take our next question from Michael Kaufman with MK Investments. Please go ahead.

Hi, Steve. Doug and Ron, great quarter. It is refreshing to see a company scale and maintain and grow profitability these days, especially after looking at some of your competitors. Question I was, what kind of people have you added in the quarter? What is the current headcount? And what specifically are you going to do to try to get some bigger customers?

Yes. Great question. And thanks, Michael, for always being on the line have a great question for us. So current headcount, 59 employees, at the end of the quarter, and we did add a couple of sales and marketing folks during the quarter and think one or two on the engineering side. So as we continue to grow the organization, we are always looking at good people that can help us continue that growth. So obviously the marketing aspect was critical for us. And sales is always a constant for us. So we are always looking for good salespeople to help increase those sales efforts. And the second part of the question again, Mike.

Well, I’m just wondering, specifically, what would be a larger kind of target account, what are the attributes of the larger account that will get you to rev up your growth rate?

Yes. So obviously, at 21 stations, that is the epitome of a small midsize business and so to get to those larger opportunities, our product fits perfectly with larger opportunities. In fact, we sold quite a few six figure total contract pay deals during the quarter. And so we do sell a lot of deals that are in the couple hundred phone range. As I have mentioned on previous calls I think our largest account today is about 3500 stations. So we can easily play in the larger size arena. It is getting to those opportunities. So our marketing efforts are focused on trying to find bigger opportunities. And as I mentioned on one of the previous questions, our focus with our partners is to find partners that have bigger customers in their customer base. So if we think about the fact that 75% or 79% of our business from our Q2 came from our partners, if I have got a partner that is a data VAR or a managed service provider, and if they are average customers 10employees or 15 employees, that is going to be the target market they bring us into. But with some of our new partners that we have brought on in recent months, as some of their customers are much higher in size and range and so if I bring out a partner this got a lot of 100 phone or 200 phone opportunities and their customer base that is going to bode very well for us. And so we are seeing those things changing in our funnel right now, with some of the newer partners bringing bigger opportunities to the table right out of the gate.

Yes. And stepping on the gas, if you bring in more the equivalent of like applications engineers that can turn key transition from their current system to your system. Because your gross margins are so high. You are going to recover those costs very quickly. So you may need more people on your own basically to make it a seamless transition to the customer.

Absolutely, that is an important factor is that in any of these acquisitions, we do a lot of diligence to make sure that it is a very smooth migration for us and for the customer.

And Michael, I might add that in an acquisition there is productivity gains, because you don’t need all of their back. Obviously, if they have performing salespeople and performing engineers will want to retain now, but we look at productivity very, very closely. Right now our productivity is about 280 or 290 ahead. And we would like to get it over 300,000 per head. And that is our goal. And I quite frankly think we will make our goal.

Sounds incredible. I wish you the best of luck and keep up the good work and stay healthy.

Thanks Michel.

Thank you. You too.

We will take our next question from [Indiscernible] private investment. Please go ahead.

Hey, Steve. Doug and Ron. Nice. Nice to be on again. I have got two questions for you. One, given the I guess maybe parabolic stock price rise we have seen the past month. Are you considering stock offering? And if you had a stock offering even let’s say a million shares would be let’s say $10 million $12 million, would that cash be - would you ever put that be able to put that cash to work to drive sales faster?

Well, let me let me answer that one. And then I think, Jeff Korn and maybe the entire team would like to chime in. But obviously, today this volatility was caused by short sellers. That is the only explanation for -. So we need to have a slightly larger float. And in order to get a larger float, you are going to need to sell a little bit of stock. But I’m very, very keen on having anti-dilutive outputs here. As far as cash goes, to get a bigger acquisition we are going to have to have more cash and more stock so that they have skin in the game and so that they have more upside, which they wouldn’t have with a bigger competitor. At that, I’m going to turn it over to Jeff, Doug and Ron.

Okay, thanks, Steve. I have one more question after they answer.

Okay.

Yes, this is Jeff. Obviously, as Steve said being on NASDAQ, we would have to consider everything we could and some of the things he suggested would be things we will discuss with our board and discuss as a management team. But no decisions have been made at this time, but rest assured if we work around some money it would be used to grow the business.

Doug you or Ron want to add anything to that?

Now, obviously, as you pointed out, I mean, it takes money to make money. And so obviously, yes, additional capital that we can put towards any of those efforts, not only from an acquisition perspective, but for any marketing efforts. I don’t anticipate when you look at some of our competitors that have SG&A expenses in the 60% to 65% range, we are not going to go crazy in that perspective. But reinvesting back into the business has been working well for us, and we will continue to do that.

And you had another question.

Yes. One more, Steve that was given well, to one you commented on the short sellers. And I guess it wasn’t at all surprised. That at least we cans would be selling into the sub the news of the earnings release at 4 o’clock. So, maybe we will recover tomorrow. But I was curious, give them the, huge stock price increase. It looks like there is what I call one big boy out there trying to get a big position with you. And do you have any color on that and assuming it is someone that you are probably familiar with, are you open to a BOD spot for a new large holder?

Well, our Board of Directors thought obviously we want to reserve the Board of Directors to either a CEO or CEO of a target company. As far as large shareholder, you would have to watch this on Bloomberg, and you would have to watch it. Every second of every day, and frankly, we are more interested in growing the business than we are in determining who is a large shareholder and who isn’t. But right now, unless we get a little bit more liquidity in the stock, we are going to have probably short sellers that are taking advantage of a situation. But I think as Doug said earlier, organically, we should be able to grow at about 20% or more. And my goal is to grow, on an acquisition on the creative acquisition basis by at least that much. So, we are going to get a lot bigger but it is going to take several years going forward. But I think any short seller on our stock is going to be disappointed in the long run. Maybe, Jeff, you would like to add to that.

Actually, Steve, I don’t have a lot to add to that. Other than to answer your question we are not aware of who’s acquiring the stock. And frankly, if we did know we probably wouldn’t discuss it on the call anyway.

I understand. Thank you very much. I’m a little guy stockholder. So you can understand how I might come up with dumb questions. Thanks a lot and I will look on the next call.

Thanks [Steve] (Ph).

We will take our next question from [Greg Hillman] (Ph), a private investor. Please go ahead.

Doug, I have a couple questions for you. Do you know what the net promoter score is for Crexendo and how it is changed overtime?

I do not know that. Greg, but I will get that information for you and I have got your contact information I can reach out to you after the fact, but I do not have that handy now.

Okay. And also, in terms of conferencing, how does the functionality of your system compared to zoom, for people doing, meetings with multiple people?

Yes, we have had a great collaboration offering as part of our platform. It is called our Crexendo Crex-Connect. And so our Crex-Connect is actually a collaboration tool, very similar to zoom. It is actually, just a quick side funny story that the founder of the person, we didn’t actually build that in house, we white label that offering. And so the founder of the company that makes the product that we represent is one of the co-founders of WebEx, the other co founder of WebEx was the person that started zoom. So when WebEx was sold off to Cisco a few years ago, the two co-founders, both after their non-competes, expired, started up collaboration companies. One of zoom, and one of them is the partner that we have associated with, which is called Moxtra. And so we have been very pleased with our association with Moxtra, the Moxtra product is very similar to zoom. So for most of our customers that are our Crexendo Clients, they use our collaboration tool to remotely video conference and communicate and collaborate and screen share, and file share with their customers and their employees all the time. So we have got a very robust offering there, that competes very nicely with zoom.

Sounds great. And Doug also, can you just update me on the relationship with U.S. Cellular in terms of how many of their reps are trained in your platform right now and how that is changing?

Yes. We had our strongest quarter ever with the U.S. Cellular in Q2, so a very strong quarter, the relationship continues to grow and prosper. U.S. Cellular. I don’t have the exact numbers but I think they have got about 100 to 125 direct reps out there. And then they have got their agent in their partner channel with is also come on-board and has been extremely successful with us. So the partnership with them is extremely, extremely robust right now and we have got a tremendous funnel and tremendous amount of opportunity. And again, coming up our strongest bookings quarter that we have had with them since the relationship started.

That is great. And Doug your comps relative to competitors. How are your cockpit compare right now in terms of like enterprise value to EBITDA or price to sales or any other costs like that? Where do you stack up with some of the other ones your ringtones and stuff like that?

If you think about RingCentral just announced this past week as day-by-day had tremendous losses and I think I’m disappointed the street with their losses. I think that they had nice revenue growth but, again at the expense of losing more money than they anticipated. RingCentral had nice revenue growth, but continues to lose money. So, as I look at our competitors, I think that, you know, we feel like we are managing the ship extremely well, we had a little bit smaller percentage of growth than our competitors, but much more profitability. And so, we have always believed, and we have always had in the fact that we are going to grow, but we are going to grow profitably. And so we are reinvesting back into the business, but we are not spending, as I mentioned earlier, in the 60% to 70%, range sales and marketing expenses, it is hard to, it is hard to ever get to profitability with those kind of numbers. So, granted, they are growing their top line, but at the detriment to their bottom line. So, I think that we compare well, and a lot of the metrics that we have discussed, I think our churn rate is probably one of the lowest in the industry. And I think that our operating profits that we have today are probably one of the highest in the industry.

That is great.

And Greg I would like to add to that. On a valuation basis, we are probably less than half the valuation of our larger competitors. As Doug pointed out, most of them are losing money. If you take 59 or RingCentral, specifically, their cash flowing a little bit, but they are losing on a GAAP basis. And from the standpoint of valuation, we are at about 40% or 45% of their value. So there is a lot more head space with Crexendo than any of those competitors. I don’t know if you would like to add to that, Jeff or not, but and you also Doug.

I think you summed it up -.

Thank you. Yes, I then Doug just one final question. And, on the sales cycle, how has the sales cycle changed overtime? And how does that differ for 20 station organization versus a 300 station organization?

Yes, I always Greg, that sometimes it takes just as long to sell a 300 phone opportunity as it does a 20 phone opportunity and vice versa. So, yes, the sales process is fairly similar in both environments. You find your needs and pain points in the business and then you recommend solutions and hope fully you have got a good ROI to help them move forward fairly quickly. The sales process really hasn’t changed. I think if anything COVID is up the process because up until COVID, I think that businesses were looking at migrating to the cloud. Because they realized it was something that they needed to do, eventually. I think COVID is sped up that eventually to brand need to do something much quicker than I anticipated. So, yes, we talked to a lot of businesses, it is the communication solution is lacking, but it works well in a COVID environment for many businesses, that doesn’t work. So before when everybody’s still had all of their employees showing up at the office, even though their phone system may have been lacking in capabilities. It still did the functions they needed for day to day. Now that in many cases in our office 80% of our employees are still working remotely. So businesses are using premise based systems, they have got employees using personal cell phones using home phones and not having any consistency within their organization. I think the sales process has sped up a little bit. We are seeing businesses making quicker decisions. The larger businesses tend to actually make decisions quicker than the smaller businesses because larger businesses realize that they can’t wait and they have got to reinvest to continue keeping their business running. Smaller businesses tend to have a lot of emotional decision making aspects that are harder to control. So I would say that, we tend to see the larger deals in our funnel, go through the funnel process, in actually a quicker timeframe than the smaller ones. But an average size transaction for us from the time we start talking to them to the time we hopefully get an agreement to move forward, typically about four weeks.

Four weeks. Okay, and just one housekeeping, what is the turn rate right now? I think you said I forgot what was your churn rate?

Yes, our churn rate so on a seat basis, were for the quarter we are averaging six-tenths of a percent on a monthly basis. And on a customer rates, it is around 1%.

Okay, 1% per month churn.

Yes. That is from about six-tenth of a percent in the prior quarters.

Okay, thanks a lot for bearing with me.

Thanks.

You bet.

We will take our next question from [Renault Paul] (Ph), private investor. Please go ahead.

Yes. Thank you. I just wondered about the PPP loan, we took this quarter. What is the process going forward with that?

Jeff, do you want to take that?

Sure. Obviously, we have not made a decision or we would have let, the PPP loan or require some review. And we will determine what action we are going to take just historically, as you understand that, we are a [indiscernible] a regulated telephone company, and we provide vital communications and we take that responsibility very seriously. We were at the time we took the PPP loan under various state regulations which precluded us from canceling anybody services. We as a company stepped up and took the keep America connected pledge where we agreed not to disconnect customers. We had to slam and add a bunch of customer service, so that we could support all our customers who were moving from their office to their remote locations. We did this at a time with zero visibility as to how many customers we are going to cancel, or how many customers we are going to go out of business. At the time, we were on OTCQX and we had limited ability to raise any money if we needed to. So, we took the PPP loan, when it was absolutely necessary for us to continue to provide absolutely necessary services to our customers. So, we are reviewing all of that, and we will determine what action we are going to take relative to the PPP loan.

Okay. Thank you.

And there appear to be no further questions at this time. We will turn the floor back to Mr. Mihaylo for closing remarks.

Okay. Thank you, Karen. Obviously, this has been a good quarter for us. And we expect to see all of you back here when we announced the third quarter, which will be in early October. I’m sure. This time we reported - normal because we have got a couple of analysts on the call. And they had, they also follow a couple of our competitors which announced on the day we wanted to announce. So we will see if we announce -the rest of the pack or if we announce a few days after the rest of the pack. At any rate, we will see you all back here. Be safe. Follow the CDC guidelines and we will talk to you at the end of our third quarter.

Thanks everybody.

Thank you. Ladies and gentlemen, this does conclude today’s teleconference. We thank you for your participation. You may disconnect your lines at this time. Have a great day.