Crexendo (NASDAQ:CXDO) reported second-quarter 2026 revenue of $24.6 million, up 49% from the prior-year period, as the company benefited from growth in telecom services and contributions from its acquisition of Estech Systems LLC, or ESI.
GAAP net income was $1.1 million, or $0.03 per diluted share, while non-GAAP net income totaled $4.1 million, or $0.12 per diluted share. Adjusted EBITDA rose 46% year over year to $4.1 million, representing a 17% adjusted EBITDA margin. Chief Financial Officer Ron Vincent said the margin returned to the level Crexendo had maintained during the prior year after a first-quarter decline.
Revenue Mix and Margin Improvement
Service revenue increased 78% to $14.9 million and carried a 67% gross margin. Software solutions revenue rose 5% to $7.3 million, with a 70% gross margin, while product revenue more than doubled to $2.5 million and generated a 44% gross margin.
Vincent said consolidated organic revenue growth was 7% in the quarter, while year-to-date organic growth was 11%, which he said was in line with the company’s target for double-digit organic growth for the full year. He attributed the lower quarterly organic growth rate in part to a $700,000 decline in perpetual-license revenue compared with a record sales quarter a year earlier, when average order size was about three times the company’s typical quarterly average.
The ESI acquisition also eliminated about $180,000 of revenue that had been recognized in the year-earlier quarter, Vincent said. Adding that amount back to the current-quarter comparison would have resulted in an approximately 8% growth rate, according to the company.
Crexendo’s consolidated gross margin was 66%, up 500 basis points from the first quarter. The company cited a 400-basis-point sequential improvement in service gross margin, a 1,300-basis-point increase in product gross margin and a 200-basis-point improvement in software solutions gross margin.
Doug Gaylor, Crexendo’s president and COO, said software margin improvement was helped by the company’s migration to Oracle Cloud Infrastructure and the decommissioning of legacy data centers at the end of the first quarter. Telecom services margins benefited from higher-margin ESI sales, he said.
Platform Customer Wins Accelerate
Crexendo added six new NetSapiens platform customers during the second quarter, bringing first-half new-logo wins to 11, compared with two during the first half of 2025. Two of the six second-quarter customers migrated from Metaswitch, while one migrated from Cisco BroadSoft. Four of the 11 first-half wins were Metaswitch migrations.
The company also booked seven upgrade orders from existing licensees. Management said newer customers have tended to make smaller initial commitments amid economic uncertainty, but upgrade orders have averaged roughly 50% more than initial orders.
Vincent said typical initial orders were in the range of $250,000, while average upgrade orders were approximately $350,000. Korn said smaller initial licenses can close more quickly than large platform deals and could provide a longer-term stream of upgrades as customers expand.
Crexendo’s remaining performance obligation increased 97% year over year to $139 million. Gaylor said the measure includes remaining contract values from telecom services and software solutions customers that are expected to be recognized over the next 60 months.
Management attributed platform momentum to the company’s sessions-not-seats pricing model, its product capabilities and uncertainty among some competitors’ customer bases. Korn said the company believes its pricing model can save communications providers 40% to 50% on platform usage costs.
ESI Integration, Cash Flow and Acquisition Pipeline
ESI contributed $6.9 million of revenue in the second quarter, or an average of $2.3 million per month, compared with $2.1 million during March, its first month under Crexendo ownership. Korn said ESI sales have exceeded initial expectations, while Gaylor pointed to the acquired company’s reseller relationships and expanded sales message following the combination.
Operating expenses increased $8.1 million, or 53%, from a year earlier, with ESI accounting for $6.9 million of the increase. Crexendo said it has integrated or begun integrating accounting, legal and marketing functions and expects further operating synergies and cost savings.
The company ended the quarter with $18.3 million in cash and cash equivalents, compared with $31.4 million at the end of 2025. Cash from operating activities totaled $4.8 million during the first six months, an 89% increase from the same period last year. Crexendo used $26.2 million in investing cash flow for the cash portion of the ESI purchase price, while financing activities provided $8.4 million, including $4.9 million from a Wells Fargo term loan and $3.6 million in net proceeds from stock-option exercises.
Korn said the company is evaluating several potential acquisition opportunities but intends to remain selective. He said a new transaction could occur in the fourth quarter or shift into 2027 depending on size and due diligence requirements.
AI Offerings Gain Early Traction
Crexendo launched its CAIRO artificial intelligence receptionist and orchestrator in late January. The product can answer calls, address frequently asked questions, route calls and schedule appointments, according to the company.
Gaylor said CAIRO generated an average revenue increase of approximately $120 per account per month during the quarter, about 35% above the average $340 monthly revenue per telecom services account. He said the product carries “great margins” and should be accretive to company margins as adoption grows.
CAIRO has been rolled out to licensees and is being marketed to Crexendo’s existing retail customers. Management said AI-related revenue is not yet material but expects AI adoption and related revenue to become more meaningful in 2027.
Separately, the company’s ecosystem vendor program grew to 57 vendors, including 13 offering AI-related applications and solutions. The program contributed $400,000 of revenue in the quarter, though management characterized it as still being in the early stages of monetization.
About Crexendo (NASDAQ:CXDO)
Crexendo, Inc (NASDAQ: CXDO) is a provider of cloud-based communications and collaboration solutions tailored to businesses of varying sizes. The company’s flagship offering, CXsuite, integrates enterprise-grade voice, video conferencing, instant messaging, presence, and contact center functionality into a single platform delivered over the internet. By leveraging hosted infrastructure and a subscription-based model, Crexendo aims to reduce on-premises hardware costs and simplify management for IT teams and resellers.
Crexendo’s product portfolio includes a multi-tenant cloud PBX, SIP trunking, session border controllers and an application programming interface (API) suite that allows partners and customers to embed real-time communications into custom workflows.
