Crexendo (NASDAQ:CXDO) reported third-quarter 2026 revenue of $25.2 million, up 44% from a year earlier, as the company said it reached a $100 million annualized revenue run rate. The communications software and services provider also reported GAAP net income of $1.1 million, or $0.03 per diluted share, and adjusted EBITDA of $4 million, compared with $2.9 million in the prior-year quarter.
Chairman and Chief Executive Officer Jeff Korn said the quarter reflected growing adoption of the company’s NetSapiens platform, continued contributions from its ESI acquisition and progress in its artificial-intelligence offerings. “Through the third quarter, we have already won more platform logos than in all of last year,” Korn said.
Revenue Growth and Profitability
Service revenue rose 75% year over year to $15.1 million, while software solutions revenue increased 2% to $7.7 million. Product revenue climbed 78% to $2.4 million.
- Service gross margin was 67%, unchanged from the second quarter.
- Software solutions gross margin improved to 71% from the preceding quarter.
- Product gross margin was 41%.
- Adjusted EBITDA margin was 16%, down 100 basis points sequentially.
Chief Financial Officer Ron Vincent said operating expenses increased about $7.9 million, or 49%, from the prior-year period, with the ESI acquisition accounting for $7.1 million of that increase. The company maintained a 4% operating margin, consistent with the second quarter.
Crexendo ended the quarter with $22.8 million in cash and cash equivalents, up $4.5 million from its June 30 balance but down from $31.4 million at the end of 2025. The company generated $9.7 million in cash from operating activities during the first nine months of the year, including $4.9 million during the third quarter.
Its remaining performance obligations totaled $139.6 million at Sept. 30, compared with $139 million at June 30. Doug Gaylor, Crexendo’s president and chief operating officer, said the figure was up 59% from the third quarter of 2025 and represents remaining contract payments from telecom services and software customers expected to be recognized over the next 60 months.
New Licensees and Migration Opportunities
Crexendo added five NetSapiens licensees in the third quarter, bringing its year-to-date total to 16, above the 14 licensees added during all of 2025. Two of the third-quarter additions migrated from Metaswitch. For the first nine months, Crexendo said it had won six Metaswitch migrations and one migration from Cisco’s BroadSoft platform.
The company also received six add-on orders from existing licensees. Gaylor said the average total contract value for new licensees signed during the quarter exceeded $400,000, improving from average transaction sizes of roughly $175,000 to $230,000 in the prior two quarters.
Korn said new licensees can provide a longer-term source of upgrade orders and recurring revenue as they migrate customers and expand their businesses. However, he said larger upgrade purchases were lower than historical levels because many licensees finance such purchases and have been more cautious amid elevated interest rates.
“It is primarily interest rate driven,” Korn said, adding that providers are holding more cash and buying capacity closer to when it is needed. He said Crexendo expects providers to have incentives to add capacity as usage grows because exceeding allotted session limits carries substantial costs.
Gaylor said the company’s telecom-services business recorded its two largest sales of the year during the quarter. Bookings through technology services distributors increased 41% year over year in both the third quarter and first nine months. Average monthly telecom churn was 0.62%, an improvement from the prior quarter, according to Vincent.
ESI Performance and Cash Priorities
The ESI acquisition contributed $6.8 million in third-quarter revenue, slightly below $6.9 million in the second quarter. Gaylor said the acquired business historically grew at roughly 7% to 8%, while one-time items can cause quarterly results to fluctuate. He said Crexendo continued to see strong reseller momentum and was working to realize cost savings and operational synergies from the acquisition.
Korn said the company intends to preserve its cash primarily for acquisitions rather than debt repayment or share repurchases in the near term. He said the merger-and-acquisition pipeline remained strong and that Crexendo was evaluating opportunities based on strategic fit and economic impact.
Flow Platform and AI Initiatives
Crexendo is targeting the first half of 2027 for the release of NetSapiens Flow, a new version of its platform designed to provide a more modern interface and expanded capabilities. Korn said the company previewed Flow at its user group meeting in Austin, where licensees showed interest in paying for sandbox environments to test the platform before general availability.
While existing licensees will be eligible to deploy Flow under their universal session licensing agreements, Chief Revenue Officer Jon Brinton said the release is expected to create opportunities to increase average revenue per user through AI applications, third-party integrations and the company’s marketplace.
The company said its Ecosystem Vendor Program now includes 66 vendors, including 22 offering AI applications and solutions. Program revenue increased 12% sequentially in the third quarter. Crexendo also introduced conversational intelligence capabilities that analyze recorded calls and provide call summaries and other insights.
CAIRO, Crexendo’s AI receptionist and orchestrator, recorded 20% sequential revenue growth, according to Gaylor. Korn said adoption is increasing but that he does not expect CAIRO to make a substantial financial contribution until the second half of 2027.
Management did not provide 2027 organic-growth guidance, citing uncertainty around interest rates and the economy. Korn said Crexendo’s internal objective remains double-digit organic growth, while the company continues to manage expenses and hiring selectively.
About Crexendo (NASDAQ:CXDO)
Crexendo, Inc is a provider of cloud-based communications and technology services. The company offers unified communications as a service, business voice and messaging solutions, video conferencing, contact center capabilities, and related communications tools designed for small and medium-sized businesses, enterprises, and service providers.
Crexendo also provides a communications software platform through its NetSapiens business. The platform supports hosted voice, unified communications, contact center, and application programming interface services, enabling telecommunications providers and channel partners to deliver branded communications solutions to their customers.
Founded in 1995 and headquartered in Arizona, Crexendo serves customers primarily through direct sales, resellers, agents, and other channel partners.
