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Crexendo, Inc. (NASDAQ:CXDO) is slated to report Q4 and full year 2020 financial results tomorrow after the market closes at 4:30PM. The dial-in number for domestic participants is 877-545-0320 and 973-528-0002 for international participants, with access code 625166.
As you know, the company’s President and COO, Doug Gaylor, participated in our new Management Morning Briefing service on March 16, 2022. CXDO was the second company to have been featured in such a manner. Altigen Communications Inc (OTC:ATGN) is next in line, this week.
Even though the stock isn’t performing commensurate with the strong sentiment being conveyed by the company, the narrative has not changed and is still echoed in the briefing.
A key piece of input we wanted to get clarity on from Doug was how he felt about the competitive landscape of the UCaaS industry, especially in light of Ringcentral, Inc. (NYSE:RNG) 36% year to date decline in stock price. More specifically, is the decline in RNG’s price a warning that the industry growth outlook may be changing? We also wanted to get Doug’s opinion on how CXDO is positioned to compete as Microsoft begins to aggressively roll out its UCaaS product offerings. It’s worth noting that CXDO is now selling at a P/S of 2.2 on current 2022 revenue estimates.
Doug addresses some of these talking points in the following excerpt from the conversation:
“We were 113% year over year in #3. And I expect those trends to continue as we go forward. So when I look at where the industry is, there’s still tremendous opportunity in the industry. And we’ve had numerous Fireside Chats before, with you before, Maj.
And you know, the statistics still show that 50 to 60% of the US business market still has not moved to the cloud yet. And, it’s not a matter of if they move to the cloud, it’s when, because we all know the cloud is going to dominate, especially in our industry.
With communications, there’s no sense to have a traditional premise based system anymore. The cloud has so much more functionality and efficiency and cost savings, that it’s just a matter of time. If you look at what’s happened in our sector, it’s just as shocking to me as it is to you. You know, we were doing great execution, continuing to do great execution, we were expecting after Q3 when we had phenomenal earnings and beat all the analysts expectations by a mile…we were expecting a nice bump in the stock price.
That was back in November. Ever since, the microcaps, and especially the UCaaS stocks have been getting hammered. I think we kind of got caught up in the fact that the post COVID type momentum just shifted.
If you look at what happened during COVID, it really highlighted the technology that we sell and use every single day. It’s the Work at Home app opportunities and applications, the collaboration applications. And so those are all of the capabilities that we really benefited from during COVID. That doesn’t go away.
If you look at the statistics, prior to COVID, 15 to 20% of employees were working remotely. And during the peak of COVID, 85% of employees were working remotely. And that number is still in the 30 to 40% range
So it’s not as if everybody’s come back to the office and nobody needs the cloud anymore. And so I’m just as surprised as you are at how much pressure has been put on the UCaaS area that it’s trading at two and a half times our forward looking earnings.
I think we’re extremely, extremely undervalued because as you highlighted, most of our competition was trading at much, much higher multiples. They haven’t sniffed profitability in years and years, and some of them since their inception.”
We also want to let you know that we had preliminary interviews with Tsr, Inc. (NASDAQ:TSRI) and Canterbury Park Holding Corpora (NASDAQ:CPHC). We are trying to secure Fireside Chats with these companies since we believe there may be significant upside potential if the growth we think they are capable of materializes. Please stay tuned for our follow ups which may come by way of RFTs to elaborate on the reasons why further analysis is needed
TSRI is an IT staffing company that we believe has tangible organic opportunities, as well as inorganic ones in the form of acquisitions that will enable it to build upon the strong numbers it reported in fiscal Q2 2022.
In CPHC’s case, we believe the stock may eventually see a large expansion in its valuation multiples as new management begins to exploit untapped growth opportunities in its casino operations. CPHC hosts pari-mutuel wagering on horse races and unbanked card games at its Canterbury park racetrack and card casino facility in Shakopee, Minnesota. To catch a glimpse on how the company performed last quarter, please go here.
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