Crexendo (CXDO) risk factors, FY2024 10-K

Other

1. 01Public health crises could materially adversely affect our business, financial condition and results of operations
2. 02Adverse conditions in the U.S. and international economies could impact our results of operations and financial condition
3. 03The US economy has been strong, however there is a possibility of a recession or increase in inflation. If Inflation rises the Federal Reserve may not continue to reduce rates any further or may raise them and these factors may negatively affect our business
4. 04Our quarterly and annual results of operations have fluctuated in the past and may continue to do so in the future. As a result, we may fail to meet or to exceed the expectations of research analysts or investors, which could cause our stock price to fluctuate and impair our ability to raise capital
5. 05our ability to maintain compliance with all regulatory requirements
6. 06Our growth and the evolving markets in which we operate make it difficult to evaluate our current business and future prospects, which may increase the risk of investing in our stock
7. 07Our business may be affected by Global economic conditions, including relations between the United States and Foreign Countries
8. 08Regulatory Risks in International Expansion
9. 09We cannot be certain that we will be able to achieve or maintain operating profitability in the future
10. 10We stopped paying a quarterly dividend in April 2023, the Company may consider a dividend in the future if there do not appear to be accretive acquisitions in 2025
11. 11We expect to undertake acquisitions, mergers or change to our capital structure to expand our business, which may pose risks to our business and dilute the ownership of our existing stockholders. We may be required to incur debt to fund acquisitions or mergers
12. 12We may not be able to secure financing on favorable terms, or at all, to meet future needs
13. 13Our strategy to expand through acquisitions or investments in other companies may divert our management’s attention, increase expenses, disrupt our operations and harm our results of operations
14. 14Our ability to use our net operating loss carry-forwards may be reduced in the event of an ownership change and could adversely affect our financial results
15. 15The telecommunications industry is highly competitive. We face intense competition from traditional telephone companies, wireless companies, cable companies and alternative voice communication providers and other UCaaS companies
16. 16Impact of AI and Automation on Core Business
17. 17Our UCaaS or cloud telecommunications service competes against established well financed alternative voice communication providers (such as 8x8 and Ring Central), who may provide comparable services at comparable or lower pricing
18. 18Our Software Solutions division competes against numerous competitors including established well-financed competitors
19. 19The Software Solutions Division previously sold licenses primarily as a “perpetual” license. We are now selling more subscriptions based licenses on a monthly recurring revenue model, how the sale is structured may affect results on a quarter-to-quarter basis
20. 20The Managed Service Provider Industry is highly competitive. We face intense competition from both large and regional providers
21. 21Increasing Complexity in Managed Service Offerings
22. 22Cyber-attacks impacting our networks or systems could have an adverse effect on our business
23. 23Natural disasters, extreme weather conditions, acts of war, terrorist or other hostile acts could cause damage to our infrastructure and result in significant disruptions to our operations
24. 24Errors in our technology or technological issues outside our control could cause delays or interruptions to our customers
25. 25If we do not successfully maintain our physical infrastructure and maintain sufficient diverse geo redundant locations, which require large investments, we may be unable to substantially increase our sales and retain customers
26. 26Failure in our data centers or services could lead to significant costs and disruptions
27. 27Migration to Oracle Cloud Infrastructure
28. 28Risks Associated with Relying on Oracle Cloud
29. 29Operational Risks During Migration
30. 30Long-Term Dependence on Oracle's Business Strategy
31. 31We depend on our senior management and other key personnel, and a loss of these individuals could adversely impact our ability to execute our business plan and grow our business
32. 32We have targeted sales to mid-market and larger enterprise customers. Not properly managing these customers could negatively affect our business, margins, cash flow and operations
33. 33Sales to small and medium-sized businesses face risks as they may have fewer financial resources to weather an economic downturn
34. 34We must acquire new customers on an ongoing basis to maintain and increase our customers and revenues while the significant costs to acquire new customers may reduce our profitability
35. 35If we do not successfully expand our sales, including our partner channel program and direct sales, we may be unable to increase our sales and that may affect our stock price
36. 36A substantial portion of our sales is dependent on our partner channel (including but not limited to, resellers, and master agents) to sell our products and services; our failure to effectively develop, manage, and maintain our indirect sales channels could materially and adversely affect our revenues
37. 37Our churn rate may increase in future periods due to customer cancellations or other factors, which may adversely impact our revenue or require us to spend more money to grow our customer base
38. 38We may not be able to scale our business efficiently or quickly enough to meet our customers’ growing needs, in which case our operating results could be harmed
39. 39Our success depends in part upon our ability to provide customer service that effectively supports the needs of our customers
40. 40We depend upon industry standard protocols, best practices, solutions, third-party software, technology, and tools, including but not limited to open-source software
41. 41Changes to rates by our suppliers and increasing regulatory charges or tariffs may require us to raise prices, which could impact results
42. 42Vendor Concentration Risks
43. 43Changes in laws and regulations and the interpretation and enforcement of such laws and regulations could adversely impact our financial results or ability to conduct business
44. 44Our collection, processing, storage, use, and transmission of personal data could give rise to liabilities as a result of governmental regulation, conflicting legal requirements, differing views on data privacy, or security breaches
45. 45We face risks in our sales to certain market segments including, but not limited to, sales subject to HIPAA Regulations
46. 46We could be liable for breaches of security on our website, fraudulent activities of our users, or the failure of third-party vendors to deliver credit card transaction processing services
47. 47We could experience security breaches in the transmission and analysis of confidential and proprietary information of the consumer, the merchant, or both, as well as our own confidential and proprietary information
48. 48We collect personal and credit card information from our customers and employees could misuse this information
49. 49Our ability to offer services outside the U.S. is subject to different regulations which may be unknown and uncertain
50. 50Examinations by relevant tax authorities may result in material changes in related tax reserves for tax positions taken in previously filed tax returns or may impact the valuation of certain deferred income tax assets, such as net operating loss carry-forwards
51. 51The FCC net neutrality rules have changed. There may be a negative effect to our business going forward as a consequence of those changes
52. 52States are adding regulations for VoIP providers which could increase our costs and change certain aspects of our service
53. 53Taxing authorities may successfully assert that we should have collected or in the future should collect sales and use, value added, or similar taxes, and any such assessments could adversely affect our business, financial condition, and results of operations
54. 54As a public company we incur significant legal, accounting, and other expenses, including costs associated with public company reporting requirements. Our management team and other personnel devote a substantial amount of time complying with SEC, Nasdaq and other public company requirements
55. 55We may incur substantial expenses in defending against third-party patent and trademark infringement claims regardless of their merit

Risks Related to Our Common Stock

1. 56Our stock price may be volatile and may decline
2. 57other events or factors, including those resulting from war, incidents of terrorism, the COVID-19 pandemic or responses to these events
3. 58We are a “smaller reporting company,” and the reduced disclosure requirements applicable to us as such may make our common shares less attractive to our stockholders and investors
4. 59Our actual operating results may not meet expectations, which could likely cause our stock price to decline
5. 60Our stock price, volatility and acceptance of our securities may be influenced by the research and reports that securities or industry analysts may publish about us or our business
6. 61We may invest or spend the proceeds of our cash both from operations and from past and future offerings in ways with which you may not agree or in ways which may not yield a favorable return
7. 62Our former Chairman of the Board owns a significant amount of our common stock and could exercise substantial corporate control. There may be limited ability to sell the Company absent the consent of the Chairman
8. 63As part of our recent acquisitions there are certain employees who own substantial amounts of our common stock which is subject to sale on the open market. The NetSapiens acquisition allowed employees to convert their options to options to purchase common stock of Crexendo
9. 64There is no guarantee that Crexendo and recently acquired companies will fully integrate operations or failure to properly manage the acquisitions could impact financial results and our stock price
10. 65We are planning to migrate most of Crexendo’s customers to the Crexendo Software Solutions communication platform, failure to do that efficiently and properly may impact our business revenue and stock price
11. 66Crexendo may have difficulty attracting, motivating and retaining executives and other key employees
12. 67Crexendo’s business relationships, including customer relationships, may be subject to disruption due to Acquisitions
13. 68The market price of our Common Stock after recent and future acquisitions may be affected by factors different from those affecting our common stock currently. The market price of our common stock may decline as a result of acquisitions
14. 69We expect to continue to undertake acquisitions, mergers or change to our capital structure to expand our business, which may pose risks to our business and dilute the ownership of our existing stockholders