Crexendo (CXDO) risk factors, FY2025 10-K

Other

1. 01Public health crises could materially adversely affect our business, financial condition and results of operations
2. 02Adverse Macroeconomic Conditions Could Materially Adversely Affect Our BusinessNew
3. 03Our 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
4. 04our ability to maintain compliance with all regulatory requirements
5. 05Our 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
6. 06Our business may be affected by Global economic conditions, including relations between the United States and Foreign Countries36% rewritten
7. 07The United States has imposed trade restrictions and tariffs on equipment we use, particularly from China and Canada. An increase in costs or limitation on our ability to source equipment including telephones and ancillary equipment may affect our results from operations as well as results and our stock priceNew
8. 08Regulatory Risks in International Expansion

Risks Related to Lawful Intercept and CALEA Compliance

1. 09We cannot be certain that we will be able to achieve or maintain operating profitability in the future
2. 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 2026
3. 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
4. 12We may not be able to secure financing on favorable terms, or at all, to meet future needs
5. 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
6. 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
7. 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
8. 16Service Level Agreement, Crexendo VIP 100% Uptime Guarantee and Customer Credit ExposureNew
9. 17A portion of our revenues is derived from a limited number of large customers and service provider partners. The loss, downsizing, or repricing of one or more of these relationships could materially adversely affect our revenues, margins, and results of operationsNew
10. 18One of our competitive advantages relating to our software solutions division is our open application programming interfaces (“APIs”), allowing licenses to use applications that either they or third parties develop. Retail customers also use third party applicationsNew
11. 19Our ability to compete depends on maintaining feature parity with competing UCaaS and cloud communications platforms and rapidly deploying new functionality in response to customer expectations and technological changeNew
12. 20Licensees Self-Hosted DeploymentsNew
13. 21Usage-Based Pricing and Revenue VolatilityNew

Risks Related to Robocalls, Spoofing, and STIR/SHAKEN Compliance

1. 22Impact of AI and Automation on Core Business32% rewritten

Risks Related to Artificial Intelligence and Automation

1. 23Generative AI Evolution and Competitive Disruption RiskNew
2. 24Our 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
3. 25Our Software Solutions division competes against numerous competitors including established well-financed competitors
4. 26The Software Solutions Division previously sold licenses primarily as a “perpetual” license. We are now selling more subscription-based licenses on a monthly recurring revenue model, how the sale is structured may affect results on a quarter-to-quarter basis
5. 27The Managed Service Provider Industry is highly competitive. We face intense competition from both large and regional providers
6. 28Increasing Complexity in Managed Service Offerings
7. 29Cyber-attacks impacting our networks or systems could have an adverse effect on our business

Risks Related to Data Localization and Cross‑Border Transfers

1. 30Natural 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
2. 31Errors in our technology or technological issues outside our control could cause delays or interruptions to our customers
3. 32If 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
4. 33Failure in our data centers or services could lead to significant costs and disruptions
5. 34Migration to Oracle Cloud Infrastructure
6. 35Risks Associated with Relying on Oracle Cloud
7. 36Operational Risks During Migration100% rewritten
8. 37Long-Term Dependence on Oracle's Business Strategy
9. 38We 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
10. 39We 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
11. 40Sales to small and medium-sized businesses face risks as they may have fewer financial resources to weather an economic downturn
12. 41We 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
13. 42If 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
14. 43A 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
15. 44Our 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
16. 45We 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
17. 46Our success depends in part upon our ability to provide customer service that effectively supports the needs of our customers

Risks Related to E‑911 and Emergency Call Failures

1. 47We depend upon industry standard protocols, best practices, solutions, third-party software, technology, and tools, including but not limited to open-source software

Risks Related to Open‑Source Software Licensing

1. 48Changes to rates by our suppliers and increasing regulatory charges or tariffs may require us to raise prices, which could impact results
2. 49Vendor Concentration Risks
3. 50Changes 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
4. 51Our 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
5. 52We face risks in our sales to certain market segments including, but not limited to, sales subject to HIPAA Regulations
6. 53We 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
7. 54We 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
8. 55We collect personal and credit card information from our customers and employees could misuse this information
9. 56Our ability to offer services outside the U.S. is subject to different regulations which may be unknown and uncertain
10. 57Examinations 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
11. 58The FCC net neutrality rules have changed. There may be a negative effect to our business going forward as a consequence of those changes
12. 59States are adding regulations for VoIP providers which could increase our costs and change certain aspects of our service
13. 60Taxing 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
14. 61As 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
15. 62We 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. 63Our stock price may be volatile and may decline
2. 64other events or factors, including those resulting from war, incidents of terrorism, the COVID-19 pandemic or responses to these events
3. 65We 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. 66Our actual operating results may not meet expectations, which could likely cause our stock price to decline
5. 67Our 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. 68We 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. 69Our 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. 70As 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. 71There 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. 72We 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. 73Crexendo may have difficulty attracting, motivating and retaining executives and other key employees
12. 74Crexendo’s business relationships, including customer relationships, may be subject to disruption due to Acquisitions
13. 75The 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. 76We 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