Crexendo, Inc. (CXDO) Q1 2026 Earnings Report, Transcript and Summary

Greetings. Welcome to the Crexendo First Quarter 2026 Earnings Call. [Operator Instructions] Please note, this conference is being recorded. I will now turn the conference over to your host, Jeff Korn, CEO and Chairman of the Board. You may begin.

Thank you, John, and good afternoon, everyone. Welcome to the Crexendo Q1 2026 Conference Call. I am, as John said, Jeff Korn, Chairman of the Board and CEO. On the call with me today are Doug Gaylor, our President and COO; Ron Vincent, our CFO; and Jon Brinton, our CRO. In a moment, I'm going to ask John to read the safe harbor statement. After that, I will give some brief comments on our performance and strategy. Ron will then provide more details on the numbers before handing the call over to Doug to provide a business and sales update. After that, I will open the call up for questions. Jon, would you please read the safe harbor?

Thank you, Jeff. I want to take this opportunity to remind listeners that this call will contain forward-looking statements within the meaning of the Securities Act of 1933 and the Securities Exchange Act of 1934. The Private Securities Litigation Reform Act of 1995 provides a safe harbor for such forward-looking statements. All statements made in this conference call other than statements of historical fact are forward-looking statements. Forward-looking statements include, but are not limited to, words like believe, expect, anticipate, estimate, will and other similar statements of expectation identifying forward-looking statements. Investors should be aware that any forward-looking statements are based on assumptions that are subject to risks and uncertainties that could cause actual results to differ materially from those discussed here today. These risk factors are explained in detail in the company's filings with the Securities and Exchange Commission, including the Form 10-K for fiscal year ended December 31, 2025, and the Forms 10-Q as filed. Crexendo does not undertake any obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. I'd now like to turn the call back to Jeff. Jeff?

Thanks. This really was a very special quarter for us, and I can't tell you how proud I am of the entire team and the efforts they made. And I think the results show how everybody is working together, working in unison and continuing to make this what I believe is the best UCaaS company in the industry. When I took over as CEO just over 3 years ago, the team and I made a series of clear and deliberate commitments to our shareholders. We committed to stopping the cash burn, returning the business to positive cash flow. We committed to restoring and sustaining GAAP profitability. We continue to -- we committed to investing in the platform in sales and marketing and in strengthening our security infrastructure. We committed to driving constant growth, and we committed to pursuing disciplined accretive acquisitions. I am very pleased and proud to say that we have delivered on all of those commitments. More importantly, what you are seeing now is those efforts coming together. The foundation we built is translating into a business that is growing, scaling and becoming more efficient with increasing strategic flexibility. The first quarter is a clear example of that. I and the team are incredibly pleased with our first quarter results, which continue to demonstrate not only strong execution, but the increasing strength, scalability and durability of our operating model. Revenue for the quarter was $20.7 million, up 29% year-over-year, reflecting both solid organic performance and the contributions from the Estech Systems ESI acquisition. We delivered GAAP net income of $0.6 million and non-GAAP income of $3.3 million. Importantly, this marks another quarter of GAAP profitability, extending our strength to 11 consecutive quarters. And it's especially impressive this quarter while we absorbed all the acquisition-related expenses and the incremental amortization of intangible assets associated with the ESI transaction. The intangible expenses are fully reflected in our GAAP results. However, they are nonoperational in nature, and our non-GAAP performance more accurately reflects the underlying earning power of the business. What that performance shows is a company that is scaling efficiently, expanding profitably and demonstrating clear operating leverage as we grow. The ESI acquisition is exceeding our expectations and is already contributing meaningfully across the income statement. Integration is advancing ahead of plan across sales, operations, engineering, and we are only beginning to capture early synergies. More importantly, this transaction reinforces a key point. We have disciplined, repeatable M&A framework that is both strategic and financially driven. We are focused on assets that are highly complementary, operationally, actionably and accretive within a short period of time. ESI fits squarely within that framework and strengthens our ability to execute similar opportunities going forward. Operationally, execution continues to improve across the organization. On the retail side, with VIP, we continue to make inroads on enterprise sales, demonstrating continued progress in our capabilities and our ability to compete for and win larger, more complex opportunities. From a product standpoint, we are investing where it matters and seeing results. We've already demonstrated to our licensees and will soon be releasing a new user interface and administrative initiative that has been exceptionally well received by our community during early previews, reinforcing the competitiveness of our platform. We also launched CAIRO, our AI-driven solution, which we believe positions us well as AI continues to become an increasingly vital component of our communication stack. We are actively reviewing and testing other AI solutions, and we will continue to roll out AI applications, which will overlay onto our platform, increase our productivity and more importantly, increase our customers' productivity and therefore, increase our sales per customer. At the same time, our marketplace is gaining traction and beginning to validate the broader ecosystem strategy. While still early from a revenue standpoint, it is strategically important as it expands our reach, deepens customer engagement and creates incremental monetization layers that should scale over time. From a profitability standpoint, we are executing with discipline and intent and increasing recurring revenue. We are continuing to invest in the platform, AI, security and go-to-market capabilities, but we are doing so in a way that is driving increased efficiency across the business. As a result, we are seeing early indications of margin expansion and improving EBITDA conversion, even while integrating acquisitions and continuing to invest for growth. The trend is expected to become more evident over time. Looking ahead, we remain confident in our ability to deliver sustained double-digit organic growth. While macro conditions may continue to impact timing on larger enterprise decisions, underlying demand remains strong and our pipeline supports continued momentum. In parallel, we are actively evaluating additional acquisition opportunities. The environment continues to present attractive opportunities, particularly among companies already operating on our platform or those that can be integrated efficiently into our ecosystem. Our approach remains disciplined, but we believe we are well positioned to selectively deploy capital in a way that enhances both growth and profitability. We are clearly on a trajectory toward $100 million in annual revenue. More importantly, we are doing so with a business that is becoming more efficient, more scalable and more profitable as it grows. Additionally, as you may have seen or will shortly see, we just secured $5 million in term debt along with a line of credit, both of which we believe are on highly attractive terms. This will enable us to have a seat at the table to discuss additional acquisitions and will assist in our expectation of growing the company strategically and profitably. Let me make clear, we didn't borrow the money because we need it. We borrowed the money to secure future acquisitions. We are, as I said, not raising capital out of necessity. We are doing it from a position of strength. Our objective is to ensure that we remain aggressively positioned to pursue accretive acquisitions as opportunities arise. Based on our experience, having capital readily available and meaningfully available improves both access and negotiating leverage, allowing us to act decisively when others cannot. We do not anticipate deploying this capital in the immediate quarter or 2. We firmly believe in the principle that you secure capital when it is available on favorable terms, not when it is required. This approach preserves optionality and ensures we maintain a leadership position when evaluating strategic opportunities. We're building not just for today, but shaping a future where we intend to be the premier cloud communication company in our sector, and this is one more step in that direction. We continue to build the platform and company for the future. We are excited to design a business that will make our customers and shareholders proud, and we will continue to attract new customers and shareholders. We are also closely monitoring developing regulatory dynamics that could create a meaningful opportunity for the company. The Federal Trade Commission has advanced a proposal that, if adopted, will require certain customer service and contact center operations to be located completely within the United States. At this stage, the proposal remains in the early phase. There is approximately a 1-year period for public comment and evaluation, and it is not assured this proposal will ultimately be implemented or adopted in the current form. However, if enacted, it could have significant positive implications for the customer experience and customer-centric markets. We continue to improve our offerings in this arena, and our objective is to ensure that we are prepared and positioned to respond quickly and effectively to take advantage of what we believe could be a significant incremental sales opportunities if these changes are required. In summary, this was a very, very strong quarter and reflects the company executing at a high level, integrating acquisitions successfully, expanding its platform capabilities and positioning itself to drive both growth and margin expansion over time. I remain highly confident in our strategy, our execution, our team and our ability to continue delivering meaningful long-term shareholder value. The best is yet to come, and the team and I work every day to make the best telecom platform support engineering software provider and platform in the industry. I started with discussing commitments we made. Let me now add to that. I want you all to understand we will work tirelessly every day to grow the company profitably, both organically and inorganically, while continuing to build the best software telecom in the industry and provide the best service in the industry. As I said before, the best is yet to come. This is a very, very exciting time for us. And with that, I will turn the call over to Ron, who will provide more details on the finances.

Thank you, Jeff. Good afternoon, everyone. As Jeff mentioned in his comments, we had another very strong quarter with consolidated revenue growth of 29%. Organic growth for that quarter was 15.9% over the prior year quarter. So excluding $2.1 million in revenue contributed from the ESI acquisition that we completed on March 1 of this year. On March 1, we -- of this year, we closed the acquisition of Estech Systems or as we refer to ESI. The consolidated results of operations of ESI for 1 month are included in our operating results for the 3 months ended March 31, 2026. Since our last call, ESI completed their historical audit for the year ended December 31, 2025, and we filed pro forma financial disclosures as required with the SEC on Form 8-K/A on May 4 of this month. I encourage you to review the Form 8-K filing if you would like to see what the operating results of the combined company would have looked like on a pro forma basis if we had closed the transaction on January 1, 2025. Now let's talk about details for the quarter. For the quarter, we had service revenue that increased 29% to $10.6 million, and our gross margin was 63% for the quarter. Software Solutions revenue increased 12% to $7.7 million, and our gross margin was 68% for the quarter. During the quarter, we booked 5 new logos and had 9 upgrade orders from existing customers. Product revenue increased 141% to $2.4 million, and our gross margin was 31% for the quarter. During the quarter, our service revenue gross margin improved by 300 basis points and our software solutions revenue gross margin improved by 500 basis points compared to the fourth quarter of last year. Product revenue gross margins decreased by 1,100 basis points compared to the fourth quarter. Although product revenue increased significantly during the quarter, the additional network equipment product sales were with very low margins. Operating expenses increased approximately $3.2 million excluding the ESI operations. The increases are attributed to $1 million directly related to the increase in product revenue, $800,000 in acquisition-related expenses related to the ESI acquisition and $500,000 related to the OCI expenses for our hosting arrangement. In the first quarter of the prior year, we had no operating expenses related to OCI. So it's a big increase. Our operating margin for the quarter came in at 2%. That's a decrease in operating margin from the prior period. But without the acquisition-related expenses of $800,000, our operating margins will return to 6% or 7% as they have been in the historical years. Earnings for the first quarter, we reported net income of $0.6 million for the quarter, that's $0.02 per basic and diluted common share. On a non-GAAP basis, we reported non-GAAP net income of $3.3 million. That's $0.10 per basic and diluted common share. We reported EBITDA for the quarter of $1.6 million and adjusted EBITDA of $3.2 million. Our cash and cash equivalents at the end of the quarter was $7.2 million compared to $31.4 million at the end of December 31, 2025. As we've been discussing the acquisition, we paid for a large majority of that acquisition in cash on hand that we generated from operations. So investing activities for the quarter utilized $26.2 million in cash. Operating activities for the quarter provided $2 million in cash and financing activities provided about $100,000 in cash. As Doug -- as Jeff mentioned, we completed our debt financing credit facility with Wells Fargo Bank for a $5 million term loan and a $5 million revolving credit facility. Additional information, our remaining performance obligations at the end of the first quarter was $135.6 million as compared to $89.1 million at December 31, 2025. The addition of ESI's remaining performance obligations contributed $49.6 million of the increase. With that, I'll turn it over to Doug Gaylor, our President and COO, for additional comments on sales and operations.

Thanks, Ron. I'm extremely pleased with our strong results to start the year. Strong demand for both our retail telecom services solutions, combined with our wholesale software solutions propelled us to our 11th consecutive GAAP profitable quarter and our 30th consecutive quarter of non-GAAP net income. The 29% increase in revenue for the quarter was a combination of strong organic growth in both segments of the business, combined with 1 month of revenue from our ESI acquisition. Our Telecom Services segment saw an 18% organic growth year-over-year, combined with 12% organic growth from our Software Solutions segment. When you layer in the 1 month of revenue from our ESI acquisition, our Telecom Services segment increased 41% year-over-year. The stronger demand for all of our offerings continues, and we are seeing strong traction with our new AI applications, including our recently released Crexendo AI receptionist orchestrator that we refer to as CAIRO. Our GAAP profitability continues to be positively affected by controlling costs while making necessary investments and driving synergies within the business. We were able to post GAAP profits of $578,000 despite having over $800,000 of acquisition-related costs as well as over $400,000 of intangible amortization costs associated with the ESI acquisition. Our strong GAAP income, combined with strong cash flow -- free cash flow allows us to continually reinvest in our people and our products and to continue delivering the best solutions and the best customer satisfaction in the industry. We continue to see strong organic growth from our Software Solutions segment of the business that saw 12% organic growth in the quarter and benefited from 5 new logos -- new logo orders, along with 9 upgrade orders from our existing licensees. This is a dramatic improvement from Q1 of 2025, which had no new logos for the quarter. Two of the 5 new logos in Q1 are migrating from Metaswitch, and we continue to see opportunities created by uncertainties created by the competition. The new logos that we are winning love our proven platform. They love our open along with our solid suite of AI applications and solutions, combined with our unique pricing and support model, and that makes our software solution platform the best in the industry. Our Telecom Services Retail segment grew at 18% organically for the quarter and was positively impacted by some very large impactful wins that were sold and delivered during the quarter. I'm extremely pleased that we are seeing double-digit organic growth in such a strong fashion from this segment of the business. The heavy retail demand for our offerings was led by a 51% year-over-year increase in sales bookings from master agent technology service distributors, combined with strong traction on our new AI receptionist and a nice increase in SMB retail orders. Our remaining performance obligation, also referred to as our backlog continues to grow and is now at $135.5 million, an increase of 56% from just the end of last year, December 31. A large portion of that increase in the remaining performance obligation is attributable to the acquisition of ESI. The majority of ESI's retail customers are on long-term agreements, typically 5-year terms, thus giving us a very sticky customer base from this acquisition. The remaining performance obligation for the rest of 2026 is currently at $46 million. And as a reminder, our remaining performance obligation number is the sum of the remaining contract values for our telecom services and our software solutions customers that will be recognized on a sliding scale over the next 60 months, and it's a very strong indicator of our future revenue stream. Consolidated gross margin for Q1 was 61%, which was up slightly from Q4 of last year. Our gross margin for the quarter was impacted by higher cost for the quarter for our Oracle Cloud Infrastructure, or OCI hosting as we completed migrations from our legacy hosting to OCI on the Software Solutions segment of the business. The migrations for the quarter significantly increased our OCI utilization and spend while we were still incurring legacy hosting costs as well. With our migration now complete and our legacy hosted environment fully decommissioned, we will see cost savings going forward with improved margins. For the quarter, the Software Solutions margins were 68%, down 10% year-over-year due to the OCI cost that I just mentioned, but up 5% from Q4, which included our UGM conference expenses. Our Telecom Services segment gross margin was 57% for the quarter, which was up from 56% in Q1 of 2025. And our Telecom Services gross margins were positively affected in Q1 by the revenue contribution from ESI, and we would anticipate the margins for this sector to improve with a full quarter's contribution from ESI. We are confident that we should continue to see gross margin improvements in both segments of the business in the future. As Jeff mentioned, the ESI acquisition is exceeding our expectations, and we're seeing historically strong sales bookings from the ESI team in our first 2 months together. ESI has a strong and loyal reseller base, along with a talented direct sales team, and we are very pleased with the first 2 months sales performance from each sector. As I previously stated, we believe that artificial intelligence will be the biggest game changer in the communications sector since the move to the cloud began over 20 years ago. Crexendo is leading the AI charge with many new releases that allow small and midsized businesses to be more efficient and more productive. Our AI solutions are targeted at making small and midsized businesses more successful and more profitable by giving them affordable efficiency tools to help them run their business. In January of this year, we released CAIRO, Crexendo's AI receptionist orchestrator, and Cairo allows new and existing customers to leverage the power of an AI receptionist to answer all incoming calls, answer frequently asked questions, schedule, reschedule or cancel appointments, access customer records and talk to a live person when needed. The initial sales success of the product has been strong over the first 2 months, and we're excited to see the momentum continue. For the typical SMB customer, this technology will allow their business to be more effective and productive for a minimal cost. Crexendo's average retail revenue per account is roughly $350 per month per account. And by adding the CAIRO solution, that customer's monthly could increase by over 25% Crexendo's ecosystem vendor partner program or as we refer to our EVP program that was introduced last year, continues to gain great traction and now has 48 official partners in the program. These partners provide products, software and application solutions to our platform that allow Crexendo and our partners to benefit from selling solutions that end users will make their businesses more efficient, productive and profitable. Of the 48 EVP partners that we have, 11 of them are focused on AI solutions and applications. The EVP program is currently generating new and increasing revenue streams, and we're extremely encouraged by the growth potential. Crexendo has had a great start for 2026, and I fully expect that trend to continue as we continue to meet and exceed our targeted goals. We had previously set a goal of getting to $100 million revenue run rate by the end of 2026. And with our strong organic growth, combined with our exciting acquisition of ESI, we are well on our way to meeting that goal. We have continually highlighted how a strong M&A strategy could positively impact our company, and we continue to prove that with the ESI acquisition, becoming our third meaningful acquisition and game-changing acquisition in the last 5 years. I'm thrilled about the future direction and opportunity for Crexendo. Our strong double-digit organic growth, combined with our ESI acquisition and our GAAP profitability and our strong positive cash flow, combined with our growing remaining performance obligation have laid a great foundation for our future success. We're positioned perfectly with the combination of great products, strong demand and great solutions with a disruptive pricing model. And combine that with the best and most talented workforce in the industry, we're a force to be reckoned with. We're excited about the additional opportunities to drive growth and innovation that our new AI offerings will infuse into our business and are very optimistic that applications like our AI receptionist will drive even more demand and higher revenues. As the fastest-growing platform solution in the country, now supporting well over 7 million end users, we are laser-focused on growing our business, enhancing our solutions, improving our efficiencies and continuing to return strong results. With that, I'll turn it back over to Jeff for any further comments.

Thank you, Doug. Actually, I don't have any further comments at this time. So John, let's open the call to questions.

[Operator Instructions] First question comes from Mike Latimore with Northland Capital Markets.

Fabulous quarter there.

And before you start, Mike, I want to make clear to everybody listening, the static you heard on the line was not from us. It was from our operator, and we're going to be talking to them about getting a Crexendo system after the call is over. Sorry to interrupt you, but go ahead, Mike.

Yes. So again, fabulous quarter. I guess one number that jumps out is the 18% organic telecom service growth. I guess, can you elaborate a little bit on kind of what you're seeing there? It sounds like there were some big deals. How big were those? Just a little bit more color on that would be great.

We're not going to detail exactly how large the deals are because we think that's anticompetitive. But as you know, Mike, as well as anybody, enterprise deals take a long time, and we've been working on this one for over a year. And we have several other in the hoppers that we've been working on for some time. It's hard to tell you when they're going to come through because enterprise deals tend to work at their own schedule. But we're very, very excited about this deal. We believe we're going to get others, and we think this is going to continue to see growth in the telecom -- retail telecom sector. And I'll let Doug add something if he wishes to.

Yes, Mike, and I think that, combined with the nice increase that we saw from the technology service distributors of 51% really just added to a great quarter. So we just executed extremely well on all aspects of the business on the retail side this quarter.

Okay. Great. And then the service gross margin looks really good. I think it's the best in 3 -- maybe over 3 years. I know ESI helped there some. I guess where -- but that was only 1 month of ESI. Like what should we think about -- what would be a good range for service gross margin kind of as we get into a full quarter of ESI?

Yes. So Mike, Ron here. So I think we're going to see continued improvement. I would expect in the next quarter that we could see improvement of 1% or 2% in the next quarter.

Got it. Okay. Great. And then on CAIRO, it sounds like a lot of opportunity there. I guess -- with the initial work you've done, is the interest from companies that have receptionists and they want to kind of lower the cost? Or is it they don't have any real professional kind of receptionist, they want to add a capability and automate it through technology? Or do they want to replace legacy IVRs or something? Like what are you seeing in terms of where is the interest for CAIRO? What's the use case?

It's kind of both. We see some people who don't have a receptionist who sees this as a way to not have the expense. And we see some of the larger customers who have a receptionist or have multiple receptionists and they can then use this, keep the receptionist for questions that CAIRO may not want to answer or don't answer as well and at the same time, defer these people to other parts of the business. So it's all across the board. And Jon, who sells them more than the rest of us combined.

Yes, Jeff's comments are correct. So one of the key areas is staff augmentation. So many companies today that the person in that role is not necessarily full time. They've got 3 other jobs. So does it deflect calls so that they can focus on other things and only take the escalated calls. In others, we're seeing like health care applications where -- there in office environments where you are putting them in front of somebody that would normally take those calls in order to help with the call diversion. And the great thing about Cairo is, obviously, we're having our retail success, but quite a few of our licensees are now enrolled to offer it as well. So we're excited to see what they bring to the use cases that are out there.

The next question comes from George Sutton with Craig-Hallum.

Nice to see the 5 new logos, particularly after last year and consistent with Q4. Can you just give us a sense of the pipeline that you see for the next few quarters coming from the opportunities you have there?

I'll let Jon answer that. We're not going to give very specific numbers as obviously, there's a lot of competition out there. But we have a strong pipeline, but I can let Jon give a little more detail.

Yes. George, we do have a strong pipeline. We've commented in the past that some of the deal sizes have been slightly smaller initially because of some of what we think are the macro geopolitical things. But the number of opportunities that are in the pipeline is very strong, both here and in EMEA, and we're just looking to continue to harvest those. As you know, sometimes the larger ones take a little longer, and we're just working them through. But that continues to be very positive, and we don't foresee having a quarter like we did in Q1 and Q2 of last year. It's actually -- there's a lot of strength, a lot of strength now from multiple competitors in a more pronounced way than we've had before. So we're looking forward to getting these people into our community and having them participate in what we're doing globally.

You mentioned 11 partners that are working with you on AI opportunities. Can you give us a sense of how broad the AI product opportunity set might be? And when might we see additional products?

Yes. Those 11 partners out of the EBP program are all working on different aspects of AI, including our CAIRO solution. Our CAIRO solution was developed by one of our partners there. We obviously sell that as a Crexendo labeled product, but it was developed for us as one of our AI EVP partners. So those AI applications range anywhere from the CAIRO application to call sentiment analysis and call recording summation AI solutions. We've got AI solutions that use Agentic AI for call center, contact center applications. So the list is endless from the amount of opportunities that these guys can continue to develop. We're really trying to focus on what's going to be the most impactful for us and for our customers out there. Again, when you talk about the SMB market, these customers are chomping at the bit for applications that will help improve their efficiency and productivity. And that's what a lot of these AI solutions bring to the table. If you think about just AI call summation and AI capabilities when it comes to call recording, call recording has been around for 25 years. But when you report a conversation and you've got 100 call recordings at the end of the day, it's playing whack-a-mole to try and find what you're looking for. Now with AI summation, we can actually go in there and tell the system, hey, only send me the recording for somebody mentioned this word or use profanity or got upset at my customer service representative. And now you skinny that down to getting exactly what you're looking for. So those AI applications are only going to continue to improve and get better, and that's going to bring more sales to us.

George, I think Jon can add a little color to that.

Yes. So Doug gave you a great outline there. Just a couple of other things besides the conversational analytics and some of the areas just George, to let you see how deep this goes. If you're familiar with our industry, some of these applications actually help our licensees operate their platform more efficiently with even things down to applications that help with the 10DLC registration, which has kind of become the bane of existence of when you add a customer and move them to our services when they're going to use texting or SMS marketing in our industry. So I think the great thing is the partners that we're working with tend to understand our business well and they're finding their own use cases to help end customers and our licensees.

The next question comes from Eric Martinuzzi with Lake Street.

Jeff, you talked about the double-digit organic growth expectation for 2026. I was wondering, does that include the acquired the ESI business as well?

No. By organic, I meant excluding ESI. I am guiding toward double-digit organic growth of the business outside of ESI.

Okay. Then I guess it's more modeling question. The $2.1 million that was recorded in the quarter, so the month of March, just kind of -- is that a good run rate to run with there? Maybe it's a question for Ron.

I would say that's as good a run rate at this point as ever. We're all on the same boat. We have to see if it will sustain that high, it may be lower, it may be higher. But it's hard it's hard for us with 1 month of experience to give you a strong idea of what we expect on a monthly basis. Ron, do you have any further thoughts on that?

Eric, I'd point you to those pro formas that we just filed yesterday. So those have been filed with the SEC. So those are available for you to look at '25 and what that was. And then you can use that for loan growth trajectory into '26, and we can talk about it further when you get to your model.

Got you. Okay. And then kind of a housekeeping item here. There were some puts and takes with the acquisition with the equity issuance and then there was the debt, the term loan. Just curious kind of as of month end April 30, what's our cash debt and shares outstanding?

So we obviously just closed on the debt financing that funded yesterday. So we haven't drawn on that debt other than.

Nor do we have any short-term intention to draw on.

And the cash, obviously, the cash increased from operating activities in the first quarter. I don't have that the cash balance at the end of April, but we're not declining a decreasing cash balance.

I was assuming the term loan -- you had drawn the term loans. That's not the case.

No.

It's a term loan that we can draw on when we choose to.

We have a credit facility. So we have a $5 million term loan and a $5 million line of credit.

Congrats on the quarter and the continued double-digit outlook.

The next question comes from Scott Buck with Titan Partners.

Jeff, you mentioned in the prepared remarks that the ESI is delivering above expectations. I was wondering if you could give us a little bit more color on what you're seeing there. Are we talking top line? Are we talking profitability? Or are we just talking about the way the integration is going?

We're actually talking all of the above. The sales were higher than, to be honest, I expected, which is why answering the previous question was a little difficult because it's hard to model where the whole year will be. The profitability was great, especially if you take out the intangible costs, which they're not responsible for. And more importantly, the spirit of the team there, they have all rolled up their sleeves. They are coming to us and going, what can we help with? They are now -- we are combining purchasing. We've just substantial amount of phones for the combined organization is substantial savings. We are moving other things over to savings. We are going to be moving -- they have hosted data centers. We're going to be moving those to ESI. There's savings. We have a whole list -- excuse me to OCI. We have a whole list of things that we intend to be doing as the year goes on to reduce costs, improve efficiency, but the manner in which the ESI team has worked to join with us to ask what they could do to help us, not with us even having to ask is amazing. The sales teams are working closely together. Marketing teams are working closely together. Engineering teams are working closely together. I have a great relationship with their President. Doug is working with their SVP of Operations on a close basis. Ron is in contact every day and managing the accounting systems. It has just moved faster and more efficiently than I anticipated, and I am very pleasantly surprised.

Great. That's great to hear. And then my second one, I want to ask about CAIRO. Maybe you could remind us how you guys price the product. Is that flat fee on a monthly basis? Or is that based on usage?

Yes. So it's different with the retail and our licensees, but I'll just give you an outline. CAIRO, we have packages that have a bundled number of minutes. And then in excess of that bundle, customers pay for overage on it. With our licensee, it's slightly different, but it's more tied to an overall minute cost after a monthly minimum. So -- but it is to help customers understand it, there is a small, medium, large, and then we can expand the large pricing methodology that then we bill for additional minutes used in excess of the bundle.

Great. And I know it's early, but how often are you seeing folks move to -- move over their limits as they get more comfortable with the product?

Yes. The customer acceptance and partner acceptance has been excellent. So...

I knew he was talking about usage. How often we...

I'm sorry, I missed that word. Actually, we are seeing quite a few customers exceed the usage bundle in the minimums for their package. Apologies for misunderstanding the question.

[Operator Instructions] The next question comes from Matthew Maus with B. Riley Securities.

This is Matthew. Great quarter. I guess just following up on that CAIRO question. I'm pretty sure previously, you guys mentioned a range of ARPU uplift between like 25% to 40%. And then this call, you mentioned 25%. And you also just mentioned how customers are kind of using it more than expected. I guess like what would get you closer towards that 40% uplift end of the range?

Yes. I'm not sure we mentioned the percentage uptake. Again, we've only been selling the product for 2 months now, so we really don't have a percentage of sales where we're actually attaching CAIRO to that we reported. So I'm not sure where you got that 25% to 40%. But the 25% to 40% increase in price would be the average revenue contribution per account. So if you think about our average account paying us $350 per month, the $350 per month payment when they add CAIRO could go upwards of 25% to 40% increase in their monthly payment to us. So that $350 a month account that's just using Pure UCaaS, they decide to add CAIRO to their solution. Now all of a sudden, they're paying us $500 a month, and then they pay usage on top of that if they exceed their usage targets. That's a pretty nice significant increase on a revenue per account basis. So we see that as a great, great pull-through item for our existing revenue per account numbers. And then again, we'll have -- as we get another quarter or 2 into it, we'll have better metrics to report... [Audio Gap]