iMergent Inc. F1Q10 (Qtr End 9/30/09) Earnings Call Transcript

| About: CREXENDO INC (CXDO)

iMergent Inc. (IIG) F1Q10 Earnings Call November 2, 2009 4:30 PM ET

Executives

Steve Mihaylo - Chief Executive Officer

Clint Sanderson - President of our StoresOnline & Crexendo Divisions

Dave Krietzberg - Chief Administrative Officer

Jon Erickson - Chief Financial Officer

Jeff Korn - General Council

Analysts

Neal Goldman - Goldman Capital Management

Jeff Bash - Private Investor

Robyn Lockner - Private Investor

Michael Shonstrum - Unidentified Company

Operator

Good afternoon, my name is Kim and I will be your conference operator today. At this time I’d like to welcome everyone to the iMergent Inc. fiscal 2010 earnings conference call. All lines have been placed on mute to prevent any background noise. After the speakers remarks there will be a question-and-answer session. (Operator instructions)

Thank you. Mr. Mihaylo, you may begin your conference.

Steve Mihaylo

Thank you, Kim. Good afternoon everyone and welcome to iMergent’s first fiscal quarter, 2010. With me today is Clint Sanderson, our Senior Vice-President who is also the President of StoresOnline and Crexendo Divisions.

We also have Dave Krietzberg, our Chief Administrative Officer on the line with us, Jon Ericsson, our Chief Financial Officer and Jeff Korn, our General Counsel is on the line with us. Before we get started I will be going over just a rough overview of the results from the quarter, but we probably get started with Jeff Korn to read forward-looking statement, could you give that please Jeff.

Jeff Korn

Thank you, Steve. 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 the safe harbor for such forward-looking statements. All statements made in this press release other than those 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 and are subject to risks and uncertainties that could cause actual results to differ materially from those discussed here today.

The risk factors are explained in detail in the company’s filings with the Securities and Exchange Commission including the Form 10-K for the fiscal year ended June 30, 2009 and the Form 10-Q for the period ending September 30, 2009. iMergent does not undertake any obligation to publicly update or revise any forward-looking statements, whether result of new information, future events or otherwise.

I’d now like to turn the call back to Steve for some comments.

Steve Mihaylo

Thank you, Jeff. Let me just started by going over the numbers just roughly here, I am not going to get into the granularity; I will let Jon Erickson do that.

We have total revenues for the quarter of $17,378,000, which compared with $27,266,000 the last year. I would also like to remind you that traditionally our first quarter is our slowest quarter. These numbers of course were impacted by the fact that its is also our smallest quarter, we were also impacted by the continuing recession in larger attendances in some of our events.

However we did have a profit of $718,000 compared with a loss of $7,499,000 in the year before. This translates a $.06 of share in earnings versus $0.66 in losses the previous year, approximately the same number of shares outstanding, just slightly more.

Our balance sheet remains very, very strong. We have $22 in cash and restricted cash, compared to just about the same amount in the June quarter of 2009. This is after paying all of the expenses associated with the audit that we just completed and announced in the previous quarter.

So we have a very strong balance sheet, no doubt and I think we are well positioned going forward here. I would also like to remind all of you that what we are presenting at AAA0039 Classic Financial Conference in San Diego tomorrow we are available or you can hear along the web and then in conurbation with the press release that you should have seen the last year too.

John, do you want to get into the granularity of what’s going on, and then we’ll open it up for questions.

Jon Erickson

Sure, thanks Steve. As Steve mentioned the September quarter is typically our slowest quarter of the year and one that been historically difficult for us to take profitability in. In fact this is our first profitable September quarter since September of 2006.

The main drivers behind the profitability in this quarter are primarily due to efficiencies gained in our selling and marketing expenses, which dramatically reduced our advertising expense as well as continued collections on our accounts receivable, which for us represents revenue in the quarter in which it’s collected.

In addition to the net income that Steve mentioned earlier, other income which is made up primarily of interests received and our EPTA contract collections, was $1.3 million for the quarter compared to $1.6 million of other income for the same quarter last year. Loss from operations was $213,000 for the quarter compared to a loss of $3.3 million for the same quarter last year.

Cost of products and other revenue decreased 33% to $5.6 million for the quarter, compared to $8.4 million for the same quarter last year. Selling and marketing expenses decreased 54% to $7.9 million for the quarter, compared to $17.1 million for the same quarter last year. This reduction is due primarily to improvements made in our data modeling that allowed us to reduce our cost per name as well as reductions in our cost per mail piece.

Total operating expenses decreased 42% to $17.6 million for the quarter, compared to $30.5 million for the same quarter last year. During the three months ended September 30, 2009, the company held 154 workshops, with four workshops held internationally, compared to 208 workshops including eight held internationally in the same quarter of last year.

Revenues for the first quarter of fiscal 2010 dropped to $17.4 million compared to $27.3 million last year. Revenues were negatively impacted by the lower number of workshops, as well as the percentage of customers making a purchase at the event. During the first quarter of 2010, 23% of buying units made a purchase at the workshops during the current quarter, compared to 32% the prior year quarter.

The decrease is percentage of buying units making a purchase is primarily due to an increase in the number of sales channel tax we performed during the current quarter, including our direct to workshop tests in our efforts to refine our stores online business unit. During the first quarter of fiscal 2010, the average number of buying units attending our workshop is 77, compared to 87 units in the prior year quarter. The average workshop purchase price decreased to 5170 during the current quarter, compared to 5350 in the prior year quarter.

As far as a review of our cash flows and balance sheets though, cash provided by operating activities during the first quarter of fiscal 2010, was $963,000 compared to cash used for operating activities of $513,000 during the same quarter last year. As of September 30, 2009 cash and cash equivalence were $20.3 million, working capital was $16.5 million and working capital excluding deferred revenue was $37.9 million. Total current and long term trade receivables were $27.9 million at September 30, 2009.

Steve, I’ll now turn it back over to you for question-and-answers.

Steve Mihaylo

Thank you Jon. At this time Kim we would like to open it up for questions.

Question-and-Answer Session

Operator

(Operator Instructions) Your first question comes from Neal Goldman - Goldman Capital Management.

Neal Goldman - Goldman Capital Management

Where do you stand on Crexendo right now? What kind of traction have we gotten yet in terms of VARs or actual sales on the product line?

Steve Mihaylo

Well, we’ve actually got a small backlog currently. We have had to retool the way you go to market on this. One of the ideas I’ll let both Clint Sanderson Crexendo and Dave Krietzberg, Dave might talk about the number of hours and some of the things that we are getting ready in that area. Clint is going to talk about the sales. I am very excited to announce that we just hired Doug who is in charge of all of direct sales and have had several 100 sales people working for himself, this is a great addition to our team. Clint would you like to go first and then Dave you after that.

Clint Sanderson

Sure, I’ll go first. On the Crexendo side, we’ve made a lot of progress on the Crexendo side, specifically two areas; one is obviously through our marketing channels and doing lead generation for Crexendo leads and then moving them through a sales pipeline to closure, so with our VARs, Value Added Resellers, we’ve been able to hold events, this quarter live events, with our VARs and we are seeing positive results there.

In addition to our own lead generation activities via marketing and that has resulted in albeit small backlog of sales as Steve mentioned, but we are seeing traction and it’s just a matter of not only getting the marketing channels and lead generation in place, which we are making very good progress on, but also making sure we have the fulfillment engine in place to make sure that we exceed expectations for everyone of these Crexendo clients that we generate, and I know David can talk to that.

Dave Krietzberg

Hello Neal. We are making good progress. We are in the early stages of earning business with the VARs as we are engaging their websites and optimizing that. We are driving their sales group as far as training goes, so they could fulfill our pipeline. So that’s the focus now, educating and training their sales team to drive our activity and that’s pretty much it and Clint covered the rest.

Neal Goldman - Goldman Capital Management

When do you expect to have any meaningful sales from this segment?

Steve Mihaylo

I don’t know what you consider meaningful, but anything over probably a 100,000 in the first quarter that we are still recording, sales would be meaningful and I think there’s a pretty good chance that probably to achieve this quarter.

Neal Goldman - Goldman Capital Management

How many VARs do we have today?

Steve Mihaylo

We have approximately 20 VARs, is that right David?

Dave Krietzberg

Yes, a little more than that Steve.

Steve Mihaylo

Okay. But you have to realize that there’s a lot of hand holding that has been going on, a lot of tweaking of the government market strategy here, and I think we’ve got as Clint mentioned though the next piece that we are going to be wrestling with is the fulfillment side of it, and maybe Dave mentioned that, but I think we are dialing in the best quarter market strategy with you here and we are starting to provide leads to our sales force. So, it’s coming together, it has been a little slower than we might think once we get the firmly together its going to get very profitable piece of our business.

Neal Goldman - Goldman Capital Management

Okay. Do you think you have reached bottom on the regular business?

Steve Mihaylo

I do personally, Neal. I think we’ve absolutely reached bottom, we are seeing some positive signs, but it’s too early to say, we are uncertain, of like the way they talk about this current recession, it’s all the times that we are looking good, but there is still smother call and then to the recession.

We are serve, that the same bulk here except I’m a lot more optimistic than I was last quarter when we spoke technology, but we have still got challenges, maybe Clint you might talk a little about our experts on line divisions and what you are seeing there.

Clint Sanderson

On the StoresOnline side, obviously as Jon mentioned we continued to execute on the cost savings and that has been a big plus for us, but more importantly we are testing approaches in our marketing and our sales model that are dramatic changes from really anything we have ever done before.

We have mentioned in prior calls the direct workshop model and Jon mentioned that, and we have tested that and actually found that based on results there we are going to scale back on those tests, but although we are scaling back on the direct workshops, we continue to test changes that improve the model.

For example we are doing in addition to direct mail in our marketing and lead generation efforts for StoresOnline, we are utilizing online lead generation strategies that we are seeing positive results for now, and continue to make improvements and changes that not only drive results, but also reduce customer complaints and better meet the needs of the customers we are seeing.

Steve Mihaylo

I think that’s a real key, we have currently done our customer complaints tremendously, and part of this has been actually designed to wheel up to cause flexible earnings, is viable than some of the early ones.

Jon Erickson

Neal, this is Jon Erickson. I guess from a revenue standpoint from hitting bottom, I think it’s important to remember that piece of our revenue is derived from cash collected on receivables. So as the receivables balance goes down, so will our cash collected in the quarter, which represents revenue for us. In the quarter that just ended September 30, 2009, approximately $5.5 million of our $17.3 million in revenue was related to cash collected on receivables.

Neal Goldman - Goldman Capital Management

Right, okay, and in terms of the legal issues, are there any remaining issues at this point?

Jon Erickson

Well, Neal as you are aware of, we still have the outstanding issue in Australia. We are hopeful that we can negotiate a settlement with the Australian government, but one of their claims is that we have engaged in misleading sales tactics and if that would be a condition of settlement, that’s something unacceptable to us, because we have not and never have engaged in any misleading tactics. Other than that there are no remaining issues.

Neal Goldman - Goldman Capital Management

We haven’t done any workshops there in a long time, right?

Jon Erickson

Well, we have done workshops Neal there. As we discussed in the last call, we have scaled back as a business decision on international workshops across the board other than Canada, while we were dialing in, the changes we were making in the United States market, but prior to that we have held events in Australia since, we have held events in Australia since the action filed by the ACCC and there is nothing to prohibit us from holding events while the litigation is ensuing.

Steve Mihaylo

In answering your questions, it’s probably been close to a year since we have had any events down there, is that right?

Jon Erickson

Yes, that’s correct.

Operator

Your next question comes from Jeff Bash – Private Investor

Jeff Bash - Private Investor

You had talked about how you might have seen the bottom in terms of company performance in the core business. How hard is that to examine versus the alternate possible conclusion that any rebound your seeing is maybe just a recovery you’re seeing from the normally slow summer season?

Steve Mihaylo

Well, I think Clint talked about some of the things that we have being doing. First of all, before the end of the quarter we started to see better closing rates. It seems better customers, in other words more cash buyers. There’s a lot of things that are indicated in that, we are giving more traction here.

Why don’t you give us a little bit of granularity on that if you could Clint, and then Jon why don’t you jump in and also comment if you would. But if sometimes you just have to get in the field, the cost of the business, and as I look at everything out there, it’s working much firmer to me, and it’s looking like it’s starting to take off. Clint, do you want to comment?

Clint Sanderson

Sure, as Jon mentioned, this past quarter our sales rates as you look at them compared over last years quarter were actually lower. A lot of that again would go back to what we’ve done in the past quarter, a significant amount of testing as we change our model to not only improve results, but also to improve customer complaints in reducing those.

In our StoresOnline sales, we have not seen any substantial improvements as far as the economy is concerned and what we are seeing with our attendees, their ability to purchase with cash. Instead what we are seeing is as we continue with our efforts in marketing to improve the quality, and as I mentioned before, as we differ the ways in addition to direct mail that we are bringing attention to our events, we are seeing improvements there, but we have yet to see benefits of the economy helping out our sales and our sales efforts in the StoresOnline division.

Jon Erickson

I guess Jeff, one of the things that we are seeing so far in Q2 is there has been a slight increase in the percentage of customers, say in cash, in the month of October, whether or not that’s market driven or a trend we don’t know at this point of time. It’s too early to tell.

Jeff Bash - Private Investor

What was the percentage of cash buyers in the current quarter, the quarter just ended?

Jon Erickson

The quarter ended September 30 was 42%, which was higher than a year ago. A year ago September was 40%. So we had an increase in the cash percentage in September 2009 quarter, compared to the September 2008 quarter.

Jeff Bash - Private Investor

Okay Steve, approximately how much in expenses from percent were absorbed by the core business?

Steve Mihaylo

Jon is going to now answer that, but I think it was approximately the same the previous quarter, it was a couple of $100,000, is that right Jon?

Jon Erickson

Yes, first up with the Crexendo business solutions division, which mainly was web services for the quarter was $292,000. For the Crexendo telecom services, 300 plus a 115,000 related to telecom. So in total it was 405,000; a good couple of cents per share after taxes.

Jeff Bash - Private Investor

My last question has to do with the receivables. I know that the short-term receivables allowance for doubtful accounts was like 32% in the June quarter and is now 24% to 25% this quarter. Is this just a natural result of the way the formula works, which I’m familiar with from having lower sales in the summer quarter, which gives you lower amounts of new receivables which have very high percentages against them, or has there been a change in the quality of the customers?

Jon Erickson

That’s an interesting question Jeff. Actually what we’ve seen in our receivables portfolio, the new contract that we are signing, are actually performing quite well. Where we had deterioration on receivables is our older contracts who have been performing and stopped performing.

As far as it allows the percentage, extra for the mechanics of physically writing them off, but the positive sign is with new contract signing, the first thing would be fold it down, they are performing well. It’s the older customers who about a year ago, who went to the default which required additional reserves on our part.

Operator

Your next question comes from Robyn Lockner - Private Investor.

Robyn Lockner - Private Investor

You recently announced a change of your auditing firm now going with Deloitte & Touche, a larger and more prestigious firm. What do you believe the advantages are of that move?

Steve Mihaylo

Well, obviously one of the reasons why we won’t work with the firm is that we have a new statement, and we have had some of the issues that made it necessary for us to go with the smaller firm. We were actually quartered by several of the big core-auditing firms in selected [Inaudible] of a very extensive study. I am sure the other step is only the [Inaudible]. We are disappointed by the fact that they didn’t receive the engagement.

I think it tells loud and clear, that the company has gotten lot of the previous issues behind it and for that, I think everyone of our shareholders should be very happy with the fact that we now have our nationally recognize firm Deloitte & Touche doing our audit. Do you want to add anything more to that Jon?

Jon Erickson

Yes, I do. Actually, one of the things that we had into consideration is, with all of these new items that we’ve going on in our business with Crexendo and really kind of changing our business models towards online, there’s a lot of complexities there involved, and so we felt that going with a larger firm, with a national office and additional resources would assist us in making sure that everything we did was correct from an accounting perspective and we are considering all necessary items before we get anything.

So Deloitte has come in and they have done an excellent job of assisting us in analyzing the way we do business, the way we present things and it has been a big benefit to us so far.

Operator

(Operator Instructions) Your next question comes from Michael Shonstrum – Unidentified Company.

Michael Shonstrum - Unidentified Company

Could you give a little more detail on what we can expect in terms of the number of workshops going forward? I mean typically, historically you get a response rate from the direct mail and other direct marketing efforts you make. That response rate climbed in the 2006-2007 period and generated some pretty good growth, subsequently fell off and is that response rate coming back? Is that part of what you are seeing improving, and based upon that, do you see an opportunity to begin doing more workshops?

Steve Mihaylo

Well, let me first say that some of the reduction in workshops was the result of a very difficult economy. We’ve got the flexibility now and when we can actually switch in and out of the number of things that we’ve got. In the last month of two we’ve actually taken a couple of previous things, and we have converted them into workshop things or one workshop thing. So we’ve been going with five workshop things in two months I’d say.

Right now it looks like we are going to get an [Inaudible] that’s up from four, so that’s a 25% increase, but we are hearing some other things to generate needs and to generate interest. So we are actually practicing what we could, as far as optimization of our own site, being able of perform things, we are building things like webinars, all of these things and other methods of generating needs, and this is also during our cost hearing.

We have experience running those direct to workshop, or finding that the real call [Inaudible] but also seeing that that folks that aren’t a serious buyer, or a well qualified buyer [Inaudible] results once we got it. So we have done a lot of things like improving the amount of workshops. I am not sure if I answered your question, but maybe Jon might want to expand on that.

Jon Erickson

Well, I would just summarize what you said Steve. With our workshop teams, especially with the economy the way that it is now, response rates, what we’ve seen over the past year, is response rates are even more sensitive to the market that we are going to, and so what this does, we do have a fifth workshop team that we can utilize as we go to markets with, that have better response and better demand, versus other markets that have a lower response. So this fifth team has just given us more flexibility to capitalize on the better markets that we go to.

Michael Shonstrum - Unidentified Company

Well, yes basically I am trying to get to come up with a number of workshops for the next quarter, but...

Steve Mihaylo

It’s not the same model that we had before. This is something that bought banks their earnings, even though we have summary workshops and so on and so forth. So we’ve been doing, we’ve been generating a lot of our CapEx in places for campaigns and much more than our costs are, and we’ve had larger or we expect to have larger events, in other words, more people events. So it may not be meaningful to say we are doing X number of workshops to think that, you know 30% more attendees is what I’m trying to tell you.

Michael Shonstrum - Unidentified Company

Right, and going forward, historically you’ve had some high profile workshop leaders who are independent contractors, and as you’ve disabled teams over the last year or so, what is the potential of attracting that type of person and do you need that type of person to?

Steve Mihaylo

Well, for the time being we are not going to do anything that destabilizes our storage online. We have to be very sensible to results itself, because it’s highly dependant on the people. However having said that, I think we are going to give a position going forward, to start generating revenue from the Crexendo division; in other words, it’s going to be more concepts driven than sales.

I think it’ll also be sure if we start shipping more software [Inaudible] other directions that you we caught up in the past. We had the goods of yield platform that’s beautiful, we had to deal with the, and we had a lot of other issues in here and otherwise that it had to get behind the store, and we are doing a lot of other things simultaneous.

I personally feel that we’ve gotten a lot of that behind us and we are ready to start cleaning the after burns, I’m hearing and checking those thing. now, it’s still going to be dependant on the economy, I am not going to tell you that everything is clumsy because we don’t know, as John Erickson and we want know probably for at least for one more quarter, but we are getting very, very close and know. To me it feels like it’s improving, but we are still don’t have any empirical data to prove that yet.

Michael Shonstrum - Unidentified Company

One final question. On the VAR channel could you tell me if there are any competitors out there going through that channel the way you are or any UIP business falling vendors going that way, I mean what does the competition look like?

Steve Mihaylo

Yes, the competition here is, this is a really great moment in the industry. The one thing that has interested in our concern, Michael is [inaudible] hundreds of billions of dollars it’s not trilling to buy, it’s a huge industry worldwide, but there are literally thousands and thousands and thousands of people that are really questioning us of what we did. I don’t think they are doing it to the extend encompassing the way you do it, they did piece of that. VAR is the only thing that can be firmly type groups, they can be an actual VAR that goes out and set off the stuff and build large sites and settlements and so forth. So I’m not kind of the dodge the question here.

But its just kind of interestingly because it summers up out with individual developers that would build websites because once we had a website full a lot of companies realized that there is nothing more they adopted, but I am sure unless on the form, so then search engine optimization came along.

Well, and that’s great if you can get enough to the first maybe the search engine, but if they are not generating any business, now lets we assume we are not doing anything. So the conversion rate optimization came along where you convert international sale and then we had the advertising and other things we are moving along the webinar, some traditional forms of advertising like billboards and mails and forwards and the regulars and all the other things and I guess things we saw, duplicators.

So, attentive marketing came along. Then we have all of the attended reviews and we have all of the things, social networking groups that pays stuff and are quite happy and then [inaudible]. So and this is a stuff that all happened in the last 18 or 25 months, but we are getting a hand of all this we are finding a fellow by the name of [Parker Borrows] who is an absolute expert in this area and is well recognized in the industry. So we are getting the plans in place and we just hired Dough, as I said earlier to give more direct sales trough the VAR’s and the more complex events.

We are building a team and we are refueling as we go with it, so we have a very, very solid platform and some very talented developers and this is apart from that can be robust and that’s to handle anything that comes our way. So I see a lot of quarters, we are making a lot of progress, I don’t know if anybody else...

Clint Sanderson

Sure, this is Clint. Just within the war channel, Mike, we have not run into any competitors yet, as far as the dealing with the VARs that are currently in our channel and that we are working within our pipeline right now. They are not being quoted or even considering another SEO or e-commerce web builder option like we offer.

Michael Shonstrum - Unidentified Company

Is that making it difficult to sell through them? I mean, do they understand what the proposition is to their customers and where they can add value and you can add value. I mean, is that a hard thing to structure for them?

David

It’s not difficult; it’s just part of the challenge in building our sales pipeline. It’s educating and training sales reps, to VAR sales reps and the value proposition to the customers. Its being very well received, it’s just that the education process, they are very excited about having a new service that they can offer their customer basis instead of phone systems. So we are very encouraged by this sales activity that we expect to get, but it’s just started right now.

Steve Mihaylo

In that sales channel, it’s been used to call upon products and hardware and I understand the things that are out, like Smart Phone software and servicing phones and services, just inquired the training space, but I don’t see it being any different than what we sold in the telecom world. It’s actually easier to sale, because it’s a very simple concept.

We have a website, on the Crexendo site. They are generating cycles and the needs for it, and at the right time, you need all the services and most of the time, we are not generally sales to lease off of our website, it’s more informational than we think, and that’s where the huge off percentages are, and we are starting to get traction, we are starting to get people with the light bulb that is turning on in their head and we are saying “My guess is, there’s a huge opportunity,” but when switched on, we have this wave cuts and we are going to start earning direct sales in the field, working with the VARs.

So when we start building more traction, exposing more, our next problem would be the fulfillment side, but we are working on that, with regard to people that’s fulfilling the enrollment side. So it’s not regarding webinar involvement, because this is going to be sale up, to give you more of it.

Michael Shonstrum - Unidentified Company

Great, now as you scale up, are you going to be pushing your cost numbers up in relationship to sales near term or will they remain sort of where we’ve seen them, sort of have a team base?

Steve Mihaylo

Well, obviously we’re going to start getting a sale level that supports the expense level. We are going to see a little bit of that, but Jeff Bash asked the question, and the expressed concern is somewhat leveled. They are running about 300 a quarter, but we haven’t had sales push it up, but we want more sales people and so we start to get the traction. We are going to scale along with the sales team. So and that gives me a question, you are going to see a little bit of an increase. I don’t expect too much, like spending but once we start to see the sales come in, we’ll start seeing the effect.

Operator

Your next question comes from Neal Goldman - Goldman Capital Management.

Neal Goldman - Goldman Capital Management

Just a follow-up; besides the individual, I guess Doug Gaylord who came from Isabelle, he mentioned that you hired one who understands the market, who was that and where did he come from?

Steve Mihaylo

Well, Parker and why don’t you give Neal some background.

Dave Krietzberg

Okay, yes Neal, Parker actually was our guru in working with our stores online customers. He was not an employee, but was the gentleman that was the brainchild behind the merchant services and all the strategies and training that we offer to our stores online customers, and we were able to recruit him and bring him on full time as the Vice president of our SEO services.

His background: he is a serial entrepreneur, he has his own website, we were able to purchase his existing clients. He had been servicing several clients in Utah. We were able to purchase those clients and bring him on full time, so he is the brains behind our fulfillment on all of our SEO services and Internet promotional services that we offer to the SMB space.

Operator

Your next question comes from Jeff Bash – Private Investor

Jeff Bash - Private Investor

Two things; first I want to add something on Parker. I heard him lead a workshop and a seminar, and he was just absolutely terrific in terms of his knowledge. The question I have is, you said that in the first half of 2010 you are going to be having the telecom services aspect of Crexendo. What I am interested in is your long-term view of the significance of telecom, relative to the website development in terms of the Crexendo business. Which do you think is more…

Steve Mihaylo

Well, the telecom has done some real service that basically is to acquire. A significant development in all the other facilities is the training that we have been offered now, but it also remains that there’s something to engage our customers, because what we’ve already got the data center and data quotes, anything that you can hold in a data center. So the kinds of services we can offer our customers are actually a [Inaudible] significance of providing alternate services. So that’s really what I see. It’s not nearly the sales market that we have or our early services that would slip more and more related to the services. It’s not something that we are continuing across others like software or other insurances.

Operator

There are no further questions at this time. Mr. Mihaylo, I turn the call back over to you.

Steve Mihaylo

Okay. Thank you very much Kim, and thank you for all of you that are on the conference today. We have been working very, very hard to get our costs in like to resolve the reason that we have and to equating, start the process to get StoresOnline for leverage; I should say our knowledge in StoresOnline and the Crexendo version. We have got the footprint, we have got the nucleus now and we are certain to get some correction. I am very optimistic about where we are going to be as a company.

I am very proud of our people, I am proud of the fact that we have been able to use it simultaneously and get all this new initiatives going up at the same time. I the really appreciate all of you shareholders and look forward to giving you a feeling of our performance in the next quarter, which will be December 31, the same time. I should say [Inaudible] at the end of the quarter, and I am not sure if we’ve announced the findings here, but probably Jon is filing our accounting.

Jon Erickson

Excuse me Steve, to make it clear, one of the things we have been discussing as a management team is moving the year-end to a calendar year. It’s not been presented to the board yet and nothing we voted on.

Steve Mihaylo

Okay. Well, if and when this occurs, it could delay the results of the second quarter call a little bit, by a week or two or so. One of the important things was to go over the results of the second quarter. I appreciate all your support and I want to wish you a good day.

Operator

This concludes today’s conference call. You may now disconnect.

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