Jeff Korn: We’ve seen some seasonality in the fourth quarter, and frankly I’ll let Doug give a little more detail, but it depends on the year. We’ve seen certain years when buying decisions are deferred from Q4 to Q1 as people are trying to keep money in their year-end balance. But we’ve seen that a couple of years and we’ve seen that with years where it doesn’t happen. So, it’s not completely seasonable, but Doug may be able to give you a little more detail on sales.
Doug Gaylor: Yes, I like to always use the reference that every business has got a phone system and most of them need our services out there. And so, it’s not as seasonal as you would see in other industries. So, we’re fairly consistent. We do see a little bit of a bump in Q4 typically because we have our user group meeting, which adds to a little bit of a revenue pop. That is a one-time event that we have each year in the fourth quarter. But aside from that, our business is fairly consistent across the board.
Vivek Palani: Great. My next question is, what about the levels of cross sales you are seeing with Allegiant?
Doug Gaylor: Yes. So, Allegiant is a great component of our business today. And so, they have their UCaaS offering, which is very similar to what we have on the Telecom Services side of the house. But they also have managed services offerings and data services offerings that are unique to that division of our company. And we’re expanding that and cross-selling opportunities to our direct sales team as we speak. So, that initiative is just getting underway, and we anticipate that having a nice impact on our direct sales offerings across the board.
Vivek Palani: Yes, that’s it. Thank you. Have a nice day.
Jeff Korn: Thank you, sir. You have a great day too.
Operator: We now hear from Tony Felling with Lake Street Capital.
Tony Felling: Hey guys, congratulations on a great quarter.
Jeff Korn: Thank you, Tony.
Tony Felling: Good to hear from you. So, filling in for Eric Martinuzzi here, but was there anything kind of one-time in the quarter where – or is this kind of just the new run rate we should think about going forward? I know you guys aren’t giving guidance, but you’ve taken a nice steer step-up here.
Jeff Korn: I won’t promise you that this is the run rate. I certainly hope it will be, and we’re going to steer for that to be, but there were no onetime events here. This was just business as usual, and we just hit – we fired on all cylinders.
Doug Gaylor: Yes, I think it was good execution on all sides of the equation. So, as I mentioned in my comments, we saw strong increases organically from all divisions of the business. So, I think when you have a good product and customers need that solution, it’s a perfect fit for what we’re offering out there right now.
Tony Felling: That’s great. And I know you talked about obviously for the future accretive M&A targets. Is there anything near-term M&A that you can talk about or give us some insights on what you’re looking at?
Jeff Korn: As you may recall, when I took over, I put the brakes on looking at acquisitions because I thought it was imperative that we fix what we have, get all the synergies out of the business and stop the burn, which we were having at the beginning of the year. We’ve righted the ship and we’re now in a position where we’re going to start to look. So, we don’t have anything immediately on the horizon. But as Doug likes to talk about, we have the integrated fishing pond where we could first start looking, and we have other people who reach out to us from time to time. But nothing specific immediately on target, but we’re now ready to start looking again.
Tony Felling: Got you. That’s great. Well, congrats again. Appreciate you taking my call.
Jeff Korn: Thank you, sir.
Operator: Our next questioner is Chris Sakai with Singular Research.
Chris Sakai: Hi, good afternoon. Just a question. Let’s see. What was this 1.459 gain on sale of property and equipment in the quarter?
Ron Vincent: Yes, so last quarter, we announced that we had a contract to sell our building, and we sold it the day before the earnings call last quarter. We sold our corporate headquarters building for $4 million. It generated $1,459,000 gain on the sale.
Chris Sakai: Okay. And what – looks like service revenue gross margin lowered from about 70% to 58% year-over-year. What was the reason for that?
Jeff Korn: Yes, so when we made the acquisition of Allegiant in November of last year, so it wasn’t in our first nine months of the year. So, our traditional Telecom Services gross margins were typically between 68% and 71%, depending on which quarter you were looking at. If you were to carve out – we did the acquisition of Allegiant, so that’s skewing the numbers because they have lower margins given our service offerings bundled in with all their additional IT services. And so, if you look at independently, our gross margins for the quarter for the Crexendo Business Solutions, Telecom Services is 68% for the quarter. And last quarter was 69%. So, if you carve out that, but Allegiant came in at 42% for the quarter. So, that was a drag on our margins.
