管理層發言
Greetings, and welcome to the Crexendo Second Quarter 2026 Earnings Conference Call. The conference is being recorded. I will now turn the conference over to your host, Mr. Jeff Korn, Chairman and Chief Executive Officer with Crexendo. Sir, the floor is yours.
Thank you, Ali, and good afternoon, everyone. It's my pleasure to welcome you to the Crexendo Q2 2026 Conference Call. I'm Jeff Korn, Chairman of the Board and CEO. Here with me today are Doug Gaylor, our President and COO; Ron Vincent, our CFO; and Jon Brinton, our CRO. In a moment, Jon will read the safe harbor statement. After that, I will provide some brief comments on our performance and strategy. Ron will then provide a more detailed discussion of our financial results, and Doug will provide a business, sales and product update. After that, we will open the call for questions. Jon, would you please read the safe harbor statement?
Thank you, Jeff. I want to take this opportunity to remind listeners that this call will contain forward-looking statements with 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 and 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 the fiscal year ended December 31, 2025, and the Forms 10-Qs 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?
Thank you, Jon. We delivered an exceptionally strong quarter. Revenue increased 49% year-over-year to $24.6 million. We generated GAAP net income of $1.1 million or $0.03 per diluted share, non-GAAP net income of $4.1 million and adjusted EBITDA of $4.1 million, an increase of 46% from the prior year quarter. We also continued to improve our margins and generated $4.8 million of cash from operating activities during the first six months of the year, an increase of 89% compared with the same period last year. These high-level results demonstrate the growth, increasing scale and operating leverage of the business. They are particularly encouraging because we remain GAAP profitable while absorbing the acquisition-related costs and amortization associated with ESI. Ron will provide a deeper discussion of the financial results, including our revenue mix, margin performance and cash flow in a few minutes. One of the most encouraging developments this year is the substantial increase in new platform customers. We secured 11 new platform logos through the first two quarters of 2026 compared with only two at the same point last year. That level of activity reinforces my conviction that the Crexendo NetSapiens platform is increasingly the platform of choice for communication providers seeking a modern, improved and scalable solution. The increase in logos strengthens the long-term opportunity of the business. Our "Sessions not Seats" model gives providers a compelling economic advantage, especially in an uncertain economic environment. And our platform gives them the functionality, scalability and flexibility they need to compete. We expect these wins to develop into a meaningful and durable stream of revenue. Doug will give more details on the specifics relating to the new logos. I could not be more pleased with the ESI acquisition. The integration is progressing exceptionally well. The ESI employees are engaged and sales have exceeded our initial expectations. We have already integrated or begun integrating accounting, legal and marketing functions and the engineering teams are working closely together. ESI has significantly increased our revenue, strengthened our customer base and adds an experienced team that shares our commitment to innovation and outstanding customer service. It has also meaningfully expanded our telecom operations, adding to the strong growth in service and product revenue this quarter. The performance of ESI demonstrates why we are careful and deliberate in assessing acquisition opportunities. We look for companies that are strategically complementary, operationally actionable and capable of continuing to contribute to both growth and profitability. ESI is delivering exactly the benefits we expected and further validates our disciplined approach. We are also continuing to invest in the platform. We currently expect to release our next major software version, Volume 46, in Q2 2027. It will include a fully redesigned user interface that creates a substantially stronger first impression together with improvements throughout the product that should enhance both the sales process and the day-to-day user experience. We look forward to showcasing these platform updates, ecosystem and product roadmap at our upcoming October user group meeting, which is on track to be the largest in our history. Our strong cash generation gives us additional strategic flexibility. We ended the quarter with $18.3 million in cash and cash equivalents after using $26.2 million for the ESI acquisition. The substantial increase in operating cash flow, together with our balance sheet strength, should allow us to continue evaluating strategic, accretive opportunities while having the flexibility and ability to not substantially dilute shareholders. We will remain disciplined and we'll move forward only when the financial, operational and strategic merits of an opportunity support the transaction. Finally, we remain excited about our AI offerings. They are not yet a meaningful contributor to revenue, but they continue to receive strong praise and market acceptance. We expect AI adoption to expand, and I continue to believe that AI-related revenue can become meaningful in 2027. Doug will discuss our AI initiatives in greater detail during his update. In summary, this was a very strong quarter. We delivered substantial revenue growth, continued GAAP profitability, improving margins and significantly stronger operating cash flow. We are successfully integrating a highly beneficial acquisition, winning new platform customers at a dramatically higher rate, advancing an important software release and maintaining financial flexibility to pursue additional accretive growth. We have built a stronger and more valuable company and the opportunities in front of us continue to expand. I am extremely enthusiastic about Crexendo's direction and confident in our ability to deliver profitable growth and meaningful long-term shareholder value. With that, I'll turn the call over to Ron to walk through the financials in more detail. Ron?
Thank you, Jeff. We reported $24.6 million in total revenue, beating top-line analyst expectations. That's a 49% increase over the second quarter of the prior year. Consolidated organic revenue came in a little light this quarter at 7% over the prior year. However, year-to-date organic revenue growth of 11% is in line with our guidance of delivering double-digit organic growth for the year. Service revenue increased 78% to $14.9 million, and our gross margin was 67% for the quarter. Software Solutions revenue increased 5% to $7.3 million, and our gross margin was 70% for the quarter. During the quarter, we booked six new logos and seven upgrade orders from existing customers. There are a couple of items to note here. Perpetual license revenue is down $700,000 compared to the prior year quarter, which is primarily the reason for the decrease in organic growth percentage year-over-year as Q2 of 2025 was a record sales quarter; the average order size was three times our average order size we typically book each quarter. Additionally, the acquisition of ESI eliminated approximately $180,000 of revenue recognized in the prior year quarter. For comparison purposes, if we had added back that $180,000 of ESI revenue to the current quarter, our growth rate would be more like 8% compared to the prior quarter. We are confident that these new customers will need larger upgrade orders in the future as they grow their customer base and migrate their existing customers over to our platform. Product revenue increased 104% to $2.5 million, and our gross margin was 44% for the quarter. During the quarter, our service revenue gross margins improved by 400 basis points. Our product revenue gross margins improved by 1,300 basis points, and our software solutions revenue gross margins improved by 200 basis points compared to the first quarter of this year. Our consolidated revenue gross margin was 66% for the quarter. That's a 500 basis point increase compared to the first quarter this year. Operating expenses increased approximately $8.1 million or 53% compared to the prior year. The ESI acquisition contributed $6.9 million of the increase in operating expenses. Operating margins improved to 4% for the quarter. That's a 200 basis point increase from the first quarter this year. We reported net income of $1.1 million. That's $0.03 per basic and diluted common share, in line with analyst expectations. On a non-GAAP basis, we reported non-GAAP net income of $4.1 million for the quarter. That's $0.12 per basic and diluted common share, 200 basis points higher than analyst expectations. We reported EBITDA for the quarter of $3 million and adjusted EBITDA of $4.1 million. Our adjusted EBITDA margin was 17% for the quarter, an increase of 200 basis points compared to the first quarter this year. Our cash and cash equivalents at the end of the quarter was $18.3 million compared to $31.4 million at the end of the prior year. Operating activities for the six-month period provided $4.8 million in free cash flow. For the quarter, we had $2.8 million in free cash flow. That's a 35% increase over the first quarter of this year. Investing activities for the six-month period utilized $26.2 million in cash related to the cash portion of the ESI acquisition purchase price. Financing activities for the six-month period provided $8.4 million in cash, primarily related to $4.9 million in proceeds from the term loan we entered into with Wells Fargo and $3.6 million in net proceeds from stock option exercises. With that, I'll turn it over to Doug Gaylor, our President and COO, for additional comments on sales, operations and products.
Thanks, Ron. It was a great quarter for Crexendo, and we had a lot of significant accomplishments. As Jeff stated, we added six new logos on the NetSapiens platform during the quarter. Combine that with the five new logos we had in Q1, we have added 11 new logos for the first six months of this year compared to two new logos for the first six months of 2025. Of the six new logos in Q2, two of them migrated from Metaswitch and one of them migrated from Cisco's BroadSoft. Of the 11 new logos so far this year, four have been Metaswitch migrations. In addition, we also had seven add-on orders during the quarter from our existing licensees, and we're extremely excited about the new logo momentum in our pipeline. The pipeline is very solid, and we continue to see strong demand for our award-winning software platform. As Ron mentioned, we saw a $700,000 decrease in perpetual license purchases in the quarter. I believe the current economic and financial climate is driving new licensees to launch with a smaller initial investment of sessions and subscription, which tends to be more attractive because it has a lower upfront cost. The six new logos for the quarter were smaller than the average deal booked in the prior year quarter as we have seen a trend with our new licensees to start with a smaller initial commitment and grow that commitment over time. It's worthwhile to note that although the average order size was smaller this quarter than the average deal booked in the prior year quarter, our average upgrade order value is increasing and averages 50% higher than our initial orders. As our base of over 250 licensees continues to grow and expand, we have seen and expect to continue to see continual strong add-on orders. We also had strong sales bookings on the Telecom Services segment of the business. During the quarter, we sold 15 six-figure opportunities that helped contribute to a very successful quarter. Most notably, we saw a huge increase in sales from our technology service distributors, or TSDs. We saw sales increase by 39% for the quarter. Year-to-date, we have seen sales increase by 42% over the same period in 2025. We continue to see great momentum in this area of the business and are excited about the number and size of opportunities that we're seeing brought in by the TSDs. As Jeff mentioned, our ESI acquisition is paying off very nicely for us. We saw very strong sales during the quarter, which helped propel us from $2.1 million in revenue that ESI contributed in March of Q1 to an average of $2.3 million per month for a total of $6.9 million in revenue for Q2. We have great momentum with ESI resellers and are excited about the results that we have seen in very short order. We continue to work on synergies and cost savings from the ESI acquisition and are confident these synergies will continue improving our bottom line. Our strong sales bookings in both segments of the business helped increase our remaining performance obligation to $139 million, a 97% increase over Q2 of 2025. 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. We are very pleased with our gross margin improvements for the quarter on both sides of the business. On the Software Solutions side of the house, gross margins improved to 70% for the quarter largely attributable to cost savings recognized from decommissioning our legacy data centers at the end of Q1 as we completed our migration to Oracle Cloud Infrastructure, or OCI. Our Telecom Services segment saw gross margins improve significantly to 67% on the strength of higher-margin sales from our ESI acquisition. In addition, ESI's product contributions also helped improve our overall product gross margins, which improved to 44%, up significantly from the prior quarter. As we successfully scale both segments of the business, we expect these gross margin improvements to continue. At the end of January, we launched CAIRO, Crexendo's AI receptionist and orchestrator, and are seeing great early success on the offering. CAIRO allows businesses to use our artificial intelligence receptionist to answer all calls, handle them accordingly by answering frequently asked questions, process calls to the right individuals or departments and even set appointments. We are extremely excited about the new offering and have seen strong customer interest and success in our initial rollout period. The average revenue increase per account during the quarter was approximately $120 per account per month, and that represents an increase of approximately 35% over the average revenue per account of $340 that we see on our average Telecom Services customer. During the quarter, we began rolling out CAIRO to our licensees and are pleased with the initial traction we are seeing from our licensees to also resell CAIRO. Also during the quarter, we started marketing initiatives to roll CAIRO out to our existing base of retail customers. And although still very early in our rollout of the product, we are extremely excited about the successful launch of the solution and are confident we will continue to see strong growth in sales and adoption of the offering. Our ecosystem vendor program, which we refer to as our EVP program, continues to grow and is now up to 57 vendors providing services and solutions to our licensees and customers on a revenue share basis. Of the 57 vendors, 13 of them are providing AI-related applications and solutions. Similar to CAIRO, we are in the very early stages of revenue generation from our EVP program, but we did see $400,000 in revenue contribution from the program during the quarter and are very pleased with the growth trajectory and the opportunities we are seeing. Crexendo has had a great first half of 2026, and we continue to meet and exceed our targeted goals. We are right on track to reach our goal of a $100 million revenue run rate by the end of 2026. I'm thrilled about the future direction and opportunity for Crexendo. Our strong organic and inorganic growth, combined with our 12 consecutive quarters of GAAP profitability, our strong positive cash flow and our growing remaining performance obligation have laid a great foundation for our future success. 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 CAIRO will continue to drive even more demand and higher revenues. As the fastest-growing platform solution in the country, supporting nearly 8 million end users, we are laser-focused on growing our business, enhancing our solutions and improving our efficiencies and continue to return very strong results. With that, I'll now turn it back over to Jeff for any further comments.
Thank you, Doug. Thank you, Ron. Ali, I don't have any further comments at this point. So why don't you open the call to questions.
分析師問答
The operator will now provide instructions for the question-and-answer session. Our first question today is coming from George Sutton with Craig-Hallum.
Nice to see the accelerating platform wins. So I'm wondering if you could just give us a picture of why is this happening now versus last year, for example? Is it kind of where an Alianza is in their process of kind of keeping everybody on hold? Or is there something broader we should be aware of? And I'm curious if you could walk through the timing of the impact of these new platforms. So as we look forward a quarter and a year from now, what kind of impact should we see?
Well, George, as I think you realize, our new logos started to accelerate in the second half of last year, and we started to gain additional wins. We think there are a variety of reasons for it, but we think the huge upgrade in logos in the first half of this year has more to do with the economy and the fact that we are offering better solutions than our competitors. The wins didn't just come from Metaswitch, they came from Cisco and other platforms. So it's across the board. I have discussed this before: our model of "Sessions not Seats" is a compelling model. It can save you 40% to 50% for what you're paying for platform usage. And our model is particularly compelling in difficult economic times or uncertain times as compared to what our platform competitors may be doing, as you can purchase a small license and work on a "cap and grow" strategy. And we believe that's what's been happening in the first half of the year. A number of people have purchased licenses to start the "cap and grow" strategy. And I'm particularly excited about that because that's going to mean continued upgrades, more logo wins and more upgrades as we proceed. So of all the things we talked about today, that's perhaps the most exciting thing I see, and I see that as a great propellant for our future.
And I would just add, George, that it doesn't hurt that our competition hasn't been doing a lot from a development perspective. There's still uncertainty and doubt with a lot of our competitors' licensees. And when they're looking for another alternative solution out there, we're the best option for them.
But I will make clear, George, that irrespective of what our competitors are doing, we are absolutely the best solution out there. We have the best technology. We have the most open APIs. We have the ability to either use facilities-based or cloud-based deployments. And we have an amazing EVP program where you can pick and you can literally make the platform your own. Our now more than 250 licensees each have the ability to develop their platform exactly the way they want, go into their metrics and their type of customer, and you wouldn't necessarily know that these aren't NetSapiens customers. So this is an amazing reason why we continue to do well irrespective of what our competitors do.
Super. Just one other question on CAIRO. I know you've been moving to trial with a number of folks. Can you give us a sense of how quickly the trials move to deals? And Jeff, you had mentioned 2027 would be the time frame when we start to see some impact. I wondered if you could just put any metrics around that.
I'll let Doug or Ron give you some metrics. But the reason I believe 2027 will start to show some meaningful revenue is that we are starting to see strong acceptance from our licensees on the EVP program. The new customers that we have been actively trying to sell CAIRO to seem to be excited about it. We've received initial enthusiasm from the marketing materials we sent out to the base, which we have not yet fully started reaching out to. I expect it will be a measured rollout, but I do expect to start to see some substantial revenue coming in in 2027. I'll let Doug or Ron give you some specific metrics.
Yes. Since we started from no customers on CAIRO when we launched the product in January, we saw great success. We started rolling it out initially with new customers combining it with our UCaaS offering. Then about midway through the second quarter, we started rolling it out to our licensees and saw a nice pickup with our licensees jumping on board to sell the product. Then we started rolling out marketing initiatives to our base of customers. So we're extremely excited about where we are with CAIRO. We haven't seen any bumps in the road yet, and we're excited about the future revenue growth opportunity. As I mentioned in my comments, the ones that we have sold have shown an average uplift of about $120 revenue per account per month. That's significant, about a 35% increase over what a typical customer is paying us. We have the capability to take that number even higher. As we continue to roll this out, one of the things about CAIRO is that it's a usage-based application. As customers feel more comfortable having all their calls answered with an AI receptionist, we're seeing overage charges starting to tick up. For a customer that chooses to have all of their calls handled and frequently asked questions answered, they could see overage charges upwards of a couple of thousand dollars. That's a significant savings for them versus having a live person answer calls, and it's a strong revenue benefit for us.
Our next question is coming from Joshua Reilly with Needham.
If you look at the 11 new platform wins here in the first half of 2026, just a couple of items on that. How much smaller would you say the initial deal sizes are versus the last couple of years? And how—if you look at the mix—how many are choosing to host on your infrastructure versus their own infrastructure and the implications for the upfront revenue from licenses versus a more ratable structure if they choose your architecture or your infrastructure?
I'll start with the average size deal. There's still a couple-hundred-thousand-dollar range for the initial orders. But in the prior year, we had some large transactions that spiked that number—some were three times that amount. So the typical initial order is around $250,000 and then the upgrade orders average $300,000 to $350,000. So upgrade orders represent a significant increase over the initial order. Jon, would you like to comment on the mix between perpetual versus subscription and hosted versus facilities-based?
Yes. We skewed a little bit more to facilities-based this quarter while we also have hosted opportunities. One thing that I think is really exciting is we had a couple of new licensees that started with us on a hosted platform so we could get it rolled out for them as quickly as possible, and then they may migrate to facilities-based later. We've also had a couple of our legacy licensees choose to move from a facilities-based to a hosted environment. The key is being able to meet each customer individually with the type of delivery platform they prefer. The mix will vary a little bit from quarter to quarter, but we're seeing a good direction across the base overall. And apologies for earlier when I misspoke on the name.
And Josh, I'll add one thing. Large deals have a much longer sales cycle. We've taken as long as four years to close very large orders. An initial smaller license is much easier to close and these customers almost always, if not always, do upgrades and continue to expand on the platform. So I am very excited about the large number of new logos we got and the size of them does not bother me in the least because to me, that's a future annuity.
Sure. And then just following up on that, if you look at the pipeline now for the second half of the year, should we be expecting a number of high-volume smaller deals or do you have some mega deals in the pipeline? Just give us a sense of what you may be cooking up for the second half of the year.
The overall pipeline is strong. We're continuing to win new logos. While this is forward-looking, we feel really good about it. We can't predict the ultimate size that some of these licensees go to, but we are talking to some pretty exciting opportunities that we believe will close in the next six months.
Got it. Last question for me is on the TSD bookings. You gave a metric there. What drove the strength in the TSD bookings? And is that sustainable?
I don't know, Josh. George would have remembered the number.
We saw TSD sales increase 39% for the quarter and 42% year-to-date. I think that's a combination of factors. We're investing attention in our partnerships with specific TSDs, and we continue to rank #1 on G2 for customer satisfaction, which helps. If a TSD has been selling one of our competitors and experienced poor customer service, they'll look for an alternative. When they find Crexendo and see that installations go smoothly and customers are satisfied, they tend to sell more. The growth we've seen in the TSDs is primarily associated with the fact that we're supporting them well, delivering for their customers, and that generates repeat business.
I'd just add we have a solid team focused on the channel. Over the past few years, what was once a relatively new business for us has matured; that team has built strong relationships and continues to grow our success with TSD partners.
Our next question is coming from Mike Latimore with Northland Capital Markets.
Congrats on the great results here. I guess you mentioned that the ESI sales were exceeding your expectations. Can you provide a little more context there? What kind of benefits has the acquisition shown? Sometimes acquisitions cause distractions, but it sounds like maybe that's not the case here. Can you provide a little more context on why they're exceeding your expectations?
Well, as Doug pointed out, in March they did $2.1 million, and they've averaged $2.3 million per month in Q2. We have been working with them on additional marketing and expanding offerings. They do a very strong job, and we've been very pleased with the results.
ESI has its own reseller channel, and our combined messaging has been strong to those resellers. The combination with Crexendo strengthens their story and reach. Often with M&A there can be a short pause in sales; we haven't seen that. The ESI sales team has performed very well, and from their end-user customers and resellers, the message has been well received.
Doug, Jon and their management team did a very good job of talking to their channel sellers and convincing them that we were not going to disrupt what they already had; instead, they're beginning to expand it. So it's been a very symbiotic relationship, and we've done quite well with it.
Great. And then on the new software logos, is the subscriber count of the organizations to whom you're selling average? Or are they smaller or bigger than average? Just to get a sense of the organizational size you're selling to.
They're fairly consistent, although we see an increase in the size of the bases that these potential licensees manage. Part of the smaller initial order sizing is conservatism in the current economic environment. There's also the operational work stream required when migrating a large base to a new platform. We aren't trying to go down market—we are going upmarket, and many of these prospective customers have larger bases than we've seen before.
We almost never tend to be the first platform somebody uses. Almost all of our customers tend to migrate from somebody else when they've grown to the point where they need additional bells, whistles, tools and support.
Makes sense. And lastly, EBITDA margin was outstanding. Should we think about that—can you maintain that EBITDA margin, or should we think about it expanding through year-end?
That 17% adjusted EBITDA margin is consistent with what we had all of last year. We had a dip in Q1 and committed to getting back to the 17% level; we achieved that in Q2. We should be able to maintain that level going forward.
Our next question is coming from Eric Martinuzzi with Lake Street Capital.
I was trying to get a feel for the run rate for product revenue. This was our first full quarter with ESI. Is that $2.5 million of product revenue a reasonable place to assume a roughly $10 million annual run rate for product?
Yes, that's a good run rate with the ESI component included. It's not too accelerated from our historical rates, and we think it's very maintainable.
Okay. And then I know you're not giving formal guidance, but the services line historically has trended higher sequentially as you add more telco services customers to the base. Any reason why that would take a step back, or should we assume the historic trend holds?
I would assume the historic trend holds.
Okay. And lastly, you finished the quarter at $18.3 million in cash. I understand the $4.9 million term loan, but still, the net cash step-up was substantial. That leads me to ask about your appetite for M&A. I know you only closed on ESI at the beginning of March, but what are you seeing in the M&A pipeline?
We have a solid pipeline. We have several opportunities we are evaluating. Whether they close this year or next year I can't predict. Diligence is required. The primary integration team for ESI is deeply involved here, so we can't do more than one integration at a time. ESI was an excellent acquisition and we've mostly integrated it. By the end of next quarter, it will be fully integrated other than moving their employees onto our payroll and benefits changes that can only be done at year-end. Depending on the size of a potential acquisition, I wouldn't be shocked if we did something in Q4, but it could extend into Q1 or Q2 of next year.
Our next question is coming from Scott Buck with Titan Partners.
I'm curious: Selling and marketing expense as a percentage of revenue moved substantially higher versus a year ago. Is that by design or just a secondary effect of the ESI integration?
ESI contributed a portion of that increase. So the larger increase you referenced is primarily related to the ESI contribution. We don't typically have large swings in sales and marketing from one period to the next unless it's related to commissions and top-line revenue growth. We called out the ESI contribution in the MD&A section.
I'll add that we are spending more on marketing because it produces strong results, particularly on the software solutions side. We'll continue to invest in marketing as long as we see a clear return on investment.
Okay, that's helpful. Second, is CAIRO margin accretive at the current pricing, or are you pricing it to accelerate adoption and possibly move pricing higher over time?
I don't believe in loss leaders, so we're not going to sell anything we can't make money on. I'll let Doug provide more detail.
We designed CAIRO and we have strong margins on it. It should be a positive impact on our margins going forward as we continue to sell more.
Okay. Last question: your equipment financing receivables are above $8 million now, up substantially from year-end 2025. How should we think about that book? Is it just growing with ESI hardware sales? At some point does that require a separate funding facility?
It doesn't require a separate funding facility. We recognize revenue on a sales-type lease model when we deliver the equipment and install the service, and we amortize that. Customers pay us over time and are effectively renting devices from us over the contract term. It's more of a hosted offering versus a product sale upfront. As we sell more, that receivable will grow and then amortize over time.
Our next question is coming from Josh Nichols with B. Riley. Matthew Maus is on for Josh.
This is Matthew on for Josh. To start off, you mentioned about 15 six-figure opportunities in the telecom bookings. Can you give a sense of the conversion timing and how many could land in the second half?
That wasn't in the pipeline—that was actually sold during the quarter. That was 15 six-figure opportunities that were sold in the Telecom Services segment during the quarter. They're in different stages of implementation: some have been implemented and some are sold and in the process of being implemented. It was a strong number for us, and we continue to see a pipeline of larger six-figure opportunities.
Got it. On the software side, software margin improved quarter-over-quarter but it's not fully back to the low 70s you've historically run at. With legacy fully off, what's the remaining gap and how do you expect to close out?
On the software solutions side, at the end of Q1 we completed the migration of hosted customers to OCI and shut down the legacy data centers. We realized synergies and cost savings from that migration as well as other operational efficiencies. The margins are solid and are attainable going forward.
Great. Last question: back on CAIRO, you mentioned it's still early in the retail side. As that picks up in 2027, how big of a role does the reseller channel play versus direct retail attach?
Not just CAIRO, but the broader EVP program is growing. We continue to see solid growth across the entire program, which includes several AI applications. When a licensee adopts a product like CAIRO, there's a time to market to put it through operational systems, train sales teams and partners and deploy it. We'll continue to see solid growth within that whole EVP category, and AI applications are an important component.
As we have no further questions at this time, I would like to turn the call back over to Mr. Korn for any closing remarks.
Thank you, Ali, and I want to thank everybody who dialed in to listen and everybody who pays attention to our results. As we have all said, this was a very exciting and strategic quarter for us, and I think only the beginning of continued strong results and continued strong growth. We're very excited. We have our User Group Meeting coming up in October, and the palpability and excitement of our licensees continues to grow. I can't wait to speak with all of them and show them what we're doing. I also look forward to speaking with all of you when we discuss our Q3 results. Until that time, thank you for your attention, and have a good afternoon.
Thank you. Ladies and gentlemen, this concludes today's conference, and you may disconnect your lines at this time. We thank you for your participation.