Company: CXDO
Filing Date: 2025-08-05
Form Type: 10-Q
Source: 0001654954-25-009071
Chunk: 52

Company: Crexendo, Inc.
Filing Date: 2025-08-05
Form: 10-Q
Item: Part I, Item 1
Chunk 52
---
 receivable credit risk is low because of the geographic and industry diversification of our clients and small account balances for most of our clients.

 8Table of Contents

Contract Assets and Allowance for Credit Losses–Contract assets primarily relate to the Company’s rights to consideration for work completed but not billed as of the reporting date. The Company recognizes a contract asset when the Company transfers products or services to a customer and the right to consideration is conditional on something other than the passage of time. The contract assets are transferred to receivables when the rights become unconditional. The allowance for credit losses is determined based on an assessment of historical collection experience using the loss-rate method as well as consideration of current and future economic conditions and changes in our loss-rate trends. We utilize a five-year lookback period to establish our estimate of expected credit losses, as our contractual terms range from three to five years. Contract assets are written off against the allowance after all collection efforts have been exhausted and management deems the account to be uncollectible. We believe that our contract assets credit risk is low because of the geographic and industry diversification of our clients and small account balances for most of our clients. We continually evaluate the adequacy of the allowance for credit losses and adjust as necessary. Contract Costs–Contract costs primarily relate to incremental commission costs paid to sales representatives and sales leadership as a result of obtaining software solutions and telecommunication service contracts which are recoverable. The Company capitalized contract costs in the amount of $5,041 and $4,810 at June 30, 2025 and December 31, 2024, respectively. Capitalized commission costs are amortized based on the transfer of goods or services to which the assets relate, which typically range from thirty-six to sixty months, and are included in selling and marketing expenses. During the three months ended June 30, 2025 and 2024, the Company amortized $749 and $546, respectively, and during the six months ended June 30, 2025 and 2024, the Company amortized $1,572 and $1,046 respectively, and there was no impairment loss in relation to the costs capitalized. Inventory–Finished goods telecommunications equipment inventory is stated at the lower of cost or net realizable value (first-in, first-out method). In accordance with applicable accounting guidance, we regularly evaluate whether inventory is stated at the lower of cost or net realizable value. If net realizable value is less than cost, the write-down is recognized as