.jpg)
Fusion Executiive Summary
FUSION TELECOMMUNICATIONS INTERNATIONAL, INC.
420 Lexington Avenue, Suite 1718
New York, NY 10170
www.fusiontel.com
INVESTMENT HIGHLIGHTS
EXECUTIVE SUMMARY
MAY 2012
Fusion is an Emerging Leader in Cloud
Communications and Cloud Delivered Services, one
of the Fastest Growth Areas in the
Telecommunications Market Estimated at $3.2
billion and Growing at 36% per Year.
Shift to Focus on Delivering Unified
Communications Services to Business Customers
Promises to Grow Recurring Revenue as a Portion
of Total Revenues, to Increase Margins and to
Bring Multi-Year Service Contracts.
High Industry Valuation Multiples in excess of 30x
EBITDA for Cloud-Based Telephony Companies
Suggest Strong Increases in Fusion Valuation and
Share Appreciation.
GNYHA Agreement Names Fusion as the Exclusive
Provider of Cloud-base Communications and Other
Cloud Information and Security Services to the
Greater New York Hospital Association’s +15,000
Members Throughout the US.
Focus on Delivering Vertically-Oriented Cloud-
based Solutions to Large Vertical Markets
Including Healthcare, Transportation and
Education Provides Competitive Advantage, Large
Enterprise Sales and Partnership Opportunities.
Recently Announced Acquisition Expected to
Produce Approximately +$5 million in positive
EBITDA on $74 million in Consolidated Revenues
within 2012 Upon Integration and Bring Expanded
Infrastructure.
Acquisition of Other Communications or Cloud
Service Companies May Leverage the High
Valuation Multiples of Cloud-Based Carriers like
Fusion.
Use of Commercial Software and Product
Platforms and Partnerships with Established
Vertical and System Integration Partners Lowers
Need for Capex and Speeds Time to Market.
Unique Reach into Corporations, Institutions and
Government through Strong Board of Directors
and Management Team.
The Company
Fusion Telecommunications International, Inc. (OTCBB: FSNN), a Delaware corporation, is a
provider of Internet Protocol (“IP”) based digital voice and data communications services and
cloud services to carriers and corporations worldwide.
Fusion was formed in 1997 and commenced operations in 1998, as a provider of domestic and
international telecommunication service to carriers, corporations and consumers. The Company
completed its Initial Public Offering in February 2005. In 2009, Fusion sold its consumer services
business segment in order to more fully focus its efforts on its higher volume carrier services and
higher margin corporate services business segments.
Our Business
Our business addresses two major segments of the communications market: Carrier Services and
Corporate Services.
Our Carrier Services are sold to other communications service providers throughout the world,
including U.S. based carriers wishing to terminate transmission of telephone services to
international destinations and foreign carriers wishing to terminate in the U.S. and throughout
the world. We also purchase domestic and international termination services from many of our
carrier customers. We currently have over 270 carrier customers and vendors.
Our Corporate Services segment provides a rapidly growing portfolio of
telecommunications’, cloud communications’ and cloud services to small and medium
sized businesses and to large enterprises. These services include local, long distance, and
international Voice over Internet Protocol (“VoIP”) services; broadband Internet access; private
line circuits; virtual private network services; audio and web conference calling; fax services, and
other enhanced communications services and features. These communications services are
enhanced and sold with a rich array of cloud-based products including Infrastructure-as-a-
Service (IaaS); Software-as-a-Service (SaaS) and Platform-as-a-Service (PaaS). Our entire offering
is provided within a highly secure framework protecting our customers’ service and information.
This spectrum of cloud communication and cloud services, called Unified Communication-as-a-
Service (UCaaS), allows us to deliver voice, data, applications and Internet access services over a
single facility, while providing service quality and reliability comparable to that of the historical
circuit-switched service providers. We currently serve corporate users in 30 states.
Fusion’s product offerings are designed to capitalize on the rapid growth of cloud-based voice
and information services which replaces on-premise equipment based on traditional circuit
switched technology including PBX’s and servers with remote services delivered over the
internet. Customers switch from legacy, equipment-based communication and information
services to cloud based services to take advantage of lower cost of ownership, lower exposure to
obsolescence, materially reducing management responsibility and maintenance responsibility,
take advantage of a larger range of services and applications available from the cloud, scale as
their businesses grow (or contract) without hardware changeouts, and to achieve greater
reliability. We are aggressively introducing a broad suite of cloud services, particularly
focusing on select, large vertical markets, which address industry-specific customer needs
and are not easily duplicated by competitors. These cloud communications and cloud-based
information services are being developed primarily through major partners who seek access to
the Company’s expertise and its distribution channels.
The Market
Fusion believes that the telecommunications market is at an inflection point as customers
ranging from small to enterprise sized switch from premise based equipment to cloud based
services. Through this Unified Communications approach, network management and security;
voice and telephony; messaging and presence; conferencing; and applications are delivered
through a single facility and managed through the cloud. The transformation offers cloud based
telephony companies the ability to gain share rapidly as customers choose new vendors in the
sector and offer to increase the average revenue per user (ARPU) by offering an expanding
number of communications, communications and security “Apps” and to generate higher overall
margins. According to a recent research report, cloud-based telephony services are growing at
36% per year and represent a $3.2 billion market. Cloud based information services for one of
Fusion’s target markets, healthcare, is projected by BCC to grow to $17.5 billion by 2016 with
50% of that growth coming from cloud computing.
The market for cloud communications and cloud services, Unified Communications as a Service,
is significantly more attractive than the traditional model based on hardware sales. Unified
Communications offers a financial model based on high margin recurring revenue and large,
multi year sales.
2201_010612_1a
FUSION TELECOMMUNICATIONS INTERNATIONAL, INC.
420 Lexington Avenue, Suite 1718
New York, NY 10170
www.fusiontel.com
MANAGEMENT AND BOARD
EXECUTIVE SUMMARY
MAY 2012
The Executive Management of Fusion consists of:
Marvin S. Rosen, Chairman of the Board: Mr. Marvin Rosen co-
founded the Company in 1997 and has served as the Chairman
of our Board of Directors since November 2004. He formerly
served as a name partner at Greenberg Traurig, Finance
Chairman under President Clinton and Chairman of the Florida
Housing Finance Agency. Currently, he serves on the Board of
Directors of the Robert F. Kennedy Memorial. Mr. Rosen
served on the Board of Directors of Terremark Worldwide, Inc
until its acquisition in 2011 by Verizon.
Matthew D. Rosen, CEO and Director: Mr. Matthew Rosen has
served as a Director since May 2005 and has been our Chief
Executive Officer since March of 2006. Formerly President of
the Northwest and New England Operations for Expanets, a
$1.3 billion nationwide roll-up of voice and data networking
companies; an investment banker in Merrill Lynch’s corporate
finance department, where he worked on over $1 billion of
debt, equity and M&A transactions; and the Director of
Operations for Oxford Health Plans, a $4 billion healthcare
company, where he worked on developing and executing
turnaround strategies.
Gordon Hutchins, Jr., President, Chief Operating Officer, and
Acting Chief Financial Officer: Mr. Hutchins serves as President
and Chief Operating Officer and as Acting Chief Financial
Officer. He has served as President and Chief Executive Officer
of SwissFone, Inc., a $100 million telecommunications carrier;
President and Chief Executive Officer of STAR
Telecommunications, Inc., an $800 million international
telecommunications carrier.
Jan Sarro, Executive Vice President - Corporate Services: Ms.
Sarro serves as Executive Vice President – Corporate Services.
Formerly President of the Americas for Viatel, a global,
facilities-based carrier where she grew annual carrier
revenues from $20 million to $160 million in under two years,
and built a $140 million sales organization to market Internet
access, corporate networks and international voice services to
multinational corporations in the United States and Latin
America. She also held senior executive marketing and sales
management positions at Argo Communications, FTC
Communications, TRT Communications, and WorldCom.
The Board of Directors of Fusion consists of:
Marvin S. Rosen (Chairman): see above
Matthew D. Rosen: see above
E. Alan Brumberger: Formerly Managing Director Drexel
Burnham, Managing Director of Shearson American Express,
and President and CEO of Shearson’s international Investment
Banking business
Philip D. Turits (Treasurer): Former Treasurer of Larry Stuart,
CEO of Continental Chemical Company
Michael J. Del Giudice: Board member of Con Edison and
former board member of Barnes and Noble; Formerly Chief of
Staff for Mario Cuomo and General Partner at Lazard Freres
Julius Erving: Formerly board member of Saks, Willtel, Darden
Restaurants, Sports Authority, NBC and member of NBA
William Rubin: President of the Rubin Group, a prominent,
Florida based lobbying firm; Formerly Assistant Insurance
Commissioner and Treasurer of the State of Florida, advisor to
many large companies, primarily advising health care
companies doing business in Florida.
Paul C. O’Brien: Former President and Chairman of New
England Telephone (Nynex), Advisor to Sovereign Bank
Larry Blum: Former Senior Partner of the Florida Region of
Marcum LLP (Marcum Rachlin), Managing Partner of Rachlin
LLP, litigation advisor and member of the Florida Bar.
The Advisory Board of Fusion consists of:
John H. Sununu: Former three term Governor of New
Hampshire, Chief of Staff for President Bush and Counselor to
the President
Fred Salerno: Board member of CBS, Viacom, Popular Inc.,
Intercontinental Exchange and Akamai, Former Vice Chairman
and CFO for Verizon.
Jack Rosen: CEO of Rosen Partners, Hudson Institute Board
Member, Chairman of the American Jewish Congress
Fusion’s Strategy
Our strategy is to continue to grow our existing Carrier Services business, which today comprises
95% of our revenue while accelerating the growth of our Corporate Services business to ensure
that an increasing portion of our total revenues is derived from the higher margin, more
stable and largely recurring Corporate Services business segment. We believe that the
Carrier Services business supports the growth of the Corporate Services business by providing
enhanced service offerings for our corporate customers, by lowering the overall cost basis of the
communication infrastructure shared by the Corporate Services business and by strengthening
our relationships with key service providers and carriers throughout the world.
Growth in the Carrier Service business will be driven by expanding the number of international
carriers with whom we interconnect; expanding sales to non-traditional carriers, including cable
television providers, Internet search engine companies, and large IP telephone companies; and by
expanding current carrier relationships to maximize the traffic received from and sent to them.
We intend to generate substantial growth in the Corporate Services segment to make the revenues
and margins from this segment a more significant portion of our total revenues and margins. The
expansion of the Corporate Services business will come from both organic growth and
acquisitions. Organic growth will be delivered from a combination of expanding the number and
types of services available and sold to our current customers and by customizing our product and
service offerings to address the needs of target large sectors. We believe that there is
substantial opportunity to gain market share, to increase the size of our average sale and to
sell a broad range of our products by focusing on offering highly targeted product and
service solutions to these large sectors including healthcare, transportation and education.
Our strong entry into these markets also leverages our experience and relationships to provide a
competitive advantage and offers the opportunity to create sector specific partnerships with
incumbent cloud service providers in each sector. Such larger sales to enterprise customers
typically have lower churn rates and provide substantial opportunities for adding additional
services to a core communications offering. Targeted, “bolt-on” acquisitions are also seen as
part of our core strategy, expanding our customer base and providing new prospective
customers for our growing portfolio of cloud services; potentially adding products and services to
our own; and increasing the scale of our operations while leveraging our existing infrastructure
and costs. Such acquisitions may be consummated at lower valuation multiples than would be
accorded to Fusion, thus effectively lowering the cost of the acquisition.
Recent Events
The growth strategy of Fusion in terms of both large sale organic growth and growth through
acquisition has been evidenced by two recent, announced events.
In January, 2012, Fusion announced that it had entered into an exclusive agreement for cloud
services and communications solutions with the group purchasing organizations (“GPOs”) of the
Greater New York Hospital Association (GNYHA). Fusion and the GPOs will offer the more than
+15,000 GPO members in healthcare and other vertical markets a full range of cloud
services, including cloud computing, disaster recovery, storage and security. Through this
agreement, Fusion may also provide GNYHA members hosted voice and data solutions that
include a full complement of advanced service features, unified communications and presence,
Internet and other broadband data services, as well as a comprehensive portfolio of leading edge
hardware designed to meet the specific needs of the healthcare industry. These services may be
offered directly by Fusion or in partnership with major hardware, software and systems
integration partners.
In January, 2012, Fusion announced that it had entered into purchase agreements to acquire the
business currently operated by Network Billing Systems, LLC and Interconnect Systems Group II
LLC (collectively, “NBS”). The aggregate purchase price for the NBS acquisition transaction is $20
million. NBS currently provides voice (including VoIP) and data telecommunications services, as
well as a wide variety of managed and cloud-based telecommunications services, to small and
medium sized companies. NBS has approximately 5,000 customers and for FY 2011 generated
(unaudited) revenues of approximately $26.8 million and over $3 million in net income
(unaudited). The Company expects that as a result of the acquisition of NBS, it will, on a
consolidated basis, generate positive EBITDA. In addition to the financial benefits which are
foreseen to accrue from the acquisition, Fusion believes this acquisition will accelerate its organic
growth plans and provide a compelling platform for future acquisitions.
Competition
Fusion competes with both larger and more established competitors as well as new market
entrants. These include traditional carriers (AT&T, Verizon and Windstream), cable companies
(Comcast), focused IP Telephony companies (8x8, West IP Communications, RingCentral,
M5/Shoretel) and IP network hardware and software providers (Cisco, Broadview). The market is
highly fragmented with no single market participant having more than 5% of the market.
2201_010612_1a
FUSION TELECOMMUNICATIONS INTERNATIONAL, INC.
420 Lexington Avenue, Suite 1718
New York, NY 10170
www.fusiontel.com
VALUATIONS
Anticipating the growth in the market, valuations for focused IP communications companies have been established at above market and forward
looking levels as evidenced in both the public and private market. The Enterprise Value of 8x8 (NASDAQ: EGHT) was recently 2.99x revenue and 26.99x
EBITDA. In recent M&A transactions, one of the leading providers of cloud-based telephony, M5 Networks was acquired by Shoretel, a traditional facilities-
based telephony provider, for 3.3x revenue and 45.7x EBITDA. Another provider of cloud-based telephony, Smoothstone IP Communications, was acquired
by West Communications for 3.1x revenue and 38x EBITDA. The Company believes that should such forward looking valuation levels be accorded to
Fusion, the Company may gain the ability to leverage its high valuation in acquiring smaller companies at significantly lower valuations and to arbitrage the
difference between its own valuation and that of the acquired company.
