NEW YORK, NY --(Marketwired - November 15, 2016) - Fusion (
Third Quarter Highlights
- Consolidated revenue increased 20% year-over-year to $29.5 million driven by a 27% increase in Business Services segment revenue to $20.6 million
- Signed $8.5 million in new Business Services total contract value during the third quarter, up 67% from the year-ago period, demonstrating continued progress in developing the company's sales growth engine
- Ended the third quarter with approximately $373,000 in Business Services MRR in backlog, representing $12.6 million in total contract value, up 78% over the third quarter of 2015
- Signed several large, multi-year enterprise customers combining multiple cloud service offerings into an integrated solution, including a three year, $1.1 million contract with a leading Southeastern bank connecting 33 of its locations to the Fusion cloud
- Ended the quarter with an average monthly revenue per customer (ARPU) of $568 and a churn rate of 1.1%, compared to $547 and 1.26% at June 30, 2016
- Adjusted EBITDA (a non-GAAP measure) was $1.7 million, reflecting a full quarter of investments in sales and marketing efforts to enhance organic revenue growth
In a separate press release issued today, Fusion also announced that it has acquired Herndon, Virginia based Apptix, Inc., a leading cloud services provider, for total consideration of $28.0 million consisting of $23.0 million in cash and approximately 3.0 million shares of Fusion unregistered common stock priced at $1.68 per share. The acquisition significantly expands Fusion's scale and scope, adding approximately $25 million in annual revenue and $8 million in post-synergy Adjusted EBITDA (a 30% contribution margin), for a total pro forma annual revenue run-rate of approximately $145 million and Adjusted EBITDA of $16 million.
The acquisition was financed with a new $70.0 million senior secured credit facility led by East West Bank, which replaces and adds to Fusion's previous $40.0 million senior credit facility. The acquisition and debt financing closed on Monday, November 14.
Matthew Rosen, Fusion's Chief Executive Officer, commented, "Our business during the third quarter demonstrated strong year-over-year revenue growth and continued positive momentum in sales bookings. The contract value of our bookings grew 67% during the quarter and over the last 12 months, indicating the early success of our sales and marketing investments and validating our organic sales strategy. At the same time, our solid performance on key metrics including ARPU and churn illustrates the success of our positioning in the market as the single source for the cloud, delivering multiple services in an integrated solution to capture larger customer orders and create strong customer loyalty.
"We were pleased to be awarded several large, multi-year enterprise customer wins during the third quarter," Mr. Rosen continued. "The performance of our recent hires in our direct sales organization is also on track, and I am confident that they will help deliver on our goal of 5% to 7% annualized organic growth. Additionally, we expect the Apptix acquisition to further develop Fusion's organic growth platform, creating substantial cross- and up-selling opportunities into the combined Apptix and Fusion base of more than 13,000 business customers."
Michael Bauer, Fusion's Chief Financial Officer, said, "We are excited by the addition of Apptix's high-margin cloud services business, along with the additional scale and significant flow-through of incremental revenue to adjusted EBITDA that it brings. This acquisition is a big step forward to achieving our intermediate financial goals of $200 million in revenue, 50% gross margin and 15% Adjusted EBITDA margin."
Third Quarter Results
Fusion reported consolidated revenue of $29.5 million for the third quarter of 2016, which represents an increase of $5.0 million or 20% over consolidated revenue of $24.5 million reported for the third quarter of 2015.
Revenue in the Company's Business Services segment increased 27% to $20.6 million, as compared to $16.3 million in the third quarter of 2015, driven primarily by the Fidelity acquisition in the fourth quarter of 2015.
Revenue in the Company's Carrier Services segment was $8.9 million, as compared to $8.3 million in the third quarter of 2015, an increase of 7%. This increase was primarily due to an increase in the blended rate per minute of traffic terminated, partially offset by a decrease in the number of minutes of traffic carried during the quarter.
Fusion's consolidated gross margin during the third quarter of 2016 was 43.1% as compared to 44.8% in the third quarter of 2015. Business Services had a gross margin of 59.9% for the third quarter of 2016, compared to 63.8% in the third quarter of 2015, due primarily to the integration of the Fidelity acquisition, which carried a lower gross margin.
Carrier Services' gross margin for the third quarter of 2016 was approximately 4.3%, down from 7.6% in the same period a year ago due to a higher per-minute cost of termination for minutes carried.
The Company reported a net loss attributable to common shareholders of $3.4 million, or $0.23 per share on a basic and diluted basis, as compared to a net loss of $5.2 million, or $0.72 per share on a basic and diluted basis for the third quarter of 2015. Adjusted EBITDA was $1.7 million during the third quarter of 2016, as compared to an Adjusted EBITDA of $1.9 million for the third quarter of 2015.
Conference Call Information
Fusion will hold a conference call today, November 15, 2016 at 11:00 a.m. Eastern Time to discuss its results for the quarter ended September 30, 2016, as well as the Apptix acquisition and financing transactions. To participate in the live conference call, interested parties should dial (844) 883-3892 or (412) 317-9248 at least 10 minutes prior to the start time and ask to be placed in the Fusion call. A replay will be available following the call at ir.fusionconnect.com.
Use of Non-GAAP Financial Measurements
The Company believes that EBITDA (earnings before interest, taxes, depreciation and amortization) is useful to investors because it is commonly used in the cloud communications industry to evaluate companies on the basis of operating performance and leverage. Adjusted EBITDA provides an adjusted view of EBITDA that takes into account certain significant non-recurring transactions, if any, such as impairment losses and expenses associated with pending acquisitions, which vary significantly between periods and are not recurring in nature, as well as certain recurring non-cash charges such as changes in fair value of the Company's derivative liabilities and stock-based compensation. The Company also believes that Adjusted EBITDA provides investors with a measure of the Company's operational and financial progress that corresponds with the measurements used by management as a basis for allocating resources and making other operating decisions. Although the Company uses Adjusted EBITDA as one of several financial measures to assess its operating performance, its use is limited as it excludes certain significant operating expenses. EBITDA and Adjusted EBITDA are not intended to represent cash flows for the periods presented, nor have they been presented as an alternative to operating income or as an indicator of operating performance and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP"). In accordance with SEC Regulation G, the non-GAAP measurements in this press release have been reconciled to the nearest GAAP measurement, which can be viewed under the heading "Reconciliation of Net Loss to Adjusted EBITDA", immediately following the Consolidated Balance Sheets included in this press release.
- Tables Follow -
| FUSION TELECOMMUNICATIONS INTERNATIONAL, INC. AND SUBSIDIARIES | ||||||||||||||||
| Consolidated Statements of Operations | ||||||||||||||||
| (Unaudited) | ||||||||||||||||
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
| 2016 | 2015 | 2016 | 2015 | |||||||||||||
| Revenues | $ | 29,497,129 | $ | 24,530,824 | $ | 93,101,835 | $ | 74,857,557 | ||||||||
| Cost of revenues (exclusive of depreciation and amortization, shown separately below) | 16,769,587 | 13,533,647 | 53,936,078 | 41,359,955 | ||||||||||||
| Gross profit | 12,727,542 | 10,997,177 | 39,165,757 | 33,497,602 | ||||||||||||
| Depreciation and amortization | 2,998,628 | 3,140,427 | 8,946,781 | 9,183,632 | ||||||||||||
| Selling, general and administrative expenses | 11,408,048 | 9,796,483 | 34,102,847 | 29,379,196 | ||||||||||||
| Total operating expenses | 14,406,676 | 12,936,910 | 43,049,628 | 38,562,828 | ||||||||||||
| Operating loss | (1,679,134 | ) | (1,939,733 | ) | (3,883,871 | ) | (5,065,226 | ) | ||||||||
| Other (expenses) income: | ||||||||||||||||
| Interest expense | (1,625,195 | ) | (1,434,734 | ) | (4,877,828 | ) | (4,650,286 | ) | ||||||||
| Gain on change in fair value of derivative liability | 152,057 | 1,237,730 | 380,099 | 2,543,878 | ||||||||||||
| Loss on extinguishment of debt | -- | (2,720,355 | ) | -- | (2,720,355 | ) | ||||||||||
| Other income (expense), net | 18,069 | (2,399 | ) | 33,514 | 56,369 | |||||||||||
| Total other expenses | (1,455,069 | ) | (2,919,758 | ) | (4,464,215 | ) | (4,770,394 | ) | ||||||||
| Loss before income taxes | (3,134,203 | ) | (4,859,491 | ) | (8,348,086 | ) | (9,835,620 | ) | ||||||||
| Provision for income taxes | (10,951 | ) | -- | (10,951 | ) | -- | ||||||||||
| Net loss | (3,145,154 | ) | (4,859,491 | ) | (8,359,037 | ) | (9,835,620 | ) | ||||||||
| Preferred stock dividends | (285,646 | ) | (379,740 | ) | (2,102,467 | ) | (1,186,826 | ) | ||||||||
| Net loss attributable to common stockholders | $ | (3,430,800 | ) | $ | (5,239,231 | ) | $ | (10,461,504 | ) | $ | (11,022,446 | ) | ||||
| Basic and diluted loss per common share | $ | (0.23 | ) | $ | (0.72 | ) | $ | (0.72 | ) | $ | (1.52 | ) | ||||
| Weighted average common shares outstanding: | ||||||||||||||||
| Basic and diluted | 14,990,816 | 8,958,815 | 14,536,893 | 8,529,642 | ||||||||||||
| FUSION TELECOMMUNICATIONS INTERNATIONAL, INC. AND SUBSIDIARIES | ||||||||
| Consolidated Balance Sheets | ||||||||
| September 30, | December 31, | |||||||
| 2016 | 2015 | |||||||
| (unaudited) | ||||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | 882,040 | $ | 7,540,543 | ||||
| Accounts receivable, net of allowance for doubtful accounts of approximately $366,422 and $308,813, respectively | 8,199,522 | 7,650,141 | ||||||
| Prepaid expenses and other current assets | 2,457,736 | 1,618,603 | ||||||
| Total current assets | 11,539,298 | 16,809,287 | ||||||
| Property and equipment, net | 12,929,148 | 14,055,493 | ||||||
| Other assets: | ||||||||
| Security deposits | 548,288 | 575,038 | ||||||
| Restricted cash | 27,153 | 165,123 | ||||||
| Goodwill | 28,049,775 | 27,060,297 | ||||||
| Intangible assets, net | 42,727,552 | 45,824,399 | ||||||
| Other assets | 302,053 | 281,045 | ||||||
| Total other assets | 71,654,821 | 73,905,902 | ||||||
| TOTAL ASSETS | $ | 96,123,267 | $ | 104,770,682 | ||||
| LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||
| Current liabilities: | ||||||||
| Notes payable - non-related parties | $ | 685,780 | $ | 685,780 | ||||
| Due to RootAxcess seller | 333,334 | 300,000 | ||||||
| Due to TFB seller | 100,000 | - | ||||||
| Equipment financing obligations | 997,089 | 959,380 | ||||||
| Accounts payable and accrued expenses | 12,610,885 | 13,129,225 | ||||||
| Total current liabilities | 14,727,088 | 15,074,385 | ||||||
| Long-term liabilities: | ||||||||
| Notes payable - non-related parties, net of discount | 30,672,580 | 30,795,745 | ||||||
| Term loan | 25,000,000 | 25,000,000 | ||||||
| Indebtedness under revolving credit facility | 15,000,000 | 15,000,000 | ||||||
| Due to RootAxcess seller | -- | 333,333 | ||||||
| Due to TFB seller | 861,606 | - | ||||||
| Notes payable - related parties | 1,112,445 | 1,074,829 | ||||||
| Equipment financing obligations | 1,492,558 | 2,085,416 | ||||||
| Derivative liabilities | 233,934 | 953,005 | ||||||
| Total liabilities | 89,100,211 | 90,316,713 | ||||||
| Commitments and contingencies | ||||||||
| Stockholders' equity (deficit): | ||||||||
| Preferred stock, $0.01 par value, 10,000,000 shares authorized, 17,299 and 23,324 shares issued and outstanding | 173 | 233 | ||||||
| Common stock, $0.01 par value, 50,000,000 shares authorized, 15,064,953 and 12,788,971 shares issued and outstanding | 150,650 | 127,889 | ||||||
| Capital in excess of par value | 185,764,507 | 184,859,084 | ||||||
| Accumulated deficit | (178,892,274 | ) | (170,533,237 | ) | ||||
| Total stockholders' equity | 7,023,056 | 14,453,969 | ||||||
| TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $ | 96,123,267 | $ | 104,770,682 | ||||
| FUSION TELECOMMUNICATIONS INTERNATIONAL, INC. AND SUBSIDIARIES | ||||||||||||||||
| Reconciliation of Net Loss to EBITDA and Adjusted EBITDA | ||||||||||||||||
| (Unaudited) | ||||||||||||||||
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
| 2016 | 2015 | 2016 | 2015 | |||||||||||||
| Net (loss) | $ | (3,145,154 | ) | $ | (4,859,491 | ) | $ | (8,359,037 | ) | $ | (9,835,620 | ) | ||||
| Interest expense and other financing costs | 1,625,413 | 3,141,848 | 4,878,328 | 6,371,806 | ||||||||||||
| Provision for income taxes | 10,951 | -- | 10,951 | -- | ||||||||||||
| Depreciation and amortization | 2,998,628 | 3,140,427 | 8,946,781 | 9,183,632 | ||||||||||||
| EBITDA | 1,489,838 | 1,422,784 | 5,477,023 | 5,719,818 | ||||||||||||
| Acquisition transaction expenses | 111,900 | 485,573 | 275,710 | 1,650,875 | ||||||||||||
| Change in fair value of derivative liability | (152,057 | ) | (1,237,730 | ) | (380,099 | ) | (2,543,878 | ) | ||||||||
| Loss on disposal of property and equipment | 13,958 | 3,892 | 86,777 | 2,502 | ||||||||||||
| Non-recurring employee related expenses | -- | -- | 535,500 | 28,846 | ||||||||||||
| Refinancing transaction costs | -- | 1,038,320 | -- | 1,038,320 | ||||||||||||
| Stock based compensation expense | 228,040 | 153,916 | 686,535 | 658,445 | ||||||||||||
| Adjusted EBITDA | $ | 1,691,679 | $ | 1,866,755 | $ | 6,681,446 | $ | 6,554,928 | ||||||||
Forward Looking Statements
Statements in this press release that are not purely historical facts, including statements regarding Fusion's beliefs, expectations, intentions or strategies for the future, may be "forward-looking statements" under the Private Securities Litigation Reform Act of 1996. Such statements consist of any statement other than a recitation of historical fact and may sometimes be identified by the use of forward-looking terminology such as "may", "expect", "anticipate", "intend", "estimate" or "continue" or the negative thereof or other variations thereof or comparable terminology. The reader is cautioned that all forward-looking statements are speculative, and there are certain risks and uncertainties that could cause actual events or results to differ from those referred to in such forward-looking statements. Important risks regarding the Company's business include the Company's ability to raise additional capital to execute its comprehensive business strategy; the integration of businesses and assets following an acquisition; the Company's ability to comply with covenants included in its senior debt agreements; competitors with broader product lines and greater resources; emergence into new markets; natural disasters, acts of war, terrorism or other events beyond the Company's control; and other factors identified by Fusion from time to time in its filings with the Securities and Exchange Commission, which are available through http://www.sec.gov . However, the reader is cautioned that Fusion's future performance could also be affected by risks and uncertainties not enumerated above.
In the event that there is any inconsistency between the information contained in this press release and the information set forth in Fusion's Form 10-K or 10-Q filed with the Securities and Exchange Commission, the information contained in the Form 10-K or 10-Q governs.
About Fusion
Fusion, a leading provider of integrated cloud solutions to small, medium and large businesses, is the industry's single source for the cloud. Fusion's advanced, proprietary cloud service platform enables the integration of leading edge solutions in the cloud, including cloud communications, contact center, cloud connectivity, and cloud computing. Fusion's innovative, yet proven cloud solutions lower our customers' cost of ownership, and deliver new levels of security, flexibility, scalability, and speed of deployment. For more information, please visit www.fusionconnect.com .
Fusion Contact Brian Coyne (212) 201-2404 Email contact Darrow Associates Contacts for Fusion Jordan Darrow (512) 551-9296 Email contact Bernie Kilkelly (516) 236-7007 Email contact
