Fusion Reports First Quarter 2017 Financial Result
Post# of 617763
NEW YORK, NY --(Marketwired - May 10, 2017) - Fusion (
Highlights
- Consolidated revenue grew 6% to $35.8 million, compared to $33.8 million in Q1 2016, driven by a 32% increase in Business Services segment revenue to $28.5 million, over 85% of which was contracted and recurring
- Excluding the contribution from Apptix, Business Services revenue grew 2.5% year-over-year
- Consolidated gross margin increased approximately 700 basis points to 46.2%, compared to 39.2% in Q1 2016
- Net loss attributable to common shareholders was $4.7 million or $(0.23) per share on a basic and diluted basis, compared to net loss in Q1 2016 of $4.1 million or $(0.30) per share on a basic and diluted basis
- Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization ("Adjusted EBITDA") grew 18% to $3.3 million, compared to $2.8 million in Q1 2016, and grew 49% compared to $2.2 million in Q4 2016 (see definition and further discussion about the presentation of Adjusted EBITDA, a non-GAAP term, below)
- Ended the quarter with approximately 13,600 Business Services customers and approximately $11.4 million in total contract value in backlog
- Ended the quarter with an average monthly revenue per customer ("ARPU") of $732, compared to $557 at March 31, 2016 and $695 at December 31, 2016
- Churn was 1.0%, compared to 1.0% in Q1 2016 and 0.8% in Q4 2016
- Reduced the number of outstanding shares of B-2 Preferred Stock by 24% through conversions to common stock, thereby reducing future dividend payment obligations
- Reduced the term loan balance by $0.8 million as the Company commenced scheduled principal payments during the quarter
- Received a 2017 INTERNET TELEPHONY Product of the Year Award for Fusion Contact360 cloud contact center solution
Management Commentary
"The strong momentum from 2016 has accelerated into the first quarter of 2017, as demonstrated by our solid growth in both revenue and Adjusted EBITDA," said Matthew Rosen, Fusion's Chief Executive Officer. "Our first quarter results validate our sales and marketing initiatives and our investments in our service delivery platform that are now generating improved operating and financial performance. We also saw continued traction in delivering organic growth in our Business Services segment, as our key service metrics of ARPU and churn once again reflect the success of our strategy to sell multiple cloud services to our growing customer base.
"Our sales and M&A pipelines remain robust and position Fusion to achieve our intermediate financial goals of $200 million in annual revenue and $30 million in annual Adjusted EBITDA. In addition, we expect to continue de-levering our balance sheet by making scheduled principal payments on our indebtedness, expanding our Adjusted EBITDA with continued revenue growth, and executing on targeted acquisitions at attractive valuations. For all these reasons, we believe Fusion is poised to create substantial value for shareholders," Mr. Rosen continued.
Michael Bauer, Fusion's Chief Financial Officer, said, "During the first quarter, we converted a significant number of outstanding B-2 Preferred Stock into common stock, thereby reducing future dividend obligations. This brings the total amount of B-2 Preferred Stock that we have eliminated to approximately 60% of the original $23 million issued. We intend to take meaningful steps to simplify our capital structure and improve our financial flexibility in the coming quarters.
"We are also making excellent progress on the integration of Apptix which should result in greater operating efficiencies, and we remain on track to realize the full run-rate of our expected cost synergies by the second half of 2017," Mr. Bauer concluded.
First Quarter 2017 Financial Results
Consolidated revenue grew 6% in Q1 2017 to $35.8 million, compared to $33.8 million in Q1 2016, due to an increase in the Company's Business Services segment revenue. Business Services revenue grew 32% in Q1 2017 to $28.5 million, compared to $21.6 million in Q1 2016, primarily due to the acquisition of Apptix. Carrier Services revenue in Q1 2017 was $7.3 million, compared to $12.2 million in Q1 2016, primarily due to a decline in the total minutes of traffic carried on Fusion's network.
Consolidated gross margin in Q1 2017 was 46.2%, an increase of approximately 700 basis points compared to 39.2% in Q1 2016, primarily due to a greater proportion of Business Services revenue in consolidated revenue. Business Services gross margin was 57.4%, compared to 59.0% in Q1 2016. Carrier Services gross margin was 2.7%, compared to 4.4% in Q1 2016.
Net loss attributable to common shareholders in Q1 2017 was $4.7 million, or $(0.23) per share on a basic and diluted basis, compared to net loss in Q1 2016 of $4.1 million, or $(0.30) per share on a basic and diluted basis.
Adjusted EBITDA grew 18% in Q1 2017 to $3.3 million, compared to $2.8 million in Q1 2016. Adjusted EBITDA grew 49% compared to $2.2 million in Q4 2016, due primarily to the successful integration of Apptix and synergies achieved from the acquisition which closed in November 2016.
Cash at March 31, 2017 totaled $6.6 million, compared to $7.2 million at December 31, 2016. During Q1 2017, the Company made approximately $813,000 in principal payments, reducing its outstanding term loan balance.
On March 31, 2017, the Company converted 2,958 shares of its Series B-2 Preferred Stock into 986,665 shares of common stock.
Further details about the Company's financial results are available in its quarterly report on Form 10-Q, which is available in the investor relations section of the Company's website at ir.fusionconnect.com .
Conference Call Information
Fusion will host a conference call today to discuss its Q1 2017 financial results, followed by a question and answer period. To access the call, please use the following information:
Date: Wednesday, May 10, 2017 Time: 4:30 p.m. ET / 1:30 p.m. PT Dial-in: (844) 883-3892 (domestic) / (412) 317-9248 (international) Webcast: ir.fusionconnect.com under "Events"
Participants should dial in 10 minutes prior to the start time and ask to be placed into the Fusion call. An operator will register your name and organization. If you have any difficulty connecting with the conference call, please contact MZ Group at (949) 491-8235.
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 March 31, | ||||||||
| 2017 | 2016 | |||||||
| Revenues | $ | 35,811,876 | $ | 33,794,249 | ||||
| Cost of revenues (exclusive of depreciation and amortization, shown separately below) | 19,270,913 | 20,531,511 | ||||||
| Gross profit | 16,540,963 | 13,262,738 | ||||||
| Depreciation and amortization | 3,837,148 | 2,916,263 | ||||||
| Selling, general and administrative expenses (including stock- based compensation of $224,647 and $198,884, respectively) | 14,134,875 | 11,424,786 | ||||||
| Total operating expenses | 17,972,023 | 14,341,049 | ||||||
| Operating loss | (1,431,060 | ) | (1,078,311 | ) | ||||
| Other (expenses) income: | ||||||||
| Interest expense | (2,092,312 | ) | (1,627,964 | ) | ||||
| (Loss) gain on change in fair value of derivative liabilities | (40,445 | ) | 182,400 | |||||
| Loss on disposal of property and equipment | (26,800 | ) | - | |||||
| Other income, net | 116,480 | (9,670 | ) | |||||
| Total other expenses | (2,043,077 | ) | (1,455,234 | ) | ||||
| Loss before income taxes | (3,474,137 | ) | (2,533,545 | ) | ||||
| Provision for income taxes | (7,811 | ) | - | |||||
| Net loss | (3,481,948 | ) | (2,533,545 | ) | ||||
| Preferred stock dividends | (1,254,109 | ) | (1,531,982 | ) | ||||
| Net loss attributable to common stockholders | $ | (4,736,057 | ) | $ | (4,065,527 | ) | ||
| Basic and diluted loss per common share | $ | (0.23 | ) | $ | (0.30 | ) | ||
| Weighted average common shares outstanding: | ||||||||
| Basic and diluted | 20,707,699 | 13,741,366 | ||||||
| FUSION TELECOMMUNICATIONS INTERNATIONAL, INC. AND SUBSIDIARIES | ||||||||
| Consolidated Balance Sheets | ||||||||
| March 31, | December 31, | |||||||
| 2017 | 2016 | |||||||
| (Unaudited) | ||||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | 6,642,153 | $ | 7,221,910 | ||||
| Accounts receivable, net of allowance for doubtful accounts of approximately $690,000 and $427,000, respectively | 12,316,401 | 9,359,876 | ||||||
| Prepaid expenses and other current assets | 1,590,928 | 1,084,209 | ||||||
| Total current assets | 20,549,482 | 17,665,995 | ||||||
| Property and equipment, net | 13,520,740 | 14,248,915 | ||||||
| Security deposits | 630,373 | 630,373 | ||||||
| Restricted cash | 27,153 | 27,153 | ||||||
| Goodwill | 35,286,629 | 35,689,215 | ||||||
| Intangible assets, net | 63,190,659 | 63,617,471 | ||||||
| Other assets | 68,822 | 77,117 | ||||||
| TOTAL ASSETS | $ | 133,273,858 | $ | 131,956,239 | ||||
| LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||
| Current liabilities: | ||||||||
| Term loan - current portion | $ | 4,062,500 | $ | 2,979,167 | ||||
| Obligations under asset purchase agreements - current portion | 912,212 | 546,488 | ||||||
| Equipment financing obligations | 1,041,466 | 1,002,578 | ||||||
| Accounts payable and accrued expenses | 23,347,554 | 19,722,838 | ||||||
| Total current liabilities | 29,363,732 | 24,251,071 | ||||||
| Long-term liabilities: | ||||||||
| Notes payable - non-related parties, net of discount | 31,561,993 | 31,431,602 | ||||||
| Notes payable - related parties | 889,413 | 875,750 | ||||||
| Term loan | 58,900,945 | 60,731,204 | ||||||
| Indebtedness under revolving credit facility | 3,000,000 | 3,000,000 | ||||||
| Obligations under asset purchase agreements | 1,315,811 | 890,811 | ||||||
| Equipment financing obligations | 974,701 | 1,237,083 | ||||||
| Derivative liabilities | 376,321 | 348,650 | ||||||
| Total liabilities | 126,382,916 | 122,766,171 | ||||||
| Commitments and contingencies | ||||||||
| Stockholders' equity (deficit): | ||||||||
| Preferred stock, $0.01 par value, 10,000,000 shares authorized, 14,341 and 17,299 shares issued and outstanding | 143 | 174 | ||||||
| Common stock, $0.01 par value, 90,000,000 and 50,000,000 shares authorized, 22,412,403 and 20,642,028 shares issued and outstanding | 224,124 | 206,422 | ||||||
| Capital in excess of par value | 193,398,183 | 192,233,032 | ||||||
| Accumulated deficit | (186,731,508 | ) | (183,249,560 | ) | ||||
| Total stockholders' equity | 6,890,942 | 9,190,068 | ||||||
| TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $ | 133,273,858 | $ | 131,956,239 | ||||
| FUSION TELECOMMUNICATIONS INTERNATIONAL, INC. AND SUBSIDIARIES | ||||||||
| Reconciliation of Net Loss to EBITDA and Adjusted EBITDA | ||||||||
| Three Months Ended March 31, | ||||||||
| 2017 | 2016 | |||||||
| Net loss | $ | (3,481,948 | ) | $ | (2,533,545 | ) | ||
| Interest expense and other financing costs | 2,108,635 | 1,627,992 | ||||||
| Income tax benefit | 7,811 | - | ||||||
| Depreciation and amortization | 3,837,148 | 2,916,263 | ||||||
| EBITDA | 2,471,646 | 2,010,710 | ||||||
| Acquisition and transaction expenses | 322,639 | 92,370 | ||||||
| Change in fair value of derivative liability | 40,445 | (182,400 | ) | |||||
| Loss on disposal of property and equipment | 26,800 | 60,822 | ||||||
| Non-recurring employment related expenses | - | 535,500 | ||||||
| Stock based compensation expense | 397,392 | 250,785 | ||||||
| Adjusted EBITDA | $ | 3,258,922 | $ | 2,767,787 | ||||
About Fusion
Fusion (
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.
Fusion Contact: Brian Coyne (212) 201-2404 Email contact Investor Relations: Chris Tyson MZ North America (949) 491-8235 Email contact www.mzgroup.us
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