NEW YORK, NY--(Marketwired - August 14, 2017) - Fusion (
Second Quarter Financial and Operational Highlights
- Business Services segment revenue grew 40% year over year to $30.0 million, of which over 86% was contracted and recurring. Consolidated revenue grew 23% to $38.1 million, compared to $31.0 million in Q2 2016
- Consolidated gross margin increased approximately 270 basis points to 45.1%, compared to 42.4% in Q2 2016
- Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization ("Adjusted EBITDA") grew 66% to $3.7 million, compared to $2.2 million in Q2 2016 and grew 13% compared to $3.3 million in Q1 2017 (see definition and further discussion about the presentation of Adjusted EBITDA, a non-GAAP measurement, below)
- Ended the quarter with approximately 13,100 Business Services customers and approximately $13.4 million in total contract value in backlog
- Ended the quarter with an average monthly revenue per customer ("ARPU") of $751, compared to $539 at June 30, 2016 and $732 at March 31, 2017
- Ended the quarter with monthly churn of 0.9%, compared to 1.0% in Q2 2016 and 1.0% in Q1 2017
- Reduced the Company's senior debt balance by $4.6 million year to date, as the Company made scheduled principal payments and paid down its revolving credit facility during the quarter
- Announced the formation of Fusion Global Services, which will combine Fusion's Carrier Services division with XComIP, LLC, enhancing Fusion's focus on its Business Services segment and reducing operating expense, thereby improving the Company's consolidated margin profile
- Completed the implementations of a new operations support system (OSS) and unified billing platform
- Launched a new and enhanced customer portal for Fusion's leading-edge SD-WAN (Software Defined Wide Area Network) cloud network solution
- Added to the Russell Microcap Index, one of the most widely followed equity investment benchmarks for emerging growth companies
"Fusion continued to improve its financial performance as demonstrated by our strong results in the second quarter," said Matthew Rosen, Fusion's CEO. "By executing on our strategy, we delivered solid year-over-year growth in revenue and Adjusted EBITDA by leveraging our market position as the single source for the cloud, our unified service delivery platform, and our robust nationwide network. The investments we have made in our highly scalable platform and our sales and marketing organization have enabled us to expand our margins efficiently as we grow both organically and through acquisition. Furthermore, the implementation of our new OSS system, which we completed during the second quarter, will improve Fusion's operational efficiency, reduce the time between sales and revenue recognition, and allow us to integrate acquisitions faster and more easily.
"I am also pleased to note that Fusion produced nearly 11% year-over-year revenue growth in Business Services, excluding the contribution from our Apptix acquisition which closed last November. We achieved this through a combination of solid sales bookings, installations and customer novations. In addition, our M&A pipeline remains solid, and we continue to anticipate closing one to two acquisitions per year to drive significant growth in our customer base, revenue and cash flow."
Michael Bauer, Fusion's CFO, said, "In the first half of this year, we reduced our outstanding debt by $4.6 million through principal payments and repayments against our revolver. At quarter end, our full $5.0 million revolver was undrawn and available. Also, we remained focused on taking meaningful steps to simplify our capital structure and improve our financial flexibility in the coming quarters.
"The Apptix acquisition has been fully integrated and we have achieved the full run-rate of our expected cost synergies. And, with our expanded Business Services platform and our robust sales and M&A pipelines, Fusion is well positioned to achieve its intermediate financial goals of $200 million in annual revenue and $30 million in annual Adjusted EBITDA."
Second Quarter 2017 Financial Results
Fusion's consolidated revenue grew 23% in Q2 2017 to $38.1 million, compared to $31.0 million in Q2 2016, due to an increase in the Company's Business Services segment revenue. Business Services revenue grew 40% to $30.0 million, compared to $21.4 million in Q2 2016, primarily due to the acquisition of Apptix which closed in November 2016. Carrier Services segment revenue in Q2 2017 was $8.1 million, compared to $9.6 million in Q2 2016, primarily due to a decline in the total minutes of traffic carried on Fusion's network.
Consolidated gross margin in Q2 2017 was 45.1%, an increase of approximately 270 basis points compared to 42.4% in Q2 2016, primarily due to a greater proportion of Business Services revenue in consolidated revenue. Business Services segment gross margin of 56.7% decreased slightly from 59.3% in Q2 2016, primarily due to the addition of lower margin revenue from new customers the Company began servicing during the second quarter. Carrier Services segment gross margin was 2.4% compared to 4.8% in Q2 2016.
Net loss attributable to common shareholders in Q2 2017 was $3.1 million, or $(0.14) per share on a basic and diluted basis, compared to net loss in Q2 2016 of $3.0 million, or $(0.20) per share on a basic and diluted basis.
Adjusted EBITDA grew 66% in Q2 2017 to $3.7 million, compared to $2.2 million in Q2 2016, and grew 13% compared to $3.3 million in Q1 2017, due primarily to revenue growth and the achievement of additional synergies associated with the acquisition of Apptix.
Capital expenditures in Q2 2017 totaled $1.4 million, or 3.6% of revenue. Capital expenditures in the first half of 2017 totaled $2.3 million, or 3.2% of revenue.
Cash at June 30, 2017 totaled $2.4 million, compared to $7.2 million at December 31, 2016. During 2017, the Company made $4.6 million in debt pay downs, reducing its outstanding term loan balance by $1.6 million and completely repaying the $3.0 million outstanding on its revolving credit facility. As of June 30, 2017, the Company's full $5.0 million revolving credit facility was undrawn and available.
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 CEO Matthew Rosen and CFO Michael Bauer will host a conference call today to discuss its Q2 2017 financial results, followed by a question and answer period. To access the call, please use the following information:
Date: Monday, August 14, 2017
Time: 4:30 p.m. ET / 1:30 p.m. PT
Dial-in: (888) 427-9411 (domestic) / (913) 981-5526 (international); Conference ID 4384178
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 June 30, | Six Months Ended June 30, | |||||||||||||||
| 2017 | 2016 | 2017 | 2016 | |||||||||||||
| Revenues | $ | 38,089,006 | $ | 31,041,047 | $ | 73,900,882 | $ | 64,835,296 | ||||||||
| Cost of revenues (exclusive of depreciation and amortization, shown separately below) | 20,901,548 | 17,865,570 | 40,172,461 | 38,397,081 | ||||||||||||
| Gross profit | 17,187,458 | 13,175,477 | 33,728,421 | 26,438,215 | ||||||||||||
| Depreciation and amortization | 3,600,609 | 3,031,890 | 7,437,757 | 5,948,153 | ||||||||||||
| Selling, general and administrative expenses | 14,330,934 | 11,270,013 | 28,465,809 | 22,694,799 | ||||||||||||
| Total operating expenses | 17,931,543 | 14,301,903 | 35,903,566 | 28,642,952 | ||||||||||||
| Operating loss | (744,085 | ) | (1,126,426 | ) | (2,175,145 | ) | (2,204,737 | ) | ||||||||
| Other (expenses) income: | ||||||||||||||||
| Interest expense | (2,172,084 | ) | (1,624,669 | ) | (4,264,396 | ) | (3,252,633 | ) | ||||||||
| Gain on change in fair value of derivative liability | 113,779 | 45,642 | 73,334 | 228,042 | ||||||||||||
| Loss on disposal of property and equipment | (65,250 | ) | (11,996 | ) | (92,050 | ) | (72,818 | ) | ||||||||
| Other income, net | 13,365 | 37,111 | 129,845 | 88,263 | ||||||||||||
| Total other expenses | (2,110,190 | ) | (1,553,912 | ) | (4,153,267 | ) | (3,009,146 | ) | ||||||||
| Loss before income taxes | (2,854,275 | ) | (2,680,338 | ) | (6,328,412 | ) | (5,213,883 | ) | ||||||||
| Provision for income taxes | (23,100 | ) | - | (30,911 | ) | - | ||||||||||
| Net loss | (2,877,375 | ) | (2,680,338 | ) | (6,359,323 | ) | (5,213,883 | ) | ||||||||
| Preferred stock dividends in arrears | (240,498 | ) | (284,839 | ) | (1,494,607 | ) | (1,816,821 | ) | ||||||||
| Net loss attributable to common stockholders | $ | (3,117,873 | ) | $ | (2,965,177 | ) | $ | (7,853,930 | ) | $ | (7,030,704 | ) | ||||
| Basic and diluted loss per common share | $ | (0.14 | ) | $ | (0.20 | ) | $ | (0.36 | ) | $ | (0.49 | ) | ||||
| Weighted average common shares outstanding: | ||||||||||||||||
| Basic and diluted | 22,408,335 | 14,864,768 | 21,562,714 | 14,306,170 | ||||||||||||
| FUSION TELECOMMUNICATIONS INTERNATIONAL, INC. AND SUBSIDIARIES | ||||||||
| Consolidated Balance Sheets | ||||||||
| June 30, | December 31, | |||||||
| 2017 | 2016 | |||||||
| (Unaudited) | ||||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | 2,407,317 | $ | 7,221,910 | ||||
| Accounts receivable, net of allowance for doubtful accounts | 9,486,904 | 9,359,876 | ||||||
| Prepaid expenses and other current assets | 1,707,268 | 1,084,209 | ||||||
| Total current assets | 13,601,489 | 17,665,995 | ||||||
| Property and equipment, net | 13,850,574 | 14,248,915 | ||||||
| Security deposits | 612,299 | 630,373 | ||||||
| Restricted cash | 27,153 | 27,153 | ||||||
| Goodwill | 35,286,629 | 35,689,215 | ||||||
| Intangible assets, net | 60,975,789 | 63,617,471 | ||||||
| Other assets | 60,527 | 77,117 | ||||||
| TOTAL ASSETS | $ | 124,414,460 | $ | 131,956,239 | ||||
| LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||
| Current liabilities: | ||||||||
| Term loan - current portion | $ | 4,875,000 | $ | 2,979,167 | ||||
| Obligations under asset purchase agreements - current portion | 911,370 | 546,488 | ||||||
| Equipment financing obligations | 1,238,986 | 1,002,578 | ||||||
| Accounts payable and accrued expenses | 20,692,741 | 19,722,838 | ||||||
| Total current liabilities | 27,718,097 | 24,251,071 | ||||||
| Long-term liabilities: | ||||||||
| Notes payable - non-related parties, net of discount | 31,692,383 | 31,431,602 | ||||||
| Notes payable - related parties | 903,583 | 875,750 | ||||||
| Term loan | 57,341,519 | 60,731,204 | ||||||
| Indebtedness under revolving credit facility | - | 3,000,000 | ||||||
| Obligations under asset purchase agreements | 1,290,811 | 890,811 | ||||||
| Equipment financing obligations | 983,364 | 1,237,083 | ||||||
| Derivative liabilities | 262,542 | 348,650 | ||||||
| Total liabilities | 120,192,299 | 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 shares authorized, 22,505,365 and 20,642,028 shares issued and outstanding | 225,054 | 206,422 | ||||||
| Capital in excess of par value | 193,605,847 | 192,233,032 | ||||||
| Accumulated deficit | (189,608,883 | ) | (183,249,560 | ) | ||||
| Total stockholders' equity | 4,222,161 | 9,190,068 | ||||||
| TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $ | 124,414,460 | $ | 131,956,239 | ||||
| FUSION TELECOMMUNICATIONS INTERNATIONAL, INC. AND SUBSIDIARIES | ||||||||||||||||
| Reconciliation of Net Loss to EBITDA and Adjusted EBITDA | ||||||||||||||||
| (Unaudited) | ||||||||||||||||
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
| 2017 | 2016 | 2017 | 2016 | |||||||||||||
| Net (loss) | $ | (2,877,375 | ) | $ | (2,680,338 | ) | $ | (6,359,323 | ) | $ | (5,213,883 | ) | ||||
| Interest expense and other financing costs | 2,167,124 | 1,624,923 | 4,275,759 | 3,252,915 | ||||||||||||
| Income tax benefit | 23,100 | - | 30,911 | - | ||||||||||||
| Depreciation and amortization | 3,600,609 | 3,031,890 | 7,437,757 | 5,948,153 | ||||||||||||
| EBITDA | 2,913,457 | 1,976,475 | 5,385,104 | 3,987,185 | ||||||||||||
| Acquisition transaction expenses | 602,603 | 71,439 | 925,242 | 163,809 | ||||||||||||
| Change in fair value of derivative liability | (113,779 | ) | (45,642 | ) | (73,334 | ) | (228,042 | ) | ||||||||
| (Gain) loss on disposal of property and equipment | 65,250 | 11,996 | 92,050 | 72,818 | ||||||||||||
| Non-recurring employee related expenses | - | - | - | 535,500 | ||||||||||||
| Stock based compensation expense | 225,500 | 207,712 | 622,892 | 458,496 | ||||||||||||
| Adjusted EBITDA | $ | 3,693,031 | $ | 2,221,980 | $ | 6,951,954 | $ | 4,989,766 | ||||||||
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.
Contact Information:
Fusion Contact:
Brian Coyne
(212) 201-2404
www.mzgroup.us