Fusion Reports Second Quarter 2016 Results
Revenue Grows 21% to $30.4 Million; Introduces Three-Year Financial Targets
/EINPresswire.com/ -- NEW YORK, NY--(Marketwired - August 11, 2016) - Fusion (NASDAQ: FSNN), a leading cloud services provider, today announced financial results for the quarter ended June 30, 2016.
Second Quarter Highlights
- Consolidated revenue increased 21% year-over-year to $30.4 million, driven by a 30% increase in Business Services segment revenue to $20.8 million
- Adjusted EBITDA (a non-GAAP measure) was $2.2 million, consistent with the second quarter of 2015, reflecting investments in sales and marketing
- Signed a total of $8.8 million in new Business Services contract value during the second quarter, up 65% from the year-ago period
- Ended the quarter with approximately $390,000 in Business Services MRR in backlog, representing $13.7 million in total contract value
- Signed several large, multi-year enterprise customers combining multiple cloud service offerings into an integrated solution
- Ended the quarter with approximately 12,200 customers, an average monthly revenue per customer (ARPU) of $547, and a churn rate of 1.26%
- Established three-year financial targets of $200 million in revenue, 50% gross margin, and 15% Adjusted EBITDA margin
Matthew Rosen, Fusion's Chief Executive Officer, commented, "During the second quarter, Fusion delivered very strong year-over-year revenue growth and solid bookings of nearly $9 million driven in part by several large, multi-year enterprise customer wins. These included a $1.3 million contract with a leading cybersecurity company, a $650,000 contract with a regional Midwestern library system, and a $500,000 contract with a major industrial company. These large wins will help drive revenue growth in the second half of the year.
"We anticipate that our momentum will continue as we made additional investments during the second quarter in our direct sales organization. Since we appointed John Hendler as our new Senior Vice President of Sales in April, we have brought in 10 highly experienced sales professionals to strengthen and expand our sales organization. With these new hires expected to ramp up during the second half of 2016, and as we convert our backlog into monthly recurring revenue, we will be in a position to deliver our goal of 5% to 7% annualized organic growth."
Michael Bauer, Fusion's Chief Financial Officer, said, "We are introducing a set of financial objectives for Fusion, targeting a run rate of $200 million in revenue, a 50% gross margin, and a 15% Adjusted EBITDA margin. We intend to achieve these objectives by driving further growth in our higher-margin Business Services segment through a combination of organic growth and targeted acquisitions. Our acquisition pipeline is robust, and we remain optimistic that we can complete one to two transactions per year and achieve our financial objectives within the next three years."
Second Quarter Results
Fusion reported consolidated revenue of $30.4 million for the quarter ended June 30, 2016, which represents an increase of $5.3 million or 21% over consolidated revenue of $25.1 million reported for the second quarter of 2015.
Revenue in the Company's Business Services segment increased 30% to $20.8 million in the second quarter of 2016, as compared to $16.0 million in the second quarter of 2015, driven primarily by the Fidelity acquisition in the fourth quarter of 2015.
Revenue in the Company's Carrier Services segment was $9.6 million, as compared to $9.0 million in the second 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 second quarter of 2016 was 43.3% as compared to 44.9% in the second quarter of 2015. Business Services had a gross margin of 61.1% for the second quarter of 2016, compared to 63.6% in the second quarter of 2015. Carrier Services' gross margin for the quarter ended June 30, 2016 was 4.8%, down from 11.6% 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 $2.9 million, or $0.20 per share on a basic and diluted basis, as compared to a net loss of $1.3 million, or $0.33 per share on a basic and diluted basis for the second quarter of 2015. In the second quarter of 2016, net loss included a $46,000 non-cash gain in the fair value of derivative liability, as compared to a $2.5 million gain in the second quarter of 2015. Adjusted EBITDA was $2.2 million during the second quarter of 2016 and the second quarter of 2015.
Conference Call Information
Fusion will hold a conference call today, Thursday, August 11, 2016 at 10:30 a.m. Eastern Time to discuss its results for the quarter ended June 30, 2016. 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 Six Months Ended
June 30, June 30,
------------------------ ------------------------
2016 2015 2016 2015
----------- ----------- ----------- -----------
Revenues $30,420,291 $25,063,695 $63,604,706 $50,326,733
Cost of revenues
(exclusive of
depreciation and
amortization, shown
separately below) 17,244,814 13,813,615 37,166,491 27,826,307
----------- ----------- ----------- -----------
Gross profit 13,175,477 11,250,080 26,438,215 22,500,426
Depreciation and
amortization 3,031,890 3,039,758 5,948,153 6,043,205
Selling, general and
administrative expenses 11,270,013 9,851,735 22,694,799 19,582,713
----------- ----------- ----------- -----------
Total operating expenses 14,301,903 12,891,493 28,642,952 25,625,918
----------- ----------- ----------- -----------
Operating (loss) income (1,126,426) (1,641,413) (2,204,737) (3,125,492)
----------- ----------- ----------- -----------
Other (expenses) income:
Interest expense (1,624,669) (1,608,709) (3,252,633) (3,215,552)
Gain (loss) on change in
fair value of
derivative liability 45,642 2,510,950 228,042 1,306,148
Other income (expense),
net 25,115 26,756 15,445 58,767
----------- ----------- ----------- -----------
Total other income
(expenses) (1,553,912) 929,006 (3,009,146) (1,850,637)
----------- ----------- ----------- -----------
Loss before income taxes (2,680,338) (712,407) (5,213,883) (4,976,129)
Provision for income
taxes - - - -
----------- ----------- ----------- -----------
Net loss (2,680,338) (712,407) (5,213,883) (4,976,129)
Preferred stock
dividends in arrears (284,839) (630,523) (1,816,821) (1,049,511)
----------- ----------- ----------- -----------
Net loss attributable to
common stockholders $(2,965,177) $(1,342,930) $(7,030,704) $(6,025,640)
=========== =========== =========== ===========
----------- ----------- ----------- -----------
Basic and diluted loss
per common share $ (0.20) $ (0.33) $ (0.49) $ (0.81)
----------- ----------- ----------- -----------
Weighted average common
shares outstanding:
Basic and diluted 14,864,768 8,461,794 14,306,170 8,311,499
=========== =========== =========== ===========
FUSION TELECOMMUNICATIONS INTERNATIONAL, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
June 30, December 31,
2016 2015
------------- -------------
(unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 3,798,911 $ 7,540,543
Accounts receivable, net of allowance for
doubtful accounts of approximately $311,654
and $308,813, respectively 7,881,031 7,650,141
Prepaid expenses and other current assets 2,627,478 1,618,603
------------- -------------
Total current assets 14,307,420 16,809,287
------------- -------------
Property and equipment, net 13,234,210 14,055,493
------------- -------------
Other assets:
Security deposits 549,423 575,038
Restricted cash 27,153 165,123
Goodwill 27,722,494 27,060,297
Intangible assets, net 44,078,486 45,824,399
Other assets 530,732 281,045
------------- -------------
Total other assets 72,958,288 73,905,902
------------- -------------
TOTAL ASSETS $ 100,499,918 $ 104,770,682
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable - non-related parties $ 685,780 $ 685,780
Due to RootAxcess seller 500,000 300,000
Due to TFB seller 100,000 -
Equipment financing obligations 991,681 959,380
Accounts payable and accrued expenses 13,263,707 13,129,225
------------- -------------
Total current liabilities 15,541,168 15,074,385
------------- -------------
Long-term liabilities:
Notes payable - non-related parties, net of
discount 30,713,635 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 886,606 -
Notes payable - related parties 1,099,530 1,074,829
Equipment financing obligations 1,744,190 2,085,416
Derivative liabilities 385,990 953,005
------------- -------------
Total liabilities 90,371,119 90,316,713
============= =============
Commitments and contingencies
Stockholders' equity (deficit):
Preferred stock, $0.01 par value, 10,000,000
shares authorized,17,324 and 23,324 shares
issued and outstanding 173 233
Common stock, $0.01 par value, 50,000,000
shares authorized, 14,975,482 and 12,788,971
shares issued and outstanding 149,755 127,890
Capital in excess of par value 185,725,991 184,859,082
Accumulated deficit (175,747,120) (170,533,237)
------------- -------------
Total stockholders' equity 10,128,799 14,453,969
------------- -------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 100,499,918 $ 104,770,682
============= =============
FUSION TELECOMMUNICATIONS INTERNATIONAL, INC. AND SUBSIDIARIES
Reconciliation of Net Loss to EBITDA and Adjusted EBITDA
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
------------------------ ------------------------
2016 2015 2016 2015
----------- ----------- ----------- -----------
Net (loss) $(2,680,338) $ (712,407) $(5,213,883) $(4,976,129)
Interest expense and
other financing costs 1,624,923 1,623,115 3,252,915 3,229,958
Depreciation and
amortization 3,031,890 3,039,758 5,948,153 6,043,205
----------- ----------- ----------- -----------
EBITDA 1,976,475 3,950,466 3,987,185 4,297,034
Acquisition transaction
expenses 71,439 458,929 163,809 1,165,302
Change in fair value of
derivative liability (45,642) (2,510,950) (228,042) (1,306,148)
(Gain) loss on disposal
of property and
equipment 11,996 (1,390) 72,818 (1,390)
Non-recurring employee
related expenses - - 535,500 28,846
Stock based compensation
expense 207,712 285,662 458,496 504,529
----------- ----------- ----------- -----------
Adjusted EBITDA $ 2,221,980 $ 2,182,717 $ 4,989,766 $ 4,688,173
=========== =========== =========== ===========
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 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, 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
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