Fusion Generates Positive Adjusted EBITDA and Increases First Quarter Revenue 40% to $16.2 Million

Marketwired

NEW YORK, NY--(Marketwired - May 14, 2013) -  Fusion Telecommunications International, Inc. (OTCQB: FSNN), a provider of cloud communications, cloud computing and managed cloud solutions, today announced financial results for the first quarter ended March 31, 2013.

Company Highlights

  • Achieved revenues of $16.2 million for the quarter ended March 31, 2013, an increase of $4.6 million, or 40.2%, from the first quarter of 2012.
    • Revenues from Fusion's higher margin Business Services Segment increased by $6.9 million to $7.5 million in the first quarter of 2013 compared to the same period last year.
  • Gross profit increased 196% to $4.4 million compared to the three month period ended March 31, 2012.
  • Gross margin increased to 27.3% for the first quarter of 2013, as compared to 12.9% for the first quarter of 2012.
  • Achieved positive adjusted EBITDA milestone: Adjusted EBITDA for the first quarter of 2013 was $0.2 million compared to an adjusted EBITDA loss of $0.6 million for the first quarter of 2012.
  • The number of business customers totaled 3,495 in the first quarter of 2013, with the average revenue per customer reaching approximately $700.00.
  • Signed contracts valued at more than $5.3 million, representing a record quarter of newly contracted business.
  • Completed integration of operations from NBS, the recently acquired cloud services provider.

"Our achievement of positive EBITDA in the first quarter of 2013 was an important and exciting milestone for the Company," stated Matthew Rosen, Fusion's Chief Executive Officer. "We are extremely pleased that our ongoing efforts to increase shareholder value have resulted in a number of significant accomplishments, including record sales in contracted business and an overall increase in revenue of 40%. As we continue to emerge as a leader in the rapidly expanding cloud services industry, we are encouraged by our customers' confidence in the value of our cloud solutions and our commitment to service excellence. The successful integration of NBS systems, infrastructure, experienced management team and staff, coupled with a growing pipeline of sales opportunities, positions us for further growth both organically and through the acquisition of additional profitable businesses in the future. We remain committed to our strategic business model for continued market expansion and strong financial gains."

First Quarter Results

Fusion reported consolidated revenues of $16.2 million for the quarter ended March 31, 2013, an increase of $4.6 million, or 40.2%, from the first quarter of 2012. Revenues from Fusion's Business Services Segment increased by $6.9 million to $7.5 million in the first quarter of 2013 compared to the same period of a year ago, due to the inclusion of revenue contributed by NBS, which the Company acquired on October 29, 2012. The Company's Carrier Services revenue for the first quarter decreased by $2.3 million, or 20.7%, from the first quarter of 2012, due to a decrease in the volume of traffic terminated over its network, partially offset by higher realization rates.

The Company's consolidated gross margin increased to 27.3% for the first quarter of 2013, as compared to 12.9% for the first quarter of 2012, due to an increased contribution from the higher margin Business Services segment, which generated a gross margin of 49.6% in the first quarter of 2013, compared with a 37.7% gross margin in the same period of a year ago, due to the acquisition of NBS. The gross margin for the Carrier Services segment decreased to 8.2% in the first quarter 2013 from 11.6% in the same period of a year ago, mainly due to higher rates for the cost of traffic terminated.

Net loss for the first quarter was $1.6 million, or ($0.01) per share, as compared to $0.8 million and ($0.01) per share in the same period of a year ago. The net loss in the first quarter of 2013 includes interest on senior debt of $0.5 million and amortization of intangibles acquired in the NBS transaction of $0.6 million, with no comparable amounts present in 2012. Adjusted EBITDA (earnings (loss) from continuing operations before interest, taxes, depreciation, amortization, and specific non-recurring and non-cash adjustments) for the first quarter of 2013 was $0.2 million, as compared to an adjusted EBITDA loss of $0.6 million in the first quarter of 2012, with the improvement being attributable to the inclusion of NBS' results in the first quarter of 2013.

At March 31, 2013, the Company had a working capital deficit and stockholders' deficit of $8.3 million and $6.7 million, respectively, as compared to a working capital deficit of $8.0 million and $6.1 million, respectively, at December 31, 2012, and total assets of $27.5 million. 

Use of Non-GAAP Financial Measurements:

The Company believes that EBITDA (earnings from continuing operations before interest, taxes, depreciation and amortization) is useful to investors because it is commonly used in the communications industry to evaluate companies on the basis of operating performance and leverage. The Company also believes that 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. Adjusted EBITDA provides an adjusted view of EBITDA that takes into account certain significant non-recurring transactions, if any, such as impairment losses and professional fees 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 stock-based compensation. 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 period 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 ("U.S. 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 EBITDA and Adjusted EBITDA", immediately following the Consolidated Balance Sheets included in this press release.

   
   
Fusion Telecommunications International, Inc. and Subsidiaries  
Consolidated Statements of Operations  
(unaudited)  
   
    Three Months Ended March 31,  
    2013     2012  
Revenues   $ 16,168,421     $ 11,534,705  
Cost of revenues     11,751,596       10,044,760  
Gross profit     4,416,825       1,489,945  
Operating expenses:                
Depreciation and amortization     849,915       98,223  
Selling general and administrative expenses     4,267,597       2,051,142  
Total operating expenses     5,117,512       2,149,365  
Operating loss     (700,687 )     (659,420 )
Other (expenses) income:                
Interest expense, net of interest income     (659,519 )     (57,086 )
Other     (236,074 )     (69,445 )
Total other (expenses) income     (895,593 )     (126,531 )
Net loss   $ (1,596,280 )   $ (785,951 )
Preferred stock dividends in arrears     (99,246 )     (100,349 )
Net loss applicable to common stockholders:   $ (1,695,526 )   $ (886,300 )
Basic and diluted loss per common share:                
Loss from continuing operations   $ (0.01 )   $ (0.01 )
Loss from discontinued operations     -       -  
Loss per common share   $ (0.01 )   $ (0.01 )
Weighted average common shares outstanding:                
Basic and diluted     178,670,488       159,988,401  
                 
                 
                 
Fusion Telecommunications International, Inc.  
Consolidated Balance Sheets  
   
    March 31, 2013     December 31, 2012  
ASSETS                
Current assets:                
Cash and cash equivalents   $ 419,390     $ 543,214  
Accounts receivable, net     4,225,142       2,924,302  
Inventory     507,949       341,118  
Prepaid expenses and other current assets     655,559       1,001,449  
Total current assets     5,808,040       4,810,083  
Property and equipment, net     2,349,326       2,406,944  
Other assets:                
Security deposits     576,768       439,741  
Restricted cash     1,026,326       1,026,326  
Goodwill     2,406,269       2,406,269  
Intangible assets, net     14,842,792       15,396,117  
Other assets     530,071       582,947  
Total other assets     19,382,226       19,851,400  
TOTAL ASSETS   $ 27,539,592     $ 27,068,427  
                 
LIABILITIES AND STOCKHOLDERS' DEFICIT                
Current liabilities:                
Notes payable - non-related parties   $ 405,137     $ 208,333  
Notes payable - related parties     696,429       639,286  
Equipment financing obligations     136,281       136,392  
Accounts payable and accrued expenses     11,671,386       10,579,496  
Related party payable     1,127,550       1,159,573  
Current liabilities from discontinued operations     55,000       55,000  
Total current liabilities     14,091,783       12,778,080  
Long-term liabilities:                
Notes payable - non-related parties, net of discount     14,396,108       14,475,747  
Notes payable - related parties     4,281,422       4,492,136  
Equipment financing obligations     72,247       102,071  
Derivative liability     1,199,250       1,066,000  
Other long-term liabilities     232,310       266,132  
Total liabilities     34,273,120       33,180,166  
Stockholders' deficit:                
                 
Preferred stock     119       119  
Common stock     1,908,491       1,782,504  
Capital in excess of par value     147,608,509       146,760,005  
Accumulated deficit     (156,250,647 )     (154,654,367 )
Total stockholders' deficit     (6,733,528 )     (6,111,739 )
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT   $ 27,539,592     $ 27,068,427  
                 
                 
                 
Fusion Telecommunications International, Inc. and Subsidiaries  
Reconciliation of Net Loss to EBITDA and Adjusted EBITDA  
(unaudited)  
   
    Three Months Ended March 31,  
    2013     2012  
Net loss   $ (1,596,280 )   $ (785,951 )
Interest expense and other financing costs     743,003       132,238  
Depreciation and amortization     849,915       98,223  
EBITDA     (3,362 )     (555,490 )
Acquisition transaction expenses     -       16,306  
Loss on forgiveness of debt     58,203       -  
Change in fair value of derivative liability     133,250       -  
Non-cash adjustment to tax accruals     -       (98,141 )
Stock-based compensation expense     47,831       6,996  
Adjusted EBITDA   $ 235,922     $ (630,329 )
                 

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 can 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. This disclosure highlights some of the important risks regarding the Company's business. The primary risk is the Company's ability to raise new and continued capital to execute its comprehensive business strategy. Additional risks include uncertainties associated with: the integration of businesses following an acquisition; the Company's ability to comply with its senior debt agreements; concentration of revenue from one source; 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; the termination of any of the Company's significant contracts or partnerships; the Company's inability to maintain working capital requirements to fund future operations; the Company's ability to attract and retain highly qualified management, technical and sales personnel; and the other factors identified by us from time to time in the Company's filings with the Securities and Exchange Commission, which are available through http://www.sec.gov. However, the reader is cautioned that our future performance could also be affected by risks and uncertainties not enumerated above.

About Fusion

Fusion is a leading provider of cloud communications, cloud computing and managed applications solutions to small, medium and large businesses, and carriers worldwide. Fusion's advanced, high availability service platform enables the integration of leading edge products and services in the cloud, including hosted voice, data, managed network services, Infrastructure as a Service, storage, security, data center services and Emergency Preparedness. Fusion's innovative yet proven cloud-based 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.fusiontel.com.

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Laura Nadal
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