Fusion Reports Fourth Quarter and Full Year 2009 Results

NEW YORK, March 25 /PRNewswire-FirstCall/ --  Fusion (OTC Bulletin Board: FSNN) today announced financial results for the quarter and full year ended December 31, 2009. All figures cited exclude the impact of the former consumer business segment, which has been reclassified to discontinued operations.

Fusion reported Consolidated Revenues of $40.9 million and $11.4 million for the year and quarter ended December 31, 2009, respectively.  This represented a decrease in Consolidated Revenues of 17.4% and 10.9% when compared to revenues of $49.5 million and $12.8 million for the year and quarter ended December 31, 2008. The decrease over the prior year was primarily attributable to a decrease in Carrier Services business segment revenues due to lower traffic volumes resulting from the challenging economic environment, constraints on resources resulting from the Company’s focus during the year on its restructuring and exiting the consumer business, limitations on the Company’s ability to offer extended payment terms to large customers due to its cash position, and normally expected variations in traffic.

Although overall revenues were lower than anticipated, due to the reasons indicated above, Consolidated Gross Margin increased significantly to 8.3% for the full year and 10.2% for the fourth quarter of 2009 compared to 6.2% for the full year and 5.9% for the fourth quarter of 2008. The increase in Consolidated Gross Margin is a result of stronger gross margins in the Carrier Services business segment, as well as an increased contribution from the higher margin Corporate Services business segment, which achieved a gross margin for the fourth quarter and full year 2009 of 36.2% and 36.1% respectively.

In addition, despite lower revenues for the Carrier Services business segment, fourth quarter revenues for the Corporate Services business segment increased by 212% when comparing 2009 to 2008 and by 180% when comparing to the fourth quarter of 2009 to the fourth quarter of 2008. The fourth quarter was our eighth successive quarter of growth in both revenue and margin for the Corporate Services business segment.

Selling, General and Administrative costs also improved significantly with a 12.4% decrease in SG&A costs when comparing 2009 to 2008.  In addition, there was a 4.3% improvement in SG&A costs when comparing the fourth quarter of 2009 to the fourth quarter of 2008.

For the year ended December 31, 2009, Adjusted EBITDA loss (earnings before interest, taxes, depreciation, amortization, and specific non-recurring and non-cash adjustments) decreased $1.2 million, or 18.2%, to ($5.4) million, compared to ($6.6) million for the year ended December 31, 2008. The fourth quarter of 2009 was the Company’s best quarter in Adjusted EBITDA performance since the Company’s Initial Public Offering in the first quarter of 2005.

Fusion also reported a decrease in Net Loss for the year ended December 31, 2009 compared to the year ended December 31, 2008.  For 2009, Fusion reported a Net Loss of ($9.6) million, and a Net Loss applicable to Common Stockholders of ($10.2 million) or ($0.16) per share compared to a Net Loss of ($15.6) million, and a Net Loss applicable to Common Stockholders of ($16.2) million or ($0.44) per share during the year ended December 31, 2008.  

As of December 31, 2009, the Company had Current Assets of $2.9 million compared to $4.2 million as of December 31, 2008.  Total Liabilities as of December 31, 2009, were $12.7 compared to $14.2 at December 31, 2008. Stockholders' Equity (deficit) at December 31, 2009 was a ($7.3) million deficit, compared to a ($4.8) million deficit at December 31, 2008.

Commenting on the results, Matthew Rosen, Chief Executive Officer of Fusion, said, “During the first quarter of 2009, Fusion initiated a plan to restructure its corporate organization and implement major cost reductions as part of its efforts to achieve profitability.  These efforts, which culminated in the Company’s sale of its consumer business in the second quarter of 2009, allowed Fusion to increase its focus on the Corporate Services and Carrier Services business segments.  I am pleased to report that several key improvements have resulted from the restructuring which demonstrate the significant progress we have made in achieving the milestones we set for ourselves. Consolidated Gross Margin percentage improved 73% from the first quarter of 2009 to the fourth quarter of 2009, which, when combined with continuing improvement in expense reduction over the period, helped improve our Net Loss by 42% when comparing the fourth quarter of 2009 to the first quarter of 2009. We are especially pleased to report that Adjusted EBITDA improved 46% from the first quarter of 2009 to the fourth quarter of 2009. Although we still have much to do, including raising necessary financing, we believe we are well positioned for a strong 2010.”

Expanding on Mr. Rosen’s comments, Don Hutchins, President and Chief Operating Officer of Fusion, said, “We have been delighted with the dramatic growth in our Corporate Services business segment, as evidenced by the strong performance in 2009, as well as the significant improvement in margin contribution from both the Corporate and Carrier business segments. We experienced 280% growth in the number of corporate customers in 2009, and more than 400% growth in total contract value.  A growing pipeline of potential accounts and an expansion of our experienced sales force should help accelerate revenue growth and position us well for the future.”

Use of Non-GAAP Financial Measures:

The Company believes that EBITDA (earnings before interest, taxes, depreciation and amortization) is useful to investors because it is commonly used in the communications industry to analyze 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 nonrecurring transactions, such as impairment losses associated with divested businesses and forgiveness of debt, which vary significantly between periods and are not recurring in nature. 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 Generally Accepted Accounting Principles (GAAP).  Consistent with the SEC Regulation G, the non-GAAP measures in this press release have been reconciled to the nearest GAAP measure, which can be viewed under the heading "Reconciliation of Net Income (Loss) to Adjusted EBITDA", immediately following the Consolidated Statements of Operations included in this press release.

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 1995. All forward-looking statements involve a number of risks and uncertainties that could cause actual results to differ materially from the plans, intentions and expectations reflected in or suggested by the forward-looking statements. Such risks and uncertainties include, among others, introduction of products in a timely fashion, market acceptance of new products, cost increases, fluctuations in and obsolescence of inventory, price and product competition, availability of labor and materials, development of new third-party products and techniques that render Fusion's products obsolete, delays in obtaining regulatory approvals, potential product recalls, securing necessary funding and litigation. Risk factors, cautionary statements and other conditions which could cause Fusion's actual results to differ from management's current expectations are contained in Fusion's filings with the Securities and Exchange Commission and available through http://www.sec.gov

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    FUSION       Philip Turits
    CONTACT:     212-201-2407
                 pturits@fusiontel.com
    
    
          FUSION TELECOMMUNICATIONS INTERNATIONAL, INC. AND SUBSIDIARIES      
                       CONSOLIDATED STATEMENT OF OPERATIONS                   
                                                                              
                                                                              
                            Three Months Ended          Fiscal Year Ended     
                               December 31,               December 31,        
                               ------------               ------------        
                             2009         2008          2009          2008 
                             ----         ----          ----          ---- 
                                                                              
    Revenues             $11,433,533  $12,833,957   $40,938,615   $49,498,727 
    Operating expenses:                                                       
      Cost of revenues    10,261,872   12,079,432    37,553,727    46,437,810 
      Depreciation and                                                        
       amortization          341,263      472,438     1,361,798     1,819,112 
      Loss on Impairment           -      129,232       243,000       129,232 
      Selling, general                                                        
       and administrative                                     
       expenses            2,224,141    2,349,459     9,216,292    10,515,377 
      Advertising and                                                         
       Marketing              28,186       20,294        42,704        50,576 
                              ------       ------        ------        ------ 
           Total operating                                    
            expenses      12,855,462   15,050,855    48,417,522    58,952,107 
                          ----------   ----------    ----------    ---------- 
    Operating loss        (1,421,929)  (2,216,898)   (7,478,907)   (9,453,379)
                                                                              
    Other income (expense)                                                    
      Gain (loss) on                                                          
       sale/disposal of                                                       
       Fixed Assets          (71,178)           0       (71,178)      (59,158)
      Gain (loss) on                                                          
       sale of Other                                                          
       Assets                      -            -             -          (537)
      Interest income                                                         
       (expense), net        (58,610)    (121,663)     (383,227)     (316,299)
      Gain (loss) on                                                          
       debt forgiveness       12,758            -        12,758       659,991 
      Other                    3,650         (854)        9,135         2,769 
                               -----         ----         -----         ----- 
         Total other income 
          (expense)         (113,380)    (122,517)     (432,512)      286,766 
                            --------     --------      --------       ------- 
    Loss from continuing                 
     operations           (1,535,309)  (2,339,415)   (7,911,419)   (9,166,613)
                                                                              
    Income (loss) from                                                        
     discontinued                                                             
     operations             (206,950)  (5,431,964)   (1,674,793)   (6,433,448)
                            --------   ----------    ----------    ---------- 
                                                                              
    Net loss             $(1,742,259) $(7,771,379)  $(9,586,212) $(15,600,061)
                         ===========  ===========   ===========  ============ 
                                                                              
    Losses applicable to 
     common stockholders                                  
      Loss from continuing  
       operations        $(1,535,309) $(2,339,415)  $(7,911,419)  $(9,166,613)
      Preferred stock                                                         
       dividends in                                                           
       arrears              (161,214)    (161,214)     (639,600)     (641,352)
                            --------     --------      --------      -------- 
    Net loss applicable to 
     common stockholders                                
     from continuing                                                         
     operations           (1,696,523)  (2,500,629)   (8,551,019)   (9,807,965)
      Income from                                                             
       discontinued                                                           
       operations           (206,950)  (5,431,964)   (1,674,793)   (6,433,448)
                            --------   ----------    ----------    ---------- 
    Net loss applicable                                                       
     to common                                                                
     stockholders        $(1,903,473) $(7,932,593) $(10,225,812) $(16,241,413)
                         ===========  ===========  ============  ============ 
                                                                              
    Basic and diluted net 
     loss per common share:                              
      Loss from continuing                                      
       operations             $(0.04)      $(0.09)       $(0.13)       $(0.26)
      Income (loss)                                                           
       from discontinued                                                      
       operations              (0.00)       (0.19)        (0.03)        (0.17)
                               -----        -----         -----         ----- 
    Net loss applicable                                                       
     to common                                                                
     stockholders             $(0.04)      $(0.28)       $(0.16)       $(0.44)
                              ======       ======        ======        ====== 
                                                                              
    Weighted average shares 
     outstanding                                       
      Basic and diluted   42,924,966   28,360,155    65,475,687    37,274,411 
                          ==========   ==========    ==========    ========== 
    
    
    
    
           FUSION TELECOMMUNICATIONS INTERNATIONAL, INC. AND SUBSIDIARIES 
                           CONSOLIDATED BALANCE SHEET 
                                                                            
                                                                            
                                       December 31, 2009  December 31, 2008 
                                       -----------------  ----------------- 
    ASSETS                                                                  
    Current assets                                                          
      Cash and cash equivalents                  $99,019           $427,433 
      Accounts receivable, net of                                           
       allowance                               2,500,319          3,240,670 
      Restricted cash, current portion           168,176                  - 
      Prepaid expenses and other                                            
       current assets                            130,647            261,863 
      Assets held for sale                         6,513                  - 
      Assets of Discontinued                                                
       Operations                                 32,283            302,533 
                                                  ------            ------- 
        Total current assets                   2,936,957          4,232,499 
                                               ---------          --------- 
                                                                            
    Property and equipment, net                1,664,583          3,829,669 
                                               ---------          --------- 
                                                                            
    Other assets                                                            
      Security deposits                           23,008             50,241 
      Restricted cash, net of current                                       
       portion                                   248,390            416,566 
      Intangible assets, net                     489,294            810,908 
      Other assets                                62,119            127,908 
                                                  ------            ------- 
        Total other assets                       822,811          1,405,623 
                                                 -------          --------- 
    TOTAL ASSETS                              $5,424,351         $9,467,791 
                                              ==========         ========== 
                                                                            
    LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)                          
    Current Liabilities                                                     
      Long-term debt, current portion         $2,407,187         $2,362,992 
      Capital and equipment financing                                       
       lease obligations, current                                           
       portion                                    14,831            122,960 
      Accounts payable, accrued                                              
       expenses and escrow payable             9,585,290         10,039,015 
      Liabilities of discontinued                                           
       operations                                360,294            261,972 
                                                 -------            ------- 
        Total current liabilities             12,367,602         12,786,939 
                                              ----------         ---------- 
                                                                            
    Long-term liabilities                                                   
      Other long-term liabilities                339,402          1,445,431 
                                                 -------          --------- 
        Total long-term liabilities              339,402          1,445,431 
                                                 -------          --------- 
                                                                            
    Stockholders' equity                                                    
      Preferred stock, Class A-1, 
       A-2, A-3 & A-4                                 80                 80 
      Common stock                               925,440            457,500 
      Capital in excess of par value         130,984,766        124,384,568 
      Accumulated deficit                   (139,192,939)      (129,606,727)
                                            ------------       ------------ 
        Total stockholders' equity            (7,282,653)        (4,764,579)
                                              ----------         ---------- 
                                                                            
    TOTAL LIABILITIES AND                                                   
     STOCKHOLDERS' EQUITY                     $5,424,351         $9,467,791 
                                              ==========         ========== 
    
    
          FUSION TELECOMMUNICATIONS INTERNATIONAL, INC. AND SUBSIDIARIES      
    
                   RECONCILIATION OF NET LOSS TO ADJUSTED EBITDA              
                                                                              
                                                                              
                             Three Months Ended         Fiscal Year Ended     
                                December 31,               December 31,       
                                ------------               ------------       
                              2009         2008         2009          2008 
                              ----         ----         ----          ---- 
                                                                              
    Net loss              $(1,742,259) $(7,771,379) $(9,586,212) $(15,600,061)
                                                                              
    Income from discontinued                          
     operations               206,950    5,431,964    1,674,793     6,433,448 
                              -------    ---------    ---------     --------- 
    Loss from continuing                                                      
     operations            (1,535,309)  (2,339,415)  (7,911,419)   (9,166,613)
    Adjustments:                                                              
    Interest (income)                                                         
     expense, net              58,610      121,663      383,227       316,299 
    Loss on impairment              -      129,232      243,000       129,232 
    Depreciation and                                                          
     amortization             341,263      472,438    1,361,798     1,819,112 
                              -------      -------    ---------     --------- 
    EBITDA                 (1,135,436)  (1,616,082)  (5,923,394)   (6,901,971)
    Adjustments:                                                              
    (Gain) loss on                                                            
     settlements of debt      (12,758)           -      (12,758)     (659,991)
    (Gain)/loss on                                                            
     disposal of fixed                                                        
     assets                    71,178            -       71,178        59,158 
    (Gain) loss on sale                                                       
     of other assets                -            -            -           537 
    Other taxes                38,379       37,401      131,126       289,923 
    Non cash compensation      29,690      174,873      294,601       617,499 
                               ------      -------      -------       ------- 
    Adjusted EBITDA       $(1,008,947) $(1,403,808) $(5,439,247)  $(6,594,845)
                          ===========  ===========  ===========   =========== 
    

SOURCE Fusion Telecommunications International