Fusion Completes Acquisition of MegaPath
June 18 2018 - 8:30AM
Fusion (NASDAQ:FSNN), a leading provider of cloud services,
announced today that on June 15, 2018, it closed its
previously-announced acquisition of MegaPath Holding Corporation
(“MegaPath”). The total purchase price was $71.5 million,
consisting of $61.5 million in cash and 1.7 million
shares of Fusion common stock priced at $5.78 per share. The cash
portion of the purchase price was financed from Fusion’s existing
cash balances held in escrow for this acquisition.
The acquisition of MegaPath contributes to
Fusion approximately $67 million in annualized revenue, 95% of
which is contracted monthly recurring revenue, with an average
monthly revenue per customer (ARPU) of $750 and 1.0% monthly churn,
and brings Fusion’s customer base to approximately 160,000
businesses. MegaPath also contributes to Fusion approximately
$15 million in annualized Adjusted EBITDA including
anticipated cost synergies, which will be realized within 12 months
of the close.
With the close of the transaction, Fusion has
appointed Dan Foster to the newly-created position of Chief Revenue
Officer to lead the Company’s sales, marketing, and go-to-market
efforts. Mr. Foster brings to Fusion over 25 years of experience in
the technology industry, serving most recently as President and
Chief Operating Officer at MegaPath where he was responsible for
day-to-day management and leadership of the company’s sales,
marketing and operational organizations. Previously, Mr. Foster was
a partner at a leading management consulting firm, working with
Fortune 500 companies on a wide range of strategic assignments. Mr.
Foster received engineering and liberal arts degrees from Tufts
University and graduated from Harvard Business School’s executive
PMD program.
Financial Outlook
Fusion today also reiterated its near-term
financial outlook following the close of its acquisition of the
Cloud and Business Services business of Birch Communications
Holdings, Inc. (“Birch”) on May 4, 2018, of a near-term annualized
revenue run-rate of more than $500 million. For the 12 months
beginning July 1, 2018, and including the contribution from
MegaPath, Fusion expects total revenue of at least
$575 million.
Additionally, in the 45 days since the close of
the Birch acquisition, Fusion has achieved nearly 20% of the
anticipated annualized cost synergies related to Birch, which is
ahead of management’s plan. The Company further anticipates that it
will achieve in excess of 50% of the total synergies related to
Birch and MegaPath by the end of 2018. As these synergies are fully
realized over the next 12 months, Fusion expects its Adjusted
EBITDA to reach 25% of total revenue.
Management Commentary
Mathew Rosen, Fusion’s Chairman and CEO, said,
“MegaPath is an ideal fit with Fusion, and the acquisition
demonstrates that we are well on our way toward achieving our
intermediate financial objectives of $750 million in annual
revenue and $185 million in annual Adjusted EBITDA. MegaPath
brings to Fusion a skilled team of technology professionals, a
robust, fully-integrated suite of cloud services, and enhanced
sales, digital marketing, and distribution capabilities. I am also
excited to welcome Dan Foster to Fusion and look forward to his
contributions to further driving the company’s organic growth.
“Our integration of Birch is also moving forward
quickly and efficiently,” Mr. Rosen continued. “As with each of our
previous acquisitions, we have identified all the integration tasks
related to Birch and are managing them on a daily basis. We have
already successfully rolled out our new organizational structure
and implemented a single HR management platform on Workday. We have
completed the interconnection of our networks, which allows us to
route all voice traffic through a single network, yielding
significant cost savings. We have begun training our sales and
customer support teams on Fusion’s integrated product suite,
systems, software and processes, all of which will facilitate
upselling and cross-selling into our customer base and improve the
customer experience. We have likewise made meaningful progress
toward consolidating our products and services into a single
quoting engine to increase our responsiveness to customers and take
advantage of new sales opportunities.
“These and other integration efforts have put us
ahead of schedule in realizing our cost synergy objectives. We now
expect to realize more than 50% of the total annualized cost
savings related to Birch and MegaPath by the end of 2018. This
gives us further conviction that we will realize all of our
targeted cost savings within 12 months of closing these
acquisitions and achieve an Adjusted EBITDA margin of 25%, with the
potential for expansion in future periods,” Mr. Rosen
concluded.
About Fusion
Fusion, a leading provider of integrated 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, contact center, 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.
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 1995. 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 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 https://www.sec.gov. However, the
reader is cautioned that Fusion’s future performance could also be
affected by risks and uncertainties not enumerated above.
Fusion ContactBrian
Coyne212-201-2404bcoyne@fusionconnect.com
Investor RelationsChris TysonMZ North
America(949) 491-8235FSNN@mzgroup.us