Fusion Acquires Cloud Services Provider Apptix

The acquisition, which closed on November 14, 2016, was financed with a new $70.0 million senior secured credit facility led by East West Bank, which replaces Fusion’s previous $40.0 million senior credit facility. The new credit facility reduces Fusion’s weighted average borrowing cost from 8.0% down to 7.5%.

Highlights

• Significantly expands Fusion’s scale and scope, adding approximately $25 million in annual revenue and $8 million in post-synergy Adjusted EBITDA (a 30% contribution margin), for a total pro forma annual revenue run-rate of approximately $145 million and Adjusted EBITDA of $16 million
• Adds a growing, high-quality business customer revenue base, over 90% of which is under multi-year contract and recurring, with an existing gross margin of approximately 60%
• Represents a highly attractive acquisition price, equivalent to 3.5x pro forma Adjusted EBITDA and 1.1x revenue
• Extends Fusion’s reach to the desktop and into the customer’s IT infrastructure, allowing for greater service control and increased customer loyalty and "stickiness," while expanding the services Fusion can sell
• Accelerates Fusion’s growth strategy and advances its leadership position in the rapidly expanding cloud computing market for SMB and Enterprise customers
• Contributes a powerful cloud computing infrastructure with significant available capacity for growth
• Brings engineering and development resources to advance Fusion’s cloud computing infrastructure and service offerings, as well as a team of highly capable sales, implementation and support professionals
• Creates a large cross- and up-sell opportunity into Apptix’s 1,500 customers and into Fusion’s own customer base seeking a broader array of cloud services
• Fusion’s new five-year $70 million senior secured credit facility consists of a $65.0 million term loan and a $5.0 million revolver (undrawn at close), at an interest rate of LIBOR (with no floor) + 5.00%
• Retired the Company’s previous $25.0 million senior term loan and $15.0 million senior revolver

Fusion also announced today the pricing of a $2.8 million private placement consisting of 2.4 million shares of its common stock at a purchase price of $1.15 per share. The offering included additional commitments from Fusion’s chairman, its chief executive officer, and other members of its board of directors. Fusion will use the net proceeds from this offering, which is expected to close on November 16, 2016, for working capital and general corporate purposes. Craig-Hallum Capital Group acted as the sole placement agent in the offering.

Matthew Rosen, Fusion’s Chief Executive Officer, said, "Fusion’s acquisition of Apptix continues our previously announced strategy to build a market leading portfolio of integrated cloud service offerings and to achieve greater scale through disciplined, targeted acquisitions. The addition of Apptix deepens our comprehensive service portfolio with a focus on extending these services to the desktop and IT infrastructure of our customers. I am particularly pleased to further grow our team of seasoned, highly trained cloud technology professionals.

"In addition to its significant revenue and EBITDA contribution, we anticipate that the Apptix acquisition will accelerate Fusion’s growth initiatives," Mr. Rosen continued. "We believe that Fusion’s award-winning UCaaS and Contact Center solutions, as well as our secure and diverse cloud connectivity and security services, will connect well with Apptix’s existing customers, creating substantial cross- and up-selling opportunities into the combined Apptix and Fusion base of more than 13,000 business customers."

For the three months ended September 30, 2016, Apptix reported, on an unaudited basis, revenue of $6.3 million and Adjusted EBITDA of $0.8 million.

Johan Lindqvist, Chairman of Apptix, said, "For more than a decade, Apptix’s advanced, secure and reliable cloud services have helped businesses of all sizes work more efficiently. It has been our mission to increase our customers’ productivity across the enterprise with high quality, high value communications, collaboration and infrastructure services, and we believe that Fusion’s single source cloud solutions are a perfect complement to our own.

"We have gotten to know the Fusion team exceedingly well over the past several months, and have been impressed with management, the company’s business, its position in the marketplace, and its commitment to providing the highest level of service to its customers. We have great confidence in Fusion’s growth strategy and its ability to create significant value. Importantly, the two companies share a common vision and culture which provides a great foundation for the integration of our teams. On behalf of the shareholders of Apptix ASA, we are extremely excited to participate in Fusion’s ongoing success as shareholders of this emerging cloud services leader," Mr. Lindqvist concluded.

Michael Bauer, Fusion’s Chief Financial Officer, stated, "We are extremely pleased to announce our new senior credit facility led by East West Bank. Together with our common share offering, this new facility gives Fusion additional financial strength and flexibility to continue to pursue our growth strategy. This acquisition is a big step forward to achieving our intermediate financial goals of $200 million in revenue, 50% gross margin and 15% Adjusted EBITDA margin."