Fusion Telecommunications International, Inc. :FSNN-US: Earnings Analysis: Q3, 2017 By the Numbers : November 15, 2017

Fusion Telecommunications International, Inc. reports financial results for the quarter ended September 30, 2017.

We analyze the earnings along side the following peers of Fusion Telecommunications International, Inc. – Pareteum Corporation, Lumos Networks Corp., Cogent Communications Holdings Inc, Cincinnati Bell Inc., 8×8, Inc. and Hawaiian Telcom Holdco, Inc. (TEUM-US, LMOS-US, CCOI-US, CBB-US, EGHT-US and HCOM-US) that have also reported for this period.

Highlights

  • Summary numbers: Revenues of USD 36.36 million, Net Earnings of USD -3.70 million.
  • Gross margins widened from 32.98% to 35.47% compared to the same period last year, operating (EBITDA) margins now 8.13% from 4.47%.
  • Year-on-year change in operating cash flow of 240.32% is about the same as the change in earnings, likely no significant movement in accruals or reserves.
  • Earnings decline largely a result of non-operational activity, pretax margins improved from -10.63% to -10.15%.

The table below shows the preliminary results and recent trends for key metrics such as revenues and net income growth:

2017-09-30 2017-06-30 2017-03-31 2016-12-31 2016-09-30
Relevant Numbers (Quarterly)
Revenues (mil) 36.36 38.09 35.81 28.94 29.5
Revenue Growth (%YOY) 23.25 25.21 7.92 7.85 20.25
Earnings (mil) -3.7 -2.88 -3.48 -4.36 -3.15
Earnings Growth (%YOY) -17.74 -7.35 -37.43 -371.35 35.28
Net Margin (%) -10.19 -7.55 -9.72 -15.05 -10.66
EPS -0.18 -0.14 -0.23 -0.98 -0.23
Return on Equity (%) -164.99 -56.11 -55.57 -54.06 -40.01
Return on Assets (%) -11.81 -8.93 -10.46 -15.21 -12.8

Access our Ratings and Scores for Fusion Telecommunications International, Inc.

Market Share Versus Profits

Revenues History
Earnings History

FSNN-US’s change in revenue this period compared to the same period last year of 23.25% is almost the same as its change in earnings, and is about average among the announced results thus far in its peer group, suggesting that FSNN-US is holding onto its market share. Also, for comparison purposes, revenues changed by -4.55% and earnings by -28.70% compared to the immediate last period.

Revenues Growth Versus Earnings Growth

Quadrant label definitions. Hover to know more

Leader, Earnings Focus, Laggard, Revenues Focus

Earnings Growth Analysis

The company’s year-on-year earnings decline did not come as a result of a contraction in gross margins or because of any cost control issues. Both gross margins and operating margins (EBITDA) margins actually improved over this time frame. Gross margins went from 32.98% to 35.47%, while operating margins improved from 4.47% to 8.13% over this period. For comparison, gross margins were 35.67% and EBITDA margins 7.50% in the immediate last period.

Gross Margin Versus EBITDA Margin

Quadrant label definitions. Hover to know more

Differentiated; Low Cost, Commodity; Low Cost, Commodity; High Cost, Differentiated; High Cost

Gross Margin Trend

Companies sometimes sacrifice improvements in revenues and margins in order to extend friendlier terms to customers and vendors. Capital Cube probes for such activity by comparing the changes in gross margins with any changes in working capital. If the gross margins improved without a worsening of working capital, it is possible that the company’s performance is a result of truly delivering in the marketplace and not simply an accounting prop-up using the balance sheet.

Gross Margin History
Working Capital Days History

FSNN-US’s improvement in gross margin has been accompanied by an improvement in its balance sheet as well. This suggests that gross margin improvements are likely from operating decisions and not accounting gimmicks. Its working capital days are now -36.03 days compared to -6.82 days for the same period last year.

Gross Margin Versus Working Capital Days

Quadrant label definitions. Hover to know more

Customer Financed, Cash Starved, Supplier Financed, Cash Rich

Cash Versus Earnings – Sustainable Performance?

It is important to examine a company�s cash versus earnings numbers to gauge whether its performance is sustainable.

FSNN-US’s change in operating cash flow of 240.32% compared to the same period last year is about the same as its change in earnings this period. Additionally, this change in operating cash flow is about average among its peer group. This suggests that the company did not use accruals or reserves to manage earnings this period, and that, all else being equal, the earnings number is sustainable.

Operating Cash Flow Growth Versus Earnings Growth

Quadrant label definitions. Hover to know more

Cash Flow based Earnings, Likely Non-cash Earnings, Low Cash Flow Base, Likely Undeclared Earnings

Margins

The company’s earnings decline is largely a result of non-operational activity. As a matter of fact, the company showed increases in operating (EBIT) and pretax margins. EBIT margins improved from -5.69% to -2.08% and pretax margins widened from -10.63% to -10.15%.

EBIT Margin Versus PreTax Margin

Quadrant label definitions. Hover to know more

Operation driven Earnings, One-time Favorables, Low Earnings Base, One-time Unfavorables
EBIT Margin History
PreTax Margin History

Access our Ratings and Scores for Fusion Telecommunications International, Inc.

Company Profile

Fusion Telecommunications International, Inc. engages in the provision of integrated cloud solution to small, medium, and large businesses. It operates through Business Services, and Carrier Services segments. The Business Services segment provides cloud communications, cloud connectivity, cloud storage, and security solutions. The Carrier Services segment is comprised of termination of domestic, and international carrier traffic utilizing primarily voice over internet protocol technology. The company was founded by Marvin S. Rosen and Philip D. Turits in September 1997 and is headquartered in New York, NY.

CapitalCube does not own any shares in the stocks mentioned and focuses solely on providing unique fundamental research and analysis on approximately 50,000 stocks and ETFs globally. Try any of our analysis, screener or portfolio premium services free for 7 days. To get a quick preview of our services, check out our free quick summary analysis of FSNN-US.

Disclaimer

The information presented in this report has been obtained from sources deemed to be reliable, but AnalytixInsight does not make any representation about the accuracy, completeness, or timeliness of this information. This report was produced by AnalytixInsight for informational purposes only and nothing contained herein should be construed as an offer to buy or sell or as a solicitation of an offer to buy or sell any security or derivative instrument. This report is current only as of the date that it was published and the opinions, estimates, ratings and other information may change without notice or publication. Past performance is no guarantee of future results. Prior to making an investment or other financial decision, please consult with your financial, legal and tax advisors. AnalytixInsight shall not be liable for any party’s use of this report. AnalytixInsight is not a broker-dealer and does not buy, sell, maintain a position, or make a market in any security referred to herein. One of the principal tenets for us at AnalytixInsight is that the best person to handle your finances is you. By your use of our services or by reading any of our reports, you’re agreeing that you bear responsibility for your own investment research and investment decisions. You also agree that AnalytixInsight, its directors, its employees, and its agents will not be liable for any investment decision made or action taken by you and others based on news, information, opinion, or any other material generated by us and/or published through our services. For a complete copy of our disclaimer, please visit our website www.analytixinsight.com.