ATLANTA, May 6, 2010 /PRNewswire via COMTEX News Network/ -- Internap Network Services Corporation (Nasdaq: INAP), a global provider of end-to-end Internet business products and services, today reported first quarter 2010 financial results. Continued improvements in segment profit and adjusted EBITDA, reflect sustained focus on profitable revenue opportunities and progress made strengthening operations.
"We had several notable accomplishments in the first quarter - adjusted EBITDA and adjusted EBITDA margin reached their highest levels in more than two years and segment margins grew for the third consecutive quarter," said Eric Cooney, President and Chief Executive Officer of Internap. "In Data center services, we continued to make progress shifting our investment and operational focus to higher margin company-controlled facilities which simplifies our business and increases value to our stockholders. And while it's still early, our initiatives to revitalize Internap's core IP services also appear to be yielding results."
First Quarter 2010 Financial Summary ------------------------------------ YoY QoQ 1Q 2010 1Q 2009 4Q 2009 Growth Growth Revenues: Data center services $33,722 $31,715 $33,176 6% 2% IP services 29,643 32,209 30,373 -8% -2% Total Revenues $63,365 $63,924 $63,549 -1% 0% Operating Expenses $63,251 $70,272 $64,176 -10% -1% GAAP Net Loss $(260) $(6,608) $(497) n/m n/m Normalized Net Income (Loss)2 $749 $(3,682) $774 n/m -3% Adjusted EBITDA $9,877 $4,614 $9,016 114% 10% Adjusted EBITDA Margin 15.6% 7.2% 14.2% 840 BPS 140 BPS
Normalized Net Income (Loss) and Adjusted EBITDA are non-GAAP measures. Reconciliations between accounting principles generally accepted in the United States, or GAAP, information and non-GAAP information contained in this table are provided later in this press release.
Net (Loss) Income
Segment Profit and Adjusted EBITDA
Balance Sheet and Cash Flow Statement
First Quarter 2010 Operational Highlights
Historical trends of key financial and operational metrics can be found in a supplementary data schedule on Internap's website at http://ir.internap.com/results.cfm.
Conference Call Information:
Internap's first quarter 2010 conference call will be held today at 5:00 p.m. EDT. Participants may access the call by dialing 877-334-0775. International callers should dial 631-291-4567. Listeners may connect to the simultaneous webcast, which will include accompanying presentation slides, on the Investor Services section of Internap's web site at http://ir.internap.com/events.cfm. An online archive of the webcast presentation will be available for one month following the call. An audio-only replay will be accessible from Thursday, May 6, 2010 at 8 p.m. EDT through Thursday, May 13, 2010 at 800-642-1687 using the replay code 70110668. International callers can access the archived event at 706-645-9291 with the same code.
Internap is a leading Internet products and services company that provides The Ultimate Online Experience(R) by managing, delivering and distributing applications and content with 100 percent uptime service level agreements. With a global platform of data centers, managed Internet services and a content delivery network (CDN), Internap frees its customers to innovate, improve service levels and lower the cost of IT operations. Thousands of companies across the globe trust Internap to help them achieve their Internet business goals. For more information, visit http://www.internap.com.
This press release contains certain forward-looking statements. These forward-looking statements include statements related to product features, functions and benefits, Internap's ability to grow its IP business and its expectations regarding the expansion of data center capacity, including timing. Because such statements are not guarantees of future performance and involve risks and uncertainties, there are important factors that could cause Internap's actual results to differ materially from those in the forward-looking statements. These factors include Internap's ability to achieve or sustain profitability; its ability to expand margins and drive higher returns on investment; its ability to maintain current customers and obtain new ones, whether in a cost-effective manner or at all; its ability to correctly forecast capital needs, demand planning and space utilization; its ability to respond successfully to technological change and the resulting competition; the availability of services from Internet network service providers or network service providers providing network access loops and local loops on favorable terms, or at all; failure of third party suppliers to deliver their products and services on favorable terms, or at all; failures in its network operations centers, data centers, network access points or computer systems; its ability to provide or improve Internet infrastructure services to its customers; and its ability to protect its intellectual property, as well as other factors discussed in Internap's filings with the Securities and Exchange Commission. Given these risks and uncertainties, investors should not place undue reliance on forward-looking statements as a prediction of actual results. Internap undertakes no obligation to update, amend or clarify any forward-looking statement for any reason.
Press Contact: Investor Contact: Mariah Torpey Andrew McBath (781) 418-2404 (404) 302-9700 firstname.lastname@example.org email@example.com INTERNAP NETWORK SERVICES CORPORATION UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (In thousands, except per share amounts) Three Months Ended March 31, 2010 2009 ---- ---- Revenues: Data center services $33,722 $31,715 Internet protocol (IP) services 29,643 32,209 ------ ------ Total revenues 63,365 63,924 ------ ------ Operating costs and expenses: Direct cost of network, sales and services, exclusive of depreciation and amortization shown below: Data center services 23,043 23,281 IP services 11,042 12,384 Direct costs of customer support 5,345 4,403 Direct costs of amortization of acquired technologies 979 1,158 Sales and marketing 7,124 7,799 General and administrative 7,926 13,499 Depreciation and amortization 7,774 6,878 Impairments and restructuring 18 870 --- --- Total operating costs and expenses 63,251 70,272 ------ ------ Income (loss) from operations 114 (6,348) Non-operating expense (income): Interest income (29) (76) Interest expense 304 164 Other, net 30 59 --- --- Total non-operating expense (income) 305 147 --- --- Loss before income taxes and equity in loss (earnings) of (191) (6,495) equity method investment: Provision for income taxes 156 45 Equity in loss (earnings) of equity- method investment, net of taxes (87) 68 --- --- Net loss $(260) $(6,608) ===== ======= Basic and diluted net loss per share $(0.01) $(0.13) ====== ====== Weighted average shares outstanding used in computing basic and diluted net loss per share 49,944 49,414 INTERNAP NETWORK SERVICES CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands, except par value amounts) March 31, December 31, 2010 2009 ---- ---- (Unaudited) ASSETS Current assets: Cash and cash equivalents $81,108 $73,926 Short-term investments in marketable securities 6,900 7,000 Accounts receivable, net of allowance for doubtful accounts of $1,966 and, 18,770 18,685 $1,953 respectively Inventory 354 375 Prepaid expenses and other assets 9,002 8,768 ----- ----- Total current assets 116,134 108,754 Property and equipment, net 105,478 91,151 Investments and other related assets 1,847 1,804 Intangible assets, net 18,141 20,782 Goodwill 39,464 39,464 Deposits and other assets 2,570 2,637 Deferred tax asset, non-current, net 2,613 2,910 ----- ----- Total assets $286,247 $267,502 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $18,684 $17,237 Accrued liabilities 8,379 10,192 Deferred revenues, current portion 3,479 3,817 Capital lease obligations, current portion 187 25 Restructuring liability, current portion 2,728 2,819 Other current liabilities 128 125 --- --- Total current liabilities 33,585 34,215 Revolving credit facility, due after one year 20,000 20,000 Deferred revenues, less current portion 2,307 2,492 Capital lease obligations, less current portion 19,711 3,217 Restructuring liability, less current portion 5,592 6,123 Deferred rent 16,774 16,417 Other long-term liabilities 603 636 --- --- Total liabilities 98,572 83,100 ------ ------ Commitments and contingencies Stockholders' equity: Preferred stock, $0.001 par value, 20,000 shares authorized; no shares issued ---- ---- or outstanding Common stock, $0.001 par value; 60,000 shares authorized; 51,832 and 50,763 52 51 shares outstanding at March 31, 2010 and December 31, 2009, respectively Additional paid-in capital 1,225,390 1,221,456 Treasury stock, at cost, 73 and 42 shares at March 31, 2010 and December 31, 2009 (304) (127) Accumulated deficit (1,036,808) (1,036,548) Accumulated items of other comprehensive loss (655) (430) ---- ---- Total stockholders' equity 187,675 184,402 ------- ------- Total liabilities and stockholders' equity $286,247 $267,502 ======== ======== INTERNAP NETWORK SERVICES CORPORATION UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) Three Months Ended March 31, 2010 2009 ---- ---- Cash Flows from Operating Activities: Net loss $(260) $(6,608) Adjustments to reconcile net loss to net cash provided by operating activities: Depreciation and Amortization 7,774 6,878 Direct costs of amortization of acquired technologies 979 1,158 Loss on disposal of property and equipment, net 1 ----- Provision for doubtful accounts 330 375 Equity in loss (earnings) from equity-method investment (87) 68 Non-cash changes in deferred rent 357 706 Stock-based compensation expense 991 2,056 Deferred income taxes 297 (27) Other, net (12) 48 Changes in operating assets and liabilities: Accounts receivable (414) 1,907 Inventory 21 (40) Prepaid expenses, deposits and other assets (174) 754 Accounts payable 1,447 (1,112) Accrued and other liabilities (1,812) 124 Deferred revenue (523) 720 Accrued restructuring liability (622) 318 ---- --- Net cash flows provided by operating activities 8,293 7,325 ----- ----- Cash Flows from Investing Activities: Purchases of property and equipment (3,908) (5,476) Maturities of investments in marketable securities 100 4,580 Proceeds from disposal of property and equipment 1 ----- --- Net cash flows used in investing activities (3,807) (896) ------ ---- Cash Flows from Financing Activities: Proceeds from notes payable 19,500 19,800 Principal payments on notes payable (19,500) (19,800) Payments on capital lease obligations (13) (95) Stock-based compensation plans 2,762 (231) Other, net (30) (28) --- --- Net cash flows provided by (used in) financing activities 2,719 (354) ----- ---- Effect of exchange rates on cash and cash equivalents (23) (51) --- --- Net increase in cash and cash equivalents 7,182 6,024 Cash and cash equivalents at beginning of period 73,926 46,870 ------ ------ Cash and cash equivalents at end of period $81,108 $52,894 ======= =======
INTERNAP NETWORK SERVICES CORPORATION
NON-GAAP (ADJUSTED) FINANCIAL MEASURES
In addition to providing financial measurements based on accounting principles generally accepted in the United States of America (GAAP), Internap has historically provided additional financial measures that are not prepared in accordance with GAAP (non-GAAP), including adjusted EBITDA, normalized net income (loss), normalized diluted shares outstanding, segment profit and segment margin. The most directly comparable GAAP equivalent to adjusted EBITDA and normalized net income (loss) is loss from operations and net loss, respectively. The most directly comparable GAAP equivalent to normalized diluted shares outstanding is diluted common shares outstanding. Segment profit is defined and disclosed in the notes to our consolidated financial statements filed with the United States Securities and Exchange Commission in Quarterly Reports on Form 10-Q and Annual Reports on Form 10-K.
We define non-GAAP measures as follows:
We detail reconciliations of our non-GAAP financial measures to the most directly comparable financial measure in the reconciliations of GAAP to non-GAAP measures below. We believe that presentation of these non-GAAP financial measures provides useful information to investors regarding our results of operations.
We believe that excluding depreciation and amortization and loss on disposals of property and equipment, as well as impairments and restructuring, to calculate adjusted EBITDA provides supplemental information and an alternative presentation that is useful to investors' understanding of Internap's core operating results and trends. Not only are depreciation and amortization expenses based on historical costs of assets that may have little bearing on present or future replacement costs, but also they are based on management estimates of remaining useful lives. Loss on disposals of property and equipment is also based on historical costs of assets that may have little bearing on replacement costs. Impairments and restructuring reflect the charge for ceasing to use part of a smaller leased data center facility and a sales office during the three months ended December 31, 2009 and adjustments in sublease income assumptions for certain properties included in previously-disclosed restructuring plans for the three months ended December 31, 2008. Internap believes that impairment and restructuring charges are unique costs that we do not expect to recur on a regular basis, and consequently, we do not consider these charges as a normal component of expenses related to current and ongoing operations.
Similarly, we believe that excluding the effects of stock-based compensation from non-GAAP financial measures provides supplemental information and an alternative presentation useful to investors' understanding of Internap's core operating results and trends. Investors have indicated that they consider financial measures of our results of operations excluding stock-based compensation as important supplemental information useful to their understanding of our historical results and estimating our future results.
We also believe that, in excluding the effects of stock-based compensation, our non-GAAP financial measures provide investors with transparency into what management uses to measure and forecast our results of operations, to compare on a consistent basis our results of operations for the current period to that of prior periods and to compare our results of operations on a more consistent basis against that of other companies, in making financial and operating decisions and to establish certain management compensation.
Stock-based compensation is an important part of total compensation, especially from the perspective of employees. We believe, however, that supplementing GAAP net loss and net loss per share information by providing normalized net income (loss) and normalized net income (loss) per share, excluding the effect of impairments, restructuring and stock-based compensation in all periods, is useful to investors because it enables additional and more meaningful period-to-period comparisons. We consider normalized diluted shares to be another important indicator of our overall performance because it eliminates the effect of non-cash items.
Adjusted EBITDA is not a measure of liquidity calculated in accordance with GAAP, and should be viewed as a supplement to -- not a substitute for -- our results of operations presented on the basis of GAAP. Adjusted EBITDA does not purport to represent cash flow provided by operating activities as defined by GAAP. Our statements of cash flows present our cash flow activity in accordance with GAAP. Furthermore, adjusted EBITDA is not necessarily comparable to similarly-titled measures reported by other companies.
We believe adjusted EBITDA is used by and is useful to investors and other users of our financial statements in evaluating our operating performance because it provides them with an additional tool to compare business performance across companies and across periods. We believe that:
Our management uses adjusted EBITDA:
Our presentation of segment profit and segment margin excludes direct costs of customer support, depreciation and amortization in order to allow investors to see the business through the eyes of management. Management views direct costs of network, sales and services as generally less controllable, external costs and management regularly monitors the margin of revenues in excess of these direct costs. Similarly, we view the costs of customer support to also be an important component of costs of revenues but believe that the costs of customer support to be more within our control and to some degree discretionary as we can adjust those costs by hiring and terminating employees.
Segment margin is an important metric to our investors and analysts, as we have regularly discussed and disclosed the effects of third party vendors' pricing declines and the corresponding effect on our revenues. The presentation of segment margin highlights the impact of the pricing declines and allows investors and analysts to evaluate our revenue generation performance relative to direct costs of network, sales and services. Conversely, we have much greater latitude in controlling the compensation component of costs of revenues, represented by customer support, and we analyze this component separately from the direct external costs.
We also have excluded depreciation and amortization from segment profit and segment margin because, as noted above, they are based on estimated useful lives of tangible and intangible assets. Further, depreciation and amortization are based on historical costs incurred to build out our deployed network and the historical costs of these assets may not be indicative of current or future capital expenditures.
Although we believe, for the foregoing reasons, that our presentation of non-GAAP financial measures provides useful supplemental information to investors regarding our results of operations, our non-GAAP financial measures should only be considered in addition to, and not as a substitute for, or superior to, any measure of financial performance prepared in accordance with GAAP.
Use of non-GAAP financial measures is subject to inherent limitations because they do not include all the expenses that must be included under GAAP and because they involve the exercise of judgment of which charges should properly be excluded from the non-GAAP financial measure. Management accounts for these limitations by not relying exclusively on non-GAAP financial measures, but only using such information to supplement GAAP financial measures. Our non-GAAP financial measures may not be the same non-GAAP measures, and may not be calculated in the same manner, as those used by other companies.
INTERNAP NETWORK SERVICES CORPORATION RECONCILIATION OF LOSS FROM OPERATIONS TO ADJUSTED EBITDA
A reconciliation of loss from operations, the most directly comparable GAAP measure, to adjusted EBITDA for each of the periods indicated is as follows (in thousands):
Three Months Ended ------------------ March 31, December March 31, 2010 31, 2009 2009 ---------- -------- ---------- Income (loss) from operations (GAAP) $114 $(627) $(6,348) Stock-based compensation 991 1,178 2,056 Depreciation and amortization, including depreciation and amortization included in direct costs of network, sales and services 8,753 8,366 8,036 Loss on disposals of property and equipment, net 1 6 - Impairments and restructuring 18 93 870 --- --- --- Adjusted EBITDA (non- GAAP) $9,877 $9,016 $4,614 ====== ====== ====== INTERNAP NETWORK SERVICES CORPORATION RECONCILIATION OF NET LOSS AND BASIC AND DILUTED NET LOSS PER SHARE TO NORMALIZED NET INCOME (LOSS) AND BASIC AND DILUTED NORMALIZED NET INCOME (LOSS) PER SHARE
Reconciliations of (1) net loss, the most directly comparable GAAP measure, to normalized net income (loss), (2) diluted shares outstanding used in per share calculations, the most directly comparable GAAP measure, to normalized diluted shares used in normalized per share outstanding calculations and (3) net loss per share, the most directly comparable GAAP measure, to normalized net income (loss) per share for each of the periods indicated is as follows (in thousands, except per share data):
Three Months Ended ------------------ March 31, December March 31, 2010 31, 2009 2009 ---------- --------- ---------- Net loss (GAAP) $(260) $(497) $(6,608) Impairments and restructuring 18 93 870 Stock-based compensation expense 991 1,178 2,056 --- ----- ----- Normalized net income (loss) (non-GAAP) $749 $774 $(3,682) Normalized income allocable to participating securities (non-GAAP) (17) (16) 0 --- --- --- Normalized net income (loss) available to common stockholders (non-GAAP) $732 $758 $(3,682) ==== ==== ======= Weighted average shares outstanding used in per share calculation: Basic (GAAP) 49,944 49,657 49,414 Participating securities (GAAP) 1,193 1,081 874 Diluted (GAAP) 49,944 49,657 49,414 Add potentially dilutive securities 519 54 - Less dilutive effect of stock-based compensation under the treasury stock method (359) (54) - ---- --- --- Normalized diluted shares (non-GAAP) 50,104 49,657 49,414 ====== ====== ====== Net income (loss) per share (GAAP): Basic and diluted $(0.01) $(0.01) $(0.13) ====== ====== ====== Normalized net income (loss) per share (non- GAAP): Basic and diluted $0.01 $0.02 $(0.07) ===== ===== ====== INTERNAP NETWORK SERVICES CORPORATION SEGMENT PROFIT AND SEGMENT MARGIN
Segment profit and segment margin, which does not include direct costs of customer support, direct costs of amortization of acquired technologies or any other depreciation or amortization, for each of the periods indicated is as follows (dollars in thousands):
Three Months Ended ------------------ March 31, December March 31, 2010 31, 2009 2009 ---------- --------- ---------- Revenues: Data center services $33,722 $33,176 $31,715 Internet protocol (IP) services 29,643 30,373 32,209 ------ ------ ------ Total 63,365 63,549 63,924 ------ ------ ------ Direct cost of network, sales and services, exclusive of depreciation and amortization: Data center services 23,043 23,065 23,281 IP services 11,042 11,210 12,384 ------ ------ ------ Total 34,085 34,275 35,665 ------ ------ ------ Segment Profit: Data center services 10,679 10,111 8,434 IP services 18,601 19,163 19,825 ------ ------ ------ Total $29,280 $29,274 $28,259 ======= ======= ======= Segment Margin: Data center services 31.7% 30.5% 26.6% IP services 62.8% 63.1% 61.6% ---- ---- ---- Total 46.2% 46.1% 44.2% ==== ==== ====
SOURCE Internap Network Services Corporation
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