Internap Corporation
02/24/11

Internap Reports Fourth Quarter and Full-Year 2010 Financial Results

ATLANTA, Feb. 24, 2011 /PRNewswire/ --

  • 2010 Revenue of $244.2 million, Fourth quarter revenue of $60.0 million;
  • 2010 segment margin(1) of 47.8 percent, Fourth quarter segment margin of 49.1 percent;
  • 2010 adjusted EBITDA(2) of $39.2 million; Fourth quarter adjusted EBITDA of $10.3 million;
  • 2010 adjusted EBITDA margin(2) of 16.1 percent; Fourth quarter adjusted EBITDA margin of 17.1 percent;
  • Announces expansion of company-controlled data center footprint to Dallas, Texas.

Internap Network Services Corporation (Nasdaq: INAP), a leading provider of IT infrastructure services, today announced financial results for the fourth quarter and full-year 2010.  

"The strategy we have executed throughout 2010 has delivered positive results including the achievement of a number of important milestones:

  • Highest profitability in company history (adjusted EBITDA of $39.2 million);
  • Expansion of company-controlled datacenter space by 30,000 net sellable square feet (26% growth); and
  • Record Data center services segment profit(1) of $45.4 million, up 27% and segment margin up 810 basis points.

We are encouraged by these results and their implications for creating long-term stockholder value," said Eric Cooney, President and Chief Executive Officer of Internap.  "Looking forward to 2011, we will further expand Internap's portfolio as an IT infrastructure services provider, and our announcement today that we are adding a company-controlled data center in the Dallas market, underscores our confidence in this strategy.  Future innovative product launches, similar to Accelerated IP™ and XIPCloud™ Storage, should continue to differentiate our IT service solutions based on performance, availability and support.  We are entering 2011 with positive momentum and a commitment to driving long-term profitable growth."

Fourth Quarter and Full-Year 2010 Financial Summary





Fourth Quarter




Full Year







2010


2009


Growth


2010


2009


Growth

Revenues:













Data center services

$  31,732


$ 33,176


-4%


$ 128,200


$ 130,711


-2%


IP services

28,227


30,373


-7%


115,964


125,548


-8%



Total Revenues

$  59,959


$ 63,549


-6%


$ 244,164


$ 256,259


-5%


















Operating Expenses

$  59,720


$ 64,176


-7%


$ 245,060


$ 325,181


-25%


















GAAP Net Loss

$      (429)


$    (497)


n/m


$   (3,622)


$ (69,725)


n/m


















Normalized Net Income (Loss)(2)

$       861


$     774


11%


$    2,419


$   (5,280)


n/m


















Adjusted EBITDA

$  10,282


$  9,016


14%


$   39,230


$   28,046


40%




Adjusted EBITDA Margin

17.1%


14.2%


290 BPS


16.1%


10.9%


520 BPS



Revenue

  • Revenue for the full-year 2010 was $244.2 million compared with $256.3 million in 2009.  The majority of the annual revenue decrease was attributable to our IP services segment.  Revenue for the fourth quarter 2010 totaled $60.0 million, a decrease of 6 percent year-over-year and 1 percent compared with the third quarter of 2010.  Quarterly revenue from Data center services decreased year-over-year but rose sequentially.  IP services revenue in the quarter decreased year-over-year and compared with the third quarter of 2010.

  • Data center services revenue for the full-year 2010 decreased by 2 percent to $128.2 million.  Fourth quarter Data center services revenue was $31.7 million, down 4 percent compared with the fourth quarter of 2009 and up 1 percent relative to the third quarter of 2010.   The year-over-year annual and quarterly declines were a direct result of our program to proactively churn certain less profitable customer contracts in partner data center sites.  Sequentially, revenue growth in higher-margin company-controlled facilities offset proactive partner revenue churn.

  • In the IP services segment, revenue for the full-year 2010 decreased $9.6 million, or 8 percent, to $116.0 million.  Fourth quarter 2010 IP services revenue totaled $28.2 million, a decrease of 7 percent compared with the fourth quarter of 2009 and 2 percent sequentially.  Increased IP traffic only partly offset reductions in IP pricing for new and renewing customers and losses of legacy contracts at higher effective prices.

Net (Loss) Income

  • GAAP net loss was $(3.6) million, or $(0.07) per share for the full-year 2010 compared with GAAP net loss of $(69.7) million, or $(1.41) per share in 2009.  GAAP net loss in the fourth quarter was $(0.4) million, or $(0.01) per share.

  • Normalized net income, which excludes the impact of stock-based compensation expense and items that management considers non-recurring, was $2.4 million, or $0.05 per share for the full-year 2010. Normalized net loss for the full-year 2009 totaled $(5.3) million, or $(0.11) per share. Normalized net income in the fourth quarter 2010 was $0.9 million, or $0.02 per share.

Segment Profit and Adjusted EBITDA

  • Total segment profit in 2010 was $116.7 million, an increase of $3.5 million, or 3 percent over the prior year.  Fourth quarter total segment profit increased 1 percent compared with the fourth quarter 2009 and 2 percent sequentially to $29.5 million.  Annual segment margin was 47.8 percent in 2010, an increase of 360 basis points over 2009.  Fourth quarter 2010 segment margin was 49.1 percent, its highest level in almost three years.

  • Data center services segment profit and margin levels continued to reach record levels.  Annual Data center services segment profit grew 27 percent over 2009 to $45.4 million.  Data center services segment profit margin in 2010 totaled 35.4 percent and fourth quarter 2010 data center services segment margin was 38.5 percent. These figures represent the highest annual and quarterly Data center segment margin levels in the history of the company.  Proactive churn of less-profitable partner data center revenue benefited Data center services segment margin compared with the full-year and fourth quarter of 2009.  Sequentially, lower seasonal power costs and proactive churn benefited Data center services segment profit and margin.

  • IP services segment profit in the full-year 2010 and the fourth quarter 2010 was $71.3 million and $17.2 million, respectively.  IP services segment margin in 2010 was 61.5 percent; in the fourth quarter of 2010 it totaled 61.1 percent. Decreased revenue more than offset lower costs in this segment, driving the year-over-year declines in IP services segment profit and margin.

  • Full-year 2010 Adjusted EBITDA totaled $39.2, the highest annual Adjusted EBITDA in the company's history. Fourth quarter 2010 Adjusted EBITDA was $10.3 million, an increase of 14 percent over the fourth quarter 2009 and 12 percent compared with the third quarter of 2010.  Adjusted EBITDA margin was 16.1 percent in 2010 and 17.1 percent in the fourth quarter of 2010, representing year-over-year increases of 520 basis points and 290 basis points, respectively.  Sequentially, fourth quarter Adjusted EBITDA margin increased 200 basis points. The year-over-year increases in Adjusted EBITDA were driven by higher segment profit and lower cash operating expenses.  

Balance Sheet and Statement of Cash Flows

  • Cash and cash equivalents totaled $59.6 million at December 31, 2010. Total debt, net of discount, was $39.5 million at the end of the quarter, including $20.2 million in capital lease obligations.

  • Cash generated from operations for the twelve months ended December 31, 2010 was $39.6 million. Capital expenditures over the same period were $62.2 million.

Recent 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.

  • We had 2,740 customers under contract at the end of the fourth quarter 2010.

  • In the fourth quarter, we successfully completed our initiative to proactively churn select, less-profitable customer contracts in partner data center facilities, with approximately 31,000 net sellable square feet returned to these data center partners since the third quarter of 2009.

  • In response to customer demand, we announced today that we are constructing a new premium, company-controlled data center in Dallas.  Like Internap's other company-controlled data centers, the DFW facility will offer customers a highly-reliable and scalable IT infrastructure.  A 55,000 net sellable square-foot facility, our new DFW data center will feature a full range of customer amenities including conference rooms, expanded technical space and private office space. The state-of-the-art facility will also incorporate green data center best practices to minimize energy consumption as well as a modular power design, which will enable our customers to select their availability and increase power densities to over 200 watts per square foot and beyond without taking on additional space.  

  • On January 18, 2011, we announced the Beta phase of our high-performance cloud storage service, XIPCloud Storage.  XIPCloud Storage is based on OpenStack™, a highly-scalable open source software platform. Internap XIPCloud Storage features self-provisioning capabilities that allow customers to log into a web portal and purchase storage capacity and network bandwidth as needed, with the ability to quickly and easily scale services up or down.

  1. Segment profit is a non-GAAP financial measure and is defined in an attachment to this press release entitled "Non-GAAP (Adjusted) Financial Measures."  Reconciliations between GAAP information and non-GAAP information related to Segment Profit is contained in the table entitled "Segment Profit and Segment Margin."  
  2. Adjusted EBITDA and Normalized Net Income (Loss) are non-GAAP financial measures and are defined in an attachment to this press release entitled "Non-GAAP (Adjusted) Financial Measures."  Reconciliations between GAAP information and non-GAAP information related to Adjusted EBITDA and Normalized Net Income (Loss) are contained in the tables entitled "Reconciliation of Loss from Operations to Adjusted EBITDA," and "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" in the attachment.

Conference Call Information:

Our fourth quarter and full-year 2010 conference call will be held today at 5:00 p.m. EST. Listeners may connect to a webcast of the call, which will include accompanying presentation slides, on the investor services section of our web site at http://ir.internap.com/events.cfm.  The call can also be accessed by dialing 866-515-9839.  International callers should dial 631-813-4875.  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, February 24, 2011 at 8 p.m. EST through Thursday, March 3, 2011 at 800-642-1687 using the replay code 40146200. International callers can access the archived event at 706-645-9291 with the same code.

About Internap

Internap provides high-performance IT infrastructure services that enable our customers to focus on their core business, improve service levels and lower the cost of IT operations. Our colocation, connectivity and managed hosting solutions are differentiated by unparalleled levels of performance, availability and support. Since 1996, thousands of enterprises have entrusted Internap to deliver their business-critical IT infrastructure needs. For more information, visit http://www.internap.com/.

Forward-Looking Statements

This press release contains certain forward-looking statements. These forward-looking statements include statements related to our ability to create long-term stockholder value and profitable growth and our expectations regarding the expansion of our IT infrastructure services portfolio. Because such statements are not guarantees of future performance and involve risks and uncertainties, there are important factors that could cause our actual results to differ materially from those in the forward-looking statements. These factors include our ability to achieve or sustain profitability; its ability to increase revenues and sustain or grow its customer base; 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

internap@daviesmurphy.com

ir@internap.com




INTERNAP NETWORK SERVICES CORPORATION

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share amounts)







Three Months Ended


Year Ended


December 31,


December 31,


2010


2009


2010


2009

Revenues:








  Data center services

$ 31,732


$ 33,176


$ 128,200


$ 130,711

  Internet protocol (IP) services

28,227


30,373


115,964


125,548

      Total revenues

59,959


63,549


244,164


256,259









Operating costs and expenses:








  Direct cost of network, sales and services, exclusive of








     depreciation and amortization, shown below:








        Data center services

19,529


23,065


82,761


94,961

        IP services

10,979


11,210


44,662


48,055

  Direct costs of customer support

5,282


4,674


19,861


18,034

  Direct costs of amortization of acquired technologies

874


979


3,811


8,349

  Sales and marketing

7,655


7,430


29,232


28,131

  General and administrative

7,312


9,332


33,048


44,645

  Depreciation and amortization

7,770


7,387


30,158


28,282

  Loss on disposal of property and equipment, net

109


6


116


26

  Impairments and restructuring

210


93


1,411


54,698









      Total operating costs and expenses

59,720


64,176


245,060


325,181









Income (loss) from operations

239


(627)


(896)


(68,922)

















Non-operating expense (income):








  Interest expense

731


163


2,170


720

  Interest income

-


(19)


(64)


(150)

  Other, net

24


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