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Internap Reports Fourth Quarter and Full-year 2009 Financial Results
ATLANTA, March 2 -- -- Revenue of $256.3 million for 2009, Fourth quarter revenue of $63.5
million;
-- 2009 segment margin(1) of 44.2 percent, Fourth quarter segment margin
of 46.1 percent;
-- 2009 adjusted EBITDA(2) of $28.0 million; Fourth quarter adjusted
EBITDA of $9.0 million;
-- 2009 adjusted EBITDA margin(2) of 10.9 percent; Fourth quarter
adjusted EBITDA margin of 14.2 percent;
-- Announces 32,000 square foot expansion of company-controlled data
center footprint in Silicon Valley and Houston.
Internap Network Services Corporation (NASDAQ:INAP) today reported fourth quarter and full-year 2009 financial results delivering continued improvement in both quarterly segment profit and adjusted EBITDA.
"2009 was clearly a transitional year for Internap with fundamental changes to strategy, people and process. With our third consecutive quarter of adjusted EBITDA growth, we are reassured the steps we are taking will create long-term stockholder value," said Eric Cooney, President and Chief Executive Officer. "We continue the purposeful investment in our data center business with the announcement of two further expansions, totaling 32,000 net sellable square feet, in Santa Clara, California and Houston, Texas. Silicon Valley represents a new market for Internap's data center presence and Houston is an expansion in an already successful growth market. We expect both expansions to be open for customers during the third quarter of 2010."
Revenue for the full-year 2009 increased $2.3 million over 2008 to $256.3 million. Higher Data center services revenue in 2009 offset a decline in IP services revenue over the same period. Fourth quarter 2009 revenue was $63.5 million, a decrease of 1.0 percent compared with the same quarter last year. The year-over-year decrease in quarterly revenue was also attributable to lower IP services revenue which was only partially offset by increased Data center services revenue. While increased occupancy and higher revenue per square foot supported increases in Data center services revenue over the prior year, IP services revenue declined due to lower per unit pricing even with strong year-over-year traffic growth. Sequentially, fourth quarter 2009 revenue decreased by 1.3 percent with lower IP services and decreased Data center services revenue contributing to the decline. The company's initiative to proactively churn customers in certain low-margin, partner data center facilities impacted Data center services revenue compared with the third quarter of 2009. IP services revenue declined sequentially as pricing decreases outweighed quarter-over-quarter network traffic growth.
For the full-year 2009, GAAP net loss was $(69.7) million, or $(1.41) per fully diluted share, compared with a net loss of $(104.8) million, or $(2.13) per diluted share in 2008. The net losses in 2009 and 2008 included goodwill impairments and restructuring charges totaling $54.7 million and $101.4 million, respectively. Fourth quarter 2009 GAAP net loss was $(0.5) million, or $(0.01) per share, compared with a GAAP net loss of $(2.0) million, or $(0.04) per share, in the prior quarter and a GAAP net loss of $(0.9) million, or $(0.02) per share, in the fourth quarter of 2008. In the fourth quarter of 2009, normalized net income(2), which excludes the impact of stock-based compensation expense and items that management considers non-recurring, was $0.8 million, or $0.02 per fully-diluted share. This compares with third quarter 2009 normalized net loss(2) of $(0.9) million, or $(0.02) per fully-diluted share, and fourth quarter 2008 normalized net income of $1.2 million, or $0.02 per fully-diluted share.
Decreased IP services revenue drove a 4.1 percent decrease in Internap's full-year 2009 total segment profit(2) compared with the prior year. Fourth quarter 2009 segment profit totaled $29.3 million, rising 4.9 percent sequentially and 2.4 percent year-over-year. Improved Data center services revenue and lower proportional costs of sales in both reporting segments were the primary contributors to the year-over-year and sequential-quarter increases. Full-year 2009 segment margin was 44.2 percent, a decrease of 230 basis points compared with full-year 2008. Segment margin in the fourth quarter 2009 was 46.1 percent - an increase sequentially and over fourth quarter 2008 margins of 280 basis points and 160 basis points, respectively.
Adjusted EBITDA for the full-year 2009 totaled $28.0 million compared with $34.3 million in 2008. In the fourth quarter 2009, adjusted EBITDA was $9.0 million, a decrease of 4.1 percent compared with the fourth quarter of 2008. Sequentially, adjusted EBITDA increased $1.4 million, or 18.0 percent. Full-year 2009 adjusted EBITDA margin was 10.9 percent, down 260 basis points versus last year. Fourth quarter 2009 adjusted EBITDA margin fell 40 basis points year-over-year to 14.2 percent. Decreased IP services segment profit drove most of the year-over-year declines in adjusted EBITDA margin. Compared with the third quarter 2009, adjusted EBITDA margin improved 230 basis points, the third consecutive quarter of sequential expansion, as increasing segment margin and stable cash operating expense continued to benefit results.
Cash and cash equivalents totaled $73.9 million at December, 31 2009. Total debt including capital lease obligations was $23.2 million at year-end 2009. Cash generated from operations for the twelve months ended December 31, 2009 was $37.5 million. Capital expenditures over the same period were $17.3 million.
Internap maintained 2,935 customers under contract at the end of the fourth quarter of 2009. 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.
As part of a program disclosed in August of 2009 to deploy additional data center capacity in key markets, Internap announced plans to expand company-controlled data center operations in Houston and Silicon Valley. The new facility in Silicon Valley, will add 27,000 net sellable square feet of premium data center capacity in two phases for approximately $23 million. The first phase will total 14,000 feet and is planned to come on line in the third quarter of 2010. In Houston, a market where Internap's company-controlled utilization is approaching capacity, the company estimates that it will spend approximately $5 million for an additional 5,000 net sellable square feet which is also planned to turn-up in the third quarter of this year. Both the Silicon Valley data center and the expansion in Houston are being built with controls designed to achieve objectives included in SAS-70, type II compliance and meet N+1 redundancy standards for UPS, backup generators, and HVAC systems.
------------------------------
1. Segment profit is segment revenue less direct costs of network, sales
and services, exclusive of depreciation and amortization, as presented
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. Segment profit does not
include direct costs of customer support, direct costs of amortization
of acquired technologies or any other depreciation or amortization
associated with direct costs. Segment margin is segment profit as a
percentage of segment revenue.
2. Reconciliations between accounting principles generally accepted in the
United States, or GAAP, information and non-GAAP information contained
in this press release are provided in the tables below 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." This information is also available on our
website under the Investor Services section. Adjusted EBITDA margin is
Adjusted EBITDA as a percentage of total revenue.
Conference Call Information:
Internap's fourth quarter and full-year 2009 conference call will be held today at 5:00 p.m., EST. Participants may access the call by dialing 877-548-7901. International callers should dial 719-325-4829. Listeners may connect to the simultaneous webcast, which will include accompanying presentation slides, on the investor relations 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 Tuesday, March 2, 2010 at 8 p.m. EST through Tuesday, March 9, 2010 at 888-203-1112 using the replay code 5245513. International callers can access the archived event at 719-457-0820 with the same code.
About Internap
Internap is a leading Internet solutions and data center company that provides The Ultimate Online Experience(TM) by managing, delivering and distributing applications and content with 100 percent performance and reliability. With a global platform of data centers, managed Internet services and a content delivery network, Internap frees its customers to innovate their business, 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.
Internap "Safe Harbor" Statement
This press release may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include statements related to Internap's ability to create long-term stockholder value and its expectations regarding the expansion of data center capacity, including costs and 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. Internap undertakes no obligation to revise or update any forward-looking statement for any reason.
Press Contact: Investor Contact:
Mariah Torpey Andrew McBath
(781) 418-2404 (404) 302-9700
internap@daviesmurphy.comir@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,
------------------- -----------------
2009 2008 2009 2008
---- ---- ---- ----
Revenues:
Internet protocol (IP)
services $30,373 $33,950 $125,548 $139,737
Data center services 33,176 30,262 130,711 114,252
------ ------ ------- -------
Total revenues 63,549 64,212 256,259 253,989
------ ------ ------- -------
Operating costs and
expenses:
Direct costs of
network, sales and
services, exclusive
of depreciation and
amortization, shown
below:
IP services 11,210 13,045 48,055 51,885
Data center
services 23,065 22,580 94,961 83,992
Direct costs of
customer support 4,919 3,699 18,527 16,217
Direct costs of
amortization of
acquired technologies 979 1,143 8,349 6,649
Sales and marketing 7,430 6,954 28,131 30,888
General and
administrative 9,087 9,656 44,152 44,235
Depreciation and
amortization 7,387 6,639 28,282 23,865
Loss (gain) on
disposals of
property and
equipment 6 - 26 (16)
Impairments and
restructuring 93 1,026 54,698 101,441
--- ----- ------ -------
Total operating
costs and
expenses 64,176 64,742 325,181 359,156
------ ------ ------- -------
Loss from operations (627) (530) (68,922) 105,167)
Non-operating
expense (income) 160 479 461 (245)
--- --- --- ----
Loss before income taxes
and equity in (earnings)
of equity-method
investment (787) (1,009) (69,383) (104,922)
(Benefit) provision
for income taxes (218) (58) 357 174
Equity in (earnings)
of equity-method
investment,
net of taxes (72) (41) (15) (283)
--- --- --- ----
Net loss $(497) $(910) $(69,725) $(104,813)
===== ===== ======== ========
Basic and diluted
net loss per share $(0.01) $(0.02) $(1.41) $(2.13)
====== ====== ====== ======
Weighted average
shares outstanding
used in computing
basic and diluted
net loss per share 49,657 49,338 49,577 49,238
====== ====== ====== ======
INTERNAP NETWORK SERVICES CORPORATION
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except per share amounts)
December 31, December 31,
----------- -----------
2009 2008
---- ----
ASSETS
Current assets:
Cash and cash equivalents $73,926 $46,870
Short-term investments in
marketable securities and
other related assets 7,000 7,199
Accounts receivable, net of
allowance for doubtful
accounts of $1,953 and
$2,777, respectively 18,685 28,634
Inventory 375 381
Prepaid expenses and other assets 8,768 10,867
----- ------
Total current assets 108,754 93,951
Property and equipment, net of
accumulated depreciation of
$203,027 and $185,895,
respectively 91,151 97,350
Investments and other related
assets,$- and $7,027,
respectively, measured at
fair value 1,804 8,650
Intangible assets, net of
accumulated amortization of
$39,377 and $30,351,
respectively 20,782 33,942
Goodwill 39,464 90,977
Deposits and other assets 2,637 2,763
Deferred tax asset, non-
current, net 2,910 2,450
----- -----
Total assets $267,502 $330,083
======== ========
LIABILITIES AND STOCKHOLDERS'
EQUITY
Current liabilities:
Accounts payable $17,237 $19,642
Accrued liabilities 10,192 8,756
Deferred revenues, current
portion 3,817 3,710
Capital lease obligations,
current portion 25 274
Restructuring liability,
current portion 2,819 2,800
Other current liabilities 125 116
--- ---
Total current liabilities 34,215 35,298
Revolving credit facility, due
after one year 20,000 20,000
Deferred revenues, less
current portion 2,492 2,248
Capital lease obligations,
less current portion 3,217 3,244
Restructuring liability, less
current portion 6,123 6,222
Deferred rent 16,417 14,114
Other long-term liabilities 636 762
--- ---
Total liabilities 83,100 81,888
------ ------
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; 50,763 and 50,224
shares outstanding,
respectively 51 50
Additional paid-in capital 1,221,456 1,216,267
Treasury stock, at cost, 42
and 83 shares, respectively (127) (370)
Accumulated deficit (1,036,548) (966,823)
Accumulated items of other
comprehensive income (430) (929)
---- -----
Total stockholders' equity 184,402 248,195
------- -------
Total liabilities and
stockholders' equity $267,502 $330,083
======== ========
INTERNAP NETWORK SERVICES CORPORATION
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
Year Ended
December 31,
-----------------------
2009 2008
---- ----
Cash Flows From Operating Activities:
Net loss $(69,725) $(104,813)
Adjustments to reconcile net loss to net
cash provided by operating activities:
Depreciation and amortization 32,496 28,663
Loss (gain) on disposal of property and
equipment, net 26 (16)
Goodwill and other intangible asset
impairments 55,647 102,336
Stock-based compensation 5,613 7,499
Equity in (earnings) from equity-method
investment (15) (283)
Provision for doubtful accounts 2,711 5,083
Non-cash changes in deferred rent 2,303 3,102
Deferred income taxes (459) 644
Other, net 178 (477)
Changes in operating assets and liabilities:
Accounts receivable 7,238 2,424
Inventory, prepaid expenses, deposits and
other assets 2,205 (2,919)
Accounts payable (2,405) 18
Accrued and other liabilities 1,436 (1,404)
Deferred revenue 351 (836)
Accrued restructuring liability (80) (1,070)
--- ------
Net cash flows provided by operating
activities 37,520 37,951
------ ------
Cash Flows From Investing Activities:
Purchases of investments in marketable
securities - (21,422)
Maturities of investments in marketable
securities 7,374 26,591
Purchases of property and equipment (17,278) (51,154)
Proceeds from disposal of property and
equipment 4 175
Change in restricted cash - 4,120
--- -----
Net cash flows used in investing activities (9,900) (41,690)
------ -------
Cash Flows From Financing Activities:
Proceeds from credit facility, due after one
year 78,500 20,000
Principal payments on credit facility, due
after one year (78,500) (20,000)
Payments on capital lease obligations (276) (807)
Stock-based compensation plans (205) 108
Other, net (117) (122)
---- ----
Net cash flows used in financing activities (598) (821)
---- ----
Effect of exchange rates on cash and cash
equivalents 34 (600)
--- ----
Net increase (decrease) in cash and cash
equivalents 27,056 (5,160)
Cash and cash equivalents at beginning
of period 46,870 52,030
------ ------
Cash and cash equivalents at end of period $73,926 $46,870
======= =======
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:
-- Adjusted EBITDA is loss from operations plus depreciation and
amortization, loss on disposals of property and equipment, impairments
and restructuring and stock-based compensation.
-- Adjusted EBITDA margin is adjusted EBITDA as a percentage of revenues.
-- Normalized net income (loss) is net loss plus impairments and
restructuring and stock-based compensation.
-- Normalized diluted shares outstanding are diluted shares of common
stock outstanding used in GAAP net loss per share calculations,
excluding the dilutive effect of stock-based compensation using the
treasury stock method.
-- Normalized net income (loss) per share is normalized net income (loss)
divided by basic and normalized diluted shares outstanding.
-- Segment profit is segment revenues less direct costs of network, sales
and services, exclusive of depreciation and amortization for the
segment, as presented in the notes to our consolidated financial
statements. Segment profit does not include direct costs of customer
support, direct costs of amortization of acquired technologies or any
other depreciation or amortization associated with direct costs.
-- Segment margin is segment profit as a percentage of segment revenues.
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.
INTERNAP NETWORK SERVICES CORPORATION
NON-GAAP (ADJUSTED) FINANCIAL MEASURES (Continued)
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, 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 statement of cash flows presents 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:
-- EBITDA is widely used by investors to measure a company's operating
performance without regard to items such as interest expense, income
taxes, depreciation and amortization, which can vary substantially
from company-to-company depending upon accounting methods and book
value of assets, capital structure and the method by which assets were
acquired; and
-- investors commonly adjust EBITDA information to eliminate the effect
of disposals of property and equipment, impairments, restructuring and
stock-based compensation which vary widely from company-to-company and
impair comparability.
Our management uses adjusted EBITDA:
-- as a measure of operating performance to assist in comparing
performance from period-to-period on a consistent basis;
-- as a measure for planning and forecasting overall expectations and for
evaluating actual results against such expectations; and
-- in communications with the board of directors, stockholders, analysts
and investors concerning our financial performance.
INTERNAP NETWORK SERVICES CORPORATION
NON-GAAP (ADJUSTED) FINANCIAL MEASURES (Continued)
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
----------------------------------------
December 31, September 30, December 31,
2009 2009 2008
----------- ------------ -----------
Loss from operations (GAAP) $(627) $(1,743) $(530)
Depreciation and amortization,
including depreciation and
amortization included in
direct costs of network,
sales and services 8,366 8,292 7,782
Loss on disposals of
property and equipment 6 20 -
Impairments and restructuring 93 - 1,026
Stock-based compensation 1,178 1,071 1,128
----- ----- -----
Adjusted EBITDA (non-GAAP) $9,016 $7,640 $9,406
====== ====== ======
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
------------------------------------------
December 31, September 30, December 31,
2009 2009 2008
---- ---- ----
Net loss (GAAP) $(497) $(1,975) $(910)
Impairments and restructuring 93 - 1,026
Stock-based compensation 1,178 1,071 1,128
----- ----- -----
Normalized net income
(loss) (non-GAAP) $774 $(904) $1,244
Normalized income allocable to
participating securities
(non-GAAP) (16) - (22)
--- --- ---
Normalized net income
(loss) available to
common stockholders
(non-GAAP) $758 $(904) $1,222
==== ===== ======
Weighted average shares
outstanding used in per
share calculation:
Basic (GAAP) 49,657 49,638 49,338
Participating securities
(GAAP) 1,081 1,126 871
Diluted (GAAP) 49,657 49,638 49,338
Add potentially dilutive
securities 54 - 4
Less dilutive effect of
stock-based compensation
using the treasury stock
method (54) - -
--- --- ---
Normalized diluted
shares outstanding
(non-GAAP) 49,657 49,638 49,342
====== ====== ======
GAAP net loss per share:
Basic $(0.01) $(0.04) $(0.02)
====== ====== ======
Diluted $(0.01) $(0.04) $(0.02)
====== ====== ======
Normalized net income
(loss) per share (non-GAAP):
Basic $0.02 $(0.02) $0.02
===== ====== =====
Diluted $0.02 $(0.02) $0.02
===== ====== =====
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
---------------------------------------
December 31, September 30, December 31,
2009 2009 2008
---- ---- ----
Revenues:
IP services $30,373 $30,867 $33,950
Data center services 33,176 33,547 30,262
------ ------ ------
Total 63,549 64,414 64,212
------ ------ ------
Direct costs of network,
sales and services,
exclusive of depreciation
and amortization:
IP services 11,210 12,047 13,045
Data center services 23,065 24,450 22,580
------ ------ ------
Total 34,275 36,497 35,625
------ ------ ------
Segment profit:
IP services 19,163 18,820 20,905
Data center services 10,111 9,097 7,682
------ ----- -----
Total $29,274 $27,917 $28,587
======= ======= =======
Segment margin:
IP services 63.1% 61.0% 61.6%
Data center services 30.5% 27.1% 25.4%
---- ---- ----
Total 46.1% 43.3% 44.5%
==== ==== ====
(Logo: http://www.newscom.com/cgi-bin/prnh/20100205/CL49469 )
Photo: http://www.newscom.com/cgi-bin/prnh/20100205/CL49469
Source: Internap Network Services Corporation
CONTACT: Press: Mariah Torpey, +1-781-418-2404,
internap@daviesmurphy.com; or Investor Contact: Andrew McBath,
+1-404-302-9700, ir@internap.com
Web Site: http://www.internap.com/
Internap Reports Fourth Quarter and Full-year 2009 Financial Results
ATLANTA, March 2 -- -- Revenue of $256.3 million for 2009, Fourth quarter revenue of $63.5
million;
-- 2009 segment margin(1) of 44.2 percent, Fourth quarter segment margin
of 46.1 percent;
-- 2009 adjusted EBITDA(2) of $28.0 million; Fourth quarter adjusted
EBITDA of $9.0 million;
-- 2009 adjusted EBITDA margin(2) of 10.9 percent; Fourth quarter
adjusted EBITDA margin of 14.2 percent;
-- Announces 32,000 square foot expansion of company-controlled data
center footprint in Silicon Valley and Houston.
Internap Network Services Corporation (NASDAQ:INAP) today reported fourth quarter and full-year 2009 financial results delivering continued improvement in both quarterly segment profit and adjusted EBITDA.
"2009 was clearly a transitional year for Internap with fundamental changes to strategy, people and process. With our third consecutive quarter of adjusted EBITDA growth, we are reassured the steps we are taking will create long-term stockholder value," said Eric Cooney, President and Chief Executive Officer. "We continue the purposeful investment in our data center business with the announcement of two further expansions, totaling 32,000 net sellable square feet, in Santa Clara, California and Houston, Texas. Silicon Valley represents a new market for Internap's data center presence and Houston is an expansion in an already successful growth market. We expect both expansions to be open for customers during the third quarter of 2010."
Revenue for the full-year 2009 increased $2.3 million over 2008 to $256.3 million. Higher Data center services revenue in 2009 offset a decline in IP services revenue over the same period. Fourth quarter 2009 revenue was $63.5 million, a decrease of 1.0 percent compared with the same quarter last year. The year-over-year decrease in quarterly revenue was also attributable to lower IP services revenue which was only partially offset by increased Data center services revenue. While increased occupancy and higher revenue per square foot supported increases in Data center services revenue over the prior year, IP services revenue declined due to lower per unit pricing even with strong year-over-year traffic growth. Sequentially, fourth quarter 2009 revenue decreased by 1.3 percent with lower IP services and decreased Data center services revenue contributing to the decline. The company's initiative to proactively churn customers in certain low-margin, partner data center facilities impacted Data center services revenue compared with the third quarter of 2009. IP services revenue declined sequentially as pricing decreases outweighed quarter-over-quarter network traffic growth.
For the full-year 2009, GAAP net loss was $(69.7) million, or $(1.41) per fully diluted share, compared with a net loss of $(104.8) million, or $(2.13) per diluted share in 2008. The net losses in 2009 and 2008 included goodwill impairments and restructuring charges totaling $54.7 million and $101.4 million, respectively. Fourth quarter 2009 GAAP net loss was $(0.5) million, or $(0.01) per share, compared with a GAAP net loss of $(2.0) million, or $(0.04) per share, in the prior quarter and a GAAP net loss of $(0.9) million, or $(0.02) per share, in the fourth quarter of 2008. In the fourth quarter of 2009, normalized net income(2), which excludes the impact of stock-based compensation expense and items that management considers non-recurring, was $0.8 million, or $0.02 per fully-diluted share. This compares with third quarter 2009 normalized net loss(2) of $(0.9) million, or $(0.02) per fully-diluted share, and fourth quarter 2008 normalized net income of $1.2 million, or $0.02 per fully-diluted share.
Decreased IP services revenue drove a 4.1 percent decrease in Internap's full-year 2009 total segment profit(2) compared with the prior year. Fourth quarter 2009 segment profit totaled $29.3 million, rising 4.9 percent sequentially and 2.4 percent year-over-year. Improved Data center services revenue and lower proportional costs of sales in both reporting segments were the primary contributors to the year-over-year and sequential-quarter increases. Full-year 2009 segment margin was 44.2 percent, a decrease of 230 basis points compared with full-year 2008. Segment margin in the fourth quarter 2009 was 46.1 percent - an increase sequentially and over fourth quarter 2008 margins of 280 basis points and 160 basis points, respectively.
Adjusted EBITDA for the full-year 2009 totaled $28.0 million compared with $34.3 million in 2008. In the fourth quarter 2009, adjusted EBITDA was $9.0 million, a decrease of 4.1 percent compared with the fourth quarter of 2008. Sequentially, adjusted EBITDA increased $1.4 million, or 18.0 percent. Full-year 2009 adjusted EBITDA margin was 10.9 percent, down 260 basis points versus last year. Fourth quarter 2009 adjusted EBITDA margin fell 40 basis points year-over-year to 14.2 percent. Decreased IP services segment profit drove most of the year-over-year declines in adjusted EBITDA margin. Compared with the third quarter 2009, adjusted EBITDA margin improved 230 basis points, the third consecutive quarter of sequential expansion, as increasing segment margin and stable cash operating expense continued to benefit results.
Cash and cash equivalents totaled $73.9 million at December, 31 2009. Total debt including capital lease obligations was $23.2 million at year-end 2009. Cash generated from operations for the twelve months ended December 31, 2009 was $37.5 million. Capital expenditures over the same period were $17.3 million.
Internap maintained 2,935 customers under contract at the end of the fourth quarter of 2009. 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.
As part of a program disclosed in August of 2009 to deploy additional data center capacity in key markets, Internap announced plans to expand company-controlled data center operations in Houston and Silicon Valley. The new facility in Silicon Valley, will add 27,000 net sellable square feet of premium data center capacity in two phases for approximately $23 million. The first phase will total 14,000 feet and is planned to come on line in the third quarter of 2010. In Houston, a market where Internap's company-controlled utilization is approaching capacity, the company estimates that it will spend approximately $5 million for an additional 5,000 net sellable square feet which is also planned to turn-up in the third quarter of this year. Both the Silicon Valley data center and the expansion in Houston are being built with controls designed to achieve objectives included in SAS-70, type II compliance and meet N+1 redundancy standards for UPS, backup generators, and HVAC systems.
------------------------------
1. Segment profit is segment revenue less direct costs of network, sales
and services, exclusive of depreciation and amortization, as presented
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. Segment profit does not
include direct costs of customer support, direct costs of amortization
of acquired technologies or any other depreciation or amortization
associated with direct costs. Segment margin is segment profit as a
percentage of segment revenue.
2. Reconciliations between accounting principles generally accepted in the
United States, or GAAP, information and non-GAAP information contained
in this press release are provided in the tables below 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." This information is also available on our
website under the Investor Services section. Adjusted EBITDA margin is
Adjusted EBITDA as a percentage of total revenue.
Conference Call Information:
Internap's fourth quarter and full-year 2009 conference call will be held today at 5:00 p.m., EST. Participants may access the call by dialing 877-548-7901. International callers should dial 719-325-4829. Listeners may connect to the simultaneous webcast, which will include accompanying presentation slides, on the investor relations 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 Tuesday, March 2, 2010 at 8 p.m. EST through Tuesday, March 9, 2010 at 888-203-1112 using the replay code 5245513. International callers can access the archived event at 719-457-0820 with the same code.
About Internap
Internap is a leading Internet solutions and data center company that provides The Ultimate Online Experience(TM) by managing, delivering and distributing applications and content with 100 percent performance and reliability. With a global platform of data centers, managed Internet services and a content delivery network, Internap frees its customers to innovate their business, 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.
Internap "Safe Harbor" Statement
This press release may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include statements related to Internap's ability to create long-term stockholder value and its expectations regarding the expansion of data center capacity, including costs and 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. Internap undertakes no obligation to revise or update any forward-looking statement for any reason.
Press Contact: Investor Contact:
Mariah Torpey Andrew McBath
(781) 418-2404 (404) 302-9700
internap@daviesmurphy.comir@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,
------------------- -----------------
2009 2008 2009 2008
---- ---- ---- ----
Revenues:
Internet protocol (IP)
services $30,373 $33,950 $125,548 $139,737
Data center services 33,176 30,262 130,711 114,252
------ ------ ------- -------
Total revenues 63,549 64,212 256,259 253,989
------ ------ ------- -------
Operating costs and
expenses:
Direct costs of
network, sales and
services, exclusive
of depreciation and
amortization, shown
below:
IP services 11,210 13,045 48,055 51,885
Data center
services 23,065 22,580 94,961 83,992
Direct costs of
customer support 4,919 3,699 18,527 16,217
Direct costs of
amortization of
acquired technologies 979 1,143 8,349 6,649
Sales and marketing 7,430 6,954 28,131 30,888
General and
administrative 9,087 9,656 44,152 44,235
Depreciation and
amortization 7,387 6,639 28,282 23,865
Loss (gain) on
disposals of
property and
equipment 6 - 26 (16)
Impairments and
restructuring 93 1,026 54,698 101,441
--- ----- ------ -------
Total operating
costs and
expenses 64,176 64,742 325,181 359,156
------ ------ ------- -------
Loss from operations (627) (530) (68,922) 105,167)
Non-operating
expense (income) 160 479 461 (245)
--- --- --- ----
Loss before income taxes
and equity in (earnings)
of equity-method
investment (787) (1,009) (69,383) (104,922)
(Benefit) provision
for income taxes (218) (58) 357 174
Equity in (earnings)
of equity-method
investment,
net of taxes (72) (41) (15) (283)
--- --- --- ----
Net loss $(497) $(910) $(69,725) $(104,813)
===== ===== ======== ========
Basic and diluted
net loss per share $(0.01) $(0.02) $(1.41) $(2.13)
====== ====== ====== ======
Weighted average
shares outstanding
used in computing
basic and diluted
net loss per share 49,657 49,338 49,577 49,238
====== ====== ====== ======
INTERNAP NETWORK SERVICES CORPORATION
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except per share amounts)
December 31, December 31,
----------- -----------
2009 2008
---- ----
ASSETS
Current assets:
Cash and cash equivalents $73,926 $46,870
Short-term investments in
marketable securities and
other related assets 7,000 7,199
Accounts receivable, net of
allowance for doubtful
accounts of $1,953 and
$2,777, respectively 18,685 28,634
Inventory 375 381
Prepaid expenses and other assets 8,768 10,867
----- ------
Total current assets 108,754 93,951
Property and equipment, net of
accumulated depreciation of
$203,027 and $185,895,
respectively 91,151 97,350
Investments and other related
assets,$- and $7,027,
respectively, measured at
fair value 1,804 8,650
Intangible assets, net of
accumulated amortization of
$39,377 and $30,351,
respectively 20,782 33,942
Goodwill 39,464 90,977
Deposits and other assets 2,637 2,763
Deferred tax asset, non-
current, net 2,910 2,450
----- -----
Total assets $267,502 $330,083
======== ========
LIABILITIES AND STOCKHOLDERS'
EQUITY
Current liabilities:
Accounts payable $17,237 $19,642
Accrued liabilities 10,192 8,756
Deferred revenues, current
portion 3,817 3,710
Capital lease obligations,
current portion 25 274
Restructuring liability,
current portion 2,819 2,800
Other current liabilities 125 116
--- ---
Total current liabilities 34,215 35,298
Revolving credit facility, due
after one year 20,000 20,000
Deferred revenues, less
current portion 2,492 2,248
Capital lease obligations,
less current portion 3,217 3,244
Restructuring liability, less
current portion 6,123 6,222
Deferred rent 16,417 14,114
Other long-term liabilities 636 762
--- ---
Total liabilities 83,100 81,888
------ ------
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; 50,763 and 50,224
shares outstanding,
respectively 51 50
Additional paid-in capital 1,221,456 1,216,267
Treasury stock, at cost, 42
and 83 shares, respectively (127) (370)
Accumulated deficit (1,036,548) (966,823)
Accumulated items of other
comprehensive income (430) (929)
---- -----
Total stockholders' equity 184,402 248,195
------- -------
Total liabilities and
stockholders' equity $267,502 $330,083
======== ========
INTERNAP NETWORK SERVICES CORPORATION
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
Year Ended
December 31,
-----------------------
2009 2008
---- ----
Cash Flows From Operating Activities:
Net loss $(69,725) $(104,813)
Adjustments to reconcile net loss to net
cash provided by operating activities:
Depreciation and amortization 32,496 28,663
Loss (gain) on disposal of property and
equipment, net 26 (16)
Goodwill and other intangible asset
impairments 55,647 102,336
Stock-based compensation 5,613 7,499
Equity in (earnings) from equity-method
investment (15) (283)
Provision for doubtful accounts 2,711 5,083
Non-cash changes in deferred rent 2,303 3,102
Deferred income taxes (459) 644
Other, net 178 (477)
Changes in operating assets and liabilities:
Accounts receivable 7,238 2,424
Inventory, prepaid expenses, deposits and
other assets 2,205 (2,919)
Accounts payable (2,405) 18
Accrued and other liabilities 1,436 (1,404)
Deferred revenue 351 (836)
Accrued restructuring liability (80) (1,070)
--- ------
Net cash flows provided by operating
activities 37,520 37,951
------ ------
Cash Flows From Investing Activities:
Purchases of investments in marketable
securities - (21,422)
Maturities of investments in marketable
securities 7,374 26,591
Purchases of property and equipment (17,278) (51,154)
Proceeds from disposal of property and
equipment 4 175
Change in restricted cash - 4,120
--- -----
Net cash flows used in investing activities (9,900) (41,690)
------ -------
Cash Flows From Financing Activities:
Proceeds from credit facility, due after one
year 78,500 20,000
Principal payments on credit facility, due
after one year (78,500) (20,000)
Payments on capital lease obligations (276) (807)
Stock-based compensation plans (205) 108
Other, net (117) (122)
---- ----
Net cash flows used in financing activities (598) (821)
---- ----
Effect of exchange rates on cash and cash
equivalents 34 (600)
--- ----
Net increase (decrease) in cash and cash
equivalents 27,056 (5,160)
Cash and cash equivalents at beginning
of period 46,870 52,030
------ ------
Cash and cash equivalents at end of period $73,926 $46,870
======= =======
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:
-- Adjusted EBITDA is loss from operations plus depreciation and
amortization, loss on disposals of property and equipment, impairments
and restructuring and stock-based compensation.
-- Adjusted EBITDA margin is adjusted EBITDA as a percentage of revenues.
-- Normalized net income (loss) is net loss plus impairments and
restructuring and stock-based compensation.
-- Normalized diluted shares outstanding are diluted shares of common
stock outstanding used in GAAP net loss per share calculations,
excluding the dilutive effect of stock-based compensation using the
treasury stock method.
-- Normalized net income (loss) per share is normalized net income (loss)
divided by basic and normalized diluted shares outstanding.
-- Segment profit is segment revenues less direct costs of network, sales
and services, exclusive of depreciation and amortization for the
segment, as presented in the notes to our consolidated financial
statements. Segment profit does not include direct costs of customer
support, direct costs of amortization of acquired technologies or any
other depreciation or amortization associated with direct costs.
-- Segment margin is segment profit as a percentage of segment revenues.
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.
INTERNAP NETWORK SERVICES CORPORATION
NON-GAAP (ADJUSTED) FINANCIAL MEASURES (Continued)
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, 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 statement of cash flows presents 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:
-- EBITDA is widely used by investors to measure a company's operating
performance without regard to items such as interest expense, income
taxes, depreciation and amortization, which can vary substantially
from company-to-company depending upon accounting methods and book
value of assets, capital structure and the method by which assets were
acquired; and
-- investors commonly adjust EBITDA information to eliminate the effect
of disposals of property and equipment, impairments, restructuring and
stock-based compensation which vary widely from company-to-company and
impair comparability.
Our management uses adjusted EBITDA:
-- as a measure of operating performance to assist in comparing
performance from period-to-period on a consistent basis;
-- as a measure for planning and forecasting overall expectations and for
evaluating actual results against such expectations; and
-- in communications with the board of directors, stockholders, analysts
and investors concerning our financial performance.
INTERNAP NETWORK SERVICES CORPORATION
NON-GAAP (ADJUSTED) FINANCIAL MEASURES (Continued)
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
----------------------------------------
December 31, September 30, December 31,
2009 2009 2008
----------- ------------ -----------
Loss from operations (GAAP) $(627) $(1,743) $(530)
Depreciation and amortization,
including depreciation and
amortization included in
direct costs of network,
sales and services 8,366 8,292 7,782
Loss on disposals of
property and equipment 6 20 -
Impairments and restructuring 93 - 1,026
Stock-based compensation 1,178 1,071 1,128
----- ----- -----
Adjusted EBITDA (non-GAAP) $9,016 $7,640 $9,406
====== ====== ======
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
------------------------------------------
December 31, September 30, December 31,
2009 2009 2008
---- ---- ----
Net loss (GAAP) $(497) $(1,975) $(910)
Impairments and restructuring 93 - 1,026
Stock-based compensation 1,178 1,071 1,128
----- ----- -----
Normalized net income
(loss) (non-GAAP) $774 $(904) $1,244
Normalized income allocable to
participating securities
(non-GAAP) (16) - (22)
--- --- ---
Normalized net income
(loss) available to
common stockholders
(non-GAAP) $758 $(904) $1,222
==== ===== ======
Weighted average shares
outstanding used in per
share calculation:
Basic (GAAP) 49,657 49,638 49,338
Participating securities
(GAAP) 1,081 1,126 871
Diluted (GAAP) 49,657 49,638 49,338
Add potentially dilutive
securities 54 - 4
Less dilutive effect of
stock-based compensation
using the treasury stock
method (54) - -
--- --- ---
Normalized diluted
shares outstanding
(non-GAAP) 49,657 49,638 49,342
====== ====== ======
GAAP net loss per share:
Basic $(0.01) $(0.04) $(0.02)
====== ====== ======
Diluted $(0.01) $(0.04) $(0.02)
====== ====== ======
Normalized net income
(loss) per share (non-GAAP):
Basic $0.02 $(0.02) $0.02
===== ====== =====
Diluted $0.02 $(0.02) $0.02
===== ====== =====
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
---------------------------------------
December 31, September 30, December 31,
2009 2009 2008
---- ---- ----
Revenues:
IP services $30,373 $30,867 $33,950
Data center services 33,176 33,547 30,262
------ ------ ------
Total 63,549 64,414 64,212
------ ------ ------
Direct costs of network,
sales and services,
exclusive of depreciation
and amortization:
IP services 11,210 12,047 13,045
Data center services 23,065 24,450 22,580
------ ------ ------
Total 34,275 36,497 35,625
------ ------ ------
Segment profit:
IP services 19,163 18,820 20,905
Data center services 10,111 9,097 7,682
------ ----- -----
Total $29,274 $27,917 $28,587
======= ======= =======
Segment margin:
IP services 63.1% 61.0% 61.6%
Data center services 30.5% 27.1% 25.4%
---- ---- ----
Total 46.1% 43.3% 44.5%
==== ==== ====
(Logo: http://www.newscom.com/cgi-bin/prnh/20100205/CL49469 )
Photo: http://www.newscom.com/cgi-bin/prnh/20100205/CL49469
Source: Internap Network Services Corporation
CONTACT: Press: Mariah Torpey, +1-781-418-2404,
internap@daviesmurphy.com; or Investor Contact: Andrew McBath,
+1-404-302-9700, ir@internap.com
Web Site: http://www.internap.com/