ATLANTA, Aug. 4, 2016 /PRNewswire/ -- Internap
Corporation (NASDAQ: INAP), a provider of high-performance Internet
infrastructure services, today announced financial results for the
second quarter of 2016.
"We are pleased with the improvement in adjusted EBITDA margin,
driven by improved operational efficiencies as a result of the
organizational structure changes made in the first quarter. As we
previously communicated, churn from a small number of large
customers impacted our revenue performance in the second quarter of
2016. We did see revenue begin to stabilize in the second quarter
as the major churn events declined and bookings improved. Given our
first half 2016 results, we are updating our full-year 2016
guidance," said Michael
Ruffolo, President and Chief Executive Officer of Internap.
"With a return to sequential revenue growth expected in the
second half of 2016, we remain confident in our ability to
accelerate profitable growth and drive
long-term shareholder value."
Second Quarter 2016 Financial Summary
|
|
|
|
|
|
|
|
|
|
|
YoY
|
|
QoQ
|
|
|
|
|
|
2Q
2016
|
|
2Q
2015
|
|
1Q
2016
|
|
Growth
|
|
Growth
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
Data center and
network services
|
$
50,459
|
|
$
53,521
|
|
$
50,872
|
|
-6%
|
|
-1%
|
|
|
Cloud and hosting
services
|
$
23,856
|
|
$
26,911
|
|
$
25,052
|
|
-11%
|
|
-5%
|
|
|
|
Total
Revenues
|
$
74,315
|
|
$
80,432
|
|
$
75,924
|
|
-8%
|
|
-2%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
Expenses
|
$
76,789
|
|
$
86,270
|
|
$
78,125
|
|
-11%
|
|
-2%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP Net
Loss
|
$
(10,693)
|
|
$
(12,534)
|
|
$
(9,644)
|
|
-15%
|
|
11%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Normalized Net
Loss1
|
$
(7,300)
|
|
$
(10,290)
|
|
$
(6,108)
|
|
-29%
|
|
20%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment
Profit2
|
$
42,945
|
|
$
47,454
|
|
$
44,847
|
|
-10%
|
|
-4%
|
|
Segment Profit
Margin2
|
57.8%
|
|
59.0%
|
|
59.1%
|
|
-120
BPS
|
|
-130
BPS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted
EBITDA
|
$
20,167
|
|
$
19,109
|
|
$
20,476
|
|
6%
|
|
-2%
|
|
Adjusted EBITDA
Margin
|
27.1%
|
|
23.8%
|
|
27.0%
|
|
330
BPS
|
|
10
BPS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
- Revenue totaled $74.3 million in
the second quarter, a decrease of 8% year-over-year and 2%
sequentially. Both decreases were driven by churn from a small
number of large customers.
- Data Center and Network Services revenue totaled $50.5 million in the second quarter, a decrease
of 6% year-over-year and 1% sequentially. Both decreases were
attributable to lower IP connectivity revenue related to the
continued decline in pricing for new and renewing customers and the
loss of legacy contracts and a decrease in partner colocation
revenue, offset by an increase in company-controlled colocation
revenue.
- Cloud and Hosting Services revenue totaled $23.9 million in the second quarter, a decrease
of 11% year-over-year and 5% sequentially. Both decreases were
driven by churn from a small number of large customers.
Net Loss
- GAAP net loss was $(10.7)
million, or $(0.21) per share,
compared with $(12.5) million, or
$(0.24) per share, in the second
quarter of 2015 and $(9.6) million,
or $(0.19) per share, in the first
quarter of 2016.
- Normalized net loss was $(7.3)
million, or $(0.14) per share,
compared with normalized net loss of $(10.3)
million, or $(0.20) per share,
in the second quarter of 2015, and normalized net loss of
$(6.1) million, or $(0.12) per share, in the first quarter of
2016.
Segment Profit and Adjusted EBITDA
- Segment profit totaled $42.9
million in the second quarter, a 10% decrease compared with
the second quarter of 2015 and a 4% decrease from the first quarter
of 2016. Segment margin was 57.8%, a decrease of 120 basis points
year-over-year and 130 basis points sequentially.
- Data Center and Network Services segment profit totaled
$25.8 million in the second quarter,
a 6% decrease compared with the second quarter of 2015 and a 3%
decrease from the first quarter of 2016. Data Center and Network
Services segment margin was 51.1% in the second quarter, down 10
basis points year-over-year and 100 basis points sequentially.
Lower IP connectivity revenue and partner colocation revenue offset
higher company-controlled colocation revenue and resulted in a
decrease in Data Center and Network Services segment profit and
segment margin.
- Cloud and Hosting Services segment profit totaled $17.1 million in the second quarter, a 15%
decrease compared with the second quarter of 2015 and a 7% decrease
from the first quarter of 2016. Cloud and Hosting Services segment
margin was 71.8% in the second quarter, down 270 basis points
year-over-year and 140 basis points sequentially. Decreased Cloud
and Hosting Services revenue resulted in declines in segment profit
and segment margin.
- Adjusted EBITDA totaled $20.2
million in the second quarter, a 6% increase compared with
the second quarter of 2015 and a 2% decrease from the first quarter
of 2016. Adjusted EBITDA margin was 27.1% in the second quarter, up
330 basis points year-over-year and up 10 basis points
sequentially. The year-over-year increase in adjusted EBITDA and
adjusted EBITDA margin was attributable to lower cash operating
expense4 primarily from optimizing our cost structure
and improved marketing program efficiencies. Benefits included a
decrease in cash-based compensation, a decrease in marketing costs
and the elimination of non-core functions, primarily the result of
our business unit realignment. Sequentially, lower segment profit
weighed on adjusted EBITDA.
Balance Sheet and Cash Flow Statement
- Cash and cash equivalents totaled $13.9
million at June 30, 2016.
Total debt was $377.8 million, net of
discount and prepaid costs, at the end of the quarter, including
$57.7 million in capital lease
obligations.
- Cash generated from operations for the three months ended
June 30, 2016 was $14.0 million. Capital expenditures over the same
period were $14.4 million.
Business Outlook
Internap updated its financial outlook for full-year 2016:
|
Full-Year
2016
|
Full-Year
2016
|
|
Current
Guidance
|
Previous
Guidance
|
Revenue
|
$300 million - $305
million
|
$310 million - $320
million
|
Adjusted
EBITDA
|
$83 million - $87
million
|
$80 million - $90
million
|
Capital
Expenditures
|
$40 million - $50
million
|
$40 million - $50
million
|
__________________________________________________
1 Adjusted
EBITDA, adjusted EBITDA margin and normalized net loss are non-GAAP
financial measures which we define 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 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 Loss and Basic and
Diluted Normalized Net Loss Per Share" in the attachment.
2 Segment margin
and segment profit are non-GAAP financial measures which we define
in an attachment to this press release entitled "Non-GAAP
(Adjusted) Financial Measures." Reconciliations between GAAP and
non-GAAP information related to segment profit and segment margin
are contained in the table entitled "Segment Profit and Segment
Margin" in the attachment.
Conference Call Information:
Internap's second quarter 2016 conference call will be held
today at 5:00 p.m. ET. Listeners may
connect to a webcast of the call, which will include accompanying
presentation slides, on the investor relations section of
Internap's web site at http://ir.internap.com/events.cfm. The call
can be also 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, August 4, 2016 at 8:00 p.m. ET through Wednesday, August 10, 2016 at 855-859-2056 using
replay code 41861490. International callers can listen to the
archived event at 404-537-3406 with the same code.
About Internap
Internap is the high-performance Internet infrastructure
provider that powers the applications shaping the way we live, work
and play. Our hybrid infrastructure delivers performance without
compromise – blending virtual and bare-metal cloud, hosting and
colocation services across a global network of data centers,
optimized from the application to the end user and backed by
rock-solid customer support and a 100% uptime guarantee. Since
1996, the most innovative companies have relied on Internap to make
their applications faster and more scalable. For more information,
visit www.internap.com.
Forward-Looking Statements
This press release contains forward-looking statements. These
forward-looking statements include statements related to our
expectations for full-year 2016 revenue, adjusted EBITDA and
capital expenditures and our ability to accelerate profitable
growth and drive long-term shareholder value. Our ability to
achieve these forward-looking statements is based on certain
assumptions, including our ability to execute on our business
strategy, leveraging of multiple routes to market, expanded brand
awareness for high-performance Internet infrastructure services and
customer churn levels. These assumptions may prove to be inaccurate
in the future. Because such forward-looking 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 our ability to
execute on our business strategy and drive growth; our ability to
maintain current customers and obtain new ones, whether in a
cost-effective manner or at all; the robustness of the IT
infrastructure services market; our ability to achieve or sustain
profitability; our ability to expand margins and drive higher
returns on investment; our ability to sell into new and existing
data center space; the actual performance of our IT infrastructure
services; our ability to correctly forecast capital needs, demand
planning and space utilization; our 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 our network operations centers, data
centers, network access points or computer systems; our ability to
provide or improve Internet infrastructure services to our
customers; and our ability to protect our intellectual property, as
well as other factors discussed in our 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. We undertake no
obligation to update, amend or clarify any forward-looking
statement for any reason.
|
|
Press
Contact:
|
Investor
Contact:
|
Mariah
Torpey
|
Mary Ann
Arico
|
(781)
418-2404
|
(404)
302-9982
|
internap@teamlewis.com
|
ir@internap.com
|
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|
|
|
|
|
|
|
INTERNAP
CORPORATION
|
UNAUDITED
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
|
(In thousands,
except per share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
June 30,
|
|
Six Months Ended
June 30,
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
Revenues:
|
|
|
|
|
|
|
|
Data
center and network services
|
$
50,459
|
|
$
53,521
|
|
$
101,331
|
|
$
107,589
|
Cloud
and hosting services
|
23,856
|
|
26,911
|
|
48,908
|
|
53,629
|
Total
revenues
|
74,315
|
|
80,432
|
|
150,239
|
|
161,218
|
|
|
|
|
|
|
|
|
Operating costs and
expenses:
|
|
|
|
|
|
|
|
Direct
costs of sales and services, exclusive of
depreciation and amortization, shown below:
|
|
|
|
|
|
|
|
Data center and network
services
|
24,650
|
|
26,116
|
|
49,023
|
|
52,597
|
Cloud and hosting
services
|
6,720
|
|
6,862
|
|
13,424
|
|
13,727
|
Direct
costs of customer support
|
7,919
|
|
9,090
|
|
16,723
|
|
18,208
|
Sales,
general and administrative
|
18,131
|
|
21,577
|
|
37,061
|
|
43,544
|
Depreciation and amortization
|
19,217
|
|
22,566
|
|
38,330
|
|
42,774
|
Exit
activities, restructuring and impairments
|
152
|
|
59
|
|
353
|
|
325
|
|
|
|
|
|
|
|
|
Total operating costs
and expenses
|
76,789
|
|
86,270
|
|
154,914
|
|
171,175
|
|
|
|
|
|
|
|
|
Loss from
operations
|
(2,474)
|
|
(5,838)
|
|
(4,675)
|
|
(9,957)
|
|
|
|
|
|
|
|
|
Non-operating
expenses:
|
|
|
|
|
|
|
|
Interest
expense
|
8,082
|
|
6,825
|
|
15,067
|
|
13,689
|
Other,
net
|
116
|
|
55
|
|
471
|
|
(474)
|
Total non-operating
expenses
|
8,198
|
|
6,880
|
|
15,538
|
|
13,215
|
|
|
|
|
|
|
|
|
Loss before income
taxes and equity in earnings of
equity-method investment
|
(10,672)
|
|
(12,718)
|
|
(20,213)
|
|
(23,172)
|
Provision (benefit)
for income taxes
|
62
|
|
(137)
|
|
200
|
|
(111)
|
Equity in earnings of
equity-method investment, net of taxes
|
(41)
|
|
(47)
|
|
(77)
|
|
(85)
|
|
|
|
|
|
|
|
|
Net loss
|
$
(10,693)
|
|
$
(12,534)
|
|
$
(20,336)
|
|
$
(22,976)
|
|
|
|
|
|
|
|
|
Basic and diluted net
loss per share
|
$
(0.21)
|
|
$
(0.24)
|
|
$
(0.39)
|
|
$
(0.45)
|
|
|
|
|
|
|
|
|
Weighted average
shares outstanding used in computing
net loss per
share:
|
|
|
|
|
|
|
|
Basic and diluted
|
52,062
|
|
51,579
|
|
52,241
|
|
51,590
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INTERNAP
CORPORATION
|
UNAUDITED
CONDENSED CONSOLIDATED BALANCE SHEETS
|
(In thousands,
except par value amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
June
30,
|
|
December
31,
|
|
|
2016
|
|
2015
|
|
|
|
|
|
ASSETS
|
|
|
|
|
Current
assets:
|
|
|
|
|
Cash and cash
equivalents
|
|
$
13,868
|
|
$
17,772
|
Accounts receivable,
net of allowance for doubtful accounts of $1,319 and
$1,751,
respectively
|
|
18,358
|
|
20,292
|
Prepaid expenses and
other assets
|
|
11,975
|
|
12,405
|
|
|
|
|
|
Total current
assets
|
|
44,201
|
|
50,469
|
|
|
|
|
|
Property and
equipment, net
|
|
325,136
|
|
328,700
|
Investment in joint
venture
|
|
3,020
|
|
2,768
|
Intangible assets,
net
|
|
31,159
|
|
32,887
|
Goodwill
|
|
130,313
|
|
130,313
|
Deposits and other
assets
|
|
8,998
|
|
9,474
|
Total
assets
|
|
$
542,827
|
|
$
554,611
|
|
|
|
|
|
LIABILITIES AND
STOCKHOLDERS' EQUITY
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
Accounts
payable
|
|
$
26,054
|
|
$
22,607
|
Accrued
liabilities
|
|
10,467
|
|
10,737
|
Deferred
revenues
|
|
6,540
|
|
6,603
|
Capital lease
obligations
|
|
9,586
|
|
8,421
|
Term loan, less
discount of $2,192 and $1,784, respectively
|
|
808
|
|
1,215
|
Exit activities and
restructuring liability
|
|
1,432
|
|
2,034
|
Other current
liabilities
|
|
1,358
|
|
2,566
|
Total current
liabilities
|
|
56,245
|
|
54,183
|
|
|
|
|
|
Deferred
revenues
|
|
4,967
|
|
4,759
|
Capital lease
obligations
|
|
48,149
|
|
48,692
|
Revolving credit
facility
|
|
35,500
|
|
31,000
|
Term loan, less
discount of $5,721 and $5,703 respectively
|
|
283,779
|
|
285,298
|
Exit activities and
restructuring liability
|
|
1,486
|
|
1,844
|
Deferred
rent
|
|
7,879
|
|
8,879
|
Deferred tax
liability
|
|
1,223
|
|
880
|
Other long-term
liabilities
|
|
4,424
|
|
4,640
|
Total
liabilities
|
|
443,652
|
|
440,175
|
|
|
|
|
|
|
|
|
|
|
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; 120,000 shares authorized; 56,689 and 55,971
shares
|
|
|
|
|
outstanding,
respectively
|
|
57
|
|
56
|
Additional paid-in
capital
|
|
1,281,762
|
|
1,277,511
|
Treasury stock, at
cost; 962 and 826 shares, respectively
|
|
(6,736)
|
|
(6,393)
|
Accumulated
deficit
|
|
(1,174,293)
|
|
(1,153,957)
|
Accumulated items of
other comprehensive loss
|
|
(1,615)
|
|
(2,781)
|
Total stockholders'
equity
|
|
99,175
|
|
114,436
|
Total liabilities and
stockholders' equity
|
|
$
542,827
|
|
$
554,611
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INTERNAP
CORPORATION
|
UNAUDITED
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
|
(In
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
June 30,
|
|
Six Months Ended
June 30,
|
|
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
|
Cash Flows from
Operating Activities:
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
(10,693)
|
|
$
(12,534)
|
|
$
(20,336)
|
|
$
(22,976)
|
|
Adjustments to
reconcile net loss to net cash provided by
operating
activities:
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
19,217
|
|
22,566
|
|
38,330
|
|
42,774
|
|
Amortization of debt discount and issuance costs
|
|
711
|
|
499
|
|
1,233
|
|
990
|
|
Stock-based compensation expense, net of capitalized
amount
|
|
1,542
|
|
2,185
|
|
3,464
|
|
3,764
|
|
Equity
in earnings of equity-method investment
|
|
(41)
|
|
(47)
|
|
(77)
|
|
(85)
|
|
Provision for doubtful accounts
|
|
239
|
|
207
|
|
580
|
|
606
|
|
Non-cash
change in capital lease obligations
|
|
40
|
|
120
|
|
527
|
|
(640)
|
|
Non-cash
change in exit activities and restructuring liability
|
|
272
|
|
165
|
|
619
|
|
536
|
|
Non-cash
change in deferred rent
|
|
(516)
|
|
(386)
|
|
(1,000)
|
|
(788)
|
|
Deferred
taxes
|
|
(38)
|
|
(211)
|
|
39
|
|
(157)
|
|
Payment
of debt lender fees
|
|
(1,716)
|
|
-
|
|
(1,716)
|
|
-
|
|
Other,
net
|
|
(15)
|
|
263
|
|
186
|
|
19
|
|
Changes in operating
assets and liabilities:
|
|
|
|
|
|
|
|
|
|
Accounts
receivable
|
|
1,165
|
|
77
|
|
1,702
|
|
(1,647)
|
|
Prepaid
expenses, deposits and other assets
|
|
2,660
|
|
582
|
|
4,606
|
|
(962)
|
|
Accounts
payable
|
|
4,084
|
|
(510)
|
|
2,269
|
|
(8,162)
|
|
Accrued
and other liabilities
|
|
(2,028)
|
|
(651)
|
|
(3,931)
|
|
(1,554)
|
|
Deferred
revenues
|
|
(97)
|
|
1,409
|
|
94
|
|
1,153
|
|
Exit
activities and restructuring liability
|
|
(775)
|
|
(679)
|
|
(1,579)
|
|
(1,342)
|
|
Asset
retirement obligation
|
|
-
|
|
-
|
|
(174)
|
|
-
|
|
Other
liabilities
|
|
8
|
|
17
|
|
(35)
|
|
35
|
|
Net cash flows
provided by operating activities
|
|
14,019
|
|
13,072
|
|
24,801
|
|
11,564
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flows from
Investing Activities:
|
|
|
|
|
|
|
|
|
|
Purchases of property
and equipment
|
|
(14,032)
|
|
(15,699)
|
|
(26,314)
|
|
(30,689)
|
|
Additions to acquired
and developed technology
|
|
(370)
|
|
(98)
|
|
(769)
|
|
(810)
|
|
Net cash flows used
in investing activities
|
|
(14,402)
|
|
(15,797)
|
|
(27,083)
|
|
(31,499)
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flows from
Financing Activities:
|
|
|
|
|
|
|
|
|
|
Proceeds from credit
agreements
|
|
3,000
|
|
4,000
|
|
4,500
|
|
17,000
|
|
Principal payments on
credit agreements
|
|
(750)
|
|
(750)
|
|
(1,500)
|
|
(1,500)
|
|
Payments on capital
lease obligations
|
|
(2,468)
|
|
(1,947)
|
|
(4,827)
|
|
(3,717)
|
|
Proceeds from
exercise of stock options
|
|
675
|
|
1,906
|
|
675
|
|
4,489
|
|
Acquisition of common
stock for income tax withholdings
|
|
(127)
|
|
(250)
|
|
(343)
|
|
(868)
|
|
Other, net
|
|
(116)
|
|
(37)
|
|
(192)
|
|
943
|
|
Net cash flows (used
in) provided by financing activities
|
|
214
|
|
2,922
|
|
(1,687)
|
|
16,347
|
|
Effect of exchange
rates on cash and cash equivalents
|
|
139
|
|
(4)
|
|
65
|
|
(84)
|
|
Net decrease in cash
and cash equivalents
|
|
(30)
|
|
193
|
|
(3,904)
|
|
(3,672)
|
|
Cash and cash
equivalents at beginning of period
|
|
13,898
|
|
16,219
|
|
17,772
|
|
20,084
|
|
Cash and cash
equivalents at end of period
|
|
$
13,868
|
|
$
16,412
|
|
$
13,868
|
|
$
16,412
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INTERNAP 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 and adjusted EBITDA margin, normalized
net loss, normalized diluted shares outstanding, segment profit and
segment margin, levered free cash flow and cash operating expense.
The most directly comparable GAAP equivalent to adjusted EBITDA and
normalized net 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.
We define non-GAAP measures as follows:
- Adjusted EBITDA is loss from operations plus depreciation and
amortization, loss (gain) on disposals of property and equipment,
exit activities, restructuring and impairments, stock-based
compensation, strategic alternatives and related costs,
organizational realignment costs and acquisition costs.
- Adjusted EBITDA margin is adjusted EBITDA as a percentage of
revenues.
- Normalized net loss is net loss plus exit activities,
restructuring and impairments, stock-based compensation,
acquisition costs and strategic alternatives and related
costs.
- 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 loss per share is normalized net loss divided by
basic and normalized diluted shares outstanding.
- Segment profit is segment revenues less direct costs of 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 or any depreciation or amortization associated
with direct costs.
- Segment margin is segment profit as a percentage of segment
revenues.
- Levered free cash flow is adjusted EBITDA less capital
expenditures, net of equipment sale-leaseback transactions and cash
paid for interest.
- Cash operating expense is GAAP operating expense less direct
cost of sales and services, depreciation and amortization, loss
(gain) on disposals of property and equipment, exit activities,
restructuring and impairments, stock-based compensation,
acquisition costs and strategic alternatives and related
costs.
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 our 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 expenses primarily reflect goodwill impairments and
subsequent plan adjustments in sublease income assumptions for
certain properties included in our previously disclosed
restructuring plans.
We believe that exit activities, restructuring and impairment
charges, strategic alternatives and related costs and
organizational realignment costs 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 our 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.
INTERNAP CORPORATION
NON-GAAP (ADJUSTED) FINANCIAL MEASURES (Continued)
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 loss and normalized
net loss per share, excluding the effect of exit activities,
restructuring and impairments, stock-based compensation and
acquisition costs 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:
- 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, analysts and
investors concerning our financial performance.
Our presentation of segment profit and segment margin excludes
direct costs of customer support and 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.
INTERNAP CORPORATION
NON-GAAP (ADJUSTED) FINANCIAL MEASURES (Continued)
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.
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
|
|
June 30,
2016
|
|
March 31,
2016
|
|
June 30,
2015
|
Loss from operations
(GAAP)
|
$
(2,474)
|
|
$
(2,201)
|
|
$
(5,838)
|
Depreciation and
amortization
|
19,217
|
|
19,113
|
|
22,566
|
Loss on disposal of
property and equipment, net
|
31
|
|
28
|
|
137
|
Exit activities,
restructuring and impairments
|
152
|
|
201
|
|
59
|
Stock-based
compensation
|
1,542
|
|
1,922
|
|
2,185
|
Strategic
alternatives and related costs
|
282
|
|
141
|
|
-
|
Organizational
realignment costs
|
1,417
|
|
1,272
|
|
-
|
Adjusted EBITDA
(non-GAAP)
|
$
20,167
|
|
$
20,476
|
|
$
19,109
|
|
|
|
|
|
|
RECONCILIATION OF NET LOSS AND BASIC AND
DILUTED
NET LOSS PER SHARE TO NORMALIZED NET LOSS AND
BASIC AND DILUTED NORMALIZED NET LOSS PER SHARE
Reconciliations of (1) net loss, the most directly comparable
GAAP measure, to normalized net 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
loss per share for each of the periods indicated is as follows (in
thousands, except per share data):
|
|
|
|
|
|
|
Three Months
Ended
|
|
June 30,
2016
|
|
March 31,
2016
|
|
June 30,
2015
|
Net loss
(GAAP)
|
$
(10,693)
|
|
$
(9,644)
|
|
$
(12,534)
|
Exit activities,
restructuring and impairments
|
152
|
|
201
|
|
59
|
Stock-based
compensation
|
1,542
|
|
1,922
|
|
2,185
|
Strategic
alternatives and related costs
|
282
|
|
141
|
|
-
|
Organizational
realignment costs
|
1,417
|
|
1,272
|
|
-
|
Normalized net loss
(non-GAAP)
|
$
(7,300)
|
|
$
(6,108)
|
|
$
(10,290)
|
|
|
|
|
|
|
Weighted average
shares outstanding used in per share calculation:
|
|
|
|
|
|
Basic and diluted
(GAAP)
|
52,062
|
|
51,774
|
|
51,579
|
Add potentially
dilutive securities
|
-
|
|
-
|
|
-
|
Less dilutive effect
of stock-based compensation under the treasury
stock
method
|
-
|
|
-
|
|
-
|
Normalized diluted
shares (non-GAAP)
|
52,062
|
|
51,774
|
|
51,579
|
|
|
|
|
|
|
Loss per share
(GAAP):
|
|
|
|
|
|
Basic and
diluted
|
$
(0.21)
|
|
$
(0.19)
|
|
$
(0.24)
|
|
|
|
|
|
|
Normalized net loss
per share (non-GAAP):
|
|
|
|
|
|
Basic and
diluted
|
$
(0.14)
|
|
$
(0.12)
|
|
$
(0.20)
|
|
|
|
|
|
|
|
|
|
|
|
|
INTERNAP CORPORATION
NON-GAAP (ADJUSTED) FINANCIAL MEASURES (Continued)
INTERNAP CORPORATION
SEGMENT PROFIT AND SEGMENT MARGIN
Segment profit and segment margin, which does not include direct
costs of customer support or any depreciation or amortization, for
each of the periods indicated is as follows (dollars in
thousands):
|
|
|
|
|
|
|
Three Months
Ended
|
|
June 30,
2016
|
|
March 31,
2016
|
|
June 30,
2015
|
Revenues:
|
|
|
|
|
|
Data
center and network services:
|
|
|
|
|
|
Company-controlled
|
$
22,933
|
|
$
22,357
|
|
$
21,801
|
Partner
|
9,793
|
|
9,938
|
|
10,711
|
IP
connectivity
|
17,733
|
|
18,577
|
|
21,009
|
Total data center and
network services
|
50,459
|
|
50,872
|
|
53,521
|
Cloud
and hosting services
|
23,856
|
|
25,052
|
|
26,911
|
Total
|
74,315
|
|
75,924
|
|
80,432
|
|
|
|
|
|
|
Direct cost of sales
and services, exclusive of
|
|
|
|
|
|
depreciation and
amortization:
|
|
|
|
|
|
Data
center and network services:
|
|
|
|
|
|
Company-controlled
|
9,994
|
|
9,712
|
|
9,510
|
Partner
|
7,051
|
|
7,172
|
|
7,963
|
IP
connectivity
|
7,605
|
|
7,489
|
|
8,643
|
Total data center and
network services
|
24,650
|
|
24,373
|
|
26,116
|
Cloud
and hosting services
|
6,720
|
|
6,704
|
|
6,862
|
Total
|
31,370
|
|
31,077
|
|
32,978
|
|
|
|
|
|
|
Segment
Profit:
|
|
|
|
|
|
Data
center and network services
|
|
|
|
|
|
Company-controlled
|
12,939
|
|
12,645
|
|
12,291
|
Partner
|
2,742
|
|
2,766
|
|
2,748
|
IP
connectivity
|
10,128
|
|
11,088
|
|
12,366
|
Total data center and
network services
|
25,809
|
|
26,499
|
|
27,405
|
Cloud
and hosting services
|
17,136
|
|
18,348
|
|
20,049
|
Total
|
$
42,945
|
|
$
44,847
|
|
$
47,454
|
|
|
|
|
|
|
Segment
Margin:
|
|
|
|
|
|
Data
center and network services
|
|
|
|
|
|
Company-controlled
|
56.4%
|
|
56.6%
|
|
56.4%
|
Partner
|
28.0%
|
|
27.8%
|
|
25.7%
|
IP
connectivity
|
57.1%
|
|
59.7%
|
|
58.9%
|
Total data center and network services
|
51.1%
|
|
52.1%
|
|
51.2%
|
Cloud
and hosting services
|
71.8%
|
|
73.2%
|
|
74.5%
|
Total
|
57.8%
|
|
59.1%
|
|
59.0%
|
|
|
|
|
|
|
|
|
|
|
|
|
INTERNAP CORPORATION
NON-GAAP (ADJUSTED) FINANCIAL MEASURES (Continued)
LEVERED FREE CASH FLOW
Levered free cash flow is a non-GAAP measure and is adjusted
EBITDA less capital expenditures, net of equipment sale-leaseback
transactions and cash paid for interest (in thousands):
|
|
|
|
|
|
|
Three Months
Ended
|
|
June 30,
2016
|
|
March 31,
2016
|
|
June 30,
2015
|
Adjusted EBITDA
(non-GAAP)
|
$
20,167
|
|
$
20,476
|
|
$
19,109
|
Capital expenditures,
net of equipment sale-leaseback transactions
|
(14,402)
|
|
(12,681)
|
|
(15,797)
|
Unlevered free cash
flow (non-GAAP)
|
5,765
|
|
7,795
|
|
3,312
|
|
|
|
|
|
|
Cash interest
expense
|
(7,816)
|
|
(6,540)
|
|
(6,602)
|
Levered free cash
flow (non-GAAP)
|
$
(2,051)
|
|
$
1,255
|
|
$
(3,290)
|
|
|
|
|
|
|
CASH OPERATING EXPENSE
Cash operating expense is a non-GAAP measure and is operating
expense defined by GAAP, less direct costs of sales and services,
depreciation and amortization, (loss) gain on disposal of property
and equipment, exit activities, restructuring and impairments,
stock-based compensation, acquisition costs and strategic
alternatives and related costs (in thousands):
|
|
|
|
|
|
|
Three Months
Ended
|
|
June 30,
2016
|
|
March 31,
2016
|
|
June 30,
2015
|
Total operating costs
and expenses
|
$
76,789
|
|
$
78,125
|
|
$
86,270
|
Direct costs of sales
and services, exclusive of depreciation and amortization
|
(31,370)
|
|
(31,077)
|
|
(32,978)
|
Depreciation and
amortization
|
(19,217)
|
|
(19,113)
|
|
(22,566)
|
Loss on disposal of
property and equipment, net
|
(31)
|
|
(28)
|
|
(137)
|
Exit activities,
restructuring and impairments
|
(152)
|
|
(201)
|
|
(59)
|
Stock-based
compensation
|
(1,542)
|
|
(1,922)
|
|
(2,185)
|
Strategic
alternatives and related costs
|
(282)
|
|
(141)
|
|
-
|
Organizational
realignment costs
|
(1,417)
|
|
(1,272)
|
|
-
|
Cash operating
expense (non-GAAP)
|
$
22,778
|
|
$
24,371
|
|
$
28,345
|
|
|
|
|
|
|
To view the original version on PR Newswire,
visit:http://www.prnewswire.com/news-releases/internap-reports-second-quarter-2016-financial-results-300309466.html
SOURCE Internap Corporation