ATLANTA, May 9, 2017 /PRNewswire/ -- Internap
Corporation (NASDAQ: INAP), a provider of high-performance Internet
infrastructure including Colocation, Cloud, and Network Services,
today announced financial results for the first quarter of
2017.
"We entered the first quarter targeting a clear set of key
initiatives, namely to: complete our debt refinancing; expand our
sales force; and realign our operations along formalized INAP COLO
and INAP CLOUD pure-play segments. We ended the quarter ahead of
schedule on many fronts, and are now tackling Phase 2 and 3 of our
cost savings and margin expansion projects, particularly in our
partnered sites and in network services. We are very confident we
can successfully improve INAP operations, and are increasing our
profitability and Adjusted EBITDA outlook to reflect our early
experience and expectations for 2017. Ultimately, all of this work
in establishing a new baseline is designed to position the company
to participate in strategic transactions down the road to
strengthen our portfolio in the growing Internet Infrastructure
industry. We are very excited about our prospects for profitable
growth."
First Quarter 2017
Financial Summary ($ in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
YoY
|
|
QoQ
|
|
|
|
|
1Q
2017
|
|
4Q
2016
|
|
1Q
2016
|
|
Growth
|
|
Growth
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Revenue
|
|
$
72,133
|
|
$
74,117
|
|
$
75,924
|
|
-5.0%
|
|
-2.7%
|
Operating
Expenses
|
|
|
$
71,641
|
|
$
79,115
|
|
$
78,125
|
|
-8.3%
|
|
-9.4%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP Net
Loss*
|
|
|
$
(8,230)
|
|
$
(13,110)
|
|
$
(9,644)
|
|
-14.7%
|
|
-37.2%
|
GAAP Net Loss
Margin
|
|
|
-11.4%
|
|
-17.7%
|
|
-12.7%
|
|
-130
BPS
|
|
-630
BPS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Minus goodwill
impairment and other items*
|
|
|
$
3,414
|
|
$
7,613
|
|
$
3,536
|
|
-3.5%
|
|
-55.2%
|
Normalized Net
Loss2
|
|
|
$
(4,816)
|
|
$
(5,497)
|
|
$
(6,108)
|
|
-21.2%
|
|
-12.4%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted
EBITDA1
|
|
|
$
21,554
|
|
$
21,561
|
|
$
20,476
|
|
5.3%
|
|
0.0%
|
Adjusted EBITDA
Margin1
|
|
|
29.9%
|
|
29.1%
|
|
27.0%
|
|
290
BPS
|
|
80
BPS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital Expenditures
(CapEx)
|
$
5,989
|
|
$
6,250
|
|
$
12,681
|
|
-52.8%
|
|
-4.2%
|
Adjusted EBITDA less
CapEx1
|
$
15,565
|
|
$
15,311
|
|
$
7,795
|
|
99.7%
|
|
1.7%
|
|
* Fourth quarter 2016
Operating Expenses and reported GAAP Net Loss included $7.1 million
of costs associated with exit activities, restructuring and
impairments, including additional goodwill impairment of $1.9
million.
|
Beginning with first quarter 2017 reporting, INAP has redefined
its segment reporting into two pure play business units:
- INAP COLO, formerly Data Center and Networking Services,
comprised of colo, IP network services, and managed hosting.
Managed hosting was previously included in the Cloud and Hosting
Services segment; and
- INAP CLOUD, formerly Cloud and Hosting Services, comprised of
AgileCLOUD, iWeb, Ubersmith and Funio.
Revenue
- Revenue totaled $72.1 million in
the first quarter, a decrease of 5.0% year-over-year and 2.7%
sequentially. The year-over-year decrease was attributable to the
decline in network services as well as colocation and INAP CLOUD
revenues, which were negatively impacted by expected churn from a
small number of large customers; on a sequential basis, these
decreases were partially offset by growth in Agile bare-metal
revenue.
- INAP COLO revenue totaled $53.3
million in the first quarter, a decrease of 4.5%
year-over-year and 3.0% sequentially. The decreases were primarily
attributable to lower network services and partner-controlled
colocation revenue in addition to previously discussed churn from
one large customer.
- INAP CLOUD revenue totaled $18.8
million in the first quarter, a decrease of 6.2%
year-over-year and 1.8% sequentially. The year-over year decrease
was driven by the acquisition of a customer by a large social media
company in the past year. The sequential decrease was driven by
higher iWeb churn partially offset by growth in Agile bare-metal
server revenue.
Net Loss, Normalized Net Loss, Adjusted EBITDA and Business
Unit Contribution
- GAAP net loss was $(8.2) million
compared with $(9.6) million in the
first quarter of 2016 and $(13.1)
million including $7.1 million
of costs associated with exit activities, restructuring and
impairment in the fourth quarter of 2016. GAAP net loss margin was
-11.4% in the first quarter of 2017.
- Normalized net loss was $(4.8)
million compared with $(6.1)
million in the first quarter of 2016 and $(5.5) million in the fourth quarter of
2016.
- Adjusted EBITDA totaled $21.6
million in the first quarter, an increase of 5.3% compared
with the first quarter of 2016 and comparable to the fourth quarter
of 2016. Adjusted EBITDA margin was 29.9% in the first quarter, up
290 basis points year-over-year and 80 basis points sequentially.
The increases in Adjusted EBITDA were attributable to continued
focus on cost control.
- Business Unit Contribution3 – As part of the
realignment of its segments into two pure play business units, INAP
COLO and INAP CLOUD, INAP is providing a measure of unit-level
profitability called business unit contribution3.
-
- INAP COLO business unit contribution totaled $19.7 million in the first quarter, a 3.3%
increase compared with the first quarter of 2016 and a 2.4%
decrease from the fourth quarter of 2016. As a percent of revenue,
INAP COLO business unit contribution margin was 36.9% in the first
quarter, up 280 basis points year-over-year and 20 basis points
sequentially. The year-over-year business unit contribution
increase reflects improving cost control. The sequential
business unit contribution decrease was primarily driven by the
revenue decrease.
- INAP CLOUD business unit contribution totaled $9.3 million in the first quarter, a 2.7%
increase compared with the first quarter of 2016 and a less than
1.0% increase from the fourth quarter of 2016. As a percent of
revenue, INAP CLOUD business unit contribution margin was 49.6% in
the first quarter, up 430 basis points year-over-year and up 120
basis points sequentially. The increases reflect improving cost
control.
Balance Sheet and Cash Flow Statement
- Cash and cash equivalents totaled $9.2
million at March 31, 2017.
Total debt was $329.6 million, net of
discount and prepaid costs, at the end of the quarter, including
$51.8 million in capital lease
obligations. On April 6, 2017 INAP
entered into a new Senior Secured Credit Facility, including a
$300 million First Lien Term Loan and
a $25 million (undrawn) Revolver,
thereby completing the refinancing of its senior secured debt.
- Cash generated from operations for the three months ended
March 31, 2017 was $7.3 million compared to $10.8 million in first quarter of 2016 and
$10.2 million in fourth quarter of
2016. Capital expenditures over the same periods were $6.0 million compared to $12.7 million and $6.3
million, respectively. Adjusted EBITDA less CapEx was
$15.6 million compared to
$7.8 million in first quarter 2016
and 15.3 million in fourth quarter 2016. Free cash flow4
over the same periods was $1.3
million compared to $(1.9)
million and $3.9 million,
respectively. Unlevered free cash flow4 was
$8.6 million for the first quarter
2017 compared to $4.6 million in
first quarter 2016 and $11.5 million
in fourth quarter 2016.
"First quarter 2017's performance reflected the improvements we
are making in our operating leverage, with Adjusted EBITDA
improving despite the down revenue comparison," said Robert M. Dennerlein, Chief Financial Officer of
INAP. "Additionally, we were able to reduce the Q4-to-Q1 rate of
revenue decrease from a year ago. These results dovetail with our
main financial objective of increasing run rate profitability and
cash flow by streamlining our cost base, managing CapEx toward
high-return projects, and culling our revenue base of our least
profitable streams. Now that our balance sheet is successfully
recapitalized, we are in full execution of the next phases of
profitability improvement. We have refined our Adjusted EBITDA
outlook upward and our CapEx outlook downward."
Business Outlook
|
Full-Year 2017
Expected Range
|
|
Previous
Guidance
|
|
Current
Guidance
|
Revenue
|
$275 million - $285
million
|
|
$275 million - $285
million
|
Adjusted
EBITDA
|
$84 million - $87
million
|
|
$85 million - $90
million
|
Capital
Expenditures
|
Approximately $42
million
|
|
$37 million - $42
million
|
|
|
1 Adjusted EBITDA,
Adjusted EBITDA margin and Adjusted EBITDA less CapEx 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 Adjusted EBITDA margin are contained
in the table entitled "Reconciliation of GAAP Net Loss to Adjusted
EBITDA". Adjusted EBITDA margin is Adjusted EBITDA as a percentage
of revenue. A reconciliation between GAAP information and non-GAAP
information related to Adjusted EBITDA less CapEx is contained in
the table entitled "Reconciliation of GAAP Net Cash Flows provided
by Operating Activities to Adjusted EBITDA less
CapEx.
|
2 Normalized net loss
is a non-GAAP financial measure 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 normalized net loss are contained in the
table entitled "Reconciliation of Net Loss to Normalized Net
Loss".
|
3 Business unit
contribution and business unit contributed margin 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
business unit contribution and business unit contribution margin
are contained in the table entitled "Business Unit Contribution and
Business Unit Contribution Margin" in the attachment. Business unit
contribution margin is business unit contribution as a percentage
of revenue
|
4 Free cash flow and
unlevered free cash flow are non-GAAP financial measures which we
define in the attachment to the press release entitled "Non-GAAP
(Adjusted) Financial Measures." Reconciliations between GAAP and
non-GAAP information related to Free cash flow and unlevered free
cash flow are contained in the table entitled "Free Cash Flow and
Unlevered Free Cash Flow".
|
Conference Call Information:
Internap Corporation's first quarter 2017 conference call will
be held today at 8:30 a.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 also be accessed by dialing 877-334-0775. International
callers should dial 631-291-4567. 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, May 9, 2017 at 8
p.m. ET through Monday, May 15,
2017 at 855-859-2056 using replay code 74495656.
International callers can listen to the archived event at
404-537-3406 with the same code.
About INAP
Internap Corporation (NASDAQ: INAP) is a leading technology
provider of Internet infrastructure through both Colocation
Business and Enterprise Services (including network connectivity,
IP, bandwidth, and Managed Hosting), and Cloud Services (including
enterprise-grade AgileCLOUD 2.0, Bare-Metal Servers, and SMB iWeb
platforms). INAP's global high-capacity network connects 15
company-controlled Tier 3-type data centers in major markets in
North America, 34 wholesale
partnered facilities, and points of presence in 26 central business
districts around the world. INAP continues to transform since its
inception in 1996, meeting customer demand for custom solutions and
high-touch state-of-the-art colocation and cloud products and
services. INAP now operates a premium business model that also
provides high-power density colocation, low-latency bandwidth, and
public and private cloud platforms in an expanding internet
infrastructure industry. For more information, visit
www.inap.com.
Forward-Looking Statements
This press release contains forward-looking statements. These
forward-looking statements include statements related to cost
reductions, improved profitability, margin expansion, operations
improvement, participation in strategic transactions, our strategy
to align into pure-play businesses and our expectations for
full-year 2017 revenue, Adjusted EBITDA and capital expenditures.
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 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; market conditions and the terms of any issuance of equity
or debt securities or the refinancing or amendment of our
indebtedness; risks related to our indebtedness, including our
substantial amount of debt, our ability to incur debt and increases
in interest rates or in our borrowing margins; our ability to meet
the financial and other covenants contained in our credit
agreement; 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.
Investor Contacts
Richard
Ramlall
404-302-9982
ir@internap.com
Carolyn Capaccio/Jody Burfening
LHA
212-838-3777
internap@lhai.com
INTERNAP
CORPORATION
|
UNAUDITED
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
|
(In thousands,
except per share amounts)
|
|
|
|
|
|
|
|
|
Three Months Ended
March 31,
|
|
|
2017
|
|
2016
|
|
Revenues:
|
|
|
|
|
INAP
COLO
|
$
53,339
|
|
$
55,881
|
|
INAP
CLOUD
|
18,794
|
|
20,043
|
|
Total
revenues
|
72,133
|
|
75,924
|
|
|
|
|
|
|
Operating costs and
expenses:
|
|
|
|
|
Direct
costs of sales and services, exclusive of depreciation and
amortization, shown below:
|
|
|
|
|
INAP
COLO
|
24,806
|
|
26,333
|
|
INAP
CLOUD
|
4,239
|
|
4,744
|
|
Direct
costs of customer support
|
7,264
|
|
8,804
|
|
Sales,
general and administrative
|
16,564
|
|
18,930
|
|
Depreciation and amortization
|
17,745
|
|
19,113
|
|
Exit
activities, restructuring and impairments
|
1,023
|
|
201
|
|
|
|
|
|
|
Total operating costs
and expenses
|
71,641
|
|
78,125
|
|
|
|
|
|
|
Income (loss) from
operations
|
492
|
|
(2,201)
|
|
|
|
|
|
|
Non-operating
expenses:
|
|
|
|
|
Interest
expense
|
8,137
|
|
6,985
|
|
Loss on
foreign currency, net
|
97
|
|
433
|
|
Other,
net
|
-
|
|
(77)
|
|
Total non-operating
expenses
|
8,234
|
|
7,341
|
|
|
|
|
|
|
Loss before income
taxes and equity in earnings of equity-method investment
|
(7,742)
|
|
(9,542)
|
|
Provision for income
taxes
|
518
|
|
138
|
|
Equity in earnings of
equity-method investment, net of taxes
|
(30)
|
|
(36)
|
|
|
|
|
|
|
Net loss
|
$
(8,230)
|
|
$
(9,644)
|
|
INTERNAP
CORPORATION
|
UNAUDITED
CONDENSED CONSOLIDATED BALANCE SHEETS
|
(In thousands, except par value amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March
31,
|
|
December
31,
|
|
|
2017
|
|
2016
|
|
|
|
|
|
ASSETS
|
|
|
|
|
Current
assets:
|
|
|
|
|
Cash and cash
equivalents
|
|
$
9,174
|
|
$
10,389
|
Accounts receivable,
net of allowance for doubtful accounts of $1,301 and $1,246,
respectively
|
|
15,654
|
|
18,044
|
Prepaid expenses and
other assets
|
|
10,311
|
|
10,055
|
|
|
|
|
|
Total current
assets
|
|
35,139
|
|
38,488
|
|
|
|
|
|
Property and
equipment, net
|
|
291,583
|
|
302,680
|
Investment in joint
venture
|
|
3,099
|
|
3,002
|
Intangible assets,
net
|
|
27,138
|
|
27,978
|
Goodwill
|
|
50,209
|
|
50,209
|
Deposits and other
assets
|
|
7,940
|
|
8,258
|
Total
assets
|
|
$
415,108
|
|
$
430,615
|
|
|
|
|
|
LIABILITIES AND
STOCKHOLDERS' EQUITY
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
Accounts
payable
|
|
$
18,003
|
|
$
20,875
|
Accrued
liabilities
|
|
10,445
|
|
10,603
|
Deferred
revenues
|
|
5,417
|
|
5,746
|
Capital lease
obligations
|
|
10,164
|
|
10,030
|
Term loan, less
discount and prepaid costs of $2,037 and $2,243,
respectively
|
|
963
|
|
757
|
Exit activities and
restructuring liability
|
|
2,922
|
|
3,177
|
Other current
liabilities
|
|
3,089
|
|
3,171
|
Total current
liabilities
|
|
51,003
|
|
54,359
|
|
|
|
|
|
Deferred
revenues
|
|
4,964
|
|
5,144
|
Capital lease
obligations
|
|
41,613
|
|
43,876
|
Revolving credit
facility
|
|
35,500
|
|
35,500
|
Term loan, less
discount and prepaid costs of $6,605 and $4,579
respectively
|
|
241,398
|
|
283,421
|
Exit activities and
restructuring liability
|
|
1,374
|
|
1,526
|
Deferred
rent
|
|
4,188
|
|
4,642
|
Deferred tax
liability
|
|
1,473
|
|
1,513
|
Other long-term
liabilities
|
|
4,293
|
|
4,358
|
Total
liabilities
|
|
385,806
|
|
434,339
|
|
|
|
|
|
|
|
|
|
|
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; 82,156 and 57,799
shares
|
|
|
|
|
outstanding,
respectively
|
|
83
|
|
58
|
Additional paid-in
capital
|
|
1,324,204
|
|
1,283,332
|
Treasury stock, at
cost; 1,143 and 1,073 shares, respectively
|
|
(7,072)
|
|
(6,923)
|
Accumulated
deficit
|
|
(1,286,579)
|
|
(1,278,699)
|
Accumulated items of
other comprehensive loss
|
|
(1,334)
|
|
(1,492)
|
Total stockholders'
equity
|
|
29,302
|
|
(3,724)
|
Total liabilities and
stockholders' equity
|
|
$
415,108
|
|
$
430,615
|
INTERNAP
CORPORATION
|
UNAUDITED
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
|
(In
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
March 31,
|
|
|
|
2017
|
|
2016
|
|
Cash Flows from
Operating Activities:
|
|
|
|
|
|
Net loss
|
|
$
(8,230)
|
|
$
(9,644)
|
|
Adjustments to
reconcile net loss to net cash provided by operating
activities:
|
|
|
|
|
|
Depreciation and amortization
|
|
17,745
|
|
19,113
|
|
Amortization of debt discount and issuance costs
|
|
715
|
|
522
|
|
Stock-based compensation expense, net of capitalized
amount
|
|
598
|
|
1,922
|
|
Equity
in earnings of equity-method investment
|
|
(30)
|
|
(36)
|
|
Provision for doubtful accounts
|
|
301
|
|
341
|
|
Non-cash
change in capital lease obligations
|
|
71
|
|
487
|
|
Non-cash
change in exit activities and restructuring liability
|
|
980
|
|
347
|
|
Non-cash
change in deferred rent
|
|
(423)
|
|
(484)
|
|
Deferred
taxes
|
|
254
|
|
77
|
|
Payment
of debt lender fees
|
|
(2,583)
|
|
-
|
|
Other,
net
|
|
(96)
|
|
202
|
|
Changes in operating
assets and liabilities:
|
|
|
|
|
|
Accounts
receivable
|
|
2,096
|
|
537
|
|
Prepaid
expenses, deposits and other assets
|
|
123
|
|
1,946
|
|
Accounts
payable
|
|
(2,247)
|
|
(1,815)
|
|
Accrued
and other liabilities
|
|
(180)
|
|
(1,903)
|
|
Deferred
revenues
|
|
(510)
|
|
191
|
|
Exit
activities and restructuring liability
|
|
(1,386)
|
|
(804)
|
|
Asset
retirement obligation
|
|
52
|
|
(174)
|
|
Other
liabilities
|
|
14
|
|
(43)
|
|
Net cash flows
provided by operating activities
|
|
7,264
|
|
10,782
|
|
|
|
|
|
|
|
Cash Flows from
Investing Activities:
|
|
|
|
|
|
Purchases of property
and equipment
|
|
(5,789)
|
|
(12,282)
|
|
Additions to acquired
and developed technology
|
|
(200)
|
|
(399)
|
|
Net cash flows used
in investing activities
|
|
(5,989)
|
|
(12,681)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from credit
agreements
|
|
-
|
|
1,500
|
|
Proceeds from stock
issuance
|
|
40,282
|
|
-
|
|
Principal payments on
credit agreements
|
|
(39,997)
|
|
(750)
|
|
Payments on capital
lease obligations
|
|
(2,491)
|
|
(2,359)
|
|
Proceeds from
exercise of stock options
|
|
7
|
|
-
|
|
Acquisition of common
stock for income tax withholdings
|
|
(149)
|
|
(216)
|
|
Other, net
|
|
(157)
|
|
(76)
|
|
Net cash flows used
in financing activities
|
|
(2,505)
|
|
(1,901)
|
|
Effect of exchange
rates on cash and cash equivalents
|
|
15
|
|
(74)
|
|
Net decrease in cash
and cash equivalents
|
|
(1,215)
|
|
(3,874)
|
|
Cash and cash
equivalents at beginning of period
|
|
10,389
|
|
17,772
|
|
Cash and cash
equivalents at end of period
|
|
$
9,174
|
|
$
13,898
|
|
|
|
|
|
|
|
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"), this
earnings press release includes additional financial measures that
are not prepared in accordance with GAAP ("non-GAAP"), including
Adjusted EBITDA, Adjusted EBITDA margin, Adjusted EBITDA less
CapEx, normalized net loss, business unit contribution, business
unit contribution margin, free cash flow and unlevered free cash
flow. A reconciliation of non-GAAP financial measures to the most
directly comparable GAAP financial measures can be found below.
We define the following non-GAAP measures as follows:
- Adjusted EBITDA is a non-GAAP measure and is GAAP net loss plus
depreciation and amortization, interest expense, provision
(benefit) for income taxes, other expense (income), (gain) loss on
disposal of property and equipment, exit activities, restructuring
and impairments, stock-based compensation, non-income tax
contingency, strategic alternatives and related costs and
organizational realignment costs.
- Adjusted EBITDA margin is Adjusted EBITDA as a percentage of
revenues.
- Adjusted EBITDA less CapEx is Adjusted EBITDA less capital
expenditures with Adjusted EBITDA for this non-GAAP measure defined
as net cash flow provided by operating activities plus cash paid
for interest, cash paid for taxes, cash paid for exit activities
and restructuring, cash paid for strategic alternatives and related
costs, cash paid for organizational realignment costs, payment of
debt lender fees and other working capital changes less capital
expenditures.
- Normalized net loss is net loss plus exit activities,
restructuring and impairments, stock-based compensation, non-income
tax contingency, strategic alternatives and related costs and
organizational realignment costs.
- Business unit contribution is business unit revenues less
direct costs of sales and services, customer support, and sales and
marketing, exclusive of depreciation and amortization.
- Business unit contribution margin is business unit contribution
as a percentage of business unit revenue.
- Free cash flow is net cash flows provided by operating
activities minus capital expenditures.
- Unlevered free cash flow is free cash flow plus cash interest
expense.
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
(gain) 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 current ongoing
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 excluding interest expense, provision (benefit)
for income taxes and other expense (income) 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
interest expense, provision (benefit) for income taxes and other
expense (income) 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 interest
expense, provision (benefit) for income taxes and other expense
(income), 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.
We believe that exit activities, restructuring and impairment
charges, non-income tax contingency, strategic alternatives and
related costs and organizational realignment costs are unique
costs, 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 current ongoing operating results and trends.
Management believes that investors consider financial measures of
our results of operations excluding stock-based compensation as
important supplemental information useful to their understanding of
our historical results and estimating our future results.
We also believe that, in excluding the effects of stock-based
compensation, our non-GAAP financial measures provide investors
with transparency into what management uses to measure and forecast
our results of operations, to compare on a consistent basis our
results of operations for the current period to that of prior
periods and to compare our results of operations on a more
consistent basis against that of other companies, in making
financial and operating decisions and to establish certain
management compensation.
Stock-based compensation is an important part of total
compensation, especially from the perspective of employees. We
believe, however, that supplementing GAAP net loss by providing
normalized net loss, 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.
Adjusted EBITDA is not a measure of financial performance
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.
INTERNAP CORPORATION
NON-GAAP (ADJUSTED) FINANCIAL MEASURES (Continued)
Our presentation of business unit contribution and business unit
contribution margin excludes depreciation and amortization in order
to allow investors to see the business through the eyes of
management.
We also have excluded depreciation and amortization from
business unit contribution and business unit contribution 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.
Free cash flow and unlevered free cash flow are used in addition
to and in conjunction with results presented in accordance with
GAAP. Free cash flow and unlevered free cash flow should not
be relied upon to the exclusion of GAAP financial measures. Free
cash flow and unlevered free cash flow reflect an additional way of
viewing our liquidity that, when viewed with our GAAP results,
provides a more complete understanding of factors and trends
affecting our cash flows. Management strongly encourages investors
to review our financial statements and publicly-filed reports in
their entirety and to not rely on any single financial measure.
We use free cash flow and unlevered free cash flow, and ratios
based on it, to conduct and evaluate our business because, although
it is similar to cash flow from operations, we believe it is a
useful measure of cash flows since capital expenditures are a
necessary component of ongoing operations. In limited circumstances
in which proceeds from sales of fixed assets exceed capital
expenditures, free cash flow would exceed cash flow from
operations. However, since we do not anticipate being a net seller
of fixed assets, we expect free cash flow to be less than operating
cash flows.
Free cash flow and unlevered free cash flow have limitations due
to the fact that they do not represent the residual cash flow
available for discretionary expenditures. For example, free cash
flow does not incorporate payments made to service our debt or
capital lease obligations. Therefore, we believe it is important to
view free cash flow as a complement to our entire consolidated
statements of cash flows.
Adjusted EBITDA less CapEx is used in addition to and in
conjunction with results presented in accordance with
GAAP. Adjusted EBITDA less CapEx should not be relied upon to
the exclusion of GAAP financial measures. Adjusted EBITDA less
CapEx reflects an additional way of viewing our liquidity that,
when viewed with our GAAP results, provides a more complete
understanding of factors and trends affecting our cash flows.
Management strongly encourages investors to review our financial
statements and publicly-filed reports in their entirety and to not
rely on any single financial measure.
We use Adjusted EBITDA less CapEx, and ratios based on it, to
conduct and evaluate our business because, although it is similar
to cash flow from operations, we believe it is a useful measure of
cash flows since capital expenditures are a necessary component of
ongoing operations.
Adjusted EBITDA less CapEx has limitations due to the fact that
it does not represent the residual cash flow available for
discretionary expenditures. Adjusted EBITDA less CapEx does not
incorporate payments made to service our debt or capital lease
obligations. Therefore, we believe it is important to view Adjusted
EBITDA less CapEx as a complement to our entire consolidated
statements of cash flows.
Adjusted EBITDA, as presented, may not be comparable to
similarly titled measures of other companies. Adjusted EBITDA
is presented as we understand certain investors use it as one
measure of our historical ability to service debt. Also adjusted
EBITDA is used in our debt covenants.
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
CORPORATION
NON-GAAP (ADJUSTED) FINANCIAL MEASURES (Continued)
|
|
RECONCILIATION OF
GAAP NET LOSS TO ADJUSTED EBITDA AND FORWARD LOOKING ADJUSTED
EBITDA
|
|
A reconciliation of
GAAP net loss to Adjusted EBITDA for each of the periods indicated
is as follows (in thousands):
|
|
|
Three Months
Ended
|
|
March 31,
2017
|
|
December 31,
2016
|
|
March 31,
2016
|
Reconciliation of
GAAP Net Loss to Adjusted EBITDA:
|
Amount
|
|
Percent
|
|
Amount
|
|
Percent
|
|
Amount
|
|
Percent
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Revenue
|
$
72,133
|
|
100.0%
|
|
$
74,117
|
|
100.0%
|
|
$
75,924
|
|
100.0%
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Loss
(GAAP)
|
$
(8,230)
|
|
-11.4%
|
|
$
(13,110)
|
|
-17.7%
|
|
$
(9,644)
|
|
-12.7%
|
Add:
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and
amortization
|
17,745
|
|
24.6%
|
|
19,021
|
|
25.7%
|
|
19,113
|
|
25.2%
|
Interest
expense
|
8,137
|
|
11.3%
|
|
7,964
|
|
10.7%
|
|
6,985
|
|
9.2%
|
Provision (benefit)
for income taxes
|
518
|
|
0.7%
|
|
236
|
|
0.3%
|
|
138
|
|
0.2%
|
Other expense
(income)
|
67
|
|
0.1%
|
|
(88)
|
|
-0.1%
|
|
320
|
|
0.4%
|
(Gain) loss on
disposal of property and equipment, net
|
(97)
|
|
-0.1%
|
|
(75)
|
|
-0.1%
|
|
28
|
|
0.0%
|
Exit activities,
restructuring and impairments, including goodwill
impairment
|
1,023
|
|
1.4%
|
|
7,149
|
|
9.6%
|
|
201
|
|
0.3%
|
Stock-based
compensation
|
598
|
|
0.8%
|
|
280
|
|
0.4%
|
|
1,922
|
|
2.5%
|
Non-income tax
contingency
|
1,500
|
|
2.1%
|
|
-
|
|
0.0%
|
|
-
|
|
0.0%
|
Strategic
alternatives and related costs
|
6
|
|
0.0%
|
|
(136)
|
|
-0.2%
|
|
141
|
|
0.2%
|
Organizational
realignment costs
|
287
|
|
0.4%
|
|
320
|
|
0.4%
|
|
1,272
|
|
1.7%
|
Adjusted EBITDA
(non-GAAP)
|
$
21,554
|
|
29.9%
|
|
$
21,561
|
|
29.1%
|
|
$
20,476
|
|
27.0%
|
|
A reconciliation of
forward looking Adjusted EBITDA for full-year 2017 is as follows
(in millions):
|
|
|
|
|
|
|
|
2017 Full-Year
Guidance
|
|
|
|
|
|
Low
|
|
High
|
|
|
|
|
|
Amount
|
|
Percent
|
|
Amount
|
|
Percent
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Revenue
|
|
|
|
|
$
275
|
|
100.0%
|
|
$
285
|
|
100.0%
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Loss
(GAAP)
|
|
|
|
|
$
(5)
|
|
-1.8%
|
|
$
(1)
|
|
-0.4%
|
Add:
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and
amortization
|
|
|
|
|
71
|
|
25.8%
|
|
71
|
|
24.9%
|
Interest
expense
|
|
|
|
|
|
|
0.0%
|
|
|
|
0.0%
|
Provision for income
taxes
|
|
|
|
|
|
|
0.0%
|
|
|
|
0.0%
|
Other expense
(income)
|
|
|
|
|
|
|
0.0%
|
|
|
|
0.0%
|
(Gain) loss on
disposal of property and equipment, net
|
|
|
|
|
|
|
0.0%
|
|
|
|
0.0%
|
Exit activities,
restructuring and impairments, including goodwill
impairment
|
|
|
|
7
|
|
2.5%
|
|
6
|
|
2.1%
|
Stock-based
compensation
|
|
|
|
|
8
|
|
2.9%
|
|
10
|
|
3.5%
|
Non-income tax
contingency
|
|
|
|
|
|
|
0.0%
|
|
|
|
0.0%
|
Strategic
alternatives and related costs
|
|
|
|
|
2
|
|
0.7%
|
|
2
|
|
0.7%
|
Organizational
realignment costs
|
|
|
|
|
2
|
|
0.7%
|
|
2
|
|
0.7%
|
Adjusted EBITDA
(non-GAAP)
|
|
|
|
|
$
85
|
|
30.9%
|
|
$
90
|
|
31.6%
|
INTERNAP
CORPORATION
NON-GAAP (ADJUSTED) FINANCIAL MEASURES (Continued)
|
|
RECONCILIATION OF
GAAP NET CASH FLOWS PROVIDED BY OPERATING ACTIVITIES TO ADJUSTED
EBITDA LESS CAPEX
|
|
A reconciliation of
GAAP Net Cash Flows Provided by Operating Activities to Adjusted
EBITDA less CapEx for each of the periods indicated is as follows
(in thousands):
|
|
|
Three Months
Ended
|
Reconciliation of
GAAP Net Cash Flows provided by Operating Activities
to Adjusted EBITDA less CapEx:
|
March 31,
2017
|
|
|
December 31,
2016
|
|
|
March 31,
2016
|
|
|
|
|
|
|
|
|
|
|
Net Cash Flow
provided by operating activities:
|
$
7,264
|
|
|
$
10,185
|
|
|
$
10,782
|
|
|
|
|
|
|
|
|
|
|
Add :
|
|
|
|
|
|
|
|
|
Cash paid for
interest
|
7,336
|
|
|
7,604
|
|
|
6,540
|
|
Cash paid for income
taxes
|
-
|
|
|
22
|
|
|
11
|
|
Cash paid for exit
activities and restructuring
|
1,386
|
|
|
1,229
|
|
|
804
|
|
Cash paid for
strategic alternatives and related costs
|
189
|
|
|
512
|
|
|
438
|
|
Cash paid for
organizational realignment costs
|
267
|
|
|
1,664
|
|
|
200
|
|
Payment of debt
lender fees
|
2,583
|
|
|
-
|
|
|
-
|
|
Other working capital
changes
|
2,529
|
|
|
345
|
|
|
1,701
|
|
Adjusted EBITDA
(non-GAAP)
|
$
21,554
|
|
|
$
21,561
|
|
|
$
20,476
|
|
|
|
|
|
|
|
|
|
|
Less:
|
|
|
|
|
|
|
|
|
Capital Expenditures
(CapEx)
|
$
5,989
|
|
|
$
6,250
|
|
|
$
12,681
|
|
Adjusted EBITDA less
CapEx
|
$
15,565
|
|
|
$
15,311
|
|
|
$
7,795
|
|
INTERNAP
CORPORATION
NON-GAAP (ADJUSTED) FINANCIAL MEASURES (Continued)
|
|
RECONCILIATION OF
NET LOSS AND BASIC TO NORMALIZED NET LOSS
|
|
Reconciliations of
net loss, the most directly comparable GAAP measure, to normalized
net loss:
|
|
|
|
|
Three Months
Ended
|
|
March 31,
2017
|
|
December 31,
2016
|
|
March 31,
2016
|
Net loss
(GAAP)
|
$
(8,230)
|
|
$
(13,110)
|
|
$
(9,644)
|
Exit activities,
restructuring and impairments, including goodwill
impairment
|
1,023
|
|
7,149
|
|
201
|
Stock-based
compensation
|
598
|
|
280
|
|
1,922
|
Non-income tax
contingency
|
1,500
|
|
-
|
|
-
|
Strategic
alternatives and related costs
|
6
|
|
(136)
|
|
141
|
Organizational
realignment costs
|
287
|
|
320
|
|
1,272
|
Normalized net loss
(non-GAAP)
|
$
(4,816)
|
|
$
(5,497)
|
|
$
(6,108)
|
INTERNAP
CORPORATION
NON-GAAP (ADJUSTED) FINANCIAL MEASURES (Continued)
|
|
BUSINESS UNIT
CONTRIBUTION AND BUSINESS UNIT CONTRIBUTION MARGIN
|
|
Business unit
contribution and business unit contribution margin, which includes
direct costs of sales and service, customer support and sales and
marketing for each of the periods indicated is as follows (in
thousands):
|
|
|
Three Months
Ended
|
|
March 31,
2017
|
|
December 31,
2016
|
|
March 31,
2016
|
Revenues:
|
|
|
|
|
|
INAP
COLO
|
$
53,339
|
|
$
54,971
|
|
$
55,881
|
INAP
CLOUD
|
18,794
|
|
19,146
|
|
20,043
|
Total
|
72,133
|
|
74,117
|
|
75,924
|
Direct costs of sales
and services, customer support and
|
|
|
|
|
|
sales
and marketing:
|
|
|
|
|
|
INAP
COLO
|
33,650
|
|
34,799
|
|
36,812
|
INAP
CLOUD
|
9,464
|
|
9,872
|
|
10,957
|
Total
|
43,114
|
|
44,671
|
|
47,769
|
Business Unit
Contribution:
|
|
|
|
|
|
INAP
COLO
|
19,689
|
|
20,172
|
|
19,069
|
INAP
CLOUD
|
9,330
|
|
9,274
|
|
9,086
|
Total
|
$
29,019
|
|
$
29,446
|
|
$
28,155
|
Business Unit
Contribution Margin:
|
|
|
|
|
|
INAP
COLO
|
36.9%
|
|
36.7%
|
|
34.1%
|
INAP
CLOUD
|
49.6%
|
|
48.4%
|
|
45.3%
|
Total
|
40.2%
|
|
39.7%
|
|
37.1%
|
INTERNAP
CORPORATION
NON-GAAP (ADJUSTED) FINANCIAL MEASURES (Continued)
|
|
FREE CASH FLOW AND
UNLEVERED FREE CASH FLOW
|
|
Free cash flow and
unlevered free cash flow are non-GAAP measures. Free cash flow is
net cash flows provided by operating activities minus capital
expenditures. Unlevered free cash flow is free cash flow plus cash
interest expense (in thousands):
|
|
|
Three Months
Ended
|
|
March 31,
2017
|
|
December 31,
2016
|
|
March 31,
2016
|
Net cash flows
provided by operating activities
|
$
7,264
|
|
$
10,185
|
|
$
10,782
|
Capital
expenditures:
|
|
|
|
|
|
Maintenance
capital
|
(790)
|
|
(1,717)
|
|
(2,133)
|
Growth
capital
|
(5,199)
|
|
(4,533)
|
|
(10,548)
|
Free cash flow
(non-GAAP)
|
1,275
|
|
3,935
|
|
(1,899)
|
|
|
|
|
|
|
Cash interest
expense
|
7,336
|
|
7,604
|
|
6,540
|
Unlevered free cash
flow (non-GAAP)
|
$
8,611
|
|
$
11,539
|
|
$
4,641
|
To view the original version on PR Newswire,
visit:http://www.prnewswire.com/news-releases/inap-reports-first-quarter-2017-financial-results-300453937.html
SOURCE Internap Corporation