The information below is a summary. Click here to view the entire release which includes our unaudited GAAP financial statements and supplemental non-GAAP financial measures.
- Highest annual and quarterly adjusted EBITDA1 and adjusted EBITDA margin1 in the history of the company
- 2014 revenue of $335.0 million, fourth quarter revenue of $84.3 million
- 2014 segment margin2 of 56.7%, fourth quarter segment margin of 57.9%
- 2014 adjusted EBITDA of $78.7 million, fourth quarter adjusted EBITDA of $22.7 million
- 2014 adjusted EBITDA margin of 23.5%, fourth quarter adjusted EBITDA margin of 27.0%
ATLANTA, GA – February 19, 2015 – Internap Corporation (NASDAQ: INAP), a provider of high-performance Internet infrastructure services, today announced financial results for the fourth quarter and full-year 2014.
“We are pleased to deliver a strong finish to 2014 having met our fourth quarter revenue guidance and exceeded the high-end range of our adjusted EBITDA guidance. The execution of our strategic transformation to an industry leading Internet infrastructure services provider is reflected in full year revenue and adjusted EBITDA growth of 18% and 36%, respectively,” said Eric Cooney, President and Chief Executive Officer of Internap. “With some significant churn events behind us, most notably the exit from 111 8th Avenue data center, we enter 2015 with a solid foundation for profitable growth from our integrated platform of high-performance hybrid Internet infrastructure services. Encouraged by our positive momentum and the stage of our business transformation, we are providing full-year 2015 revenue, adjusted EBITDA and capital expenditure guidance.”
Fourth Quarter and Full-Year 2014 Financial Summary
- Revenue for the full-year 2014 increased 18% to $335.0 million compared with $283.3 million in 2013. The increase in annual revenue was due to growth in our data center services segment, which includes $43.2 million of revenue attributable to iWeb, which we acquired in November 2013. Revenue for the fourth quarter of 2014 was $84.3 million, an increase of 14% year-over-year and flat compared with the third quarter of 2014.
- Data center services revenue for the full-year 2014 increased 31% to $242.6 million. Fourth quarter data center services revenue was $61.3 million, an increase of 23% compared with the fourth quarter of 2013 and a decrease of 1% from the third quarter of 2014. The year-over-year revenue increase was predominantly attributable to increased sales of core data center services including revenue attributable to iWeb. Sequentially, previously disclosed churn from our New York Metro migration and decreased sales in our partner data centers offset the increase in core data center services.
- IP services revenue for the full-year 2014 decreased 6% to $92.3 million. Fourth quarter IP services revenue was $23.0 million, a decrease of 6% compared with the fourth quarter of 2013 and flat from the third quarter of 2014. The year-over-year revenue decrease was driven by per unit declines in IP pricing and the loss of legacy contracts at higher effective prices, partially offset by an increase in overall traffic. Sequentially, traffic growth and non-recurring revenue offset per unit price declines in IP.
- GAAP net loss was $(39.5) million, or $(0.77) per share for the full-year 2014 compared with $(19.8) million, or $(0.39) per share in 2013. GAAP net loss in the fourth quarter was $(8.3) million, or $(0.16) per share.
- Normalized net loss was $(27.7) million, or $(0.54) per share for the full-year 2014. Normalized net loss for the full-year 2013 was $(7.5) million, or $(0.15) per share. Normalized net loss in the fourth quarter was $(5.2) million, or $(0.10) per share.
Segment Profit and Adjusted EBITDA
- Segment profit in 2014 was $190.0 million, an increase of 26% year-over-year. Segment profit in the fourth quarter increased 21% compared with the fourth quarter of 2013 and 3% sequentially to $48.8 million. Annual segment margin was 56.7% in 2014, an increase of 330 basis points over 2013. Fourth quarter segment margin was 57.9%, an increase of 340 basis points year-over-year and 180 basis points compared with the third quarter of 2014. We achieved the highest annual and quarterly segment profit and segment margin levels in our history in 2014 and fourth quarter 2014.
- Annual data center services segment profit increased 47% to $136.5 million. Fourth quarter data center services segment profit increased 38% year-over-year and 4% sequentially to $35.3 million. Data center services segment profit margin was 56.2% in 2014 and 57.6% in the fourth quarter of 2014, representing year-over-year increases of 620 basis points and 610 basis points, respectively. An increasing proportion of higher-margin services, specifically colocation sold in company-controlled data centers, hosting and cloud services and the contribution from iWeb, drove data center services segment profit and margin higher.
- IP services segment profit for the full-year 2014 decreased 9% to $53.5 million. Fourth quarter IP services segment profit was $13.5 million, a 9% decrease compared with the fourth quarter of 2013 and a 1% decrease from the third quarter of 2014. IP services segment profit margin was 58.0% in 2014 and 58.7% in the fourth quarter of 2014, representing year-over-year declines of 180 basis points and 200 basis points, respectively. Decreased IP services revenue more than offset lower costs, driving declines in IP services segment profit and segment margin.
- Full-year 2014 adjusted EBITDA increased 36% year-over-year to $78.7 million. Fourth quarter 2014 adjusted EBITDA increased 45% year-over-year and 15% sequentially to $22.7 million. Adjusted EBITDA margin was 23.5% in 2014 and 27.0% in the fourth quarter of 2014, representing year-over-year increases of 300 basis points and 590 basis points, respectively. Sequentially, fourth quarter adjusted EBITDA margin increased 370 basis points. The year-over-year and sequential increases in adjusted EBITDA were attributable to increased segment profit in our data center services segment. The sequential adjusted EBITDA margin improvement was also driven by lower cash operating expenses.
Balance Sheet and Cash Flow Statement
- Cash and cash equivalents totaled $20.1 million at December 31, 2014. Total debt was $359.0 million, net of discount, at the end of the quarter, including $60.1 million in capital lease obligations.
- Cash generated from operations for the 12 and three months ended December 31, 2014 were $53.2 million and $17.0 million, respectively. Capital expenditures over the same periods were $77.4 million and $25.1 million, respectively.
We are providing the following guidance for full-year 2015:
- Revenue: $339 million – $353 million
- Adjusted EBITDA: $89 million – $95 million
- Capital Expenditures: $70 million – $80 million
Recent Operational Highlights
Historical trends of key financial and operational metrics can be found in a supplementary data schedule on Internap’s website at https://ir.inap.com/results.cfm.
- We had 12,286 customers at December 31, 2014.
- Internap expanded our OpenStack-powered AgileCLOUD footprint to Amsterdam and the New York metro market. We currently have four OpenStack public cloud locations, providing developers and enterprise customers with one of the most robust, feature-rich OpenStack public cloud platforms.
- Internap announced the addition of powerful OpenStack management capabilities in AgileCLOUD via an integrated OpenStack Horizon dashboard. We now provide a full range of cloud and infrastructure management options that give customers the flexibility to meet their specific control requirements.
1Adjusted 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.
2Segment 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 fourth quarter and full-year 2014 conference call will be held today at 4:30 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 https://ir.inap.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, February 19, 2015 at 7:30 p.m. ET through Wednesday, February 25, 2015 at 855-859-2056 using replay code 76817780. International callers can listen to the archived event at 404-537-3406 with the same code.
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.
This press release contains forward-looking statements. These forward-looking statements include statements related to our ability to drive profitable growth and our expectations for full-year 2015 revenue, adjusted EBITDA and capital expenditures. Our expectations for full-year 2015 revenue, adjusted EBITDA and capital expenditures are based on certain assumptions, including anticipated new product launches, leveraging of multiple routes to market and expanded brand awareness for high-performance Internet infrastructure services. 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; 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 complete expansion of company-controlled data centers within the expected timeframe; our ability to sell into new data center space; the actual performance of our IT infrastructure services; our ability to maintain current customers and obtain new ones, whether in a cost-effective manner or at all; 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.
The information above is a summary. Click here to view the entire release which includes our unaudited GAAP financial statements and supplemental non-GAAP financial measures.
Davies Murphy Group