INAP Reports Third Quarter 2019 Financial Results
- Revenue of $72.9 Million, down $0.3 Million Sequentially, Demonstrating Continued Churn Stability
- Net Loss Attributable to Shareholders of $23.9 Million, or $1.01 Per Share
- Adjusted EBITDA of $23.0 Million, down $1.4 Million Sequentially, Driven by Conversion of Santa Clara to Operating Lease and Seasonal Cost Increases
- Capital expenditures of $8.6 Million, Reflecting Continued Tight Controls and Focus on Success-Based Investments
- Successfully Amended Existing Credit Facility to Gain Financial and Operational Flexibility while Company pursues Strategic Alternative
RESTON, Va., Nov. 12, 2019 — Internap Corporation (NASDAQ: INAP), a leading-edge provider of high-performance data center and cloud solutions with global network connectivity, announced today financial results for the third quarter of 2019.
“INAP’s third quarter results reflect our continued execution on all fronts, with revenue demonstrating stability in churn and Adjusted EBITDA remaining relatively flat compared to Q2 on a normalized basis. We won a number of new sales and expansions of current client footprints, with growth in private cloud and colo in high absorption flagship markets, including Phoenix, Atlanta, Los Angeles and Seattle. With respect to our strategic initiatives, we are actively engaged with interested parties and are working with our advisors to explore possible non-core asset sales and transformational transactions. The amendment to our credit facility gives us additional flexibility and time while we strive to maximize shareholder value. For the remainder of the year, we are focused on driving profitable revenue through consistency in our sales teams and channel partners, and on bringing about strategic actions that can take INAP to the next level,” said Peter D. Aquino, Chief Executive Officer.
Third Quarter 2019 Financial Summary
- Total company revenue was $72.9 million in the third quarter of 2019, a decrease sequentially of $0.3 million or 0.4%, and a decrease of $10.1 million or 12.2% year-over-year.
- INAP US revenue was $56.9 million in the third quarter of 2019, a decrease of 0.9% sequentially and a decrease of 13.3% year-over-year. The sequential decrease is primarily due to lower non-recurring revenue in Q3 in Colocation. The decrease year-over-year is primarily due to planned data center exits and churn from several large customers in 2018.
- INAP INTL revenue was $15.9 million in the third quarter of 2019, an increase of 1.6% sequentially and a decrease of 7.9% year-over-year. The sequential increase is due to higher non-recurring revenue in Q3 in Cloud and INAP Japan. The decrease year-over-year is primarily due to churn from large customers in 2018.
Net Loss, Adjusted EBITDA and Business Unit Contribution
- Net loss attributable to shareholders was $(23.9) million, or $(1.01) per share in the third quarter of 2019 compared with $(18.6) million, or $(0.78) per share in the second quarter of 2019, and compared with $(15.5) million, or $(0.77) per share in third quarter of 2018.
- Adjusted EBITDA was $23.0 million in the third quarter of 2019, a decrease of 5.9% compared with $24.4 million in the second quarter of 2019, and 23.4% decrease compared with $30.0 million in the third quarter of 2018. The sequential decline is due primarily to the conversion of our Santa Clara facility to an operating lease and seasonal cost increases. The year-over-year decline is primarily due to lower revenues partially offset by cost savings initiatives in 2019.
- Business Unit Contribution
- INAP US business unit contribution was $24.0 million in the third quarter, a 5.7% decrease compared to the second quarter of 2019 and a 21.2% decrease from the third quarter of 2018. The sequential decrease is primarily due to the conversion of our Santa Clara facility to an operating lease, lower non-recurring revenue, and seasonal cost increases. The decrease year-over-year is primarily due to lower revenues partially offset by cost saving initiatives in 2019.
- INAP INTL business unit contribution was $5.8 million in the third quarter of 2019, a 2.8% increase compared with the second quarter of 2019 and a 0.6% decrease from the third quarter of 2018. The sequential increase is primarily due to higher non-recurring revenue. The decrease year-over-year is primarily due to lower revenues partially offset by cost savings initiatives in 2019.
“Second quarter revenue performance of $73 million represents baseline stability as the Company focuses on organic growth in high demand products,” said Jim Keeley, Executive Vice President, Chief Financial Officer. “Normalized for minimal data center closure revenue still included in first quarter 2019, revenues were essentially flat sequentially, replacing churn and building a larger backlog from a growing pipeline of deals. We are encouraged by this consistency and are supporting our sales teams and channel partners to grow after over two years of reconstituting our product set.”
Cash Balance and Cash Flow Statement
- Cash and cash equivalents were $10.9 million at September 30, 2019. Total debt outstanding under the credit facility was $428.6 million, net of discount and issuance costs, and the finance lease liabilities balance was $270.1 million. The Company had $17.2 million of availability on its revolver, net of $3.7 million of letters of credit.
- Capital expenditures were $8.6 million in the third quarter of 2019, compared to $7.4 million in the second quarter of 2019 and $11.4 million in the third quarter of 2018.
- Cash generated from operations for the three months ended September 30, 2019 was $5.5 million compared to $11.4 million in the second quarter of 2019, and $9.4 million in the third quarter of 2018. The variances between periods were primarily related to changes in working capital.
- Adjusted Free Cash Flow was $(2.6) million in the third quarter of 2019, compared to $6.1 million in the second quarter of 2019 and $0.2 million in the third quarter of 2018. Adjusted Unlevered Free Cash Flow was $14.1 million for the third quarter of 2019, compared to $21.7 million in the second quarter of 2019 and $17.0 million in the third quarter of 2018.
INAP’s narrowed business outlook for 2019 is shown in the table below.
Refer to the attachments to this press release entitled “Non-GAAP (Adjusted) Financial Measures” for definitions and reconciliations between GAAP information and non-GAAP information, including Adjusted EBITDA, Adjusted Free Cash Flow, Adjusted Unlevered Free Cash Flow and business unit contribution.
2018 results include the SingleHop LLC (“SingleHop”) acquisition beginning March 1, 2018.
In prior periods, certain additions to property and equipment that were outstanding in accounts payable were not included in the Supplemental Disclosures of Cash Flow Information, “Additions to property and equipment included in accounts payable”. The amounts on the supplemental disclosure have been corrected, as well as the related adjustments to “Accounts payable” and “Purchases of property and equipment” with no impact to the net change in cash and cash equivalents in the condensed consolidated statements of cash flows. The corrections have no impact to the condensed consolidated statements of operations and comprehensive loss or the condensed consolidated balance sheets.
Conference Call Information
INAP’s third quarter 2019 conference call will be held on Tuesday, November 12, 2019 at 8:30 a.m. ET. Listeners may connect to a simultaneous webcast of the call, which will include accompanying presentation slides, on the Investor Relations section of INAP’s web site at http://ir.inap.com/events-and-presentations.
The call can be accessed by dialing 866-777-2509. International callers should dial 412-317-5413. An online archive of the webcast will be archived in the Investor Relations section of INAP’s website. An audio-only telephonic replay will be accessible from Tuesday, November 12, 2019 at 10:30 a.m. ET through Friday, November 15, 2019 at 877-344-7529 using replay code 10135998.
Internap Corporation (NASDAQ: INAP) is a leading-edge provider of high-performance data center and cloud solutions with 100 network Points of Presence worldwide. INAP’s full-spectrum portfolio of high-density colocation, managed cloud hosting and network solutions supports evolving IT infrastructure requirements for customers ranging from the Fortune 500 to emerging startups. INAP operates in 21 metropolitan markets, primarily in North America, with 14 INAP Data Center Flagships connected by a low-latency, high-capacity fiber network. For more information, visit www.INAP.com.
Certain statements in this press release contain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include statements regarding industry trends, our future financial position and performance, business strategy, revenues and expenses in future periods, projected levels of growth, availability of capital resources and liquidity and other matters that do not relate strictly to historical facts. These statements are often identified by words such as “may,” “will,” “seeks,” “anticipates,” “believes,” “estimates,” “expects,” “projects,” “forecasts,” “plans,” “intends,” “continue,” “could” or “should,” that an “opportunity” exists, that we are “positioned” for a particular result, statements regarding our vision or similar expressions or variations. These statements are based on the beliefs and expectations of our management team based on information available at the time such statements are made. Such forward-looking statements are not guarantees of future performance and are subject to risks and uncertainties that could cause actual results to differ materially from those contemplated by such forward-looking statements. Therefore, actual future results and trends may differ materially from what is forecast in such forward-looking statements due to a variety of factors, including, without limitation: our ability to drive growth while reducing costs; 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 and our ability to improve operations; our ability to correctly forecast capital needs, demand and space utilization; our ability to respond successfully to technological change and the resulting competition; the geographic concentration of our data centers in certain markets and any adverse developments in local economic conditions or the demand for data center space in these markets; the uncertainty as to whether any strategic alternative will be pursued or, if pursued, closed; uncertainty as to the terms, value and timing of any such strategic alternative; the impact of the announcement of the evaluation of strategic alternatives on INAP’s common stock, its businesses, and its operating results; our ability to realize anticipated revenue and growth; 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; the 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; our ability to protect our intellectual property; our substantial amount of indebtedness, our ability to raise additional capital when needed, on attractive terms, or at all, and our ability to service existing debt or maintain compliance with financial and other covenants contained in our credit agreement; our compliance with and changes in complex laws and regulations in the U.S. and internationally; our ability to attract and retain qualified management and other personnel; and volatility in the trading price of INAP common stock.
These risks and other important factors discussed under the caption “Risk Factors” in our most recent Annual Report on Form 10-K filed with the SEC and our other reports filed with the SEC could cause actual results to differ materially from those expressed or implied by forward-looking statements made by INAP or on our behalf.
Given these risks and uncertainties, investors should not place undue reliance on forward-looking statements as a prediction of actual results. All forward-looking statements attributable to INAP or persons acting on our behalf are expressly qualified in their entirety by the foregoing forward-looking statements. All such statements speak only as of the date made, and INAP undertakes no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise.
Chief Communications Officer, INAP
Carolyn Capaccio/Jody Burfening
For more information, visit ir.inap.com