Internap Reports Second Quarter 2016 Financial Results
- Revenue of $74.3 million, down 8% versus the second quarter of 2015
- Data Center and Network Services revenue of $50.5 million, down 6% versus the second quarter of 2015
- Cloud and Hosting Services revenue of $23.9 million, down 11% versus the second quarter of 2015
- GAAP net loss was $(10.7) million, or $(0.21) per share, improved over second quarter 2015 net loss of $(12.5) million or $(0.24) per share
- Adjusted EBITDA1 of $20.2 million increased 6% versus the second quarter of 2015
- Adjusted EBITDA margin1 of 27.1%, up 330 basis points year-over-year
ATLANTA, GA – (August 4, 2016) 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
|2Q 2016||2Q 2015||1Q 2016||YoY|
|Data center & Network Services||$50,459||$53,521||$50,872||-6%||-1%|
|Cloud & Hosting Services||$23,856||$26,911||$25,052||-11%||-5%|
|GAAP Net Loss||$(10,693)||$(12,534)||$(9,644)||-15%||11%|
|Normalized Net Loss1||$(7,300)||$(10,290)||$(6,108)||-29%||20%|
|Segment Profit Margin2||57.8%||59.0%||59.1%||-120 BPS||-130 BPS|
|Adjusted EBITDA Margin||27.1%||23.8%||27.0%||330 BPS||10 BPS|
- 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.
- 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.
Internap updated its financial outlook for full-year 2016:
|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|
- 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.
- 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 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, 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.
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 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 ContactMariah Torpey
Investor ContactMary Ann Arico