Internap Reports Third Quarter 2013 Financial Results
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.
- Revenue of $69.6 million, up 2% versus the third quarter of 2012;
- Data center services revenue of $45.5 million, up 8% versus the third quarter of 2012;
- Adjusted EBITDA1 of $14.2 million increased 14% versus the third quarter of 2012;
- Adjusted EBITDA1 margin of 20.4%, up 210 basis points year-over-year.
ATLANTA, GA – (October 24, 2013) Internap Network Services Corporation (NASDAQ: INAP), a provider of high-performance hosting services, today announced financial results for the third quarter of 2013.
“We delivered solid financial results for the third quarter of 2013, reflective of our focus on growth from company-controlled data centers, hosting and cloud services. Further, strong operating leverage resulted in favorable EBITDA growth and margin expansion in the quarter,” said Eric Cooney, President and Chief Executive Officer of Internap. “As we look toward 2014 with the macro-drivers for outsourced IT infrastructure services intact, significant available capacity in our datacenters and a compelling performance based differentiation, we are well positioned for continued growth.”
Third Quarter 2013 Financial Summary
- Revenue totaled $69.6 million compared with $68.1 million in the third quarter of 2012 and $70.0 million in the second quarter of 2013. Revenue from data center services increased year-over-year and was flat sequentially. Revenue from IP services decreased both year-over-year and sequentially.
- Data center services revenue totaled $45.5 million, an increase of 8% year-over-year and flat sequentially. The year-over-year increase was attributable to increased sales of colocation in company-controlled data centers and favorable growth in hosting and cloud services. Sequentially, decreased sales in our partner data centers offset the increase in colocation sold in company-controlled data centers, hosting and cloud services.
- IP services revenue totaled $24.1 million, a decrease of 7% compared with the third quarter of 2012 and 1% sequentially, as traffic growth was more than offset by per unit price declines in IP and the loss of legacy contracts.
- GAAP net loss was $(4.0) million, or $(0.08) per share, compared with $(2.5) million, or $(0.05) per share, in the third quarter of 2012 and $(3.7) million, or $(0.07) per share, in the second quarter of 2013.
- Normalized net loss, which excludes the impact of stock-based compensation expense and items that management considers non-recurring, was $(2.1) million, or $(0.04) per share in the third quarter of 2013. Normalized net loss was $(1.0) million, or $(0.02) per share, in the third quarter of 2012, and $(1.3) million, or $(0.03) per share, in the second quarter of 2013.
Segment Profit and Adjusted EBITDA
- Segment profit totaled $36.8 million in the third quarter, an increase of 6% year-over-year. Sequentially, segment profit decreased 1%. Segment margin was 52.9%, an increase of 220 basis points compared with the third quarter of 2012. Segment margin decreased 40 basis points compared with the second quarter of 2013.
- Segment profit in data center services was $22.3 million in the third quarter, or 49.1% of data center services revenue. IP services segment profit was $14.5 million, or 60.0% of IP services revenue. Data center services segment profit increased 20% year-over-year and decreased 3% sequentially. An increasing proportion of higher-margin services, specifically colocation sold in company-controlled data centers, hosting and cloud services, benefited data center services segment compared with the third quarter of 2012. Higher seasonal power costs drove a decrease in data center segment profit compared with the second quarter of 2013. Data center services segment margin increased 500 basis points year-over-year and decreased 120 basis points sequentially. IP services segment profit decreased 9% year-over-year and was flat sequentially. Lower IP transit revenue and the loss of legacy contracts drove the year-over-year decrease in segment profit. IP services segment margin decreased 140 basis points year-over-year and increased 100 basis points sequentially. Lower network costs primarily contributed to the sequential increase in segment margin.
- Adjusted EBITDA totaled $14.2 million in the third quarter, a 14% increase compared with the third quarter of 2012 and a 1% increase from the second quarter of 2013. Adjusted EBITDA margin was 20.4% in the third quarter of 2013, up 210 basis points year-over-year and 30 basis points sequentially. The year-over-year increase in adjusted EBITDA was attributable to increased segment profit in our data center services segment. The sequential adjusted EBITDA improvement was driven by lower cash operating expenses.
Balance Sheet and Cash Flow Statement
- Cash and cash equivalents totaled $34.4 million at September 30, 2013. Total debt was $167.7 million, net of discount, at the end of the quarter, including $54.8 million in capital lease obligations.
- Cash generated from operations for the three and nine months ended September 30, 2013 was $9.5 million and $23.7 million, respectively. Capital expenditures over the same period were $9.9 million and $32.2 million, respectively.
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 approximately 3,500 customers at September 30, 2013.
- Internap was named to the InformationWeek 500 List of Top Technology Innovators. We were recognized for the high-performance design of our Los Angeles data center, which provides advanced scalability, reliability and sustainability, as well as hybridized colocation, managed hosting and cloud services that can be mixed and matched to maximize application performance and meet specific business requirements.
- Internap was awarded a Gold Stevie® award in the 2013 American Business AwardsSM for our hybridized Agile Hosting service, which lets enterprises seamlessly mix and match on-demand virtual and bare-metal (dedicated) cloud servers across our global footprint of data centers.
1 Adjusted EBITDA, Adjusted EBITDA Margin and Normalized Net Loss are non-GAAP financial measures and are defined 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 profit and segment margin are non-GAAP financial measures and are defined 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 third quarter 2013 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, October 24, 2013 at 8 p.m. ET through Wednesday, October 30, 2013 at 855-859-2056 using the replay code 85803900. International callers can listen to the archived event at 404-537-3406 with the same code.
Internap provides intelligent IT infrastructure services that combine platform flexibility and hybridization with unmatched performance, enabling customers to focus on their core business, improve service levels and lower the cost of IT operations. The company’s cloud, hosting and colocation services are delivered from a geographically distributed platform of high-density, redundant data centers. Its patented, performance-optimized IP connectivity guarantees 100% uptime and lowest latency, resulting in a seamless user experience. For more information, visit https://www.inap.com, our blog at https://www.inap.com/blog or follow us on Twitter at https://twitter.com/internap.
This press release contains forward-looking statements. These forward-looking statements include statements related to our ability to execute on our business strategy and to drive long-term profitable growth. Because such 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; 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.
Press ContactMariah Torpey
Davies Murphy Group
Investor ContactMichael Nelson