Internap Reports Fourth Quarter and Full-Year 2012 Financial Results
-- Highest annual and quarterly revenue, segment profit1 and Adjusted EBITDA2 in
the history of the company; -- 2012 revenue of $273.6 million, fourth quarter
revenue of $69.7 million; -- 2012 segment profit of $142.6 million, fourth
quarter segment profit of $36.2 million; -- 2012 Adjusted EBITDA of $51.9
million, fourth quarter Adjusted EBITDA of $15.0 million; -- 26,000 net sellable
square feet of premium, company-controlled data center space deployed in 2012.
ATLANTA, Feb. 21, 2013 /PRNewswire via COMTEX/ -- Internap Network Services
Corporation (INAP), a provider of intelligent IT Infrastructure services, today
announced financial results for the fourth quarter and full-year 2012.
"We are pleased with the strong finish to 2012. The continued execution of our
growth strategy is reflected in full year revenue and Adjusted EBITDA growth of
12% and 20%, respectively. Successful integration of the Voxel business and focus
on our organic colocation, hosting and cloud infrastructure businesses have
delivered full-year growth in data center services revenue of 25%," said Eric
Cooney, President and Chief Executive Officer of Internap. "As we look forward to
2013, the priority is simple - focus on continued execution of the strategy to
deliver a platform of high-performance, hybridized IT Infrastructure services. We
remain confident that the opportunity for long-term profitable growth and
stockholder value creation is significant in the market for outsourced IT
Infrastructure services."
Fourth Quarter and Full-Year 2012 Financial Summary
Fourth QuarterFull Year
20122011Growth20122011Growth
Revenues:
Data center services$43,716$35,31624%$167,286$133,45325%
IP services26,03227,484-5%106,306111,175-4%
Total Revenues $69,748$62,80011%$273,592$244,62812%
Operating Expenses$67,699$63,7396%$269,828$248,5519%
GAAP Net Income (Loss)$21$4,198-99%$(4,318)$(1,702)154%
Normalized Net Income (Loss)2$2,107$269683%$2,962$(1,026)-389%
Segment Profit$36,163$32,87610%$142,638$124,31815%
Segment Profit Margin51.8%52.4%-60 BPS52.1%50.8%130 BPS
Adjusted EBITDA$14,964$12,60519%$51,854$43,35620%
Adjusted EBITDA Margin21.5%20.1%140 BPS19.0%17.7%130 BPS
Revenue
-- Revenue for the full-year 2012 was $273.6 million compared with $244.6 million
in 2011. The increase in annual revenue was primarily due to growth in our data
center services segment, which includes revenue attributable to the fourth
quarter 2011 acquisition of Voxel. Revenue for the fourth quarter of 2012 was
$69.7 million, an increase of 11% year-over-year and 2% compared with the third
quarter of 2012. Quarterly revenue from data center services increased
year-over-year and sequentially. IP services revenue in the quarter decreased
year-over-year and was unchanged sequentially. Full-year 2012 and fourth quarter
2012 represent the highest annual and quarterly revenue levels in the history of
the company.
-- Data center services revenue for the full-year 2012 increased 25% to $167.3
million. Fourth quarter data center services revenue was $43.7 million, up 24%
compared with the fourth quarter of 2011 and 4% over the third quarter of 2012.
The year-over-year revenue increase was attributable to organic growth in the
data center services segment and to the acquisition of Voxel. The sequential
increase was driven by increased sales of colocation in company-controlled data
centers and favorable growth in hosting services.
-- IP services revenue for the full-year 2012 decreased 4% to $106.3 million.
Fourth quarter IP services revenue was $26.0 million, a decrease of 5% compared
with the fourth quarter of 2011 and unchanged from the third quarter of 2012. The
year-over-year revenue decrease was driven by a decline in IP pricing for new and
renewing customers and the loss of legacy contracts at higher effective prices,
partially offset by an increase in overall traffic. The stable sequential
performance was a result of higher non-recurring IP revenue, which offset per
unit price declines in IP.
Net (Loss) Income
-- GAAP net loss was $(4.3) million, or $(0.09) per share for the full-year 2012
compared with $(1.7) million, or $(0.03) per share in 2011. GAAP net income in
the fourth quarter was $0.0, or $0.00 per share.
-- Normalized net income, which excludes the impact of stock-based compensation
expense and items that management considers non-recurring, was $3.0 million, or
$0.06 per share for the full-year 2012. Normalized net loss for the full-year
2011 was $(1.0) million, or $(0.02) per share. Normalized net income in the
fourth quarter was $2.1 million, or $0.04 per share.
Segment Profit and Adjusted EBITDA
-- Total segment profit in 2012 was $142.6 million, an increase of 15%
year-over-year. Total segment profit in the fourth quarter increased 10% compared
with the fourth quarter 2011 and 5% sequentially to $36.2 million. Annual segment
margin1 was 52.1% in 2012, an increase of 130 basis points over 2011. Fourth
quarter segment margin was 51.8%, a decline of 60 basis points year-over-year and
an increase of 110 basis points compared with the third quarter of 2012.
-- Annual data center services segment profit increased 41% to $76.7 million, the
highest annual data center segment profit in the history of the company. Fourth
quarter data center services segment profit increased 34% year-over-year and 9%
sequentially to $20.3 million, also representing a record quarterly level. Data
center services segment profit margin was 45.8% in 2012 and 46.4% in the fourth
quarter of 2012, representing year-over year increases of 490 basis points and
350 basis points, respectively. An increasing proportion of higher-margin
services, specifically colocation sold in company-controlled data centers and
hosting services, benefited data center services segment profit compared with the
full-year and fourth quarter of 2011. Sequentially, lower seasonal power costs
and increased company-controlled colocation and hosting services revenue drove
data center services segment profit and margin higher.
-- IP services segment profit for the full-year 2012 decreased 5% to $66.0
million. Fourth quarter IP services segment profit was $15.9 million, a decrease
of 10% compared with the fourth quarter of 2011 and unchanged from the third
quarter of 2012. IP services segment profit margin was 62.0% in 2012 and 61.0% in
the fourth quarter of 2012, representing year-over year declines of 80 basis
points and 350 basis points, respectively. Decreased IP services revenue more
than offset lower costs, driving the year-over-year declines in IP services
segment profit and margin. Sequentially, flat revenue growth led to stable IP
segment profit.
-- Adjusted EBITDA and Adjusted EBITDA margin represented the highest annual and
quarterly levels in the history of the company. Full-year 2012 Adjusted EBITDA
increased 20% year-over-year to $51.9 million. Fourth quarter 2012 adjusted
EBITDA increased 19% year-over-year and 20% sequentially to $15.0 million.
Adjusted EBITDA margin was 19.0% in 2012 and 21.5% in the fourth quarter of 2012,
representing year-over-year increases of 130 basis points and 140 basis points,
respectively. Sequentially, fourth quarter Adjusted EBITDA margin increased 320
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 improvement was also driven by lower cash operating
expenses.
Balance Sheet and Cash Flow Statement
-- Cash and cash equivalents totaled $28.6 million at December 31, 2012. Total
debt was $143.9 million, net of discount, at the end of the quarter, including
$48.6 million in capital lease obligations.
-- Cash generated from operations for the three and 12 months ended December 31,
2012 were $10.9 million and $43.7 million, respectively. Capital expenditures
over the same periods were $10.3 million and $74.9 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
ir.internap.com.
-- We had approximately 3,700 customers at December 31, 2012.
-- Internap's recently-expanded data center in Atlanta and newly-opened data
center in Los Angeles received Green Globes certification, following a detailed
review process by the Green Building Initiative. These certifications underscore
Internap's continued commitment to green building design and energy efficient
operations wherever feasible across its company-controlled data centers.
-- The U.S. Environmental Protection Agency (EPA) recently awarded ENERGY STAR
certification to our Santa Clara data center. Underscoring Internap's focus on
green design and energy efficiency, the company's Santa Clara data center has
already achieved Green Globes and LEED certifications. The facility has also been
awarded Silicon Valley Power's 2012 Energy Innovator Award and was named to the
InformationWeek 500 for its green data center achievements.
1 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 information 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.
2 Adjusted EBITDA and Normalized Net Income (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 Income (Loss) are contained in the tables entitled "Reconciliation of Income
(Loss) from Operations to Adjusted EBITDA," and "Reconciliation of Net Income
(Loss) and Basic and Diluted Net Income (Loss) Per Share to Normalized Net Income
(Loss) and Basic and Diluted Normalized Net Income (Loss) Per Share" in the
attachment.
Conference Call Information:
Internap's fourth quarter 2012 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 ir.internap.com. 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 21, 2013 at
8 p.m. ET through Wednesday, February 27, 2013 at 855-859-2056 using the replay
code 93172159. International callers can listen to the archived event at
404-537-3406 with the same code.
About Internap
Internap provides intelligent IT Infrastructure services that combine unmatched
performance and platform flexibility to enable our customers to focus on their
core business, improve service levels and lower the cost of IT operations. Our
unique trio of route-optimized enterprise IP, TCP acceleration and a global
content delivery network improves website performance and delivers superior
end-user experiences. Our scalable colocation, hosting, private cloud, public
cloud and hybrid offerings provide enterprises the flexibility to adapt to
changing business needs and future-proof their IT Infrastructure. Since 1996,
thousands of companies have entrusted Internap with the protection and delivery
of their online applications. Transform your IT Infrastructure into a competitive
advantage with IT IQ from Internap. For more information, visit
internap.com, our blog at internap.com or follow us on
Twitter at twitter.com.
Forward-Looking Statements
This press release contains forward-looking statements. These forward-looking
statements include statements related to our expectations regarding long-term
profitable growth and creation of stockholder value. 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 achieve or sustain profitability; our ability to expand margins
and drive higher returns on investment; our ability to successfully integrate
Voxel into our business; 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 Contact:Investor Contact:
Mariah TorpeyMichael Nelson
(781) 418-2404(404) 302-9700
internap@daviesmurphy.com ir@internap.com
INTERNAP NETWORK SERVICES CORPORATION
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
AND COMPREHENSIVE LOSS
(In thousands, except per share amounts)
Three Months Ended December 31,Year Ended December 31,
2012201120122011
Revenues:
Data center services$43,716$35,316$167,286$133,453
Internet protocol (IP) services26,03227,484106,306111,175
Total revenues69,74862,800273,592244,628
Operating costs and expenses:
Direct costs of network, sales and services, exclusive of
depreciation and amortization, shown below:
Data center services23,44520,16490,60478,907
IP services10,1409,76040,35041,403
Direct costs of customer support6,5565,38726,66421,278
Direct costs of amortization of acquired technologies1,1798754,7183,500
Sales and marketing7,3696,83731,34329,715
General and administrative8,7509,04138,63533,952
Depreciation and amortization9,68510,45836,14736,926
(Gain) loss on disposal of property and equipment, net(35)-(55)37
Exit activities, restructuring and impairments6101,2171,4222,833
Total operating costs and expenses67,69963,739269,828248,551
Income (loss) from operations2,049(939)3,764(3,923)
Non-operating expenses:
Interest expense2,2321,0147,5663,701
Other, net(131)57283165
Total non-operating expenses2,1011,0717,8493,866
Loss before income taxes and equity in (earnings) of
equity-method investment(52)(2,010)(4,085)(7,789)
(Benefit) provision for income taxes(50)(6,066)453(5,612)
Equity in (earnings) of equity-method investment, net of taxes (23)(142)(220)(475)
Net income (loss)214,198(4,318)(1,702)
Other comprehensive (loss) income:
Foreign currency translation adjustment, net of taxes(108)(96)84136
Comprehensive (loss) income$(87)$4,102$(4,234)$(1,566)
Basic and diluted net income (loss) per share$0.00$0.08$(0.09)$(0.03)
Weighted average shares outstanding used in computing
basic net income (loss) per share50,60650,22950,76150,422
Weighted average shares outstanding used in computing
diluted net income (loss) per share51,22750,67950,76150,422
INTERNAP NETWORK SERVICES CORPORATION
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except par value amounts)
December 31,December 31,
20122011
ASSETS
Current assets:
Cash and cash equivalents$28,553$29,772
Accounts receivable, net of allowance for doubtful accounts of $1,809 and $1,668, respectively 19,03518,539
Prepaid expenses and other assets13,43813,270
Total current assets61,02661,581
Property and equipment, net248,095198,369
Investment in joint venture3,0002,936
Intangible assets, net21,34226,886
Goodwill59,60559,471
Deposits and other assets5,7355,371
Deferred tax asset, net1,9092,096
Total assets$400,712$356,710
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable$22,158$21,746
Accrued liabilities11,3869,152
Deferred revenues2,9912,475
Revolving credit facility-100
Capital lease obligations4,5042,154
Term loan, less discount of $239 and $206, respectively3,2612,794
Exit activities and restructuring liability2,5082,709
Other current liabilities169151
Total current liabilities46,97741,281
Deferred revenues2,6692,323
Capital lease obligations44,05438,923
Revolving credit facility30,501-
Term loan, less discount of $388 and $367, respectively61,61255,383
Accrued contingent consideration-4,626
Exit activities and restructuring liability3,3654,884
Deferred rent15,02616,100
Other long-term liabilities9031,020
Total liabilities205,107164,540
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; 53,459 and 52,528 shares
outstanding, respectively5453
Additional paid-in capital1,243,8011,235,554
Treasury stock, at cost; 267 and 231 shares, respectively(1,845)(1,266)
Accumulated deficit(1,046,190)(1,041,872)
Accumulated items of other comprehensive loss(215)(299)
Total stockholders' equity195,605192,170
Total liabilities and stockholders' equity$400,712$356,710
INTERNAP NETWORK SERVICES CORPORATION
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
Three Months Ended December 31,Year Ended December 31,
2012201120122011
Cash Flows from Operating Activities:
Net income (loss)$21$4,198$(4,318)$(1,702)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization10,86411,33340,86540,426
(Gain) loss on disposal of property and equipment, net(35)-(55)37
Impairment of capitalized software180526438526
Stock-based compensation expense, net of capitalized amount1,4769945,8583,983
Equity in (earnings) of equity-method investment(23)(142)(220)(475)
Provision for doubtful accounts992899321,082
Non-cash change in capital lease obligations364207051,044
Non-cash change in accrued contingent consideration(195)-124-
Non-cash change in deferred rent(346)(210)(1,073)(555)
Deferred income taxes(88)(6,068)204(5,734)
Other, net6138521263
Changes in operating assets and liabilities:
Accounts receivable1,868917(1,428)(1,186)
Prepaid expenses, deposits and other assets(374)(944)(671)(2,282)
Accounts payable(4,127)(10,415)413(5,209)
Accrued and other liabilities1,4788592,304(247)
Deferred revenues198(195)862(970)
Exit activities and restructuring liability(233)(7)(1,719)(371)
Net cash flows provided by operating activities10,8601,59343,74228,630
Cash Flows from Investing Activities:
Purchases of property and equipment(10,333)(17,633)(74,947)(68,542)
Payment of accrued contingent consideration(4,750)-(4,750)-
Voxel acquisition, net of cash received-(27,723)-(27,723)
Net cash flows used in investing activities(15,083)(45,356)(79,697)(96,265)
Cash Flows from Financing Activities:
Proceeds from credit agreement8,17239,85340,40139,853
Principal payments on credit agreement(875)(250)(3,250)(1,000)
Payment of debt issuance costs-(253)(543)(253)
Payments on capital lease obligations(1,007)(287)(3,303)(1,190)
Proceeds from exercise of stock options2243102,4691,372
Tax withholdings related to net share settlements of restricted stock awards(129)(55)(1,085)(746)
Other, net(28)(35)(118)(135)
Net cash flows provided by financing activities6,35739,28334,57137,901
Effect of exchange rates on cash and cash equivalents44(37)165(76)
Net decrease in cash and cash equivalents2,178(4,517)(1,219)(29,810)
Cash and cash equivalents at beginning of period26,37534,28929,77259,582
Cash and cash equivalents at end of period$28,553$29,772$28,553$29,772
INTERNAP NETWORK SERVICES 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"), Internap has
historically provided additional financial measures that are not prepared in
accordance with GAAP ("non-GAAP"), including adjusted EBITDA, normalized net
income (loss), normalized diluted shares outstanding, segment profit and segment
margin. The most directly comparable GAAP equivalent to adjusted EBITDA and
normalized net income (loss) is loss from operations and net loss, respectively.
The most directly comparable GAAP equivalent to normalized diluted shares
outstanding is diluted common shares outstanding.
We define non-GAAP measures as follows:
-- Adjusted EBITDA is income (loss) from operations plus depreciation and
amortization, gain (loss) on disposals of property and equipment, exit
activities, restructuring and impairments and stock-based compensation.
-- Adjusted EBITDA margin is adjusted EBITDA as a percentage of revenues.
-- Normalized net income (loss) is net income (loss) plus exit activities,
restructuring and impairments and stock-based compensation.
-- Normalized diluted shares outstanding are diluted shares of common stock
outstanding used in GAAP net loss per share calculations, excluding the dilutive
effect of stock-based compensation using the treasury stock method.
-- Normalized net income (loss) per share is normalized net income (loss) divided
by basic and normalized diluted shares outstanding.
-- Segment profit is segment revenues less direct costs of network, sales and
services, exclusive of depreciation and amortization for the segment, as
presented in the notes to our consolidated financial statements. Segment profit
does not include direct costs of customer support, direct costs of amortization
of acquired technologies or any other depreciation or amortization associated
with direct costs.
-- Segment margin is segment profit as a percentage of segment revenues.
We detail reconciliations of our non-GAAP financial measures to the most directly
comparable financial measure in the reconciliations of GAAP to non-GAAP measures
below. 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 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 Internap's core 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.
INTERNAP NETWORK SERVICES CORPORATION NON-GAAP (ADJUSTED) FINANCIAL MEASURES
(Continued)
Internap believes that impairment and restructuring charges are unique costs that
we do not expect to recur on a regular basis, 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 Internap's core operating
results and trends. Investors have indicated that they 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 and net loss per share information by providing normalized net income
(loss) and normalized net income (loss) per share, excluding the effect of
impairments, restructuring and stock-based compensation in all periods, is useful
to investors because it enables additional and more meaningful period-to-period
comparisons. We consider normalized diluted shares to be another important
indicator of our overall performance because it eliminates the effect of non-cash
items.
Adjusted EBITDA is not a measure of liquidity 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.
INTERNAP NETWORK SERVICES CORPORATION NON-GAAP (ADJUSTED) FINANCIAL MEASURES
(Continued)
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.
Our presentation of segment profit and segment margin excludes direct costs of
customer support, depreciation and amortization in order to allow investors to
see the business through the eyes of management. Management views direct costs of
network, sales and services as generally less controllable, external costs and
management regularly monitors the margin of revenues in excess of these direct
costs. Similarly, we view the costs of customer support to also be an important
component of costs of revenues but believe that the costs of customer support to
be more within our control and to some degree discretionary as we can adjust
those costs by hiring and terminating employees.
Segment margin is an important metric to our investors and analysts, as we have
regularly discussed and disclosed the effects of third party vendors' pricing
declines and the corresponding effect on our revenues. The presentation of
segment margin highlights the impact of the pricing declines and allows investors
and analysts to evaluate our revenue generation performance relative to direct
costs of network, sales and services. Conversely, we have much greater latitude
in controlling the compensation component of costs of revenues, represented by
customer support, and we analyze this component separately from the direct
external costs.
We also have excluded depreciation and amortization from segment profit and
segment 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.
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 NETWORK SERVICES CORPORATION RECONCILIATION OF INCOME (LOSS) FROM
OPERATIONS TO ADJUSTED EBITDA
A reconciliation of income (loss) from operations, the most directly comparable
GAAP measure, to adjusted EBITDA for each of the periods indicated is as follows
(in thousands):
Three Months Ended
December 31, 2012September 30, 2012December 31, 2011
Income (loss) from operations (GAAP)$2,049$(84)$(939)
Depreciation and amortization, including amortization of acquired technologies 10,86411,06411,333
Gain on disposal of property and equipment, net(35)--
Exit activities, restructuring and impairments6101241,217
Stock-based compensation1,4761,363994
Adjusted EBITDA (non-GAAP)$14,964$12,467$12,605
INTERNAP NETWORK SERVICES CORPORATION RECONCILIATION OF NET INCOME (LOSS) AND
BASIC AND DILUTED NET INCOME (LOSS) PER SHARE TO NORMALIZED NET INCOME (LOSS) AND
BASIC AND DILUTED NORMALIZED NET INCOME (LOSS) PER SHARE
Reconciliations of (1) net income (loss), the most directly comparable GAAP
measure, to normalized net income (loss), (2) diluted shares outstanding used in
per share calculations, the most directly comparable GAAP measure, to normalized
diluted shares used in normalized per share outstanding calculations and (3) net
income (loss) per share, the most directly comparable GAAP measure, to normalized
net income (loss) per share for each of the periods indicated is as follows (in
thousands, except per share data):
Three Months Ended
December 31, 2012September 30, 2012December 31, 2011
Net income (loss) (GAAP)$21$(2,450)$4,198
Exit activities, restructuring and impairments6101241,217
Stock-based compensation1,4761,363994
Deferred income tax benefit related to Voxel--(6,140)
Normalized net income (loss) (non-GAAP)2,107(963)269
Normalized net income allocable to participating securities (non-GAAP)(45)-(5)
Normalized net income (loss) available to common stockholders (non-GAAP)$2,062$(963)$264
Weighted average shares outstanding used in per share calculation:
Basic (GAAP)50,60650,57250,229
Participating securities (GAAP)1,1091,1171,046
Diluted (GAAP)51,22750,57250,679
Add potentially dilutive securities---
Less dilutive effect of stock-based compensation under the treasury stock method (152)-(107)
Normalized diluted shares (non-GAAP)51,07550,57250,572
Income (loss) per share (GAAP):
Basic and diluted$0.00$(0.05)$(0.08)
Normalized net income (loss) per share (non-GAAP):
Basic and diluted$0.04$(0.02)$0.01
INTERNAP NETWORK SERVICES CORPORATION SEGMENT PROFIT AND SEGMENT MARGIN
Segment profit and segment margin, which does not include direct costs of
customer support, direct costs of amortization of acquired technologies or any
other depreciation or amortization, for each of the periods indicated is as
follows (dollars in thousands):
Three Months Ended
December 31, 2012September 30, 2012December 31, 2011
Revenues:
Data center services$43,716$42,139$35,316
IP services26,03225,99027,484
Total69,74868,12962,800
Direct cost of network, sales and services, exclusive of
depreciation and amortization:
Data center services23,44523,53920,164
IP services10,14010,0349,760
Total33,58533,57329,924
Segment Profit:
Data center services20,27118,60015,152
IP services15,89215,95617,724
Total$36,163$34,556$32,876
Segment Margin:
Data center services46.4%44.1%42.9%
IP services61.0%61.4%64.5%
Total51.8%50.7%52.4% |
