Internap Reports Second Quarter 2014 Financial Results
- Revenue of $84.1 million, up 20% versus the second quarter of 2013
- Data center services revenue of $61.4 million, up 35% versus the second quarter of 2013
- Segment margin(1) of 56.5%, up 320 basis points year-over-year
- Adjusted EBITDA(2) of $18.5 million increased 32% versus the second quarter of 2013
- Adjusted EBITDA margin(2) of 22.0%, up 190 basis points year-over-year
PR Newswire
ATLANTA, July 29, 2014
ATLANTA, July 29, 2014 /PRNewswire/ -- Internap Network Services Corporation (NASDAQ: INAP), a provider of high-performance Internet infrastructure services, today announced financial results for the second quarter of 2014.
"We delivered solid financial results for the second quarter of 2014 driven by strong growth in our core data center services business. The continued execution of our strategy to provide high-performance hybrid Internet infrastructure services is reflected in the revenue growth, segment margin expansion and record adjusted EBITDA margin for the quarter," said Eric Cooney, President and Chief Executive Officer of Internap. "With greater clarity on the future New York data center migration and IP services segment margin, we move into the second half of 2014 with a simplified focus to leverage our performance-based differentiation in support of long-term profitable growth and stockholder value creation."
Second Quarter 2014 Financial Summary
YoY QoQ 2Q 2014 2Q 2013 1Q 2014 Growth Growth ---------- ----------- ----------- ------ ------ Revenues: Data center services $ 61,395 $ 45,580 $ 58,283 35% 5% IP services 22,673 24,403 23,678 -7% -4% ---------- ----------- ----------- Total Revenues $ 84,068 $ 69,983 $ 81,961 20% 3% Operating Expenses $ 88,582 $ 71,082 $ 86,498 25% 2% GAAP Net Loss $ (11,185) $ (3,702) $ (10,675) 202% 5% Normalized Net Loss(2) $ (7,668) $ (1,278) $ (7,265) 500% 6% Segment Profit(1) $ 47,506 $ 37,330 $ 46,201 27% 3% Segment Profit 320 Margin 56.5% 53.3% 56.4% BPS 10 BPS Adjusted EBITDA $ 18,503 $ 14,067 $ 17,799 32% 4% Adjusted EBITDA 190 Margin 22.0% 20.1% 21.7% BPS 30 BPS
Revenue
-- Revenue totaled $84.1 million in the second quarter, an increase of 20% year-over-year and 3% sequentially. The increase in revenue was due to growth in our data center services segment, which includes $11.5 million of revenue attributable to iWeb, which we acquired in November 2013. -- Data center services revenue totaled $61.4 million in the second quarter, an increase of 35% year-over-year and 5% sequentially. Both increases were attributable to increased sales of core data center services including iWeb. -- IP services revenue totaled $22.7 million in the second quarter, a decrease of 7% year-over-year and 4% sequentially. Both decreases were driven by per unit price declines in IP and the loss of legacy contracts at higher effective prices, partially offset by an increase in overall traffic.
Net Loss
-- GAAP net loss was $(11.2) million, or $(0.22) per share, compared with $(3.7) million, or $(0.07) per share, in the second quarter of 2013 and $(10.7) million, or $(0.21) per share, in the first quarter of 2014. -- Normalized net loss was $(7.7) million, or $(0.15) per share, compared with normalized net loss of $(1.3) million, or $(0.03) per share, in the second quarter of 2013, and normalized net loss of $(7.3) million, or $(0.14) per share, in the first quarter of 2014.
Segment Profit and Adjusted EBITDA
-- Segment profit totaled $47.5 million in the second quarter, a 27% increase compared with the second quarter of 2013 and a 3% increase from the first quarter of 2014. Segment margin was 56.5%, an increase of 320 basis points year-over-year and 10 basis points sequentially. -- Data center services segment profit totaled $34.8 million in the second quarter, a 52% increase compared with the second quarter of 2013 and an 8% increase from the first quarter of 2014. Data center services segment margin was 56.7% in the second quarter, up 640 basis points year-over-year and 110 basis points sequentially. 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 totaled $12.7 million in the second quarter, a 12% decrease compared with the second quarter of 2013 and an 8% decrease from the first quarter of 2014. IP services segment margin was 55.9% in the second quarter, down 310 basis points year-over-year and 240 basis points sequentially. Lower IP transit revenue and the loss of legacy contracts led to a decrease in IP services segment profit and margin. -- Adjusted EBITDA totaled $18.5 million in the second quarter, a 32% increase compared with the second quarter of 2013 and a 4% increase from the first quarter of 2014. Adjusted EBITDA margin was 22.0% in the second quarter, up 190 basis points year-over-year and 30 basis points sequentially. Both the year-over-year and sequential increases in adjusted EBITDA and adjusted EBITDA margin were attributable to increased segment profit in our data center services segment, including iWeb.
Balance Sheet and Cash Flow Statement
-- Cash and cash equivalents totaled $27.9 million at June 30, 2014. Total debt was $355.4 million, net of discount, at the end of the quarter, including $60.6 million in capital lease obligations. -- Cash generated from operations for the three months ended June 30, 2014 was $11.1 million. Capital expenditures over the same period were $13.1 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 ir.internap.com.
-- We expanded our bare-metal public cloud service to London and Hong Kong. Internap's expanded bare-metal cloud footprint -- which includes existing locations in Amsterdam, Singapore, Dallas, New York Metro and Santa Clara, California -- addresses growing demand for cloud services that can meet the high-performance requirements of globally distributed, real-time, data-intensive applications, like big data analytics, mobile and digital advertising and online gaming. -- Internap launched the general availability of our next-generation OpenStack powered public cloud, AgileCLOUD. It is a massively scalable, flexible and cost-efficient public cloud platform designed to meet the demands of large-scale, performance-intensive application environments. -- Internap's Atlanta data center recently received ENERGY STAR certification, a program run by the U.S. Environmental Protection Agency to identify ways in which energy efficiency can be measured, documented and implemented in data centers. -- We had approximately 12,000 customers at June 30, 2014. 1 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. 2 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.
Conference Call Information:
Internap's second quarter 2014 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 Tuesday, July 29, 2014 at 8 p.m. ET through Monday, August 4, 2014 at 855-859-2056 using replay code 72250083. International callers can listen to the archived event at 404-537-3406 with the same code.
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