Internap Reports Second Quarter Financial Results and Narrowing EBITDA Losses.
PR Newswire, July 25, 2001 pNA
Full Text
Record Number of Customers Installed Additional Cost Reduction Measures
Implemented 2001 Revenue Guidance Adjusted
SEATTLE, July 25 /PRNewswire/ --
Internap Network Services Corporation (Nasdaq: INAP), the leading provider of intelligent routing services over the Internet, today reported results
for the second fiscal quarter ended June 30, 2001. Revenues for the quarter on a consolidated basis were $29.3 million, a 3% increase over the
$28.4 million in the first quarter and a 115% increase over the $13.6 million reported for the same period in 2000. Internap's second quarter
EBITDA* loss, on a consolidated basis, was $28.9 million, down from $34.7 million (before a $4.3 million restructuring charge) in the first quarter, and
compared to $18.5 million in the second quarter of 2000. Net loss on a consolidated basis for the second quarter of 2001 was $68.3 million, or a loss
of $0.45 per share, compared to a net loss of $266.8 million** or $1.79 per share, for the first quarter of 2001. Net loss on a normalized*** basis for
the second quarter was $47.7 million, or $0.32 per share, compared to $52.4 million, or $0.35 per share in the first quarter. In the second quarter of
2000, the net loss was $22.8 million, or $0.16 per share.
"Internap has turned the corner towards profitability, and we will aggressively manage the business to reach that goal," said Gene Eidenberg,
Chairman and CEO of Internap Network Services. "We are encouraged, particularly in these tough economic times, by the most fundamental
indicator of any service organization: Demand for Internap's service continues to grow, as evidenced by our record sales and customer installs."
"Our cost cutting initiatives are paying off by reducing cash burn and narrowing EBITDA losses," said Paul McBride, Chief Financial Officer for
Internap. "While revenue growth was hampered by a high level of customer fallout that resulted from the current economic climate, we are pleased by
our DSOs improving to 49 days and our decreasing disconnects in June. Despite the challenging conditions that have contributed to this churn,
Internap's business model is performing well, and we are confident that we will continue to show sequential improvements across the board."
Significant Quarterly Results:
-- A record 144 revenue-producing customers were installed, bringing the
total customer base to 783. New customers include ADP, Brown & Co.,
Comcast, Cox Communication, Equifax, ICN Pharmaceuticals, Instinet,
Mattel, Pinnacle Realty, Polycom and Texas Instruments.
-- Record second quarter Incremental Contract Value was approximately
$97 million. This metric represents contracts signed but not
installed.
-- Day sales outstanding at the end of June improved to 49 days, compared
with 56 days at the end of March.
-- Same store sales for the 18 Service Points deployed by the second
quarter of 2000 increased from $13.9 million in the second quarter of
2000 to $22.8 million in the second quarter of 2001, representing a
63.4% increase.
-- Internap's ASsimilator 3.0 upgrade is on track with 11 Service Points
completed, and the company expects the entire upgrade of the Internap
Network to be finalized by the end of the third quarter. ASsimilator
3.0 is already producing benefits through optimized routing, port
consolidation and improved vendor management. In June, the company
reached its lowest marginal cost of bandwidth to date.
-- Internap's direct cost of network, which excludes depreciation and
customer support costs, was $26.5 million in the second quarter,
compared to $23.2 million in the first quarter. Direct cost of network
excluding other one-time network charges was $25.9 million in the
second quarter.
-- Internap introduced the broadest multi-backbone Service Level Agreement
in the IP connectivity industry providing performance guarantees in
latency, packet loss and network availability over the Internet.
-- Average monthly revenues per customer were $12,800, compared to the
$13,800 in the first quarter and $11,600 reported for the second
quarter of 2000. Internap's top twenty customers represented less
than 30% of the company's total revenues for the second quarter.
-- Internap launched the company's first Service Point in Tokyo in July
with the company's joint venture partner NTT-ME. Internap Japan also
announced its first two customers.
Revenues for the first six months on a consolidated basis were $57.7 million, a 156% increase over the $22.5 million reported for the same six
months in fiscal 2000. Internap's six month EBITDA* loss, on a consolidated basis, was $63.6 million, or a loss of $0.43 per share, compared to an
EBITDA loss of $36.0 million, or a loss of $0.27 per share, in the first six months of 2000. Net loss on a consolidated basis for the first six months of
2001 was $335.1 million, or a loss of $2.24 per share, compared to a net loss of $43.4 million, or a loss of $0.32 per share, for the same six months
in fiscal 2000. Normalized net loss*** for the first six months of 2001 was $100.1 million, or a loss of $0.67 per share.
* EBITDA is defined as net losses before interest and financing income
(expense), investment income (loss), income taxes, depreciation,
amortization, acquired in-process research and development expenses,
restructuring costs, and impairment of goodwill and other intangible
assets.
** Includes a $196 million expense recognized in the first quarter of
2001 related to the impairment of goodwill and other intangible assets
acquired from CO Space, Inc.
*** Normalized net loss for second quarter of 2001 excludes $19.3 million
in non-cash charges related to realized losses and impairment of
investments, and $1.3 million in other non-recurring non-cash charges.
Normalized net loss for the first quarter of 2001 excludes $210.1
million of expenses related to the impairment of goodwill and other
intangible assets, including related amortization expense for the
period, acquired from CO Space, Inc., and a $4.3 million restructuring
charge.
Revised Guidance and Cost Reductions
Internap has revised revenue guidance for the full year 2001 to a range of $120 million to $130 million, representing 72 percent to 87 percent growth
over the previous year. The company will be implementing additional staff reductions of approximately 130 full-time-equivalents. Including those
announced today, the company has reduced approximately 31 percent of its staff since December 31, 2000. Internap is not revising its previously
projected EBITDA loss of $118 million.
Supplemental Financial Data (Dollars in Millions):
Q2 '01 Q1 '01 Q4 '00 Q3 '00
Revenues $29.3 $28.4 $26.9 $20.2
Direct Cost of Network $26.5 $23.2 $22.0 $17.0
EBITDA(i) $(28.9) $(34.7)(ii) $(31.5) $(25.9)
Capital Expenditures $9.5 $19.1 $20.3 $22.4
New Customer Additions 144 127 126 114
Total Customers 783 727 647 549
Day Sales Outstanding 49 56 62 55
Service Points 36 36 29 23
(i) EBITDA is defined as net losses before interest and financing income
(expense), investment income (loss), income taxes, depreciation,
amortization, acquired in-process research and development expenses,
restructuring costs, and impairment of goodwill and other intangible
assets.
(ii) Excludes a $4.3 million restructuring charge.
Internap's second quarter conference call will be held today, Wednesday, July 25, 2001 at 5:00 p.m. Eastern Time, 2:00 p.m. Pacific Time. The
dial-in numbers are +1-888-889-1954 for domestic calls and +1-712-257-2275 for international calls. The passcode is Internap, and no RSVP is
required. The replay numbers are +1-800-842-6143 for domestic calls and +1-402-280-9943 for international calls. No passcode required. A live
webcasting of the call will also be made available. Please visit our website www.internap.com/investor_services for the hyperlink or for further
information.
The conference call and webcast replays, including a written transcript, will be made available until Wednesday, August 1, 2001 at 5:00 p.m. pacific
time.
Internap Investor Services Contact
Tim Hanson
Internap Network Services
+1-206-262-3742
thanson@internap.com
Internap Media Contact
Bill Hankes
Internap Network Services
+1-206-262-3737
bhankes@internap.com
About Internap
Founded in 1996 in Seattle, Internap provides Internet connectivity that is faster and more reliable than conventional Internet service. Internap's
patented route management technology provides direct data transmission across the major Internet backbones through a single connection from a
customer's network to one of Internap's Service Points. Internap's customers bypass congestion points on the Internet, avoiding packet loss,
latency and other difficulties that can plague conventional Internet connectivity. Internap services are currently available in numerous key markets
throughout the United States including Atlanta, Boston, Chicago, Los Angeles, New York, San Jose and Seattle. Major companies and networks
served by Internap include The Nasdaq Stock Market, Datek Online, Colgate Palmolive, Earthlink, Travelocity and many others. Internap(R) and
P-NAP(R) are registered trademarks of Internap. All other trademarks and brands are the property of their respective owners. For more information,
visit www.Internap.com.
"Safe Harbor" Statement
This release may contain projections or other forward-looking statements that involve risks and uncertainties. Readers are cautioned that these
statements are only predictions and may differ materially from actual future events or results. Readers are referred to the documents filed by Internap
with the SEC, specifically its most recent annual report on Form 10-K and any later periodic reports, which identify important risk factors that could
cause actual results to differ from those contained in the forward-looking statements, including, among other things, Internap's history of operating
losses and expected future losses, Internap's limited operating history, fluctuations in Internap's quarterly operating results, Internap's need for
additional capital, Internet infrastructure and regulatory changes, volatility of stock price, deployment of new Service Points, integration of acquired
businesses and rapid technological and market change. All forward-looking statements are based on information available to Internap on the date
hereof, and Internap assumes no obligation to update such statements. This release contains certain metrics, such as "EBITDA," "normalized net
loss" and "direct cost of network" that are not computed in accordance with Generally Accepted Accounting Principles.
INTERNAP NETWORK SERVICES CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited, in thousands)
June 30, December 31,
2001 2000
ASSETS
Current assets:
Cash, cash equivalents and short-term
investments $54,623 $153,965
Accounts receivable, net of allowance
of $1,174 and $1,370, respectively 15,353 20,291
Prepaid expenses and other assets 2,700 3,303
Total current assets 72,676 177,559
Property and equipment, net 163,892 152,153
Restricted cash 8,515 8,515
Investments 9,936 35,090
Goodwill and other intangible assets, net 47,529 268,959
Deposits and other assets, net 6,079 7,834
Total assets $308,627 $650,110
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $20,061 $26,846
Accrued liabilities 13,494 18,483
Deferred revenue 1,852 3,491
Notes payable, current portion 2,279 2,320
Line of credit 10,000 10,000
Capital lease obligations, current portion 21,333 18,132
Total current liabilities 69,019 79,272
Deferred revenue 11,175 11,239
Notes payable, less current portion 1,902 2,989
Capital lease obligations, less current
portion 27,976 24,657
Total liabilities 110,072 118,157
Commitments and contingencies
Shareholders' equity:
Common stock, no par value, 500,000
shares authorized; 150,482 and 148,779
shares issued and outstanding,
respectively 785,351 786,183
Deferred stock compensation (6,869) (11,715)
Accumulated deficit (580,003) (244,915)
Accumulated items of other comprehensive
income (loss) 76 2,400
Total shareholders' equity 198,555 531,953
Total liabilities and shareholders'
equity $308,627 $650,110
INTERNAP NETWORK SERVICES CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited, in thousands, except per share and statistical amounts)
Three Months Ended Six Months Ended
June 30, June 30,
2001 2000 2001 2000
Revenues $29,285 $13,647 $57,725 $22,538
Costs and expenses:
Cost of network and
customer support 41,288 20,475 79,130 35,801
Product development 3,426 1,863 7,230 3,441
Sales and marketing 10,215 8,000 24,709 15,689
General and
administrative 15,480 5,306 32,936 9,694
Amortization of
goodwill and other
intangible assets 6,972 2,157 26,800 2,157
Amortization of
deferred stock
compensation 109 2,550 2,318 5,624
Restructuring costs --- --- 4,342 ---
Impairment of goodwill
and other intangible
assets --- --- 195,986 ---
Total operating costs
and expenses 77,490 40,351 373,451 72,406
Loss from operations (48,205) (26,704) (315,726) (49,868)
Other income (expense):
Interest income 898 4,412 2,788 7,338
Interest, investment
and financing
expense (20,962) (505) (22,150) (890)
Total other income
(expense) (20,064) 3,907 (19,362) 6,448
Net loss $(68,269) $(22,797) $(335,088) $(43,420)
Basic and diluted
net loss per share $(0.45) $(0.16) $(2.24) $(0.32)
Weighted average shares
used in computing
basic and diluted
net loss per share 150,261 138,193 149,706 135,406
Supplemental financial data:
EBITDA (A) $(28,932) $(18,536) $(63,615) $(36,017)
Network related
depreciation $8,653 $2,612 $16,521 $4,581
Other depreciation $3,307 $846 $5,755 $1,483
Capital expenditures $9,546 $9,004 $28,629 $15,142
End of period statistics:
Number of customers 783 446 783 446
Number of service points 36 18 36 18
Supplemental share information:
Common stock
outstanding 150,482 145,048 150,482 145,048
Common stock
outstanding and
unexercised options
and warrants 166,070 166,206 166,070 166,206
(A) Net losses before net interest and financing income (expense),
investment income (loss), income taxes, depreciation, amortization,
acquired in-process research and development expenses, restructuring
costs, and impairment of goodwill and other intangible assets.
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