Bernard,
Here's the release:
Internap Reports Third Quarter Earnings
Tuesday October 29, 4:22 pm ET
Record Increase in Direct Margin Exceeds EBITDA Projections Forecasts Free Cash Flow by the End of 2003
ATLANTA, Oct. 29 /PRNewswire-FirstCall/ -- Internap Network Services Corporation (Nasdaq: INAP - News), the leading provider of intelligent routing services over the Internet, today reported results for the fiscal third quarter ended September 30, 2002.
Revenues for the quarter on a consolidated basis were $32.7 million, a 12 percent increase over the $29.2 million reported for the same period in 2001.
Internap's third quarter EBITDA(ii), on a consolidated basis, including a one-time benefit of $2.1 million, was $0.8 million. Excluding this one-time benefit, Internap's third quarter EBITDA loss, on a consolidated basis, was $1.2 million, which is an 80 percent improvement from the $6.1 million loss in the previous quarter and compares to a loss of $20.3 million in the third quarter of 2001.
Internap's third quarter net loss, including a one-time benefit of $2.1 million, computed in accordance with GAAP, was $15.2 million, or a loss of $0.10 per share. Excluding this one-time benefit, Internap's third quarter net loss was $17.3 million, or a loss of $0.11 per share, compared to a net loss of $22.8 million, or a loss of $0.15 per share, in the previous quarter, and a net loss of $41.6 million, or a loss of $0.28 per share, excluding a one-time restructuring charge and loss on investment of $73.2 million, in the third quarter of 2001.
"Internap continues to show success in penetrating our key vertical markets of financial services, travel and education as executives seek out reliable network service providers to mitigate risks and uncertainties during these difficult times in the telecommunications sector," said Greg Peters, President and Chief Executive Officer of Internap. "This quarter also demonstrates our success in expanding our product portfolio."
"We have accomplished a significant milestone this quarter as Internap became EBITDA positive in September on a recurring basis," said John Scanlon, Chief Financial Officer of Internap. "Our focus turns to the company's next milestone, free cash flow, which we project will occur by the end of 2003."
Internap also announced its intention to seek approval from its stockholders for a reverse stock split that would only be effected pursuant to subsequent Board action. Internap remains focused on delivering strong financial results, acquiring new customers, and continuing its long-standing tradition of industry leading customer service.
Quarterly Results:
Internap added 122 revenue-producing customers during the third quarter. Newly installed customers for the quarter, among others, included -- Ameritrade, eBay, Fandango, Rockefeller & Co, St. John's University, The Franklin Mint and The George Washington University. Customers recently signed and awaiting installation include -- ADT Security Systems, Continental Airlines and Sony PlayStation.
Internap's direct margin(v), excluding a one-time benefit, for the third quarter improved to 41 percent, compared to 32 percent during the second quarter and 16 percent during the comparable quarter of 2001.
Revenue impact due to customer churn was less than 2 percent. Revenue impact due to pricing pressure from current customers was 1 percent.
In September, Internap turned EBITDA positive on a recurring basis a quarter ahead of the company's previous guidance.
Revenue per employee on an annualized basis increased for the sixth consecutive quarter to $376,000 compared to $305,000 in the previous quarter.
Day Sales Outstanding as of September 30, 2002 improved to 37 days, compared to 38 days as of June 30, 2002.
During the third quarter, Internap's use of cash was a record low $9.9 million, as the company continues to track toward free cash flow.
For the first time in Internap's history, all Metro Markets were direct margin positive.
Senior Management:
John Scanlon, Internap's Chief Financial Officer, will continue in his current role until his successor is chosen.
Walter DeSocio has joined Internap as its Vice President and General Counsel. Previously, DeSocio was General Counsel and head of regulatory affairs at Concert, the multi-billion dollar global communications business owned by AT&T Corporation and BT Group. Prior to Concert, DeSocio was the Chief Regional Counsel for Europe, Middle East and Africa for AT&T Corporation.
Products and Services:
During the third quarter, Internap launched eight new service offerings --
VPN, Security and Data Storage:
-- PrivatePath(TM) Enterprise VPN partnered with Blue Ridge Networks;
-- PrivatePath(TM) Remote Access VPN partnered with Blue Ridge Networks;
-- Managed Security Services partnered with VeriSign; and
-- RestorePath(TM) Data Storage partnered with ManagedStorage
International.
Connectivity and Collocation Services:
-- Internap Partner Connectivity for footprint expansion; and
-- Internap Remote Hands Collocation Services.
Content Delivery and Internet Reporting Services:
-- Internap PathView Pro(TM); and
-- Content Delivery Services partnered with Speedera Networks.
Fourth Quarter Guidance:
For the fourth quarter, Internap is projecting --
-- Sequential revenue growth;
-- EBITDA positive for the quarter;
-- Net loss on a GAAP basis in the range of $14.0 to $16.0 million; and
-- Cash use in the range of $8.0 to $9.5 million.
Supplemental Financial Data:
(Dollars in Millions)
Q3 '02 Q2 '02 Q1 '02 Q4 '01 Q3 '01
Revenues $32.7 $33.0 $32.6 $30.5 $29.2
Direct Cost of Network(i) $19.4 $22.6 $24.1 $24.5 $24.6
EBITDA(ii) ($1.2) $(6.1) $(9.8) $(13.9) $(20.3)
Net Loss (GAAP) (iii) $(17.3) $(22.8) $(20.3) $(29.3) $(114.8)
Capital Expenditures(iv) $0.4 $6.4 $1.1 $2.3 $1.2
Direct Margin(v) 41% 32% 26% 20% 16%
New Customer Additions 122 172 142 150 167
Total Customers 1,202 1,134 1,014 974 894
Day Sales Outstanding 37 38 39 45 48
Metro Markets
15 Domestic, 2
International(vi) 17 17 18 18 18
Operating Cash Flow Positive
Metro Markets 9 5 5 4 4
(i) Excludes a one-time benefit of $2.1 million during the third quarter
of 2002.
(ii) EBITDA is defined as net losses before interest income (expense),
investment income (loss), loss on sales and retirement of property
and equipment, income taxes, depreciation, amortization,
amortization of deferred stock compensation, and restructuring
costs and credits.Excludes a one-time benefit of $2.1 million
during the third quarter of 2002.
(iii) Excludes a one-time benefit of $2.1 million during the third quarter
of 2002.
(iv) Consists of cash paid for capital expenditures.
(v) Direct margin is defined as revenues less direct cost of network
divided by revenue.Excludes a one-time benefit of $2.1 million
during the third quarter of 2002.
(vi) Includes Tokyo, Japan operated through a joint venture. The joint
venture is accounted for as an unconsolidated equity-method
investment.
Third Quarter Conference Call:
Internap's third quarter conference call will be held today, Tuesday, October 29, 2002 at 5:00 p.m. Eastern Time, 2:00 p.m. Pacific Time. The dial-in numbers are 888-820-8951 for domestic calls and 712-257-2273 for international calls. The passcode is "Internap," and no RSVP is required.
The replay numbers are 800-964-3307 for domestic calls and 402-998-1023 for international calls. No passcode is required for replay. A live Web cast of the call will also be made available. Please visit our Web site at www.internap.com/investor_services for the hyperlink or for further information.
The conference call and Web cast replays, including a written transcript, will be made available until Tuesday, November 12, 2002 at 5:00 P.M. Pacific.
Investor Contact: Internap Media Contact:
Tim Hanson Chris Barker or Brian Sibley
Internap Network Services Text 100 Public Relations
206-262-3742 206-381-3791
thanson@internap.com internap@text100.com
About Internap
Internap provides customers with certainty over the Internet through its patented route management technology and service guarantees. This managed IP service intelligently routes data 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. Founded in 1996, Internap offers services in numerous key markets throughout the United States, Europe and Japan including Atlanta, Boston, Chicago, London, Los Angeles, New York, San Francisco, San Jose, Seattle, Tokyo and Washington, DC. Internap® and P-NAP® are registered trademarks of Internap. All other trademarks and brands are the property of their respective owners. For more information, visit www.internap.com.
Internap "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, including without limitation its most recent Reports on Forms 10-K and 10-Q, 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, ability to maintain Nasdaq listing, 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," "direct cost of network," and "direct margin" that are not computed in accordance with accounting principles generally accepted in the United States ("GAAP"). In practice, companies apply these definitions in a variety of ways.
INTERNAP NETWORK SERVICES CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited, in thousands)
September 30, June 30,
2002 2002
ASSETS
Current assets:
Cash, cash equivalents and
short-term investments $32,520 $42,453
Accounts receivable, net 13,120 12,824
Prepaid expenses and other assets 5,057 4,231
Total current assets 50,697 59,508
Property and equipment, net 98,455 116,706
Restricted cash 2,122 1,942
Investments 3,355 3,479
Goodwill and other intangible assets, net 32,013 33,185
Deposits and other assets, net 3,352 3,174
Total assets $189,994 $217,994
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $12,807 $12,985
Accrued liabilities 10,181 12,384
Deferred revenue 6,940 6,941
Notes payable, current portion 4,007 4,143
Line of credit 15,000 15,000
Capital lease obligations, current portion 834 827
Restructuring liability, current portion 6,969 9,804
Total current liabilities 56,738 62,084
Deferred revenue 2,721 4,182
Notes payable, less current portion 1,597 2,286
Capital lease obligations, less current portion 24,605 25,465
Restructuring liability, less current portion 9,196 13,422
Total liabilities 94,857 107,439
Commitments and contingencies
Series A convertible preferred stock,
$0.001 par value; 3,500 shares designated;
2,950 and 3,171 shares issued and outstanding,
respectively with liquidation preferences
of $94,414 and $101,487, respectively 80,292 86,314
Stockholders' equity:
Common stock, $0.001 par value, 600,000
and 600,000 shares authorized, respectively;
159,341 and 153,708 shares issued and
outstanding, respectively 159 154
Additional paid in capital 798,083 793,214
Deferred stock compensation (938) (1,904)
Accumulated deficit (782,459) (767,223)
Total stockholders' equity 14,845 24,241
Total liabilities and stockholders'
equity $189,994 $217,994
INTERNAP NETWORK SERVICES CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited, in thousands, except per share and statistical amounts)
Three Months Ended
September June March December September
30, 30, 31, 31, 30,
2002 2002 2002 2001 2001
Revenues $32,711 $33,030 $32,614 $30,516 $29,163
Costs and expenses:
Direct cost of network 17,302 22,627 24,105 24,476 24,637
Customer support 2,867 3,669 3,826 3,978 4,789
Product development 1,836 1,977 1,957 2,273 2,760
Sales and marketing 5,330 5,801 6,057 6,536 7,496
General and
administrative 4,548 5,047 6,492 7,165 9,820
Depreciation and
amortization 12,390 13,504 12,812 12,417 13,468
Amortization of
intangible assets 1,165 1,606 1,427 5,658 5,658
Amortization of
deferred stock
compensation (316) (11) 352 1,085 814
Restructuring costs 352 -- (4,954) (7,457) 67,211
Loss on sales and
retirements of
property and
equipment 1,510 841 298 2,714 --
Total operating
costs and
expenses 46,984 55,061 52,372 58,845 136,653
Loss from operations (14,273) (22,031) (19,758) (28,329) (107,490)
Other income (expense):
Interest income
(expense), net (629) (464) (231) (363) (861)
Loss on investments (334) (313) (349) (603) (6,428)
Total other income
(expense) (963) (777) (580) (966) (7,289)
Net loss $(15,236) $(22,808) $(20,338) $(29,295) $(114,779)
Basic and diluted
net loss per share $(0.10) $(0.15) $(0.13) $(0.19) $(0.76)
Weighted average
shares used in
computing basic
and diluted net
loss per share 157,177 153,537 152,002 151,221 150,541
Supplemental financial data:
EBITDA (A) $828 $(6,091) $(9,823) $(13,912) $(20,339)
Network related
depreciation $9,643 $10,495 $10,416 $10,055 $9,118
Other depreciation $2,747 $3,009 $2,396 $2,362 $4,350
Capital expenditures $415 $6,430 $1,069 $2,315 $1,150
End of period
statistics:
Number of customers 1,202 1,134 1,014 974 894
Number of Metro Markets 17 17 18 18 18
Supplemental share
information:
Common stock
outstanding 159,341 153,708 153,353 151,294 151,113
Common stock,
convertible preferred
stock and unexercised
options and warrants
outstanding 261,604 264,817 264,307 263,740 253,280
(A)Net losses before interest income (expense), investment income (loss),
loss on sales and retirements of property and equipment, income taxes,
depreciation, amortization, amortization of deferred stock compensation
and restructuring costs and credits.
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Source: Internap Network Services Corporation |
