INTERNAP CORP ATLANTA, May 5, 2016 /PRNewswire/ -- Internap Corporation (NASDAQ: INAP), a provider of high-performance Internet infrastructure services, today announced financial results for the first quarter of 2016.
"We delivered solid financial results for the first quarter of 2016 with adjusted EBITDA and adjusted EBITDA margin representing the highest levels for a first quarter in company history. We completed the transition into two distinct business units, which better aligns our cost structure and will enable us to respond better to customers and to grow faster as a result," said Michael Ruffolo, President and Chief Executive Officer of Internap. "Consistent with our guidance provided last quarter, churn from a small number of large customers created a headwind to first quarter revenue. With churn expected to decline in the second quarter of 2016, we believe we are positioned to accelerate profitable growth as we progress through 2016 and are excited by the implications for long-term shareholder value."
First Quarter 2016 Financial Summary
------------------------------------
YoY QoQ
1Q 2016 1Q 2015 4Q 2015 Growth Growth
------- ------- ------- ------ ------
Revenues:
Data center and
network services $50,872 $54,068 $53,010 -6% -4%
Cloud and hosting
services $25,052 $26,718 $25,746 -6% -3%
-----------------
Total Revenues $75,924 $80,786 $78,756 -6% -4%
Operating Expenses $78,125 $84,905 $85,509 -8% -9%
GAAP Net Loss $(9,644) $(10,442) $(11,269) 8% -14%
Normalized Net Loss(2) $(6,108) $(8,598) $(7,409) 29% -18%
Segment Profit(1) $44,847 $47,440 $47,322 -5% -5%
Segment Profit Margin 59.1% 58.7% 60.1% 40 BPS -100 BPS
Adjusted EBITDA $20,476 $17,918 $22,810 14% -10%
Adjusted EBITDA Margin 27.0% 22.2% 29.0% 480 BPS -200 BPS
Revenue
-- Revenue totaled $75.9 million in the first quarter, a decrease of 6%
year-over-year and 4% sequentially. Both decreases were driven by churn
from a small number of large customers.
-- Data Center and Network Services revenue totaled $50.9 million in the
first quarter, a decrease of 6% year-over-year and 4% sequentially. The
year-over-year decrease was attributable to lower IP connectivity
revenue related to the continued decline in pricing for new and renewing
customers and the loss of legacy contracts, a decrease in partner
colocation revenue, partially offset by an increase in
company-controlled colocation revenue. The sequential decrease was
primarily attributable to similar trends for IP connectivity and
anticipated churn from a significant company-controlled colocation
customer.
-- Cloud and Hosting Services revenue totaled $25.1 million in the first
quarter, a decrease of 6% year-over-year and 3% sequentially. Both
decreases were driven by churn from a small number of large customers.
Net Loss
-- GAAP net loss was $(9.6) million, or $(0.19) per share, compared with
$(10.4) million, or $(0.20) per share, in the first quarter of 2015 and
$(11.3) million, or $(0.22) per share, in the fourth quarter of 2015.
-- Normalized net loss was $(6.1) million, or $(0.12) per share, compared
with normalized net loss of $(8.6) million, or $(0.17) per share, in the
first quarter of 2015, and normalized net loss of $(7.4) million, or
$(0.14) per share, in the fourth quarter of 2015.
Segment Profit and Adjusted EBITDA
-- Segment profit totaled $44.8 million in the first quarter, a 5% decrease
compared with the first quarter of 2015 and a 5% decrease from the
fourth quarter of 2015. Segment margin was 59.1%, an increase of 40
basis points year-over-year and a decrease of 100 basis points
sequentially.
-- Data Center and Network Services segment profit totaled $26.5 million in
the first quarter, a 4% decrease compared with the first quarter of 2015
and a 6% decrease from the fourth quarter of 2015. Data Center and
Network Services segment margin was 52.1% in the first quarter, up 110
basis points year-over-year and down 120 basis points sequentially.
Year-over-year, lower IP connectivity revenue and partner colocation
revenue offset higher company-controlled colocation revenue and resulted
in a decrease in data center and network services segment profit. Lower
IP connectivity costs and a favorable mix shift of higher
company-controlled colocation revenue drove data center and network
services segment margin higher. Sequentially, lower data center and
network services revenue resulted in declines in segment profit and
segment margin.
-- Cloud and Hosting Services segment profit totaled $18.3 million in the
first quarter, an 8% decrease compared with the first quarter of 2015
and a 4% decrease from the fourth quarter of 2015. Cloud and Hosting
Services segment margin was 73.2% in the first quarter, down 110 basis
points year-over-year and 90 basis points sequentially. Decreased Cloud
and Hosting Services revenue resulted in declines in segment profit and
segment margin.
-- Adjusted EBITDA totaled $20.5 million in the first quarter, a 14%
increase compared with the first quarter of 2015 and a 10% decrease from
the fourth quarter of 2015. Adjusted EBITDA margin was 27.0% in the
first quarter, up 480 basis points year-over-year and down 200 basis
points sequentially. The year-over-year increase in adjusted EBITDA and
adjusted EBITDA margin was attributable to lower cash operating
expense(4 )primarily from optimizing the Company's cost structure,
reduced discretionary spending and improved marketing program
efficiencies. Benefits included a decrease in cash-based compensation, a
decrease in marketing costs and the elimination of non-core functions,
primarily the result of our business unit realignment. Sequentially,
lower segment profit and seasonally higher normalized cash operating
expense weighed on adjusted EBITDA and adjusted EBITDA margin.
Balance Sheet and Cash Flow Statement
-- Cash and cash equivalents totaled $13.9 million at March 31, 2016. Total
debt was $378.0 million, net of discount and prepaid costs, at the end
of the quarter, including $59.3 million in capital lease obligations.
-- Cash generated from operations for the three months ended March 31, 2016
was $10.8 million. Capital expenditures over the same period were $12.7
million.
Business Outlook
We are reaffirming the following guidance for full-year 2016:
-- Revenue $310 million - $320
million
-- Adjusted EBITDA $80 million - $90 million
-- Capital Expenditures $40 million - $50 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 http://ir.internap.com/results.cfm.
-- Internap announced the launch of China Performance IP(TM), a direct
connection between the company's Hong Kong private network access point
(PNAP) and mainland Chinese Internet providers. This direct,
route-optimized connection between Hong Kong and China enables
enterprises to gain low latency access to the mainland's fast-growing
markets from Hong Kong, removing the complexity, cost and time required
to set up operations on the mainland or engage directly with China's
Internet providers.
-- Internap announced the expansion of its OpenStack-based bare-metal
Infrastructure-as-a-Service offering, AgileSERVER 2.0, to its data
centers in Amsterdam, Dallas and Santa Clara, Calif. Launched in 2015
out of Internap's New York Metro data center in Secaucus, N.J.,
AgileSERVER 2.0 is now available in four locations globally, enabling
enterprises and devops teams running mission-critical applications and
big data workloads to build scale-out infrastructure environments that
are higher performing and more cost-effective than commodity public
cloud platforms.
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.
3 Levered free cash flow is a non-
GAAP measure 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
levered free cash flow is contained
in the table entitled "Levered Free
Cash Flow" in the attachment.
4 Cash operating expense is a non-
GAAP measure 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
cash operating expense is contained
in the table entitled "Cash
Operating Expense" in the
attachment.
Conference Call Information:
Internap's first quarter 2016 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 http://ir.internap.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, May 5, 2016 at 8:00 p.m. ET through Wednesday, May 11, 2016 at 855-859-2056 using replay code 91208532. International callers can listen to the archived event at 404-537-3406 with the same code.
About Internap
Internap is the high-performance Internet infrastructure provider that powers the applications shaping the way we live, work and play. Our hybrid infrastructure delivers performance without compromise - blending virtual and bare-metal cloud, hosting and colocation services across a global network of data centers, optimized from the application to the end user and backed by rock-solid customer support and a 100% uptime guarantee. Since 1996, the most innovative companies have relied on Internap to make their applications faster and more scalable. For more information, visit www.internap.com.
Forward-Looking Statements
This press release contains forward-looking statements. These forward-looking statements include statements related to (a) our expectations for the benefits to be achieved from the establishment of two distinct business units, including customer service improvements and our ability to grow faster; (b) our expectations for customer churn; (c) our ability to accelerate profitable growth and drive long-term shareholder value; and (d) our expectations for full-year 2016 revenue, adjusted EBITDA and capital expenditures. Our ability to achieve these forward-looking statements is based on certain assumptions, including our ability to execute on our business strategy, leveraging of multiple routes to market, expanded brand awareness for high-performance Internet infrastructure services and customer churn levels. These assumptions may prove to be inaccurate in the future. Because such forward-looking 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 and drive growth; our ability to maintain current customers and obtain new ones, whether in a cost-effective manner or at all; the robustness of the IT infrastructure services market; our ability to achieve or sustain profitability; our ability to expand margins and drive higher returns on investment; our ability to sell into new and existing data center space; the actual performance of our IT infrastructure services; 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 Torpey Michael Nelson
(781) 418-2404 (404) 302-9700
internap@teamlewis.com ir@internap.com
---------------------- ---------------
INTERNAP CORPORATION
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
Three Months Ended March 31,
----------------------------
2016 2015
---- ----
Revenues:
Data center and network services $50,872 $54,068
Cloud and hosting services 25,052 26,718
------ ------
Total revenues 75,924 80,786
------ ------
Operating costs and expenses:
Direct costs of sales and services, exclusive of depreciation
and amortization, shown below:
Data center and network services 24,373 26,481
Cloud and hosting services 6,704 6,865
Direct costs of customer support 8,804 9,118
Sales, general and administrative 18,930 21,968
Depreciation and amortization 19,113 20,208
Exit activities, restructuring and impairments 201 265
Total operating costs and expenses 78,125 84,905
------ ------
Loss from operations (2,201) (4,119)
------ ------
Non-operating expenses:
Interest expense 6,985 6,865
Loss (gain) on foreign currency, net 433 (514)
Other, net (77) (16)
--- ---
Total non-operating expenses 7,341 6,335
----- -----
Loss before income taxes and equity in earnings of equity-method investment (9,542) (10,454)
Provision for income taxes 138 27
Equity in earnings of equity-method investment, net of taxes (36) (39)
--- ---
Net loss $(9,644) $(10,442)
======= ========
Basic and diluted net loss per share $(0.19) $(0.20)
====== ======
Weighted average shares outstanding used in computing net loss per share:
Basic and diluted 51,774 51,336
====== ======
INTERNAP CORPORATION
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except par value amounts)
March 31, December 31,
2016 2015
---- ----
ASSETS
Current assets:
Cash and cash equivalents $13,898 $17,772
Accounts receivable, net of allowance for doubtful accounts of $1,514 and $1,751, respectively 19,570 20,292
Prepaid expenses and other assets 12,410 12,405
------ ------
Total current assets 45,878 50,469
Property and equipment, net 328,084 328,700
Investment in joint venture 2,934 2,768
Intangible assets, net 32,047 32,887
Goodwill 130,313 130,313
Deposits and other assets 9,094 9,474
Total assets $548,350 $554,611
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $21,672 $22,607
Accrued liabilities 10,525 10,737
Deferred revenues 6,784 6,603
Capital lease obligations 9,290 8,421
Term loan, less discount of $1,806 and $1,784, respectively 1,194 1,215
Exit activities and restructuring liability 1,712 2,034
Other current liabilities 1,631 2,566
----- -----
Total current liabilities 52,808 54,183
Deferred revenues 4,798 4,759
Capital lease obligations 50,007 48,692
Revolving credit facility 32,500 31,000
Term loan, less discount of $5,243 and $5,703 respectively 285,007 285,298
Exit activities and restructuring liability 1,709 1,844
Deferred rent 8,395 8,879
Deferred tax liability 1,211 880
Other long-term liabilities 4,467 4,640
----- -----
Total liabilities 440,902 440,175
------- -------
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; 56,351 and 55,971 shares
outstanding, respectively 56 56
Additional paid-in capital 1,279,490 1,277,511
Treasury stock, at cost; 908 and 826 shares, respectively (6,609) (6,393)
Accumulated deficit (1,163,601) (1,153,957)
Accumulated items of other comprehensive loss (1,888) (2,781)
------ ------
Total stockholders' equity 107,448 114,436
------- -------
Total liabilities and stockholders' equity $548,350 $554,611
======== ========
INTERNAP CORPORATION
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
Three Months Ended March 31,
----------------------------
2016 2015
---- ----
Cash Flows from Operating Activities:
Net loss $(9,644) $(10,442)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization 19,113 20,208
Amortization of debt discount and issuance costs 522 490
Stock-based compensation expense, net of capitalized amount 1,922 1,579
Equity in earnings of equity-method investment (36) (39)
Provision for doubtful accounts 341 400
Non-cash change in capital lease obligations 487 (760)
Non-cash change in exit activities and restructuring liability 347 371
Non-cash change in deferred rent (484) (401)
Deferred taxes 77 54
Other, net 202 (242)
Changes in operating assets and liabilities:
Accounts receivable 537 (1,724)
Prepaid expenses, deposits and other assets 1,946 (1,544)
Accounts payable (1,815) (7,652)
Accrued and other liabilities (1,903) (903)
Deferred revenues 191 (256)
Exit activities and restructuring liability (804) (663)
Asset retirement obligation (174) -
Other liabilities (43) 17
Net cash flows provided by (used in) operating activities 10,782 (1,507)
------ ------
Cash Flows from Investing Activities:
Purchases of property and equipment (12,282) (14,990)
Additions to acquired and developed technology (399) (712)
Net cash flows used in investing activities (12,681) (15,702)
------- -------
Cash Flows from Financing Activities:
Proceeds from credit agreements 1,500 13,000
Principal payments on credit agreements (750) (750)
Payments on capital lease obligations (2,359) (1,770)
Proceeds from exercise of stock options - 2,583
Acquisition of common stock for income tax withholdings (216) (618)
Other, net (76) 979
Net cash flows (used in) provided by financing activities (1,901) 13,424
------ ------
Effect of exchange rates on cash and cash equivalents (74) (80)
--- ---
Net decrease in cash and cash equivalents (3,874) (3,865)
Cash and cash equivalents at beginning of period 17,772 20,084
Cash and cash equivalents at end of period $13,898 $16,219
======= =======
INTERNAP 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 and adjusted EBITDA margin, normalized net loss, normalized diluted shares outstanding, segment profit and segment margin, levered free cash flow and cash operating expense. The most directly comparable GAAP equivalent to adjusted EBITDA and normalized net 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 loss from operations plus depreciation and
amortization, loss (gain) on disposals of property and equipment, exit
activities, restructuring and impairments, stock-based compensation,
strategic alternatives and related costs, organizational realignment
costs and acquisition costs.
-- Adjusted EBITDA margin is adjusted EBITDA as a percentage of revenues.
-- Normalized net loss is net loss plus exit activities, restructuring and
impairments, stock-based compensation, acquisition costs and strategic
alternatives and related costs.
-- 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 loss per share is normalized net loss divided by basic
and normalized diluted shares outstanding.
-- Segment profit is segment revenues less direct costs of 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 or any
depreciation or amortization associated with direct costs.
-- Segment margin is segment profit as a percentage of segment revenues.
-- Levered free cash flow is adjusted EBITDA less capital expenditures, net
of equipment sale-leaseback transactions and cash paid for interest.
-- Cash operating expense is GAAP operating expense less direct cost of
sales and services, depreciation and amortization, loss (gain) on
disposals of property and equipment, exit activities, restructuring and
impairments, stock-based compensation, acquisition costs and strategic
alternatives and related costs.
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 our 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.
We believe that exit activities, restructuring and impairment charges, strategic alternatives and related costs and organizational realignment costs 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 our 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.
INTERNAP CORPORATION
NON-GAAP (ADJUSTED) FINANCIAL MEASURES (Continued)
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 loss and normalized net loss per share, excluding the effect of exit activities, restructuring and impairments, stock-based compensation and acquisition costs 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.
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 and 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.
INTERNAP CORPORATION
NON-GAAP (ADJUSTED) FINANCIAL MEASURES (Continued)
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.
RECONCILIATION OF LOSS FROM OPERATIONS TO ADJUSTED EBITDA
A reconciliation of 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
------------------
March 31, 2016 December 31, 2015 March 31, 2015
-------------- ----------------- --------------
Loss from operations (GAAP) $(2,201) $(6,753) $(4,119)
Depreciation and amortization 19,113 25,250 20,208
Loss (gain) on disposal of property and equipment, net 28 453 (15)
Exit activities, restructuring and impairments 201 1,033 265
Stock-based compensation 1,922 2,582 1,579
Strategic alternatives and related costs 141 245 -
Organizational realignment costs 1,272 - -
Adjusted EBITDA (non-GAAP) $20,476 $22,810 $17,918
======= ======= =======
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
Reconciliations of (1) net loss, the most directly comparable GAAP measure, to normalized net 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 loss per share, the most directly comparable GAAP measure, to normalized net loss per share
for each of the periods indicated is as follows (in thousands, except per share data):
Three Months Ended
------------------
March 31, 2016 December 31, 2015 March 31, 2015
-------------- ----------------- --------------
Net loss (GAAP) $(9,644) $(11,269) $(10,442)
Exit activities,
restructuring and
impairments 201 1,033 265
Stock-based
compensation 1,922 2,582 1,579
Strategic
alternatives and
related costs 141 245 -
Organizational
realignment costs 1,272 - -
Normalized net loss
(non-GAAP) (6,108) (7,409) (8,598)
Normalized net
income allocable to
participating
securities (non-
GAAP) - - -
Normalized net loss
available to common
stockholders (non-
GAAP) $(6,108) $(7,409) $(8,598)
======= ======= =======
Participating
securities (GAAP) 1,369 1,260 1,151
Weighted average shares outstanding used in per share calculation:
Basic and diluted
(GAAP) 51,774 51,727 51,336
Add potentially
dilutive securities - - -
Less dilutive effect
of stock-based
compensation under
the treasury stock
method - - -
--- --- ---
Normalized diluted
shares (non-GAAP) 51,774 51,727 51,336
====== ====== ======
Loss per share (GAAP):
Basic and diluted $(0.19) $(0.22) $(0.20)
====== ====== ======
Normalized net loss per share (non-GAAP):
Basic and diluted $(0.12) $(0.14) $(0.17)
====== ====== ======
INTERNAP CORPORATION
NON-GAAP (ADJUSTED) FINANCIAL MEASURES (Continued)
INTERNAP CORPORATION
SEGMENT PROFIT AND SEGMENT MARGIN
Segment profit and segment margin, which does not include direct costs of customer support or any depreciation or amortization, for each of the periods indicated is as follows (dollars in thousands):
Three Months Ended
------------------
March 31, 2016 December 31, 2015 March 31, 2015
-------------- ----------------- --------------
Revenues:
Data center and network services:
Company-controlled $22,357 $23,310 $21,230
Partner 9,938 9,955 11,151
IP connectivity 18,577 19,745 21,687
Total data center and network services 50,872 53,010 54,068
Cloud and hosting services 25,052 25,746 26,718
Total 75,924 78,756 80,786
------ ------ ------
Direct cost of sales and services, exclusive of
depreciation and amortization:
Data center and network services:
Company-controlled 9,712 9,728 9,628
Partner 7,172 7,280 7,772
IP connectivity 7,489 7,760 9,081
Total data center and network services 24,373 24,768 26,481
Cloud and hosting services 6,704 6,666 6,865
Total 31,077 31,434 33,346
------ ------ ------
Segment Profit:
Data center and network services
Company-controlled 12,645 13,582 11,602
Partner 2,766 2,675 3,379
IP connectivity 11,088 11,985 12,606
Total data center and network services 26,499 28,242 27,587
Cloud and hosting services 18,348 19,080 19,853
Total $44,847 $47,322 $47,440
======= ======= =======
Segment Margin:
Data center and network services
Company-controlled 56.6% 58.3% 54.6%
Partner 27.8% 26.9% 30.3%
IP connectivity 59.7% 60.7% 58.1%
Total data center and network services 52.1% 53.3% 51.0%
Cloud and hosting services 73.2% 74.1% 74.3%
---- ---- ----
Total 59.1% 60.1% 58.7%
==== ==== ====
INTERNAP CORPORATION
NON-GAAP (ADJUSTED) FINANCIAL MEASURES (Continued)
LEVERED FREE CASH FLOW
Levered free cash flow is a non-GAAP measure and is adjusted EBITDA less capital expenditures, net of equipment sale-leaseback transactions and cash paid for interest (in thousands):
Three Months Ended
------------------
March 31, 2016 December 31, 2015 March 31, 2015
-------------- ----------------- --------------
Adjusted EBITDA (non-GAAP) $20,476 $22,810 $17,918
Capital expenditures, net of equipment sale-
leaseback transactions (12,681) (14,738) (15,702)
------- ------- -------
Unlevered free cash flow (non-GAAP) 7,795 8,072 2,216
Cash interest expense (6,540) (6,715) (6,450)
Levered free cash flow (non-GAAP) $1,255 $1,357 $(4,234)
====== ====== =======
CASH OPERATING EXPENSE
Cash operating expense is a non-GAAP measure and is operating expense defined by GAAP, less direct costs of sales and services, depreciation and amortization, (loss) gain on disposal of property and equipment, exit activities, restructuring and
impairments, stock-based compensation, acquisition costs and strategic alternatives and related costs (in thousands):
Three Months Ended
------------------
March 31, 2016 December 31, 2015 March 31, 2015
-------------- ----------------- --------------
Total operating costs and expenses $78,125 $85,509 $84,905
Direct costs of sales and services, exclusive of depreciation and
amortization (31,077) (31,434) (33,346)
Depreciation and amortization (19,113) (25,250) (20,208)
(Loss) gain on disposal of property and equipment, net (28) (453) 15
Exit activities, restructuring and impairments (201) (1,033) (265)
Stock-based compensation (1,922) (2,582) (1,579)
Strategic alternatives and related costs (141) (245) -
Organizational realignment costs (1,272) - -
Cash operating expense (non-GAAP) $24,371 $24,512 $29,522
======= ======= =======
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SOURCE Internap Corporation
