Internap Delivers Strong Third Quarter 2007 Financial Results
Tuesday November 6, 4:05 pm ET
-- Record revenue of $60.9 million, an increase of 32.7 percent as compared to the third quarter of 2006;
-- Record Adjusted EBITDA(1) of $10.9 million, an increase of 79.9 percent as compared to the third quarter of 2006;
-- Adjusted Gross Margin(1) of 51.9 percent; Adjusted EBITDA Margin(1) of 17.9 percent;
-- Fourth consecutive quarter of Adjusted Gross Margin(1) and Adjusted EBITDA Margin(1) improvement;
-- Return to profitability - GAAP Net Income of $1.8 million; and
-- Addition of 149 net new customers to end the third quarter at a total of 3,552 customers.
ATLANTA--(BUSINESS WIRE)--Internap Network Services Corporation (NASDAQ: INAP - News ), a global provider of fast, reliable, end-to-end Internet business solutions, today posted solid third quarter results, delivering record revenue and the fourth consecutive quarter of Adjusted Gross Margin (1) and Adjusted EBITDA Margin (1) improvement. Results demonstrated strength across IP, Data Center and CDN Services segments.
“Record revenue, increased margins, a return to GAAP profitability, and accelerating new customer growth resulted in a strong third quarter,” said James P. DeBlasio, Internap's president and chief executive officer. “Our strategy of bundling Internap's enterprise-class data center services with our proprietary IP route optimization and content delivery products is gaining momentum in the market. Another quarter of expanding margins points to revenue strength, improved operating leverage, ongoing financial discipline, and a focus on profitable growth.”
Total revenues in the third quarter 2007 increased 32.7 percent to $60.9 million, up from $45.9 million in the third quarter of 2006, which was prior to Internap's February 20, 2007 acquisition of VitalStream Holdings, Inc. Compared to the second quarter of 2007, total revenue increased 4.1 percent. Accelerated growth in core IP Services and continued strength in Data center and CDN Services drove the revenue increase. These results more than offset year-over-year and sequential declines in Other revenue, which was impacted by a decrease in resold services.
GAAP net income for the third quarter of 2007 was $1.8 million, or $0.04 per diluted share, up $1.6 million and $0.03 per diluted share, respectively, from the same quarter last year. Normalized Net Income (1) and Normalized Net Income Per Diluted Share (1) , which exclude the impact of stock-based compensation, was $4.1 million, or $0.08 per diluted share for the third quarter of 2007. Normalized Net Income (1) increased 88.6 percent compared to the third quarter of 2006 and was up 77.8 percent sequentially. Normalized Net Income Per Diluted Share (1) grew 33.3 percent year-over-year, and increased 60.0 percent compared to the second quarter of 2007.
Internap's Adjusted Gross Margin (1) grew to 51.9 percent in the third quarter of 2007, up from 45.0 percent in the third quarter of 2006. Adjusted Gross Margin (1) grew 250 basis points sequentially, an increase from 49.4 percent in the second quarter of 2007. The Company reported Adjusted EBITDA (1) of $10.9 million for the third quarter of 2007, an increase of $4.8 million, or 79.9 percent, from same quarter last year. Sequentially, Adjusted EBITDA (1) increased $2.0 million or 21.8 percent. Adjusted EBITDA Margin (1) expanded to 17.9 percent over last year's third quarter Adjusted EBITDA Margin (1) of 13.2 percent.
The Company added 149 net new customers in the third quarter, ending the period with 3,552 customers under contract. This quarter's new customers included FanU, Defender Technologies and 8x8.
Internap's updated 2007 guidance as of September 30, 2007 is as follows:
-- Full year revenue guidance of 30% - 35% over 2006;
-- Full year Adjusted EBITDA (1) in the range of $36 - $40 million;
-- Full year expected Adjusted Gross Margin (1) of approximately 50%; and
-- Full year capital expenditures in the range of $35 - $40 million, which is a decrease from previous capital expenditure guidance of $45 - $55 million. Internap's previously announced build out of additional data centers is progressing on schedule, however, the Company will shift timing of some of the expenditures from late in the fourth quarter of 2007 to early in the first quarter of 2008.
Conference Call Information:
Internap's third quarter 2007 conference call will be held today at 5:00 p.m., EST. Participants may access the call by dialing 888-256-0990. International callers should dial 913-312-1394. Listeners may also connect to the simultaneous Webcast available from the investor services section of the Company's Web site at http://ir.internap.com/events.cfm . A replay of the call will be available from November 6th at 8:00 p.m., EST, through November 20th at 888-203-1112 using the replay code 8460222. International participants can access the replay at 719-457-0820 with the same code.
(1) Reconciliations between GAAP information and non-GAAP information contained in this press release are provided in the tables below entitled "Reconciliation of Net Income (Loss) to Adjusted EBITDA," "Reconciliation of Net Income (Loss) and Basic and Diluted Net Income (Loss) Per Share to Normalized Net Income and Basic and Diluted Normalized Net Income Per Share" and "Reconciliation of Gross Margin to Adjusted Gross Margin." This information is also available on our Web site under the Investor Services heading.
About Internap
Internap is a leading Internet solutions provider that manages, delivers and distributes applications and content with unsurpassed performance and reliability. With a global platform of data centers, managed IP services, content delivery network, and content monetization services (CDN), Internap frees its customers to drive innovation inside their business and create new revenue opportunities. More than 3,500 companies across the globe trust Internap to help them achieve their Internet business goals. Internap is "Making Innovation Possible." For more information visit www.internap.com .
Internap " Safe Harbor " Statement
Certain information included in this press release constitutes forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. All statements, other than statements of historical facts, including, among others, statements regarding our future financial position, business strategy, projected levels of growth, projected capital expenditures, projected costs, and projected financing needs, are forward-looking statements. Those statements include statements regarding the intent, belief or current expectations of Internap and members of our management team, as well as the assumptions on which such statements are based, and are identified by the use of words such as "may," "will," "seeks," "anticipates," "believes," "estimates," "expects," "projects," "forecasts," "plans," "intends," "should," or similar expressions. Forward-looking statements are not guarantees of future performance and involve risks and uncertainties that actual results may differ materially from those contemplated by forward-looking statements. Other important factors that may affect Internap's business, results of operations and financial condition include, but are not limited to: our ability to sustain profitability; our ability to respond successfully to technological change; 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, network access points or computer systems; the ability to successfully integrate the operations of Internap and VitalStream; and our ability to protect our intellectual property.
Our Annual Report on Form 10-K/A, subsequent Quarterly Reports on Form 10-Q, recent Current Reports on Form 8-K and other Securities and Exchange Commission filings discuss the foregoing risks, as well as other important risk factors that could contribute to such differences or otherwise affect our business, results of operations and financial condition. The forward-looking statements in this release and the statements made in the related conference call for analysts and investors speak only as of the date they are made. We undertake no obligation to revise or update any forward-looking statement for any reason.
