Internap Corporation (NASDAQ:INAP), a global provider of
performance-driven, full-spectrum data center and cloud solutions,
today announced that, following the completion of a two-year
transformation to return to growth, including its 2018 data center
rationalization program, it is providing a preliminary 2018 year in
review, and an initial 2019 outlook.
2018 Wrap-Up and Initial 2019
Outlook
Full-Year 2018 Revenue is expected to be within
the outlook range of $320 million to $324 million.
Additionally, voluntary data center and POP asset closures were
accelerated in the fourth quarter 2018 in order to exit near the
new baseline of quarterly revenue. INAP expects these closures to
reduce annual revenues by approximately $10 million, starting
partially in Q418, and reaching a new baseline in Q119 as we expect
a similar decline from customers exiting late in Q418. We
expect sequential growth in the remainder of 2019. This
acceleration puts the Company at the lower end of the previously
announced 2018 revenue outlook range, with 4-6% organic growth from
the now more profitable data center portfolio factored into the
Full-Year 2019 Revenue Outlook of $325 million to $335
million. INAP will continue corporate development activity to
add data center assets in key metro markets such as Northern
Virginia, Chicago, Toronto, and other major cities. This will
likely be offset throughout the year by the Company’s plan to
explore the sale of non-core data center or business assets.
2018 Net Loss is expected to be approximately
$(51) million - $(54) million, and $(37) million -$(47) million in
2019. INAP expects improvements in profitability and cash
flow through the completion of significant cost savings and
portfolio enhancement initiatives undertaken by the new management
team over the last two years. 2019 Adjusted EBITDA is to
expand to a range of $120 million to $130 million. Adjusted
EBITDA will remain relatively flat sequentially from Q418 to Q119
as we eliminate the costs associated with the less profitable
locations. Adjusted EBITDA Margin targets are expected to
expand on a near linear trend for a 2019 exit run rate of
approximately 40%.
$ Millions |
2017 |
Full-Year 2018 |
2019 |
|
Reported Actual |
Guidance |
Initial Outlook |
Revenue |
$281 |
$320 - $324 |
$325-$335 |
Adjusted EBITDA (non-GAAP) |
$9232.7% Margin |
$111 - $11434.7% - 35.2% Margin |
$120-$13036.9% - 38.8% Margin |
Capital Expenditures |
$36 |
$40-$43 |
Approximately $40 with $10 Reserve |
“In an effort to better communicate our
portfolio improvement accomplishments during the last two years, we
are pleased to announce portfolio enhancements that will continue
to make INAP more profitable over the long term. The
acquisition of new data center footprints in Atlanta and Phoenix,
as well as the Managed Service product advancement through
SingleHop Cloud services, were simultaneously offset by the
completion of data center and POP closures by the end of
2018. This portfolio movement has been complex and time
consuming, but all to improve our profitability and return the
balance of core assets towards growth,” stated Peter D. Aquino,
President and Chief Executive Officer.
Mr. Aquino continued, “In 2019, we have a new
list of objectives that will continue to refine our asset
portfolio, as we work towards gaining more flexibility in our
capital structure. The recent equity infusion created runway
to continue growing our business and positions us to
opportunistically refinance our credit facility when market
conditions improve. I will add that our credit profile
remains strong with ample cash on our balance sheet, our $35
million revolver is undrawn and our total net leverage ratio is
expected to be in the 5.3x area at quarter’s end giving us ample
cushion relative to our credit facility covenant total net leverage
ratio of 5.9x. In addition, the cash savings from rent
reduction in non-core sites are material, and enhanced by Adjusted
EBITDA improvements while keeping the capital program relatively
modest compared to our public peers given our existing
capacity. However, we will continue to rationalize our costs,
opportunistically buy back shares if the stock remains severely
undervalued in these volatile markets, and pursue corporate
development actively to continue to strengthen our capabilities to
serve customers in a growing industry. We are in the right
markets to capture growth, and eying larger deals as we build our
pipeline. We are in position to continue to succeed, and our
sales teams are back in the game.”
Authorization of Stock
Repurchase
INAP’s Board of Directors authorized management
to repurchase an initial $5 million of INAP common stock, as
permitted under INAP’s current credit facility. Repurchases of
INAP’s common stock may be made from time to time, subject to
market conditions, in open market or through privately negotiated
transactions. INAP has no obligation to repurchase shares under the
authorization, and the timing, actual number and value of shares
which are repurchased will depend on a number of factors, including
the price of the Company's common stock. The Company may suspend or
discontinue the repurchase program at any time. In the future, the
Board may consider new authorizations based on a new credit
facility’s allowances should INAP shares remain significantly
undervalued.
Conference Call
INAP will hold a 1-hour conference call today,
Tuesday, December 18, 2018 at 5 p.m. E.T. to address analysts’ and
investors’ questions after brief prepared remarks. The call can be
accessed by dialing 877-334-0775. International callers should dial
631-291-4567; the audience passcode is 6679527. Listeners may
connect to a simultaneous webcast of the call on the Investor
Relations section of INAP’s web site at
http://ir.inap.com/events-and-presentations.
An online archive of the webcast will be
archived in the Investor Relations section of the Company’s
website. An audio-only telephonic replay will also be accessible
for 5 days by dialing 855-859-2056 using replay code 6679527.
International callers can listen to the archived event at
404-537-3406 with the same code.
About INAP
Internap Corporation (NASDAQ: INAP) is a global
provider of performance-driven, full-spectrum data center and cloud
solutions. Through its portfolio of high-density colocation,
managed cloud hosting and powerful network services, INAP partners
with its customers, who range from the Fortune 500 to emerging
startups, to create secure and scalable IT infrastructure
solutions. INAP operates in 53 primarily Tier 3 design data
centers in 21 metropolitan markets and has 102 POPs around the
world. INAP has over 1 million gross square feet in its portfolio,
with approximately 600,000 square feet of sellable data center
space.
For more information, visit www.inap.com.
Investor ContactsRichard RamlallChief
Communications Officer INAP404-302-9982ir@inap.com
Carolyn Capaccio/Jody BurfeningLHA212-838-3777
inap@lhai.com
Forward-Looking Statements
This press release contains forward-looking
statements. Forward-looking statements include statements regarding
industry trends, our future financial position and performance,
business strategy, revenues and expenses in future periods,
projected levels of growth and other matters that do not relate
strictly to historical facts. These statements are often identified
by words such as “may,” “will,” “seeks,” “anticipates,” “believes,”
“estimates,” “expects,” “projects,” “forecasts,” “plans,”
“intends,” “continue,” “could” or “should,” that an “opportunity”
exists, that we are “positioned” for a particular result,
statements regarding our vision or similar expressions or
variations. These statements are based on the beliefs and
expectations of our management team based on information available
at the time such statements are made. Such forward-looking
statements are not guarantees of future performance and are subject
to risks and uncertainties that could cause actual results to
differ materially from those contemplated by such forward-looking
statements. Therefore, actual future results and trends may differ
materially from what is forecast in such forward-looking statements
due to a variety of factors, including, without limitation: our
expectations for 2018 and 2019 revenue, GAAP Net Loss,
Adjusted EBITDA, GAAP Net Loss margin, Adjusted EBITDA margin, and
capital expenditures; our forecast for organic revenue growth and
margin expansion; our ability to refinance our debt on
favorable terms; our ability to successfully complete the
share repurchase program; and our ability to sell non-core
assets.
These risks and other important factors
discussed under the caption “Risk Factors” in our most recent
Annual Report on Form 10-K filed with the SEC, and our other
reports filed with the SEC could cause actual results to differ
materially from those indicated by the forward-looking statements
made in this press release.
Given these risks and uncertainties, investors
should not place undue reliance on forward-looking statements as a
prediction of actual results. All forward-looking statements
attributable to INAP or persons acting on its behalf are expressly
qualified in their entirety by the foregoing forward-looking
statements. All such statements speak only as of the date made, and
INAP undertakes no obligation to update or revise publicly any
forward-looking statements, whether as a result of new information,
future events or otherwise.
Non-GAAP Financial Measures
In addition to providing financial measurements
based on accounting principles generally accepted in the United
States of America (“GAAP”), this press release includes additional
financial measures that are not prepared in accordance with GAAP
(“non-GAAP”), including Adjusted EBITDA and Adjusted EBITDA margin.
A reconciliation of these non-GAAP financial measures to the most
directly comparable GAAP financial measures can be found below.
We define the following non-GAAP measures as
follows:
- Adjusted EBITDA is a non-GAAP measure and is GAAP net loss
attributable to INAP shareholders plus depreciation and
amortization, interest expense, provision (benefit) for income
taxes, other expense (income), (gain) loss on disposal of property
and equipment, exit activities, restructuring and impairments,
stock-based compensation, non-income tax contingency, strategic
alternatives and related costs, organizational realignment costs,
pre-acquisition costs and claim settlement.
- Adjusted EBITDA margin is Adjusted EBITDA as a percentage of
revenues.
Adjusted EBITDA is not a measure of financial performance
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.
Adjusted EBITDA, as presented, may not be
comparable to similarly titled measures of other companies.
Adjusted EBITDA is presented as we understand certain investors use
it as one measure of our historical ability to service debt. Also
Adjusted EBITDA is used in our debt covenants.
Although we believe, for the foregoing reasons,
that our presentation of the non-GAAP financial measure provides
useful supplemental information to investors regarding our results
of operations, our non-GAAP financial measure 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.
A reconciliation of GAAP Net Loss Attributable to INAP
Shareholders to full year 2017 Adjusted EBITDA and then to forward
looking Adjusted EBITDA and Adjusted EBITDA margin for full-year
2018 and 2019 is as follows (in millions):
|
|
|
|
|
Narrowed |
|
|
|
|
|
|
|
Guidance within |
|
|
|
Actual |
|
Previous Range |
|
2019 Guidance |
|
|
2017 |
|
|
as of 11/1/2018 |
|
as of 12/17/2018 |
|
|
|
|
|
Low |
|
|
|
High |
|
|
|
Low |
|
|
|
High |
|
|
|
Amount |
|
Percent |
|
Amount |
|
Percent |
|
Amount |
|
Percent |
|
Amount |
|
Percent |
|
Amount |
|
Percent |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net revenues |
$ |
281 |
|
|
100.0 |
% |
|
$ |
320 |
|
|
100.0 |
% |
|
$ |
324 |
|
|
100.0 |
% |
|
$ |
325 |
|
|
100.0 |
% |
|
$ |
335 |
|
|
100.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss (GAAP)
attributable to INAP Shareholders |
$ |
(45 |
) |
|
(16.0 |
)% |
|
$ |
(54 |
) |
|
(16.9 |
)% |
|
$ |
(51 |
) |
|
(15.7 |
)% |
|
$ |
(47 |
) |
|
(14.5 |
)% |
|
$ |
(37 |
) |
|
(11.0 |
)% |
Add: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
75 |
|
|
26.7 |
% |
|
|
88 |
|
|
27.5 |
% |
|
|
88 |
|
|
27.2 |
% |
|
|
90 |
|
|
27.7 |
% |
|
|
90 |
|
|
26.9 |
% |
Interest
expense |
|
51 |
|
|
18.1 |
% |
|
|
65 |
|
|
20.3 |
% |
|
|
65 |
|
|
20.1 |
% |
|
|
68 |
|
|
20.9 |
% |
|
|
68 |
|
|
20.3 |
% |
Provision
for income taxes |
|
0 |
|
|
0.0 |
% |
|
|
0 |
|
|
0.0 |
% |
|
|
0 |
|
|
0.0 |
% |
|
|
0 |
|
|
0.0 |
% |
|
|
0 |
|
|
0.0 |
% |
Exit
activities, restructuring and impairments |
|
6 |
|
|
2.1 |
% |
|
|
4 |
|
|
1.3 |
% |
|
|
4 |
|
|
1.2 |
% |
|
|
2 |
|
|
0.6 |
% |
|
|
2 |
|
|
0.6 |
% |
Stock-based compensation |
|
3 |
|
|
1.1 |
% |
|
|
4 |
|
|
1.3 |
% |
|
|
4 |
|
|
1.2 |
% |
|
|
5 |
|
|
1.5 |
% |
|
|
5 |
|
|
1.5 |
% |
Non-income tax contingency and acquisition costs |
|
1 |
|
|
0.4 |
% |
|
|
4 |
|
|
1.3 |
% |
|
|
4 |
|
|
1.2 |
% |
|
|
2 |
|
|
0.6 |
% |
|
|
2 |
|
|
0.6 |
% |
Other
costs |
|
1 |
|
|
0.4 |
% |
|
|
0 |
|
|
0.0 |
% |
|
|
0 |
|
|
0.0 |
% |
|
|
0 |
|
|
0.0 |
% |
|
|
0 |
|
|
0.0 |
% |
Adjusted
EBITDA (non-GAAP) |
$ |
92 |
|
|
32.7 |
% |
|
$ |
111 |
|
|
34.7 |
% |
|
$ |
114 |
|
|
35.2 |
% |
|
$ |
120 |
|
|
36.9 |
% |
|
$ |
130 |
|
|
38.8 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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