Internap Network Services Corporation (INAP)

INAP 
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Internap Network Services Corporation (INAP)

Q4 2008 Earnings Call Transcript

March 12, 2009 at 5:00 pm ET

Executives

Andrew Albrecht - Vice President of Corporate Development

Jim DeBlasio - President and Chief Executive Officer

George Kilguss - Chief Financial Officer

Analysts

James Brean - Thomas Weisel Partners

Sri Anantha - Oppenheimer

Presentation

Operator

Good day everyone and welcome to the Internap fourth quarter 2008 earnings call. Today’s call is being recorded, and for opening remarks and introductions, I would now like to turn the call over to Mr. Andrew Albrecht, Vice President of Corporate Development at Internap. Please go ahead, sir.

Andrew Albrecht

Thank you, Nicole. I would like to thank everyone for joining us for today’s call for Internap’s fourth quarter and full year 2008 conference call.

Joining me on today’s conference call was Internap’s President and CEO, Jim DeBlasio, CFO, George Kilguss and the other members of the Company’s senior management team to discuss fourth quarter and full year 2008 results. Given our pending handover of leadership to Eric Koony, we will keep management’s comments brief this quarter and we will conduct an abbreviated Q&A session.

I appreciate your understanding that we can only field questions around the Company’s historical financials and metrics. Let me remind everybody that today’s call contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements include statements regarding future financial position and performance, customer growth, business strategy and prospects, and projections regarding levels of growth, costs, expenses and margins, capital expenditures and financing needs.

Because the forward-looking statements are not guarantees of future performance, involve risks and uncertainties, there are important factors that could cause our actual results to differ materially from those forward-looking statements. These factors are discussed in our filings with the Securities and Exchange Commission. We undertake no obligation to update these statements.

In addition to reviewing fourth quarter and full year results, we will also discuss recent developments. Any non-GAAP financial measures discussed during this call will be reconciled in most direct, comparable GAAP financial measures. Non-GAAP reconciliations are available in the quarterly earnings section of the Investor Relations page on our website.

With that I would like to turn the call over to Mr. Jim DeBlasio.

Jim DeBlasio

Thanks Andrew. I would like to thank everyone for joining us on the call today.

As we previously announced, Eric Koony will be taking over as Internap’s CEO on Monday. Given the timing of this transition, we have changed the format of our earnings call.

I will provide a brief introductory comment and then our CFO, George Kilguss will review our Q4 and 2008 results. We will then take one or two financial questions from the audience.

I am sure you can appreciate that given this transition, it is not appropriate for us to respond to any questions about the future business strategies of the Company on today’s call. At the appropriate time after he has had an opportunity to properly assess the business Eric will probably share his thoughts with the full investment community.

In 2005, Internap’s Board of Directors asked me to leave my role as Board Member and chairman of the audit committee to assume the role as your CEO. At that time, Internap’s quarterly revenue was approximately $38 million and the Company had never realized a profit.

Despite these challenges, I was honored to accept this request based on my belief that with strong leadership, teamwork and financial discipline we could execute to turn around and put into Internap on strong financial footing.

I am pleased to say that Internap has posted strong growth over the past three years, and achieved many of the objectives we laid out. From a financial standpoint, we achieved net income profitability in 2006 and returned to trading on the NASDAQ global markets.

Revenue has grown to a quarterly run rate of $64 million. Adjusted EBITDA improved from $600,000 in Q3 in 2005 to $9 million this past quarter. Our cash and cash equivalents our position there has improved 34% to $54 million and we have one of the lowest leverage ratios in our peer group.

From a product and technology standpoint, we maintained our leadership position as a premiere internet routing in traffic optimization network in the industry. Furthermore, we capitalized on robust growth in a datacenter business by adding approximately 64,000 square feet of capacity as a final phase is being turned up this month with the majority of this expansion funded through cash from operations.

None of these would have been possible without the tireless work of all of our employees around the world. Thanks to them Internap is able to offer 100% uptime guarantee to our customers and we have built upon our excellent reputation for customer service. I am specially proud of and grateful for the dedication and commitment of each and every one of our employees.

During the past three years, we have faced the number of issues as every business does. I am pleased that our employees have risen to meet these challenges and we have emerged a much stronger company.

Now that our financial footing is healthy and our products are solid, I have worked with the Board of Directors on a transition plan over these past months that have resulted in the appointment of Eric Koony as CEO. I am confident that Eric’s experience combined with these relationships in digital media will be invaluable to Internap as we move forward. It has been my great pleasure to serve as Internap’s CEO.

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