INTERNAP NETWORK SERVICES CORPORATION (INAP, Financial) filed Quarterly Report for the period ended 2009-06-30.
InterNAP Network Services Corp is a provider of high performance Internet connectivity services targeted at businesses seeking to maximize the performance of mission-critical Internet-based applications. Customers connected to one of their service points have their data optimally routed to and from destinations on the Internet using their overlay network which analyzes the traffic situation on the multiplicity of networks that comprise the Internet and delivers mission-critical information and communications faster and more reliably. INTERNAP NETWORK SERVICES CORPORATION has a market cap of $159.9 million; its shares were traded at around $3.15 with and P/S ratio of 0.6.
The impairment charge of $4.1 million for acquired developed CDN advertising technology is included in the caption “Direct costs of amortization of acquired technologies” in the accompanying statements of operations. The change in accounting estimates for intangible assets related to acquired CDN customer relationships, trade names and non-compete agreements resulted in increases to our net loss of $0.5 million. The impairment charges and changes in estimated remaining lives of CDN intangible assets did not impact our cash balances or result in violation of any covenants of our debt instruments. These adjustments increased our net loss approximately $0.01 per basic and diluted share for both the three and six months ended June 30, 2009. We do not believe that our remaining intangible assets are impaired.
Total revenues for the three months ended June 30, 2009 were $64.4 million, an increase of 3% compared to the same period in 2008. Data center service revenues were $32.3 million for the three months ended June 30, 2009, representing just over 50% of total revenues, compared to IP services revenue of $32.1 million. Data center services revenue continued its growth during the period, increasing 17% over the same period last year. IP services revenue decreased 7% over the same period last year. The rate of total revenue growth in the quarter was impacted due to higher customer churn, particularly in our data center services segment. Our IP services revenue continues to be more affected by pricing pressure and the ongoing negative economic conditions.
IP services and data center services direct costs of network, sales and services for the three months ended June 30, 2009 were $12.4 million and $24.2 million, respectively. The direct costs of network, sales and services were 39% and 75% of IP services and data center services, respectively, for the three months ended June 30, 2009. The increase as a percentage of respective revenues from the same period last year were primarily due to pricing pressure in IP services noted above and an increase in total available square feet as we have expanded our data center space.
IP Services. Revenues for IP services decreased $2.5 million, or 7%, to $32.1 million for the three months ended June 30, 2009, compared to $34.6 million for the same period in 2008. For the six-month period, revenues for IP services decreased $6.0 million, or 9%, to $64.3 million as of June 30, 2009, compared to $70.3 million as of June 30, 2008. The decrease in IP services revenues was driven by a decline in IP pricing for new and renewing customers and the loss of older customers who were paying higher effective prices, partially offset by an increase in overall traffic. There have been ongoing industry-wide pricing declines over the last several years, and this trend continued during the three and six months ended June 30, 2009. Despite price declines, we continue to experience increasing demand for our traditional IP services, although we are also seeing broader economic effects as a number of customers downgraded or disconnected their services. IP traffic increased approximately 27% from the three months ended June 30, 2008 to the three months ended June 30, 2009. The increase in IP traffic resulted from customers requiring greater overall capacity due to growth in the usage of their applications, as well as in the nature of applications consuming greater amounts of bandwidth. However, as we focus on more profitable growth in IP services, we do not expect to see significant growth in total IP services revenue in the near future. We do expect that, as the economy improves, we will be well-positioned to benefit from an increasing reliance on the Internet as the medium for business applications, media distribution, communication and entertainment. IP services revenues also included FCP and other hardware sales of $1.1 million for both the three months ended June 30, 2009 and 2008, and $1.7 million and $2.2 million for the six months ended June 30, 2009 and 2008, respectively.
Direct costs of IP network, sales and services, exclusive of depreciation and amortization, decreased $0.7 million, or 6%, to $12.4 million for the three months ended June 30, 2009, compared to $13.1 million for the same period in 2008. For the six-month period, the related direct costs decreased $1.4 million, or 5%, to $24.8 million as of June 30, 2009, compared to $26.2 million as of June 30, 2008. Direct costs of IP network, sales and services were 39% and 38% of IP services revenues for the three months ended June 30, 2009 and 2008, respectively, and 39% and 37% for the six months ended June 30, 2009 and 2008, respectively. IP services segment gross profit decreased $1.8 million from $21.5 million for the three months ended June 30, 2008 to $19.7 million for the same period in 2009, and decreased $4.6 million from $44.1 million for the six months ended June 30, 2008 to $39.5 million for the same period in 2009. The increase in direct costs as a percentage of revenues and
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InterNAP Network Services Corp is a provider of high performance Internet connectivity services targeted at businesses seeking to maximize the performance of mission-critical Internet-based applications. Customers connected to one of their service points have their data optimally routed to and from destinations on the Internet using their overlay network which analyzes the traffic situation on the multiplicity of networks that comprise the Internet and delivers mission-critical information and communications faster and more reliably. INTERNAP NETWORK SERVICES CORPORATION has a market cap of $159.9 million; its shares were traded at around $3.15 with and P/S ratio of 0.6.
Highlight of Business Operations:
As a result of our recently-completed assessment based on a measurement date of June 1, 2009, we recorded an aggregate goodwill impairment charge of $51.5 million. This included, in part, $45.8 million to adjust goodwill in our former CDN services segment to $8.8 million and $3.5 million to adjust goodwill in our IP services segment to $32.8 million before the allocation of former CDN services goodwill. The $3.5 million impairment charge in IP services related to our FCP products. Subsequently, the remaining CDN services goodwill of $8.8 million was allocated on a relative fair value basis with $6.6 million allocated to IP services and $2.2 million allocated to data center services. The allocation of goodwill to the data center services segment effectively caused a second triggering event based on a comparison of the fair value of the newly-combined segment to its carrying value and we recorded an additional $2.2 million impairment charge related to CDN managed servers, now included with data center services.The impairment charge of $4.1 million for acquired developed CDN advertising technology is included in the caption “Direct costs of amortization of acquired technologies” in the accompanying statements of operations. The change in accounting estimates for intangible assets related to acquired CDN customer relationships, trade names and non-compete agreements resulted in increases to our net loss of $0.5 million. The impairment charges and changes in estimated remaining lives of CDN intangible assets did not impact our cash balances or result in violation of any covenants of our debt instruments. These adjustments increased our net loss approximately $0.01 per basic and diluted share for both the three and six months ended June 30, 2009. We do not believe that our remaining intangible assets are impaired.
Total revenues for the three months ended June 30, 2009 were $64.4 million, an increase of 3% compared to the same period in 2008. Data center service revenues were $32.3 million for the three months ended June 30, 2009, representing just over 50% of total revenues, compared to IP services revenue of $32.1 million. Data center services revenue continued its growth during the period, increasing 17% over the same period last year. IP services revenue decreased 7% over the same period last year. The rate of total revenue growth in the quarter was impacted due to higher customer churn, particularly in our data center services segment. Our IP services revenue continues to be more affected by pricing pressure and the ongoing negative economic conditions.
IP services and data center services direct costs of network, sales and services for the three months ended June 30, 2009 were $12.4 million and $24.2 million, respectively. The direct costs of network, sales and services were 39% and 75% of IP services and data center services, respectively, for the three months ended June 30, 2009. The increase as a percentage of respective revenues from the same period last year were primarily due to pricing pressure in IP services noted above and an increase in total available square feet as we have expanded our data center space.
IP Services. Revenues for IP services decreased $2.5 million, or 7%, to $32.1 million for the three months ended June 30, 2009, compared to $34.6 million for the same period in 2008. For the six-month period, revenues for IP services decreased $6.0 million, or 9%, to $64.3 million as of June 30, 2009, compared to $70.3 million as of June 30, 2008. The decrease in IP services revenues was driven by a decline in IP pricing for new and renewing customers and the loss of older customers who were paying higher effective prices, partially offset by an increase in overall traffic. There have been ongoing industry-wide pricing declines over the last several years, and this trend continued during the three and six months ended June 30, 2009. Despite price declines, we continue to experience increasing demand for our traditional IP services, although we are also seeing broader economic effects as a number of customers downgraded or disconnected their services. IP traffic increased approximately 27% from the three months ended June 30, 2008 to the three months ended June 30, 2009. The increase in IP traffic resulted from customers requiring greater overall capacity due to growth in the usage of their applications, as well as in the nature of applications consuming greater amounts of bandwidth. However, as we focus on more profitable growth in IP services, we do not expect to see significant growth in total IP services revenue in the near future. We do expect that, as the economy improves, we will be well-positioned to benefit from an increasing reliance on the Internet as the medium for business applications, media distribution, communication and entertainment. IP services revenues also included FCP and other hardware sales of $1.1 million for both the three months ended June 30, 2009 and 2008, and $1.7 million and $2.2 million for the six months ended June 30, 2009 and 2008, respectively.
Direct costs of IP network, sales and services, exclusive of depreciation and amortization, decreased $0.7 million, or 6%, to $12.4 million for the three months ended June 30, 2009, compared to $13.1 million for the same period in 2008. For the six-month period, the related direct costs decreased $1.4 million, or 5%, to $24.8 million as of June 30, 2009, compared to $26.2 million as of June 30, 2008. Direct costs of IP network, sales and services were 39% and 38% of IP services revenues for the three months ended June 30, 2009 and 2008, respectively, and 39% and 37% for the six months ended June 30, 2009 and 2008, respectively. IP services segment gross profit decreased $1.8 million from $21.5 million for the three months ended June 30, 2008 to $19.7 million for the same period in 2009, and decreased $4.6 million from $44.1 million for the six months ended June 30, 2008 to $39.5 million for the same period in 2009. The increase in direct costs as a percentage of revenues and
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