Internap Earnings Primer

Internap (INAP) reports earnings Tuesday after the market closes, so here is a quick summary of what to look for.  Internap has three lines of business:  IP transit, colocation, and CDN, and they focus all three on small to mid-sized web-centric companies that colocate their servers in datacenters.  They do not serve the enterprise customer base that is apparently giving PAETEC trouble but they do compete with Akamai on CDN, their results will be a barometer for the high end web-centric sector.

In the first quarter, they revealed substantial integration snafus in their CDN business which hurt their reputation, and they will be looking to start earning it back.  Their updated guidance projects revenue growth of 13-18% over 2007, which would be $265-276M in 2008.  Revenues for this quarter that would be inline with the midpoint of that goal would look something like this, broken down by product:

	Q1/08	Q2/08
IP Transit	31.2	32.1
Colocation	25.2	27.2
CDN	5.7	6.3
Total	62.1	65.6

Adjusted EBITDA for the full year is projected to be 17-20% of that total revenue number, which works out to $45-55M.  With Q1 at 9.8M, sequential growth that hits the midpoint of $50M would look like 9.8,11.6,13.4,15.2, so we should expect Q2 adjusted EBITDA in the neighborhood of $11-12M.

They are building out more datacenter space, and their revenue growth prospects include that space coming online on schedule, so their progress on this front is something to listen closely to.  Their recent deal with Reliance Globalcom will no doubt be a talking point, but I doubt it has much immediate relevance to earnings.  Hopefully it shows that their CDN business is back on its feet and will grow from here.

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Categories: Content Distribution · Datacenter · Financials · Internet Backbones