The information below is a summary. Click here to view the entire release which includes our unaudited GAAP financial statements and supplemental non-GAAP financial measures.

  • Revenue of $60.5 million compared with $64.4 million in the second quarter of 2009;
  • Segment profit1 of $29.3 million; segment margin1 of 48.3 percent, up 510 basis points year-over-year;
  • Adjusted EBITDA2 of $9.9 million, up 46.5 percent year-over-year; adjusted EBITDA margin2 of 16.4 percent;
  • Announced openings of data center expansions in Houston, Seattle and Silicon Valley increasing premium company-controlled selling capacity by 24 percent.

ATLANTA, GA – (August 4, 2010)Internap Network Services Corporation (NASDAQ: INAP), a leading provider of end-to-end Internet business products and services, today announced financial results for the second quarter of 2010. Continued focus on Internap-controlled data centers and corresponding growth in segment margin and adjusted EBITDA marked this quarter’s results.

“Our fourth consecutive quarter of segment margin expansion and another quarter of strong adjusted EBITDA attest to the efficacy of our strategy for Internap’s business turnaround. Proactive churn of low-margin partner data center contracts helped improve segment profit in our Data center services business by almost 7 percent sequentially and 41 percent year-over-year,” said Eric Cooney, President and Chief Executive Officer of Internap. “The addition of 26,500 net sellable square feet of company-controlled data center in July, and early traction from recent product launches in both the IP and Data center business segments, bodes well for the company’s future revenue growth.”

Revenue

  • Revenue totaled $60.5 million compared with $64.4 million in the second quarter of 2009 and $63.4 million in the first quarter of 2010. Revenue from both Data center services and IP services decreased year-over-year and compared with the first quarter of 2010.
  • Data center services revenue declined 3 percent year-over-year and 7 percent sequentially to $31.2 million. The company’s ongoing initiative to proactively churn certain low-margin contracts in partner data centers drove the year-over-year and sequential decreases.
  • IP services revenue totaled $29.3 million – a decrease of 9 percent compared with the second quarter of 2009 and 1 percent sequentially. Per-unit price declines in the second quarter of 2010 outweighed continued strong traffic growth over both the prior quarter and the second quarter of 2009.

Net (Loss) Income

  • GAAP net loss was $(1.3) million, or $(0.03) per share, compared with GAAP net loss of $(60.6) million, or $(1.22) per share, in the second quarter of 2009 and $(0.3) million, or $(0.01) per share, in the first quarter of 2010. GAAP net loss in the second quarter of 2010 included a non-cash restructuring charge of $1.2 million related to changes in assumptions on real-estate held for sublease.
  • Normalized net income2, which excludes the impact of stock-based compensation expense and items that management considers non-recurring, was $1.4 million, or $0.03 per share. This compares with normalized net loss in the second quarter of 2009 of $(1.5) million, or $(0.03) per share, and normalized net income of $0.7 million, or $0.01 per share, in the first quarter of 2010.
    Segment Profit and Adjusted EBITDA.
  • Segment profit was $29.3 million, an increase of 5 percent year-over-year and flat sequentially.
  • Segment margin was 48.3 percent, reaching its highest level in more than two years. Segment profit in Data center services was $11.4 million, or 36.6 percent of Data center services revenue. IP services segment profit was $17.8 million, or 60.9 percent of IP services revenue. Pricing discipline and initiatives to drive a greater proportion of business to Internap-controlled data center facilities benefited Data center services margins compared with prior periods. Decreased IP services revenue drove the year-over-year and sequential decrease in segment margins.
  • Adjusted EBITDA totaled $9.9 million in the second quarter, 46.5 percent higher than the second quarter of 2009 and flat relative to the first quarter of 2010. Adjusted EBITDA margin was 16.4 percent in the second quarter of 2010, up 590 basis points year-over-year and 80 basis points sequentially. The year-over-year increase in Adjusted EBITDA was driven by higher segment profit and lower cash operating expenses. Second quarter 2010 operating expenses included the benefit of a payroll tax credit from the State of Georgia of $1.1 million.

Balance Sheet and Cash Flow Statement

  • Cash and cash equivalents totaled $76.1 million at June 30, 2010. Total debt was $40.4 million at the end of the quarter, including $20.4 million in capital lease obligations.
  • Cash generated from operations for the six months ended June 30, 2010 was $23.6 million. Capital expenditures over the same period were $28.5 million.

Recent Operational Highlights

Historical trends of key financial and operational metrics can be found in a supplementary data schedule on Internap’s website at http://ir.internap.com/results.cfm.

  • We had 2,807 customers under contract at the end of the second quarter 2010.
  • Our initiative to proactively churn customers in certain less profitable partner data center facilities continued in the second quarter with approximately 19,000 net sellable square feet returned to data center partners during the quarter.
  • We launched our redesigned website in the second quarter. The new Internap.com has generated a marked increase in total visits, engagement by prospects and significant increase in traffic to solution and product-specific information.
  • On July 21, 2010, we announced significant expansions to our managed hosting solution including the addition of high-performance servers, managed enterprise storage solutions, layered data protection, standardized virtualization capabilities and managed security.
  • We opened our new/expanded data centers in Silicon Valley, Seattle, and Houston in July. The result is an increase in our company-controlled footprint of premium data center space of 24 percent to137,500 net sellable square feet.

1 Segment profit is segment revenues less direct costs of network, sales and services, exclusive of depreciation and amortization, as presented in the notes to our consolidated financial statements filed with the United States Securities and Exchange Commission in Quarterly Reports on Form 10-Q and Annual Reports on Form 10-K. Segment profit does not include direct costs of customer support, direct costs of amortization of acquired technologies or any other depreciation or amortization associated with direct costs. Segment margin is segment profit as a percentage of segment revenues.

2 Reconciliations between GAAP information and non-GAAP information contained in this press release are provided in the tables below entitled “Reconciliation of Loss from Operations to Adjusted EBITDA,” and “Reconciliation of Net Loss and Basic and Diluted Net Loss Per Share to Normalized Net Income (Loss) and Basic and Diluted Normalized Net Income (Loss) Per Share.” This information is also available on our website under the Investor Services section. Adjusted EBITDA margin is Adjusted EBITDA as a percentage of total revenue.

Conference Call Information

Internap’s second quarter 2010 conference call will be held today at 5:00 p.m. EDT. Listeners may connect to a webcast of the call, which will include accompanying presentation slides, on the investor services section of Internap’s web site at http://ir.internap.com/events.cfm. The call can also be accessed by dialing 866-515-9839. International callers should dial 631-813-4875. An online archive of the webcast presentation will be available for one month following the call. An audio-only replay will be accessible from Wednesday, August 4, 2010 at 8 p.m. EDT through Wednesday, August 11, 2010 at 800-642-1687 using the code 85875105. International callers can access the archived event at 706-645-9291 with the same code.

About Internap

Internap is a leading Internet products and services company that provides The Ultimate Online Experience® by managing, delivering and distributing applications and content with 100 percent uptime service level agreements. With a platform of data centers around the world, managed Internet services and a content delivery network (CDN), Internap frees its customers to innovate, improve service levels and lower the cost of IT operations. Thousands of companies across the globe trust Internap to help them achieve their Internet business goals. For more information, visit http://www.internap.com.

Forward-Looking Statements

This press release contains certain forward-looking statements. These forward-looking statements include statements related to future revenue growth, business turnaround, and Internap’s expectations regarding the expansion of data center capacity, including timing. Because such statements are not guarantees of future performance and involve risks and uncertainties, there are important factors that could cause Internap’s actual results to differ materially from those in the forward-looking statements. These factors include Internap’s ability to achieve or sustain profitability; its ability to expand margins and drive higher returns on investment; its ability to maintain current customers and obtain new ones, whether in a cost-effective manner or at all; its ability to correctly forecast capital needs, demand planning and space utilization; its ability to respond successfully to technological change and the resulting competition; 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 its network operations centers, data centers, network access points or computer systems; its ability to provide or improve Internet infrastructure services to its customers; and its ability to protect its intellectual property, as well as other factors discussed in Internap’s filings with the Securities and Exchange Commission. Given these risks and uncertainties, investors should not place undue reliance on forward-looking statements as a prediction of actual results. Internap undertakes no obligation to update, amend or clarify any forward-looking statement for any reason.

The information above is a summary. Click here to view the entire release which includes our unaudited GAAP financial statements and supplemental non-GAAP financial measures.

Press Contact

Mariah Torpey
(781) 418-2404
internap@daviesmurphy.com

Investor Contact:

Andrew McBath
(404) 302-9700
amcbath@internap.com