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 $78.3 million, down 7% versus the third quarter of 2014
  • Data center services revenue of $58.6 million, down 5% year-over-year
  • Segment margin1 of 57.0%, up 90 basis points versus the third quarter of 2014
  • Adjusted EBITDA2 of $19.8 million unchanged year-over-year
  • Adjusted EBITDA margin2 of 25.2%, up 190 basis points year-over-year
  • Levered free cash flow3 of $2.2 million

ATLANTA, GA – November 5, 2015 – Internap Corporation (NASDAQ: INAP), a provider of high-performance Internet infrastructure services, today announced financial results for the third quarter of 2015.

“Our company-wide growth initiatives are beginning to yield encouraging results. We gained positive operating momentum throughout the third quarter of 2015 with bookings increasing each month during the quarter and September bookings reaching the highest level in six months. Additionally, customer churn is improving while channel partner productivity is increasing,” said Michael Ruffolo, President and Chief Executive Officer of Internap. “We believe our third quarter 2015 results provide a solid foundation to accelerate top-line revenue growth and expand margins. With a disciplined approach to capital allocation, we are encouraged in our ability to generate positive levered free cash flow. We remain confident that our compelling performance-based value proposition should drive long-term profitable growth for the business.”

Third Quarter 2015 Financial Summary
Revenue

  • Revenue totaled $78.3 million in the third quarter, a decrease of 7% year-over-year and 3% sequentially. The year-over-year decrease was due to the loss of revenue related to customer attrition following our migration out of the New York metro data center into our Secaucus facility, the decrease in partner colocation revenue and lower IP revenue, partially offset by organic growth in core data center services revenue. Sequentially, revenue declined in data center services and IP services.
  • Data center services revenue totaled $58.6 million in the third quarter, a decrease of 5% year-over-year and 1% sequentially. The year-over-year decrease was primarily due to the loss of revenue from the New York metro data center migration. The sequential decrease was primarily attributable to previously-disclosed hosting churn experienced late in the second quarter of 2015, partially offset by organic growth in core revenues. Partner colocation revenue declined due to our strategy to focus on selling into our company-controlled data centers.
  • IP services revenue totaled $19.7 million in the third quarter, a decrease of 14% year-over-year and 6% sequentially. Both decreases were driven by a decline in IP pricing for new and renewing customers and the loss of legacy contracts.

Net Loss

  • GAAP net loss was $(14.2) million, or $(0.27) per share, compared with $(9.4) million, or $(0.18) per share, in the third quarter of 2014 and $(12.5) million, or $(0.24) per share, in the second quarter of 2015.
  • Normalized net loss was $(10.0) million, or $(0.19) per share, compared with normalized net loss of $(7.5) million, or $(0.15) per share, in the third quarter of 2014, and normalized net loss of $(10.3) million, or $(0.20) per share, in the second quarter of 2015.

Segment Profit and Adjusted EBITDA

  • Segment profit totaled $44.6 million in the third quarter, a 6% decrease year-over-year and quarter-over-quarter. Segment margin was 57.0%, an increase of 90 basis points year-over-year and a decrease of 200 basis points sequentially.
  • Data center services segment profit totaled $33.5 million in the third quarter, a 1% decrease compared with the third quarter of 2014 and a 4% decrease from the second quarter of 2015. Data center services segment margin was 57.2% in the third quarter, up 220 basis points year-over-year and down 180 basis points sequentially. An increasing proportion of higher-margin services, specifically colocation sold in company-controlled data centers, hosting and cloud services drove data center services segment profit and margin higher compared with the third quarter of 2014. Higher seasonal power costs resulted in a decrease in data center services segment profit and margin compared with the second quarter of 2015.
  • IP services segment profit totaled $11.1 million in the third quarter, an 18% decrease compared with the third quarter of 2014 and a 10% decrease from the second quarter of 2015. IP services segment margin was 56.5% in the third quarter, down 250 basis points year-over-year and 240 basis points sequentially. Lower IP transit revenue and the loss of legacy contracts drove the decrease in segment profit and segment margin.
  • Adjusted EBITDA totaled $19.8 million in the third quarter, flat compared with the third quarter of 2014 and a 3% increase from the second quarter of 2015. Adjusted EBITDA margin was 25.2% in the third quarter, up 190 basis points year-over-year and 140 basis points sequentially. Lower cash operating expense4 positively impacted adjusted EBITDA and adjusted EBITDA margin. Benefits included a decrease in sales and marketing costs primarily related to the removal of redundancies in connection with the phase-out of the iWeb trade name and other marketing program efficiencies. General and administrative costs decreased primarily due to lower cash-based compensation.

Balance Sheet and Cash Flow Statement

  • Cash and cash equivalents totaled $18.3 million at September 30, 2015. Total debt was $376.3 million, net of discount, at the end of the quarter, including $57.5 million in capital lease obligations.
  • Cash generated from operations for the three months ended September 30, 2015 was $10.8 million. Capital expenditures over the same period were $10.9 million and cash interest expense was $6.7 million, resulting in $2.2 million of levered free cash flow.

Business Outlook
We are reaffirming the following guidance for full-year 2015:

  • Revenue: $320 million – $325 million
  • Adjusted EBITDA: $80 million – $85 million
  • Capital Expenditures: $60 million – $70 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.

  • Internap announced the general availability of AgileSERVER 2.0, the next generation of its bare-metal Infrastructure-as-a-Service (IaaS) offering. A high-performance IaaS option, AgileSERVER 2.0 features significant hardware, networking and management advancements designed to meet the needs of enterprises and devops teams deploying mission-critical applications and big-data workloads on OpenStack.
  • Internap announced an alliance with Akamai to provide customers with Internap’s performance-optimized cloud, data center and network services combined with Akamai’s cloud security and data center protection services.
  • Internap’s New York Metro data center was recently awarded Leadership in Energy and Environmental Design (LEED) Platinum certification by the U.S. Green Building Council. This facility has also achieved ENERGY STAR certification, a program run by the U.S. Environmental Protection Agency (EPA) to identify ways in which energy efficiency can be measured, documented and implemented in data centers.
  • We had 11,021 customers at September 30, 2015.

1Segment margin and segment profit are non-GAAP financial measures which we define in an attachment to this press release entitled “Non-GAAP (Adjusted) Financial Measures.” Reconciliations between GAAP and non-GAAP information related to segment profit and segment margin are contained in the table entitled “Segment Profit and Segment Margin” in the attachment.

2Adjusted EBITDA, adjusted EBITDA margin and normalized net loss are non-GAAP financial measures which we define in an attachment to this press release entitled “Non-GAAP (Adjusted) Financial Measures.” Reconciliations between GAAP information and non-GAAP information related to adjusted EBITDA and normalized net loss are contained in the tables 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 Loss and Basic and Diluted Normalized Net Loss Per Share” in the attachment.

3Levered free cash flow is a non-GAAP measure which we define in an attachment to this press release entitled “Non-GAAP (Adjusted) Financial Measures.” Reconciliations between GAAP and non-GAAP information related to levered free cash flow is contained in the table entitled “Levered Free Cash Flow” in the attachment.

4Cash operating expense is a non-GAAP measure which we define in an attachment to this press release entitled “Non-GAAP (Adjusted) Financial Measures.” Reconciliations between GAAP and non-GAAP information related to cash operating expense is contained in the table entitled “Cash Operating Expense” in the attachment.

Conference Call Information:
Internap’s third quarter 2015 conference call will be held today at 5:00 p.m. ET. Listeners may connect to a webcast of the call, which will include accompanying presentation slides, on the investor relations section of Internap’s web site at http://ir.internap.com/events.cfm. The call can be also 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 Thursday, November 5, 2015 at 8:00 p.m. ET through Wednesday, November 11, 2015 at 855-859-2056 using replay code 61666043. International callers can listen to the archived event at 404-537-3406 with the same code.

About Internap
Internap is the high-performance Internet infrastructure provider that powers the applications shaping the way we live, work and play. Our hybrid infrastructure delivers performance without compromise – blending virtual and bare-metal cloud, hosting and colocation services across a global network of data centers, optimized from the application to the end user and backed by rock-solid customer support and a 100% uptime guarantee. Since 1996, the most innovative companies have relied on Internap to make their applications faster and more scalable. For more information, visit www.internap.com.

Forward-Looking Statements
This press release contains forward-looking statements. These forward-looking statements include statements related to our ability to accelerate top-line growth, expand margins, generate positive levered free cash flow and drive long-term profitable growth and our expectations for full-year 2015 revenue, adjusted EBITDA and capital expenditures. Our ability to accelerate top-line growth, expand margins, generate positive levered free cash flow and drive long-term profitable growth and our expectations for full-year 2015 revenue, adjusted EBITDA and capital expenditures are based on certain assumptions, including anticipated new product launches, our ability to execute on our business strategy, leveraging of multiple routes to market, expanded brand awareness for high-performance Internet infrastructure services and customer churn levels. These assumptions may prove to be inaccurate in the future. Because such forward-looking 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 our ability to execute on our business strategy and drive growth; the robustness of the IT infrastructure services market; our ability to achieve or sustain profitability; our ability to expand margins and drive higher returns on investment; our ability to complete expansion of company-controlled data centers within the expected timeframe; our ability to sell into new and existing data center space; the actual performance of our IT infrastructure services; our ability to maintain current customers and obtain new ones, whether in a cost-effective manner or at all; our ability to correctly forecast capital needs, demand planning and space utilization; our 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 our network operations centers, data centers, network access points or computer systems; our ability to provide or improve Internet infrastructure services to our customers; and our ability to protect our intellectual property, as well as other factors discussed in our 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. We undertake no obligation to update, amend or clarify any forward-looking statement for any reason.

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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
Davies Murphy Group
781.418.2404
internap@daviesmurphy.com

Investor Contact
Michael Nelson
404.302.9700
ir@internap.com