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 $63.4 million compared with $63.9 million in the first quarter of 2009;
  • Segment profit1 of $29.3 million; segment margin1 of 46.2 percent, up 200 basis points year-over-year;
  • 2009 adjusted EBITDA2 of $28.0 million; Fourth quarter adjusted EBITDA of $9.0 million;
  • Announced second quarter 2010 launch of integrated WAN acceleration solution, XIP&trade, for Internap’s IP services offering.

ATLANTA, May 6, 2010 — Internap Network Services Corporation (NASDAQ: INAP), a global provider of end-to-end Internet business products and services, today reported first quarter 2010 financial results. Continued improvements in segment profit and adjusted EBITDA, reflect sustained focus on profitable revenue opportunities and progress made strengthening operations.

“We had several notable accomplishments in the first quarter &mdash adjusted EBITDA and adjusted EBITDA margin reached their highest levels in more than two years and segment margins grew for the third consecutive quarter,” said Eric Cooney, President and Chief Executive Officer of Internap. “In Data center services, we continued to make progress shifting our investment and operational focus to higher margin company-controlled facilities which simplifies our business and increases value to our stockholders. And while it’s still early, our initiatives to revitalize Internap’s core IP services also appear to be yielding results.”

First Quarter 2010 Financial Summary

Revenue

  • Revenue totaled $63.4 million compared with $63.9 million in the first quarter of 2009 and $63.5 million in the fourth quarter of 2009. Declines in IP services revenue offset growth in Data center services both year-over-year and compared with the fourth quarter of 2009.
  • Data center services revenue grew 6 percent year-over-year and 2 percent sequentially to $33.7 million. Higher revenue per square foot more than offset the impact of the company’s ongoing program to proactively churn certain less profitable customer contracts in partner data centers.
  • IP services revenue totaled $29.6 million – a decrease of 8 percent compared with the first quarter of 2009 and 2 percent sequentially. Per-unit price declines in the first quarter of 2010 outweighed strong traffic growth over both the prior quarter and the first quarter of 2009.

Net (Loss) Income

  • GAAP net loss was $(0.3) million, or $(0.01) per share, compared with GAAP net loss of $(6.6) million, or $(0.13) per share, in the first quarter of 2009 and $(0.5) million, or $(0.01) per share, in the fourth quarter of 2009.
  • Normalized net income2, which excludes the impact of stock-based compensation expense and items that management considers non-recurring, was $0.7 million, or $0.01 per share. This compares with normalized net loss in the first quarter of 2009 of $(3.7) million, or $(0.07) per share and normalized net income of $0.8 million, or $0.02 per share in the fourth quarter of 2009.

Segment Profit and Adjusted EBITDA

  • Segment profit was $29.3 million, an increase of 4 percent year-over-year and flat sequentially.
  • Segment margin was 46.2 percent, reaching its highest level in seven quarters. Segment profit in Data center services was $10.7 million, or 31.7 percent of Data center services revenue. IP services segment profit was $18.6 million, or 62.8 percent of IP services revenue. Pricing discipline and cost reduction programs in both Data center services and IP services drove the year-over-year improvement in segment margins.
  • Adjusted EBITDA was $9.9 million representing growth of 114 percent and 10 percent compared with the first quarter and fourth quarter of 2009 respectively. Adjusted EBITDA margin was 15.6 percent in the first quarter of 2010. The year-over-year and sequential improvements in Adjusted EBITDA were driven by increased segment profit and lower cash operating expenses. First quarter 2010 operating expenses included the benefit of a payroll tax credit from the State of Georgia of approximately $0.5 million.

Balance Sheet and Cash Flow Statement

  • Cash and cash equivalents totaled $81.1 million at March 31, 2010. Total debt was $39.9 million at the end of the quarter, inclusive of capital lease obligations.
  • Cash generated from operations for the three months ended March 31, 2010 was $8.3 million. Capital expenditures over the same period were $3.9 million, excluding capital leases.

First Quarter 2010 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 maintained 2,855 customers under contract at the end of the first quarter 2010.
  • The company’s initiative to proactively churn customers in certain less profitable partner data center facilities continued in the first quarter with approximately 6,000 net sellable square feet returned to data center partners during the quarter.
  • Internap’s data center expansions in Seattle, Houston, and Silicon Valley continue to progress on schedule with anticipated opening dates in the third quarter of 2010.
  • On April 27, 2010, Internap announced the launch of XIP, a new service-based Internet traffic accelerator that can dramatically improve the performance of enterprise web based services and applications. XIP is seamless to the customer and eliminates the need for expensive hardware and cumbersome end-user software. XIP complements the Internap Performance IP portfolio and the integrated solution set from Internap.

1Segment 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.

2Reconciliations between accounting principles generally accepted in the United States, or 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 first quarter 2010 conference call will be held today at 5:00 p.m. EDT. Participants may access the call by dialing 877-334-0775. International callers should dial 631-291-4567. Listeners may connect to the simultaneous webcast, which will include accompanying presentation slides, on the Investor Services section of Internap’s web site at http://ir.internap.com/events.cfm. 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, May 6, 2010 at 8 p.m. EDT through Thursday, May 13, 2010 at 800-642-1687 using the replay code 70110668. 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 global platform of data centers, 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 product features, functions and benefits, Internap’s ability to grow its IP business and its 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