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 $256.3 million for 2009, Fourth quarter revenue of $63.5 million;
  • 2009 segment margin1 of 44.2 percent, Fourth quarter segment margin of 46.1 percent;
  • 2009 adjusted EBITDA2 of $28.0 million; Fourth quarter adjusted EBITDA of $9.0 million;
  • 2009 adjusted EBITDA margin2 of 10.9 percent; Fourth quarter adjusted EBITDA margin of 14.2 percent;
  • Announces 32,000 square foot expansion of company-controlled data center footprint in Silicon Valley and Houston.

ATLANTA, March 2, 2010 — Internap Network Services Corporation (NASDAQ: INAP) today reported fourth quarter and full-year 2009 financial results delivering continued improvement in both quarterly segment profit and adjusted EBITDA.

“2009 was clearly a transitional year for Internap with fundamental changes to strategy, people and process. With our third consecutive quarter of adjusted EBITDA growth, we are reassured the steps we are taking will create long-term stockholder value,” said Eric Cooney, President and Chief Executive Officer. “We continue the purposeful investment in our data center business with the announcement of two further expansions, totaling 32,000 net sellable square feet, in Santa Clara, California and Houston, Texas. Silicon Valley represents a new market for Internap’s data center presence and Houston is an expansion in an already successful growth market. We expect both expansions to be open for customers during the third quarter of 2010.”

Revenue for the full-year 2009 increased $2.3 million over 2008 to $256.3 million. Higher Data center services revenue in 2009 offset a decline in IP services revenue over the same period. Fourth quarter 2009 revenue was $63.5 million, a decrease of 1.0 percent compared with the same quarter last year. The year-over-year decrease in quarterly revenue was also attributable to lower IP services revenue which was only partially offset by increased Data center services revenue. While increased occupancy and higher revenue per square foot supported increases in Data center services revenue over the prior year, IP services revenue declined due to lower per unit pricing even with strong year-over-year traffic growth. Sequentially, fourth quarter 2009 revenue decreased by 1.3 percent with lower IP services and decreased Data center services revenue contributing to the decline. The company’s initiative to proactively churn customers in certain low-margin, partner data center facilities impacted Data center services revenue compared with the third quarter of 2009. IP services revenue declined sequentially as pricing decreases outweighed quarter-over-quarter network traffic growth.

For the full-year 2009, GAAP net loss was $(69.7) million, or $(1.41) per fully diluted share, compared with a net loss of $(104.8) million, or $(2.13) per diluted share in 2008. The net losses in 2009 and 2008 included goodwill impairments and restructuring charges totaling $54.7 million and $101.4 million, respectively. Fourth quarter 2009 GAAP net loss was $(0.5) million, or $(0.01) per share, compared with a GAAP net loss of $(2.0) million, or $(0.04) per share, in the prior quarter and a GAAP net loss of $(0.9) million, or $(0.02) per share, in the fourth quarter of 2008. 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 $0.8 million, or $0.02 per fully-diluted share. This compares with third quarter 2009 normalized net loss2 of $(0.9) million, or $(0.02) per fully-diluted share, and fourth quarter 2008 normalized net income of $1.2 million, or $0.02 per fully-diluted share.

Decreased IP services revenue drove a 4.1 percent decrease in Internap’s full-year 2009 total segment profit2 compared with the prior year. Fourth quarter 2009 segment profit totaled $29.3 million, rising 4.9 percent sequentially and 2.4 percent year-over-year. Improved Data center services revenue and lower proportional costs of sales in both reporting segments were the primary contributors to the year-over-year and sequential-quarter increases. Full-year 2009 segment margin was 44.2 percent, a decrease of 230 basis points compared with full-year 2008. Segment margin in the fourth quarter 2009 was 46.1 percent – an increase sequentially and over fourth quarter 2008 margins of 280 basis points and 160 basis points, respectively.

Adjusted EBITDA for the full-year 2009 totaled $28.0 million compared with $34.3 million in 2008. In the fourth quarter 2009, adjusted EBITDA was $9.0 million, a decrease of 4.1 percent compared with the fourth quarter of 2008. Sequentially, adjusted EBITDA increased $1.4 million, or 18.0 percent. Full-year 2009 adjusted EBITDA margin was 10.9 percent, down 260 basis points versus last year. Fourth quarter 2009 adjusted EBITDA margin fell 40 basis points year-over-year to 14.2 percent. Decreased IP services segment profit drove most of the year-over-year declines in adjusted EBITDA margin. Compared with the third quarter 2009, adjusted EBITDA margin improved 230 basis points, the third consecutive quarter of sequential expansion, as increasing segment margin and stable cash operating expense continued to benefit results.

Cash and cash equivalents totaled $73.9 million at December, 31 2009. Total debt including capital lease obligations was $23.2 million at year-end 2009. Cash generated from operations for the twelve months ended December 31, 2009 was $37.5 million. Capital expenditures over the same period were $17.3 million.

Internap maintained 2,935 customers under contract at the end of the fourth quarter of 2009. 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.

As part of a program disclosed in August of 2009 to deploy additional data center capacity in key markets, Internap announced plans to expand company-controlled data center operations in Houston and Silicon Valley. The new facility in Silicon Valley, will add 27,000 net sellable square feet of premium data center capacity in two phases for approximately $23 million. The first phase will total 14,000 feet and is planned to come on line in the third quarter of 2010. In Houston, a market where Internap’s company-controlled utilization is approaching capacity, the company estimates that it will spend approximately $5 million for an additional 5,000 net sellable square feet which is also planned to turn-up in the third quarter of this year. Both the Silicon Valley data center and the expansion in Houston are being built with controls designed to achieve objectives included in SAS-70, type II compliance and meet N+1 redundancy standards for UPS, backup generators, and HVAC systems.

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1Segment profit is segment revenue 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 revenue.

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 fourth quarter and full-year 2009 conference call will be held today at 5:00 p.m., EST. Participants may access the call by dialing 877-548-7901. International callers should dial 719-325-4829. Listeners may connect to the simultaneous webcast, which will include accompanying presentation slides, on the investor relations 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 Tuesday, March 2, 2010 at 8 p.m. EST through Tuesday, March 9, 2010 at 888-203-1112 using the replay code 5245513. International callers can access the archived event at 719-457-0820 with the same code.

About Internap

Internap is a leading Internet solutions and data center company that provides The Ultimate Online Experience by managing, delivering and distributing applications and content with 100 percent performance and reliability. With a global platform of data centers, managed Internet services and a content delivery network, Internap frees its customers to innovate their business, 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 internap.josh.ux.voxel.net.

Internap “Safe Harbor” Statement
This press release may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include statements related to Internap’s ability to create long-term stockholder value and its expectations regarding the expansion of data center capacity, including costs and 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. Internap undertakes no obligation to revise or update 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