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.

  • Strong Revenue and Adjusted EBITDA1 growth as data center services continues to deliver
    1. Revenue of $68.7 million up 14 percent versus the second quarter of 2011;
    2. Adjusted EBITDA1 of $12.2 million up 19 percent versus the second quarter of 2011;
  • Highest segment profit2 in the history of the company:
    1. Segment profit of $36.0 million; segment margin2 of 52.5 percent, up 310 basis points year-over-year;
    2. On-track for third quarter of 2012 opening of company-controlled data centers in Los Angeles and Atlanta;
  • Kevin Dotts named as Chief Financial Officer.

ATLANTA, July 26, 2012 — Internap Network Services Corporation (NASDAQ: INAP), a provider of intelligent IT Infrastructure services, today announced financial results for the second quarter of 2012.

“We were pleased to deliver our fifth consecutive quarter of revenue growth and see this as a positive indication of successful execution of our strategic plan. Further, the growth from the data center services segment, particularly bolstered by growth from the hosting service lines, is further evidence of the benefits from the Voxel acquisition,” said Eric Cooney, President and Chief Executive Officer of Internap. “As we continue into the second half of 2012, the Internap team continues to diligently pursue opportunities to accelerate the profitable growth of the business and is keen to lay the foundation for a successful 2013.”

Additionally, Internap has appointed Kevin Dotts as Chief Financial Officer effective August 30, 2012. Dotts will report directly to Eric Cooney and will oversee Internap’s financial operations, information technology, investor relations and facilities organizations. John Maggard, the interim Chief Financial Officer, will continue in his prior role as Vice President and Controller. Dotts joins Internap with 25 years of financial leadership experience spanning a range of industries including telecommunications and internet services, energy, and broadcast and cable media. He has served as Chief Financial Officer at EarthLink and Culligan International Company and spent 15 years in progressively senior positions at General Electric after successfully completing GE’s financial management program. “We are very pleased to announce the appointment of Kevin Dotts as our Chief Financial Officer,” said Cooney. “Kevin’s experience as a seasoned, public-company Chief Financial Officer, combined with his intimate familiarity with the IT services business, positions him well to hit the ground running as a key member of Internap’s executive leadership team.”

Second Quarter 2012 Financial Summary

Revenue

  • Revenue totaled $68.7 million compared with $60.4 million in the second quarter of 2011 and $67.0 million in the first quarter of 2012. Revenue from data center services increased year-over-year and sequentially. IP services revenue decreased compared with the second quarter of 2011 and slightly increased sequentially.
  • Data center services revenue improved 28 percent year-over-year and 4 percent sequentially to $41.5 million. The majority of this year-over-year revenue increase was attributable to organic growth in the data center services segment, but was also positively impacted by the fourth quarter 2011 acquisition of Voxel. The sequential increase was supported by higher revenue per net sellable square foot and increased occupancy.
  • IP services revenue decreased 3 percent year-over-year and increased 0 percent sequentially to $27.2 million. The year-over-year decrease was driven by per unit price declines in IP. The sequential increase was driven by non-recurring IP equipment sales.
    • Net (Loss) Income

      • GAAP net loss was $(2.0) million, or $(0.04) per share, compared with GAAP net loss of $(2.6) million, or $(0.05) per share, in the second quarter of 2011 and GAAP net income of $0.1 million, or $0.00 per share, in the first quarter of 2012.
      • Normalized net income, which excludes the impact of stock-based compensation expense and items that management considers non-recurring, was $0.3 million, or $0.01 per share. Normalized net loss was $(0.3) million, or $(0.01) per share, in the second quarter of 2011. Normalized net income was $1.6 million or $0.03 per share, in the first quarter of 2012.

      Segment Profit and Adjusted EBITDA

      • Segment profit totaled $36.0 million in the second quarter, an increase of 21 percent year-over-year and 0 percent sequentially. Segment margin was 52.5 percent, increasing 310 basis points compared with the second quarter of 2011. Segment margin decreased 100 basis points compared with the first quarter of 2012.
      • Segment profit in data center services was $18.8 million, or 45.4 percent of data center services revenue. IP services segment profit was $17.2 million, or 63.3 percent of IP services revenue. An increasing proportion of higher-margin services, specifically colocation sold in company controlled data centers and hosting services, benefited data center services segment profit compared with the second quarter of 2011. Higher seasonal power costs drove a decrease in data center segment profit compared with the first quarter of 2012. Data center services segment margin increased 620 basis points year-over-year and decreased 210 basis points sequentially to 45.4 percent. IP services segment profit increased 1 percent compared with the second quarter of 2011. Sequentially, IP segment profit increased 2 percent. Lower network costs primarily contributed to the year-over-year and sequential increases in segment margins. IP services segment margin increased 210 basis points year-over-year and increased 90 basis points sequentially to 63.3 percent.
      • Adjusted EBITDA totaled $12.2 million in the second quarter, a 19 percent increase compared with the second quarter of 2011 and flat relative to Adjusted EBITDA in the first quarter of 2012. Adjusted EBITDA margin was 17.7 percent in the second quarter of 2012, up 70 basis points year-over-year and a decrease of 60 basis points sequentially. Higher operating costs in the second quarter were more than offset by improved segment profit relative to the second quarter of 2011. Sequentially, an increase in cash operating expenses related to our brand awareness program and Voxel integration fees outweighed the quarter-over-quarter increase in segment profit.

      Balance Sheet and Cash Flow Statement

      • Cash and cash equivalents totaled $27.6 million at June 30, 2012. Total debt was $119.3 million, net of discount, at the end of the quarter, including $47.6 million in capital lease obligations.
      • Cash generated from operations for the three months ended June 30, 2012 was $6.6 million. Capital expenditures over the same period were $22.7 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 approximately 3,700 customers under contract at the end of the second quarter 2012.
      • Internap’s Santa Clara data center won Silicon Valley Power’s 2012 Energy Innovator Award, which recognizes one organization annually that exhibits superior efforts in supporting energy efficiency and renewable energy. Implementation of a wide range of conservation strategies at this facility resulted in a 49 percent reduction in overall energy use as compared to similar building types and a perfect score of 100 from the Environmental Protection Agency’s Energy Performance Rating System.
      • The Technology Services Industry Association (TSIA) recognized Internap as a Certified Support Excellence Center (CSSEC). Internap achieved certification in the Support Staff Excellence (SSE) program, offered by TSIA and delivered by Impact Learning Systems (ILS), which is a powerful staff development program that enables the delivery of a superior customer service experience through the development of the most critical service delivery resource a company has: its people.

      1. Adjusted EBITDA and Normalized Net Income (Loss) are non-GAAP financial measures and are defined 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 Income (Loss) are contained in the tables entitled “Reconciliation of Loss from Operations to Adjusted EBITDA,” and “Reconciliation of Net (Loss) Income and Basic and Diluted Net (Loss) Income Per Share to Normalized Net Income (Loss) and Basic and Diluted Normalized Net Income (Loss) Per Share” in the attachment.

      2. Segment profit and segment margin are non-GAAP financial measures and are defined in an attachment to this press release entitled “Non-GAAP (Adjusted) Financial Measures.” Reconciliations between GAAP information 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.

      Conference Call Information:
      Internap’s second quarter 2012 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 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, July 26, 2012 at 8 p.m. EDT through Wednesday, August 1, 2012 at 855-859-2056 using the replay code 99611729. International callers can listen to the archived event at 404-537-3406 with the same code.

      About Internap
      Transform your IT Infrastructure into a competitive advantage with IT IQ from Internap, intelligent IT Infrastructure solutions that combine unmatched performance and platform flexibility. Since 1996, thousands of enterprises have entrusted Internap to deliver their online applications across our portfolio of connectivity, colocation, managed hosting, cloud and hybrid services. For more information, visit our blog at http://www.internap.com/blog, or follow us on Twitter at http://twitter.com/internap.

      Forward-Looking Statements
      This press release contains forward-looking statements. These forward-looking statements include statements related to our strategy to drive long-term profitable growth, our expectations regarding the expansion of our hosting capabilities and our efforts to integrate Voxel into our business. 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 our ability to achieve or sustain profitability; our ability to expand margins and drive higher returns on investment; our ability to successfully integrate Voxel into our business; our ability to complete expansion of company-controlled data centers within the expected timeframe; our ability to sell into new 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.

      ###

      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