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 $68.1 million up 10 percent versus the third quarter of 2011;
  • Adjusted EBITDA1of $12.5 million up 11 percent versus the third quarter of 2011;
  • Premium, company-controlled data center space deployed in Los Angeles and Atlanta in the third quarter of 2012;
  • Announces intention to construct a new premium, company-controlled data center in the New York Metro market.

ATLANTA — October 25, 2012 — Internap Network Services Corporation (NASDAQ: INAP), a provider of intelligent IT Infrastructure services,today announced financial results for the third quarter of 2012.

“Continued growth in our data center services segment combined with a keen focus on operational excellence enabled the solid growth in Adjusted EBITDA profitability during the third quarter of 2012,” said Eric Cooney, President and Chief Executive Officer of Internap. “As the successful sale of our colocation, hosting and cloud services fills capacity in our existing NY metro data centers, we have made the decision to expand to support continued growth in this key metro market. We are announcing today that we have secured a property and expect to bring a new premium data center on-line in the NY metro market during the fourth quarter of 2013.”

Third Quarter 2012 Financial Summary

Revenue

  • Revenue totaled $68.1 million compared with $62.0 million in the third quarter of 2011 and $68.7 million in the second quarter of 2012. Revenue from data center services increased year-over-year and sequentially. IP services revenue decreased compared with both the third quarter of 2011 and the second quarter of 2012.
  • Data center services revenue improved 24 percent year-over-year and 2 percent sequentially to $42.1 million. The year-over-year revenue increase was attributable to organic growth in the data center services segment and to the fourth quarter 2011 acquisition of Voxel. The sequential increase was driven by increased sales of colocation in company-controlled data centers and favorable growth in hosting services.
  • IP services revenue totaled $26.0 million, a decrease of 7 percent compared with the third quarter of 2011 and 4 percent sequentially, as traffic growth was offset by per unit price declines in IP. The sequential decline was also a result of higher non-recurring IP equipment sales in the second quarter of 2012.

Net (Loss) Income

  • GAAP net loss was $(2.5) million, or $(0.05) per share, compared with $(1.8) million, or $(0.04) per share, in the third quarter of 2011 and $(2.0) million, or $(0.04) per share, in the second quarter of 2012.
  • Normalized net loss, which excludes the impact of stock-based compensation expense and items that management considers non-recurring, was $(1.0) million, or $(0.02) per share, compared with $(0.6) million, or $(0.01) per share, in the third quarter of 2011. Normalized net income was $0.3 million or $0.01 per share, in the second quarter of 2012.

Segment Profit and Adjusted EBITDA

  • Segment profit totaled $34.6 million in the third quarter, an increase of 11 percent year-over-year. Sequentially, segment profit declined 4 percent. Segment margin2 was 50.7 percent, increasing 30 basis points compared with the third quarter of 2011. Segment margin decreased 180 basis points compared with the second quarter of 2012.
  • Segment profit in data center services was $18.6 million, or 44.1 percent of data center services revenue. IP services segment profit was $16.0 million, or 61.4 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 third quarter of 2011. Higher seasonal power costs drove a decrease in data center segment profit compared with the second quarter of 2012. Data center services segment margin increased 410 basis points year-over-year and decreased 130 basis points sequentially to 44.1 percent. IP services segment profit decreased 9 percent compared with the third quarter of 2011. Sequentially, IP segment profit decreased 7 percent. Lower non-recurring IP equipment sales and IP transit revenue drove the year-over-year and sequential decreases in segment margins. IP services segment margin decreased 170 basis points year-over-year and 190 basis points sequentially to 61.4 percent.
  • Adjusted EBITDA totaled $12.5 million in the third quarter, an 11 percent increase compared with the third quarter of 2011 and a 2 percent increase over the second quarter of 2012. Adjusted EBITDA margin was 18.3 percent in the third quarter of 2012, up 10 basis points year-over-year and 60 basis points sequentially. The year-over-year increase in Adjusted EBITDA was attributable to increased segment profit in our data center services segment. The sequential Adjusted EBITDA improvement was driven by lower cash operating expenses.

Balance Sheet and Cash Flow Statement

  • Cash and cash equivalents totaled $26.4 million at September 30, 2012. Total debt was $137.6 million, net of discount, at the end of the quarter, including $49.5 million in capital lease obligations.
  • Cash generated from operations for the three months ended September 30, 2012 was $7.8 million. Capital expenditures over the same period were $25.1 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 at September 30, 2012.
  • In September, we opened our Los Angeles premium data center, which provides the highest levels of scalability, redundancy and energy efficiency. This facility will total 55,000 net sellable square feet at full deployment and features the latest in data center technology including a concurrently maintainable N+1 architecture, high-power density and award winning green initiatives. State-of-the art technology provides for high-power density configurations of up to 12kW per rack and high efficiency cooling options.
  • We expanded our Atlanta premium data center, which features the latest in data center design elements including modular Uninterruptible Power Supply units and high-efficiency cooling solutions to enable power configurations of up to 12kW per rack. This facility will add an incremental 31,000 net sellable square feet at full deployment and is designed to seamlessly connect colocation, managed hosting and cloud environments through a secure Layer 2 Virtual Local Area Network.
  • We announced that we will construct a new premium, company-controlled data center in the New York Metro market that we expect to be operational in the fourth quarter of 2013. Like Internap’s other company-controlled data centers, this facility will offer customers a highly-reliable and flexible IT Infrastructure platform. It will maintain a full range of customer amenities and will feature a modular power design that enables our customers to increase their power densities to over 12kW per rack without taking on additional space.
  • In August, we amended our credit facility to increase borrowing capacity by $30 million, bringing our total bank facility to $137.25 million.
  • Internap won top honors in the Golden Bridge Awards for our Agile Hosting Service, selected as Best Cloud Computing Service in the New Products and Innovations category.
  • Internap received the 2012 Cloud Computing Excellence Award for our Agile Hosting Service.
  • The U.S. Green Building Council recently awarded Leadership in Energy and Environmental Design (LEED) Gold certification to our Dallas data center. In addition to receiving LEED certification, this facility became the first commercial data center in Texas to achieve the Green Building Initiative’s Green Globe® certification in February 2012.
  • Internap was named to the InformationWeek 500 List of Top Technology Innovators for Green Achievements. Ranked number 65 on the list, we were recognized for energy efficiency and sustainability practices at our state-of-the-art Santa Clara, California data center.

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 (Loss) Income 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 (Loss) Income and Basic and Diluted Normalized Net (Loss) Income 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 third quarter 2012 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 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, October 25, 2012 at 8 p.m. ET through Wednesday, October 31, 2012 at 855-859-2056 using the replay code 40810615. 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.

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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