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 $84.7 million, up 22% versus the third quarter of 2013
  • Data center services revenue of $61.6 million, up 36% versus the third quarter of 2013
  • Segment margin1 of 56.1%, up 320 basis points year-over-year
  • Adjusted EBITDA2 of $19.7 million increased 39% versus the third quarter of 2013
  • Adjusted EBITDA margin2 of 23.3%, up 290 basis points year-over-year

ATLANTA, GA – October 28, 2014 – Internap Network Services Corporation (NASDAQ: INAP), a provider of high-performance Internet infrastructure services, today announced financial results for the third quarter of 2014.

“The solid financial results for the third quarter of 2014 are most notable for the demonstrated strong operating leverage in the business as reflected in record adjusted EBITDA and accelerated adjusted EBITDA margin expansion. Our integrated platform of high-performance hybrid Internet infrastructure services continues to provide a compelling basis for competitive differentiation,” said Eric Cooney, President and Chief Executive Officer of Internap. “For the fourth quarter of 2014, we are guiding for further acceleration of profitable growth supported by strong performance in several areas including: our new Secaucus, New Jersey datacenter, our bare-metal cloud offering and the successful cross-sale of the bare-metal products through the iWeb on-line/e-commerce route to market.”

Third Quarter 2014 Financial Summary
Revenue

  • Revenue totaled $84.7 million in the third quarter, an increase of 22% year-over-year and 1% sequentially. The increase in revenue was due to growth in our data center services segment, which includes $11.9 million of revenue attributable to iWeb, which we acquired in November 2013.
  • Data center services revenue totaled $61.6 million in the third quarter, an increase of 36% year-over-year and flat sequentially. The year-over-year increase was attributable to increased sales of core data center services including iWeb.
  • IP services revenue totaled $23.0 million in the third quarter, a decrease of 4% year-over-year and an increase of 2% sequentially. The year-over-year decrease was driven by per unit price declines in IP and the loss of legacy contracts at higher effective prices, partially offset by an increase in overall traffic. Sequentially, non-recurring revenue offset per unit price declines in IP.

Net Loss

  • GAAP net loss was $(9.4) million, or $(0.18) per share, compared with $(4.0) million, or $(0.08) per share, in the third quarter of 2013 and $(11.2) million, or $(0.22) per share, in the second quarter of 2014.
  • Normalized net loss was $(7.5) million, or $(0.15) per share, compared with normalized net loss of $(2.1) million, or $(0.04) per share, in the third quarter of 2013, and normalized net loss of $(7.7) million, or $(0.15) per share, in the second quarter of 2014.

Segment Profit and Adjusted EBITDA

  • Segment profit totaled $47.5 million in the third quarter, a 29% increase compared with the third quarter of 2013 and unchanged from the second quarter of 2014. Segment margin was 56.1%, an increase of 320 basis points year-over-year and a decrease of 40 basis points sequentially.
  • Data center services segment profit totaled $33.9 million in the third quarter, a 52% increase compared with the third quarter of 2013 and a 3% decrease from the second quarter of 2014. Data center services segment margin was 55.0% in the third quarter, up 590 basis points year-over-year and down 170 basis points sequentially. An increasing proportion of higher-margin services, specifically colocation sold in company-controlled data centers, hosting and cloud services and the contribution from iWeb, drove data center services segment profit and margin higher compared with the third quarter of 2013. Higher seasonal power costs resulted in a decrease in data center services segment profit and margin compared with the second quarter of 2014.
  • IP services segment profit totaled $13.6 million in the third quarter, a 6% decrease compared with the third quarter of 2013 and a 7% increase from the second quarter of 2014. IP services segment margin was 59.0% in the third quarter, down 100 basis points year-over-year and up 310 basis points sequentially. Lower IP transit revenue and the loss of legacy contracts led to a decrease in IP services segment profit and margin compared with the third quarter of 2013. The renegotiation of vendor contracts and cost reduction efforts resulted in an increase in IP services segment profit and margin compared with the second quarter of 2014.
  • Adjusted EBITDA totaled $19.7 million in the third quarter, a 39% increase compared with the third quarter of 2013 and a 7% increase from the second quarter of 2014. Adjusted EBITDA margin was 23.3% in the third quarter, up 290 basis points year-over-year and 130 basis points sequentially. The year-over-year increase in adjusted EBITDA and adjusted EBITDA margin was attributable to increased segment profit in our data center services segment, including iWeb. The sequential adjusted EBITDA and adjusted EBITDA margin improvement was driven by lower cash operating expenses.

Balance Sheet and Cash Flow Statement

  • Cash and cash equivalents totaled $25.5 million at September 30, 2014. Total debt was $354.6 million, net of discount, at the end of the quarter, including $60.2 million in capital lease obligations.
  • Cash generated from operations for the three months ended September 30, 2014 was $11.9 million. Capital expenditures over the same period were $14.8 million.

Business Outlook

  • For the fourth quarter of 2014, we expect revenue to range between $84.0 million and $85.0 million and adjusted EBITDA to range between $21.5 million and $22.5 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 opened Phase 2 of our Secaucus, New Jersey data center, which doubled the available space and power, adding an incremental 13,000 net sellable square feet. This facility will span 55,000 net sellable square feet at full deployment and features the latest in data center design elements to enable power configurations of up to 18kW per rack and concurrent maintainability for complete infrastructure redundancy. We designed this hybrid-enabled facility to seamlessly connect colocation, hosting, virtual and bare-metal cloud environments through a secure Layer 2 Virtual Local Area Network.
  • Internap was awarded a bronze Stevie® award in the New Product or Service of the Year – Software – Big Data Solution category at the 12th Annual American Business Awards. The award honors Internap and Aerospike for creating the industry’s first “fast big data” platform, which runs Aerospike’s hybrid NoSQL databases on Internap’s bare-metal servers.
  • We had approximately 12,000 customers at September 30, 2014.

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.

Conference Call Information
Internap’s third quarter 2014 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 Tuesday, October 28, 2014 at 8 p.m. ET through Monday, November 3, 2014 at 855-859-2056 using replay code 20548411. 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 expectations for revenue and adjusted EBITDA in the fourth quarter of 2014, driven by expected performance in our Secaucus, New Jersey datacenter, our bare-metal cloud offering and the successful cross-sale of the bare-metal products through the iWeb on-line/e-commerce route to market. 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 execute on our business strategy; 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 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