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Press Release -- October 27th, 2011
Source: Internap Network Services
Tags: CDN, Colocation, Datacenter, Exchange, Expansion

Internap Reports Third Quarter 2011 Financial Results

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 $62.0 million compared with $60.3 million in the prior year’s quarter
  • Segment profit1 of $31.2 million; segment margin1 of 50.4 percent, up 270 basis points year-over-year;
  • Adjusted EBITDA2 of $11.3 million, up 23 percent over the third quarter of 2010;
  • Adjusted EBITDA margin2 of 18.2 percent, up 300 basis points year-over-year;
  • Announces launch of comprehensive enterprise cloud services

ATLANTA, GA – October 27, 2011 – Internap Network Services Corporation (NASDAQ:INAP, news, filings), a leading provider of IT Infrastructure services, today announced financial results for the third quarter of 2011.

“We are pleased with Internap’s solid financial results for the third quarter of 2011. Continued strong operational performance drove improvement across the business this quarter as demonstrated by: accelerated revenue growth, higher profitability and increased data center occupancy,” said Eric Cooney, President and Chief Executive Officer of Internap. “Further, we are pleased to see confirmation of our strategic shift to an IT Infrastructure services provider as our company-controlled data center and managed hosting revenue continues to grow at or above market rates. With our on-going data center footprint expansion and the launch of our enterprise cloud services solution, Internap is now unmatched in terms of our IT services platform flexibility and performance.”

Revenue

Third quarter revenue totaled $62.0 million compared with $60.3 million in the third quarter of 2010 and $60.4 million in the second quarter of 2011. Revenue from Data center services increased year-over-year and sequentially. IP services revenue decreased compared with the third quarter of 2010 and was flat sequentially.

  • Data center services revenue increased 8 percent year-over-year and 5 percent sequentially to $34.1 million. Both the year-over-year and the sequential increases in this segment were driven by increased sales of colocation in company-controlled datacenters and accelerating growth in hosting services.
  • IP services revenue in the third quarter totaled $27.9 million – a decrease of 3 percent year-over-year and flat compared with the second quarter of 2011. Per unit price decreases, partly offset by traffic growth, drove the year-over-year decrease in IP services revenue.

Net (Loss) Income

    • GAAP net loss was $(1.8) million, or $(0.04) per share, compared with GAAP net loss of $(1.7) million, or $(0.03) per share, in the third quarter of 2010 and $(2.6) million, or $(0.05) per share, in the second quarter of 2011.
    • Normalized net loss in the third quarter, which excludes the impact of stock-based compensation expense and items that management considers non-recurring, was $(0.6) million, or $(0.01) per share. Normalized net loss was $(0.5) million, or $(0.01) per share, in the third quarter of 2010, and $(0.3) million, or $(0.01) per share, in the second quarter of 2011.

Segment Profit and Adjusted EBITDA

      • Segment profit totaled $31.2 million in the third quarter, an increase of 9 percent year-over-year and a 5 percent sequentially. Third quarter 2011 segment margin was 50.4 percent, an increase of 270 basis points year over year and 100 basis points sequentially.
      • Segment profit in Data center services totaled $13.6 million, or 40.0 percent of Data center services revenue in the third quarter of 2011. IP services segment profit for the quarter was $17.6 million, or 63.1 percent of IP services revenue. Increased colocation revenue generated at company-controlled data centers and higher managed hosting revenue benefited Data center services segment profit relative to both the third quarter of 2010 and the second quarter of 2011. Data center services segment margin increased 470 basis points year-over-year and 80 basis points sequentially to 40.0 percent. Network efficiency programs and lower ISP vendor costs allowed IP services segment profit to remain flat compared with the third quarter of 2010 and drove a 3 percent improvement sequentially. Lower network costs were the primary contributors to the 190 basis point improvement in IP services segment margins compared with both the third quarter of 2010 and the second quarter of 2011.
      • Third quarter 2011 adjusted EBITDA totaled $11.3 million, a 23 percent increase over the third quarter of 2010 and a 10 percent increase over the second quarter of 2011. Adjusted EBITDA margin was 18.2 percent in the third quarter of 2011, up 300 basis points year-over-year and 120 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 segment profit increases in both Data center services and IP services.

Balance Sheet and Cash Flow Statement

      • Cash and cash equivalents totaled $34.3 million at September 30, 2011. Total debt was $55.9 million, net of discount, at the end of the quarter, including $37.3 million in capital lease obligations.
      • Cash generated from operations for the nine months ended September 30, 2011 was $27.0 million. Capital expenditures over the same period were $50.9 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 2,737 customers under contract at the end of the third quarter 2011.
      • Today, we announced that our comprehensive enterprise cloud services are now generally available. With four access options that include both feature-rich VMware® platforms as well as a lower cost, open source solution built on OpenStack, Internap’s Enterprise Cloud is one of the most flexible, high-performance services available today.
      • We also announced today that our public and private cloud services attained VMware vCloud® Powered validation. As part of the VMware partner ecosystem, Internap delivers public and private cloud services that are vCloud Powered, providing enterprise customers with the benefits of VMware virtualization in a completely managed cloud environment.
      • Earlier this week, we announced that our CDN Mobile Service, featuring ‘publish once –deliver to any device’ technology, would be available in the fourth quarter. This service allows customers to upload a single file which is then dynamically adapted for viewing on multiple target mobile devices including Apple iPhone and iPad, and Android, Silverlight and Flash based devices.

1Segment 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 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 and Normalized Net (Loss) Income are non-GAAP financial measures and are defined in an attachment to this press release entitled “Non-GAAP (Adjusted) Financial Measures.” Reconciliations between GAAP 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 and Basic and Diluted Net Loss Per Share to Normalized Net (Loss) Income and Basic and Diluted Normalized Net (Loss) Income Per Share” in the attachment.

Conference Call Information
Internap’s third quarter 2011 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 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 27, 2011 at 8 p.m. EDT through Wednesday, November 2, 2011 at 855-859-2056 using the replay code 18857640. International callers can listen to the archived event at 404-537-3406 with the same code.

About Internap
Internap provides intelligent IT Infrastructure services that enable our customers to focus on their core business, improve service levels and lower the cost of IT operations. Our enterprise IP, CDN, colocation, managed hosting and cloud solutions are differentiated by unparalleled levels of performance, availability and support. Since 1996, thousands of businesses have entrusted Internap with the delivery and protection of their online applications. Transform your IT infrastructure into a competitive advantage with IT IQ from Internap. For more information, visit http://www.internap.com/, 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 the flexibility of our Enterprise Cloud solution and the availability and features of our CDN Mobile Service. 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 the actual performance of our IT Infrastructure services; our ability to achieve or sustain profitability; our ability to expand margins and drive higher returns on investment; our ability to complete expansion of company-controlled data centers within the expected timeframe; our ability to sell into new data center space; 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
Andrew McBath
404.302.9700
ir@internap.com

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