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Internap Reports Third Quarter 2011 Financial Results
Oct 27, 2011 (04:10 PM EDT)


-- Revenue of $62.0 million compared with $60.3 million in the prior year's quarter

-- Segment profit(1) of $31.2 million; segment margin(1) of 50.4 percent, up 270 basis points year-over-year;

-- Adjusted EBITDA(2) of $11.3 million, up 23 percent over the third quarter of 2010;

-- Adjusted EBITDA margin(2) of 18.2 percent, up 300 basis points year-over-year;

-- Announces launch of comprehensive enterprise cloud services.

ATLANTA, Oct. 27, 2011 /PRNewswire/ -- Internap Network Services Corporation (NASDAQ: INAP), 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."

Third Quarter 2011 Financial Summary




















3Q 2011


3Q 2010


2Q 2011


YoY
Growth


QoQ
Growth

Revenues:

















Data center services


$  

34,114


$

31,550


$

32,481



8

%


5

%

IP services



27,900



28,765



27,929



-3

%


0

%

Total Revenues


$

62,014


$

60,315


$

60,410



3

%


3

%


















Operating Expenses


$

62,439


$

60,851


$

62,081



3

%


1

%


















GAAP Net Loss


$

(1,788)


$

(1,662)


$

(2,612)



n/m



n/m



















Normalized Net (Loss) Income(2)


$

(575)


$

(548)


$

(319)



n/m



n/m



















Segment Profit


$

31,227


$

28,748


$

29,841



9

%


5

%

Segment Profit Margin



50.4

%


47.7

%


49.4

%


270 BPS



100 BPS



















Adjusted EBITDA


$

11,263


$

9,145


$

10,276



23

%


10

%

Adjusted EBITDA Margin



18.2

%


15.2

%


17.0

%


300 BPS



120 BPS


n/m = not meaningful



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.


(1)


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 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.  



(2)

Adjusted 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.

INTERNAP NETWORK SERVICES CORPORATION

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share amounts)



Three Months Ended


September 30,


2011


2010

Revenues:




  Data center services

$ 34,114


$ 31,550

  Internet protocol (IP) services

27,900


28,765

      Total revenues

62,014


60,315





Operating costs and expenses:




  Direct costs of network, sales and services, exclusive of




     depreciation and amortization, shown below:




        Data center services

20,480


20,405

        IP services

10,307


11,162

  Direct costs of customer support

5,407


5,033

  Direct costs of amortization of acquired technologies

875


979

  Sales and marketing

7,314


7,451

  General and administrative

8,333


8,233

  Depreciation and amortization

9,647


7,601

  (Gain) loss on disposal of property and equipment, net

(47)


(13)

  Restructuring

123


-





Total operating costs and expenses

62,439


60,851





Loss from operations

(425)


(536)









Non-operating expense (income):




  Interest income

-


(2)

  Interest expense

1,166


618

  Other, net

20


4

Total non-operating expense (income)

1,186


620





Loss before income taxes and equity in (earnings) of




  equity method investment

(1,611)


(1,156)

Provision for income taxes

275


634

Equity in (earnings) of equity-method investment, net of taxes

(98)


(128)





Net loss

$ (1,788)


$ (1,662)





Basic and diluted net loss per share

$   (0.04)


$   (0.03)





Weighted average shares outstanding used in computing basic




   and diluted net loss per share

50,217


50,026



INTERNAP NETWORK SERVICES CORPORATION

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except par value amounts)








September 30,


December 31,


2011


2010





ASSETS




Current assets:




Cash and cash equivalents

$            34,289


$          59,582

Accounts receivable, net of allowance for doubtful accounts of $1,754 and $1,883, respectively

18,898


17,588

Prepaid expenses and other assets

11,349


11,217





Total current assets

64,536


88,387





Property and equipment, net

184,402


142,289

Investment

2,846


2,265

Intangible assets, net

12,070


14,698

Goodwill

39,464


39,464

Deposits and other assets

4,731


3,600

Deferred tax asset, net

2,173


2,439

Total assets

$          310,222


$        293,142





LIABILITIES AND STOCKHOLDERS' EQUITY




Current liabilities:




Accounts payable

$            30,589


$          25,383

Accrued liabilities

7,869


8,975

Deferred revenues

2,388


3,268

Capital lease obligations

607


1,071

Term loan, less discount of $118 and $116, respectively

883


884

Restructuring liability

2,664


2,691

Other current liabilities

145


135

Total current liabilities

45,145


42,407





Deferred revenues

2,240


2,134

Capital lease obligations

36,683


19,139

Term loan, less discount of $237 and $328, respectively

17,763


18,422

Restructuring liability

4,937


5,273

Deferred rent

16,309


16,655

Other long-term liabilities

458


501

Total liabilities

123,535


104,531









Commitments and contingencies




Stockholders' equity:




Preferred stock, $0.001 par value; 20,000 shares authorized; no shares issued




or outstanding

-


-

Common stock, $0.001 par value; 120,000 shares authorized; 52,483 and 52,017 shares




outstanding, respectively

53


52

Additional paid-in capital

1,234,119


1,229,684

Treasury stock, at cost; 221 and 115 shares, respectively

(1,212)


(520)

Accumulated deficit

(1,046,070)


(1,040,170)

Accumulated items of other comprehensive loss

(203)


(435)

Total stockholders' equity

186,687


188,611

Total liabilities and stockholders' equity

$          310,222


$        293,142



INTERNAP NETWORK SERVICES CORPORATION

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)



Nine Months Ended


September 30,


2011


2010

Cash Flows from Operating Activities:




Net loss

$ (5,900)


$ (3,192)

Adjustments to reconcile net loss to net cash provided by operating activities:




  Depreciation and amortization

29,093


25,325

  Loss on disposal of property and equipment, net

37


7

  Provision for doubtful accounts

793


1,088

  Equity in (earnings) from equity-method investment

(333)


(277)

  Non-cash changes in deferred rent

(345)


200

  Stock-based compensation expense

2,990


3,551

  Deferred income taxes

334


462

  Other, net

848


619

Changes in operating assets and liabilities:




  Accounts receivable

(2,103)


(2,289)

  Prepaid expenses, deposits and other assets

(1,338)


(1,587)

  Accounts payable

5,206


7,051

  Accrued and other liabilities

(1,106)


(1,314)

  Deferred revenues

(775)


(904)

  Accrued restructuring liability

(364)


(559)

Net cash flows provided by operating activities

27,037


28,181





Cash Flows from Investing Activities:




Purchases of property and equipment

(50,937)


(43,234)

Proceeds from disposal of property and equipment

28


12

Maturities of investments in marketable securities

-


7,000

Net cash flows used in investing activities

(50,909)


(36,222)





Cash Flows from Financing Activities:




Proceeds from credit agreements

-


58,500

Principal payments on credit agreements

(750)


(58,500)

Payments on capital lease obligations

(903)


(204)

Proceeds from exercise of stock options

1,062


3,187

Tax withholdings related to net share settlements of restricted stock awards

(691)


(350)

Other, net

(100)


(218)

Net cash flows (used in) provided by financing activities

(1,382)


2,415

Effect of exchange rates on cash and cash equivalents

(39)


11

Net decrease in cash and cash equivalents

(25,293)


(5,615)

Cash and cash equivalents at beginning of period

59,582


73,926

Cash and cash equivalents at end of period

$ 34,289


$ 68,311



INTERNAP NETWORK SERVICES CORPORATION

NON-GAAP (ADJUSTED) FINANCIAL MEASURES



In addition to providing financial measurements based on accounting principles generally accepted in the United States of America ("GAAP"), Internap has historically provided additional financial measures that are not prepared in accordance with GAAP ("non-GAAP"), including adjusted EBITDA, normalized net income (loss), normalized diluted shares outstanding, segment profit and segment margin. The most directly comparable GAAP equivalent to adjusted EBITDA and normalized net income (loss) is loss from operations and net loss, respectively. The most directly comparable GAAP equivalent to normalized diluted shares outstanding is diluted common shares outstanding.

We define non-GAAP measures as follows:

  • Adjusted EBITDA is loss from operations plus depreciation and amortization, loss on disposals of property and equipment, impairments and restructuring and stock-based compensation.
  • Adjusted EBITDA margin is adjusted EBITDA as a percentage of revenues.
  • Normalized net income (loss) is net income (loss) plus impairments and restructuring and stock-based compensation.
  • Normalized diluted shares outstanding are diluted shares of common stock outstanding used in GAAP net loss per share calculations, excluding the dilutive effect of stock-based compensation using the treasury stock method.
  • Normalized net income (loss) per share is normalized net income (loss) divided by basic and normalized diluted shares outstanding.
  • Segment profit is segment revenues less direct costs of network, sales and services, exclusive of depreciation and amortization for the segment, as presented in the notes to our consolidated financial statements. 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 revenues.

We detail reconciliations of our non-GAAP financial measures to the most directly comparable financial measure in the reconciliations of GAAP to non-GAAP measures below. We believe that presentation of these non-GAAP financial measures provides useful information to investors regarding our results of operations.

We believe that excluding depreciation and amortization and loss on disposals of property and equipment, as well as impairments and restructuring, to calculate adjusted EBITDA provides supplemental information and an alternative presentation that is useful to investors' understanding of Internap's core operating results and trends. Not only are depreciation and amortization expenses based on historical costs of assets that may have little bearing on present or future replacement costs, but also they are based on management estimates of remaining useful lives. Loss on disposals of property and equipment is also based on historical costs of assets that may have little bearing on replacement costs. Impairments and restructuring expenses primarily reflect goodwill impairments and subsequent plan adjustments in sublease income assumptions for certain properties included in our previously disclosed restructuring plans.

INTERNAP NETWORK SERVICES CORPORATION

NON-GAAP (ADJUSTED) FINANCIAL MEASURES (Continued)



Internap believes that impairment and restructuring charges are unique costs that we do not expect to recur on a regular basis, and consequently, we do not consider these charges as a normal component of expenses related to current and ongoing operations.

Similarly, we believe that excluding the effects of stock-based compensation from non-GAAP financial measures provides supplemental information and an alternative presentation useful to investors' understanding of Internap's core operating results and trends. Investors have indicated that they consider financial measures of our results of operations excluding stock-based compensation as important supplemental information useful to their understanding of our historical results and estimating our future results.

We also believe that, in excluding the effects of stock-based compensation, our non-GAAP financial measures provide investors with transparency into what management uses to measure and forecast our results of operations, to compare on a consistent basis our results of operations for the current period to that of prior periods and to compare our results of operations on a more consistent basis against that of other companies, in making financial and operating decisions and to establish certain management compensation.

Stock-based compensation is an important part of total compensation, especially from the perspective of employees. We believe, however, that supplementing GAAP net loss and net loss per share information by providing normalized net income (loss) and normalized net income (loss) per share, excluding the effect of impairments, restructuring and stock-based compensation in all periods, is useful to investors because it enables additional and more meaningful period-to-period comparisons. We consider normalized diluted shares to be another important indicator of our overall performance because it eliminates the effect of non-cash items.

Adjusted EBITDA is not a measure of liquidity calculated in accordance with GAAP, and should be viewed as a supplement to — not a substitute for — our results of operations presented on the basis of GAAP. Adjusted EBITDA does not purport to represent cash flow provided by operating activities as defined by GAAP. Our statements of cash flows present our cash flow activity in accordance with GAAP. Furthermore, adjusted EBITDA is not necessarily comparable to similarly-titled measures reported by other companies.

We believe adjusted EBITDA is used by and is useful to investors and other users of our financial statements in evaluating our operating performance because it provides them with an additional tool to compare business performance across companies and across periods. We believe that:

  • EBITDA is widely used by investors to measure a company's operating performance without regard to items such as interest expense, income taxes, depreciation and amortization, which can vary substantially from company-to-company depending upon accounting methods and book value of assets, capital structure and the method by which assets were acquired; and
  • investors commonly adjust EBITDA information to eliminate the effect of disposals of property and equipment, impairments, restructuring and stock-based compensation which vary widely from company-to-company and impair comparability.

INTERNAP NETWORK SERVICES CORPORATION

NON-GAAP (ADJUSTED) FINANCIAL MEASURES (Continued)



Our management uses adjusted EBITDA:

  • as a measure of operating performance to assist in comparing performance from period-to-period on a consistent basis;
  • as a measure for planning and forecasting overall expectations and for evaluating actual results against such expectations; and
  • in communications with the board of directors, analysts and investors concerning our financial performance.

Our presentation of segment profit and segment margin excludes direct costs of customer support, depreciation and amortization in order to allow investors to see the business through the eyes of management. Management views direct costs of network, sales and services as generally less controllable, external costs and management regularly monitors the margin of revenues in excess of these direct costs. Similarly, we view the costs of customer support to also be an important component of costs of revenues but believe that the costs of customer support to be more within our control and to some degree discretionary as we can adjust those costs by hiring and terminating employees.

Segment margin is an important metric to our investors and analysts, as we have regularly discussed and disclosed the effects of third party vendors' pricing declines and the corresponding effect on our revenues. The presentation of segment margin highlights the impact of the pricing declines and allows investors and analysts to evaluate our revenue generation performance relative to direct costs of network, sales and services. Conversely, we have much greater latitude in controlling the compensation component of costs of revenues, represented by customer support, and we analyze this component separately from the direct external costs.

We also have excluded depreciation and amortization from segment profit and segment margin because, as noted above, they are based on estimated useful lives of tangible and intangible assets. Further, depreciation and amortization are based on historical costs incurred to build out our deployed network and the historical costs of these assets may not be indicative of current or future capital expenditures.

Although we believe, for the foregoing reasons, that our presentation of non-GAAP financial measures provides useful supplemental information to investors regarding our results of operations, our non-GAAP financial measures should only be considered in addition to, and not as a substitute for, or superior to, any measure of financial performance prepared in accordance with GAAP.

Use of non-GAAP financial measures is subject to inherent limitations because they do not include all the expenses that must be included under GAAP and because they involve the exercise of judgment of which charges should properly be excluded from the non-GAAP financial measure. Management accounts for these limitations by not relying exclusively on non-GAAP financial measures, but only using such information to supplement GAAP financial measures. Our non-GAAP financial measures may not be the same non-GAAP measures, and may not be calculated in the same manner, as those used by other companies.

INTERNAP NETWORK SERVICES CORPORATION

RECONCILIATION OF LOSS FROM OPERATIONS TO ADJUSTED EBITDA

A reconciliation of loss from operations, the most directly comparable GAAP measure, to adjusted EBITDA for each of the periods indicated is as follows (in thousands):  


Three Months Ended


September 30,

2011


June 30,

2011


September 30,

2010

Loss from operations (GAAP)

$         (425)


$          (1,671)


$         (536)

Stock-based compensation

1,090


989


1,114

Depreciation and amortization, including amortization of acquired






  technologies

10,522


9,643


8,580

(Gain) loss on disposal of property and equipment, net

(47)


11


(13)

Restructuring

123


1,304


-

Adjusted EBITDA (non-GAAP)

$      11,263


$         10,276


$        9,145



INTERNAP NETWORK SERVICES CORPORATION

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

Reconciliations of (1) net loss, the most directly comparable GAAP measure, to normalized net income (loss), (2) diluted shares outstanding used in per share calculations, the most directly comparable GAAP measure, to normalized diluted shares used in normalized per share outstanding calculations and (3) net loss per share, the most directly comparable GAAP measure, to normalized net income (loss) per share for each of the periods indicated is as follows (in thousands, except per share data):


Three Months Ended


September 30,

2011


June 30,

2011


September 30,

2010

Net loss (GAAP)

$         (1,788)


$ (2,612)


$         (1,662)

Restructuring

123


1,304


-

Stock-based compensation

1,090


989


1,114

Normalized net (loss) income (non-GAAP)

(575)


(319)


(548)







Normalized net income allocable to participating securities (non-GAAP)

-


-


-

Normalized net loss available to common stockholders (non-GAAP)

$            (575)


$    (319)


$            (548)







Weighted average shares outstanding used in per share calculation:






Basic (GAAP)

50,217


50,174


50,026

Participating securities (GAAP)

1,074


1,086


1,118

Diluted (GAAP)

50,217


50,174


50,026

Add potentially dilutive securities

-


-


-

Less dilutive effect of stock-based compensation under the treasury stock method

-


-


-

Normalized diluted shares (non-GAAP)

50,217


50,174


50,026







Loss per share (GAAP):






Basic and diluted

$           (0.04)


$   (0.05)


$           (0.03)







Normalized net loss per share (non-GAAP):






Basic and diluted

$           (0.01)


$   (0.01)


$           (0.01)



INTERNAP NETWORK SERVICES CORPORATION

SEGMENT PROFIT AND SEGMENT MARGIN

Segment profit and segment margin, which does not include direct costs of customer support, direct costs of amortization of acquired technologies or any other depreciation or amortization, for each of the periods indicated is as follows (dollars in thousands):


Three Months Ended


September 30,

2011


June 30,

2011


September 30,

2010

Revenues:






  Data center services

$         34,114


$ 32,481


$         31,550

  IP services

27,900


27,929


28,765

      Total

62,014


60,410


60,315







  Direct cost of network, sales and services, exclusive of






     depreciation and amortization:






        Data center services

20,480


19,733


20,405

        IP services

10,307


10,836


11,162

      Total

30,787


30,569


31,567







Segment Profit:






  Data center services

13,634


12,748


11,145

  IP services

17,593


17,093


17,603

      Total

$         31,227


$ 29,841


$         28,748







Segment Margin:






  Data center services

40.0%


39.2%


35.3%

  IP services

63.1%


61.2%


61.2%

      Total

50.4%


49.4%


47.7%



(Logo: http://photos.prnewswire.com/prnh/20110426/CL90009LOGO )

Press Contact:

Investor Contact:

Mariah Torpey

Andrew McBath

(781) 418-2404

(404) 302-9700

internap@daviesmurphy.com

ir@internap.com



SOURCE Internap Network Services Corporation