ATLANTA, Aug. 4, 2016 /PRNewswire/ -- Internap Corporation (NASDAQ: INAP), a provider of high-performance Internet infrastructure services, today announced financial results for the second quarter of 2016.

"We are pleased with the improvement in adjusted EBITDA margin, driven by improved operational efficiencies as a result of the organizational structure changes made in the first quarter. As we previously communicated, churn from a small number of large customers impacted our revenue performance in the second quarter of 2016. We did see revenue begin to stabilize in the second quarter as the major churn events declined and bookings improved. Given our first half 2016 results, we are updating our full-year 2016 guidance," said Michael Ruffolo, President and Chief Executive Officer of Internap. "With a return to sequential revenue growth expected in the second half of 2016, we remain confident in our ability to accelerate profitable growth and drive long-term shareholder value."

Second Quarter 2016 Financial Summary


                                                                                                                                                                               YoY            QoQ

                                                                                           2Q 2016                    2Q 2015                      1Q 2016                   Growth         Growth
                                                                                           -------                    -------                      -------                   ------         ------

     Revenues:

                               Data center and network
                               services                                 $50,459                    $53,521                    $50,872                       -6%                     -1%

                              Cloud and hosting services                $23,856                    $26,911                    $25,052                      -11%                     -5%
                                                                        -------                    -------                    -------

                                                         Total Revenues           $74,315                    $80,432                      $75,924                        -8%            -2%


     Operating Expenses                          $76,789                           $86,270                    $78,125                         -11%                       -2%


     GAAP Net Loss                             $(10,693)                        $(12,534)                  $(9,644)                        -15%                       11%


     Normalized Net Loss(1)                     $(7,300)                        $(10,290)                  $(6,108)                        -29%                       20%


     Segment Profit(2)                           $42,945                           $47,454                    $44,847                         -10%                       -4%

     Segment Profit Margin(2)                      57.8%                            59.0%                     59.1%                   -120 BPS                  -130 BPS


     Adjusted EBITDA                             $20,167                           $19,109                    $20,476                           6%                       -2%

     Adjusted EBITDA Margin                        27.1%                            23.8%                     27.0%                    330 BPS                   10 BPS

Revenue


    --  Revenue totaled $74.3 million in the second quarter, a decrease of 8%
        year-over-year and 2% sequentially. Both decreases were driven by churn
        from a small number of large customers.
    --  Data Center and Network Services revenue totaled $50.5 million in the
        second quarter, a decrease of 6% year-over-year and 1% sequentially.
        Both decreases were attributable to lower IP connectivity revenue
        related to the continued decline in pricing for new and renewing
        customers and the loss of legacy contracts and a decrease in partner
        colocation revenue, offset by an increase in company-controlled
        colocation revenue.
    --  Cloud and Hosting Services revenue totaled $23.9 million in the second
        quarter, a decrease of 11% year-over-year and 5% sequentially. Both
        decreases were driven by churn from a small number of large customers.

Net Loss


    --  GAAP net loss was $(10.7) million, or $(0.21) per share, compared with
        $(12.5) million, or $(0.24) per share, in the second quarter of 2015 and
        $(9.6) million, or $(0.19) per share, in the first quarter of 2016.
    --  Normalized net loss was $(7.3) million, or $(0.14) per share, compared
        with normalized net loss of $(10.3) million, or $(0.20) per share, in
        the second quarter of 2015, and normalized net loss of $(6.1) million,
        or $(0.12) per share, in the first quarter of 2016.

Segment Profit and Adjusted EBITDA


    --  Segment profit totaled $42.9 million in the second quarter, a 10%
        decrease compared with the second quarter of 2015 and a 4% decrease from
        the first quarter of 2016. Segment margin was 57.8%, a decrease of 120
        basis points year-over-year and 130 basis points sequentially.
    --  Data Center and Network Services segment profit totaled $25.8 million in
        the second quarter, a 6% decrease compared with the second quarter of
        2015 and a 3% decrease from the first quarter of 2016. Data Center and
        Network Services segment margin was 51.1% in the second quarter, down 10
        basis points year-over-year and 100 basis points sequentially. Lower IP
        connectivity revenue and partner colocation revenue offset higher
        company-controlled colocation revenue and resulted in a decrease in Data
        Center and Network Services segment profit and segment margin.
    --  Cloud and Hosting Services segment profit totaled $17.1 million in the
        second quarter, a 15% decrease compared with the second quarter of 2015
        and a 7% decrease from the first quarter of 2016. Cloud and Hosting
        Services segment margin was 71.8% in the second quarter, down 270 basis
        points year-over-year and 140 basis points sequentially. Decreased Cloud
        and Hosting Services revenue resulted in declines in segment profit and
        segment margin.
    --  Adjusted EBITDA totaled $20.2 million in the second quarter, a 6%
        increase compared with the second quarter of 2015 and a 2% decrease from
        the first quarter of 2016. Adjusted EBITDA margin was 27.1% in the
        second quarter, up 330 basis points year-over-year and up 10 basis
        points sequentially. The year-over-year increase in adjusted EBITDA and
        adjusted EBITDA margin was attributable to lower cash operating
        expense(4 )primarily from optimizing our cost structure and improved
        marketing program efficiencies. Benefits included a decrease in
        cash-based compensation, a decrease in marketing costs and the
        elimination of non-core functions, primarily the result of our business
        unit realignment. Sequentially, lower segment profit weighed on adjusted
        EBITDA.

Balance Sheet and Cash Flow Statement


    --  Cash and cash equivalents totaled $13.9 million at June 30, 2016. Total
        debt was $377.8 million, net of discount and prepaid costs, at the end
        of the quarter, including $57.7 million in capital lease obligations.

    --  Cash generated from operations for the three months ended June 30, 2016
        was $14.0 million. Capital expenditures over the same period were $14.4
        million.

Business Outlook

Internap updated its financial outlook for full-year 2016:


                                Full-Year 2016              Full-Year 2016

                               Current Guidance           Previous Guidance
                               ----------------           -----------------

    Revenue              $300 million - $305 million $310 million - $320 million

    Adjusted EBITDA        $83 million - $87 million   $80 million - $90 million

    Capital Expenditures   $40 million - $50 million   $40 million - $50 million

__________________________________________________

1 Adjusted 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.

2 Segment 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.

Conference Call Information:

Internap's second quarter 2016 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 Thursday, August 4, 2016 at 8:00 p.m. ET through Wednesday, August 10, 2016 at 855-859-2056 using replay code 41861490. 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 full-year 2016 revenue, adjusted EBITDA and capital expenditures and our ability to accelerate profitable growth and drive long-term shareholder value. Our ability to achieve these forward-looking statements is based on certain assumptions, including our ability to execute on our business strategy, leveraging of multiple routes to market, expanded brand awareness for high-performance Internet infrastructure services and customer churn levels. These assumptions may prove to be inaccurate in the future. Because such forward-looking 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 and drive growth; our ability to maintain current customers and obtain new ones, whether in a cost-effective manner or at all; 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 and existing data center space; the actual performance of our IT infrastructure services; 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.





    Press Contact:         Investor Contact:

    Mariah Torpey          Mary Ann Arico

    (781) 418-2404         (404) 302-9982

    internap@teamlewis.com ir@internap.com
    ---------------------- ---------------



                                                                                   INTERNAP CORPORATION

                                                                 UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

                                                                         (In thousands, except per share amounts)



                                                                                                                      Three Months Ended June 30,              Six Months Ended June 30,
                                                                                                                      ---------------------------            -------------------------

                                                                                                                                  2016                  2015                     2016            2015
                                                                                                                                  ----                  ----                     ----            ----

    Revenues:

       Data center and network services                                                                                        $50,459               $53,521                 $101,331        $107,589

       Cloud and hosting services                                                                                               23,856                26,911                   48,908          53,629
                                                                                                                                ------                ------                   ------          ------

           Total revenues                                                                                                       74,315                80,432                  150,239         161,218
                                                                                                                                ------                ------                  -------         -------


    Operating costs and expenses:

       Direct costs of sales and services, exclusive of

        depreciation and amortization, shown below:

         Data center and network services                                                                                       24,650                26,116                   49,023          52,597

         Cloud and hosting services                                                                                              6,720                 6,862                   13,424          13,727

       Direct costs of customer support                                                                                          7,919                 9,090                   16,723          18,208

       Sales, general and administrative                                                                                        18,131                21,577                   37,061          43,544

       Depreciation and amortization                                                                                            19,217                22,566                   38,330          42,774

       Exit activities, restructuring and impairments                                                                              152                    59                      353             325


    Total operating costs and expenses                                                                                          76,789                86,270                  154,914         171,175
                                                                                                                                ------                ------                  -------         -------


    Loss from operations                                                                                                       (2,474)              (5,838)                 (4,675)        (9,957)
                                                                                                                                ------                ------                   ------          ------


    Non-operating expenses:

       Interest expense                                                                                                          8,082                 6,825                   15,067          13,689

       Other, net                                                                                                                  116                    55                      471           (474)
                                                                                                                                   ---                   ---                      ---            ----

    Total non-operating expenses                                                                                                 8,198                 6,880                   15,538          13,215
                                                                                                                                 -----                 -----                   ------          ------


    Loss before income taxes and equity in earnings of                                                                        (10,672)             (12,718)                (20,213)       (23,172)

       equity-method investment

    Provision (benefit) for income taxes                                                                                            62                 (137)                     200           (111)

    Equity in earnings of equity-method investment, net of taxes                                                                  (41)                 (47)                    (77)           (85)
                                                                                                                                   ---                   ---                      ---             ---


    Net loss                                                                                                                 $(10,693)            $(12,534)               $(20,336)      $(22,976)
                                                                                                                              ========              ========                 ========        ========


    Basic and diluted net loss per share                                                                                       $(0.21)              $(0.24)                 $(0.39)        $(0.45)
                                                                                                                                ======                ======                   ======          ======


    Weighted average shares outstanding used in computing

      net loss per share:

        Basic and diluted                                                                                                       52,062                51,579                   52,241          51,590
                                                                                                                                ======                ======                   ======          ======



                                                                                                                          INTERNAP CORPORATION

                                                                                                             UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

                                                                                                                (In thousands, except par value amounts)



                                                                                                                                                                              June 30,             December 31,

                                                                                                                                                                                              2016                      2015
                                                                                                                                                                                              ----                      ----


                                                                                       ASSETS

    Current assets:

    Cash and cash equivalents                                                                                                                                                              $13,868                   $17,772

    Accounts receivable, net of allowance for doubtful accounts of $1,319 and                                                                                                               18,358                    20,292
                                                                                                                                                         $1,751, respectively

    Prepaid expenses and other assets                                                                                                                                                       11,975                    12,405
                                                                                                                                                                                            ------                    ------


    Total current assets                                                                                                                                                                    44,201                    50,469


    Property and equipment, net                                                                                                                                                            325,136                   328,700

    Investment in joint venture                                                                                                                                                              3,020                     2,768

    Intangible assets, net                                                                                                                                                                  31,159                    32,887

    Goodwill                                                                                                                                                                               130,313                   130,313

    Deposits and other assets                                                                                                                                                                8,998                     9,474

    Total assets                                                                                                                                                                          $542,827                  $554,611
                                                                                                                                                                                          ========                  ========


                                                                        LIABILITIES AND STOCKHOLDERS' EQUITY

    Current liabilities:

    Accounts payable                                                                                                                                                                       $26,054                   $22,607

    Accrued liabilities                                                                                                                                                                     10,467                    10,737

    Deferred revenues                                                                                                                                                                        6,540                     6,603

    Capital lease obligations                                                                                                                                                                9,586                     8,421

    Term loan, less discount of $2,192 and $1,784, respectively                                                                                                                                808                     1,215

    Exit activities and restructuring liability                                                                                                                                              1,432                     2,034

    Other current liabilities                                                                                                                                                                1,358                     2,566
                                                                                                                                                                                             -----                     -----

    Total current liabilities                                                                                                                                                               56,245                    54,183


    Deferred revenues                                                                                                                                                                        4,967                     4,759

    Capital lease obligations                                                                                                                                                               48,149                    48,692

    Revolving credit facility                                                                                                                                                               35,500                    31,000

    Term loan, less discount of $5,721 and $5,703 respectively                                                                                                                             283,779                   285,298

    Exit activities and restructuring liability                                                                                                                                              1,486                     1,844

    Deferred rent                                                                                                                                                                            7,879                     8,879

    Deferred tax liability                                                                                                                                                                   1,223                       880

    Other long-term liabilities                                                                                                                                                              4,424                     4,640
                                                                                                                                                                                             -----                     -----

    Total liabilities                                                                                                                                                                      443,652                   440,175
                                                                                                                                                                                           -------                   -------



    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; 56,689 and 55,971 shares

    outstanding, respectively                                                                                                                                                                   57                        56

    Additional paid-in capital                                                                                                                                                           1,281,762                 1,277,511

    Treasury stock, at cost; 962 and 826 shares, respectively                                                                                                                              (6,736)                  (6,393)

    Accumulated deficit                                                                                                                                                                (1,174,293)              (1,153,957)

    Accumulated items of other comprehensive loss                                                                                                                                          (1,615)                  (2,781)
                                                                                                                                                                                            ------                    ------

    Total stockholders' equity                                                                                                                                                              99,175                   114,436
                                                                                                                                                                                            ------                   -------

    Total liabilities and stockholders' equity                                                                                                                                            $542,827                  $554,611
                                                                                                                                                                                          ========                  ========



                                                                                         INTERNAP CORPORATION

                                                                      UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

                                                                                            (In thousands)



                                                                            Three Months Ended June 30,                         Six Months Ended June 30,
                                                                            ---------------------------                         -------------------------

                                                                                                          2016                                                2015        2016         2015
                                                                                                          ----                                                ----        ----         ----

    Cash Flows from Operating Activities:

    Net loss                                                                                         $(10,693)                                          $(12,534)  $(20,336)   $(22,976)

    Adjustments to reconcile net loss to net cash provided by

     operating activities:

       Depreciation and amortization                                                                    19,217                                              22,566      38,330       42,774

       Amortization of debt discount and issuance costs                                                    711                                                 499       1,233          990

       Stock-based compensation expense, net of capitalized amount                                       1,542                                               2,185       3,464        3,764

       Equity in earnings of equity-method investment                                                     (41)                                               (47)       (77)        (85)

       Provision for doubtful accounts                                                                     239                                                 207         580          606

       Non-cash change in capital lease obligations                                                         40                                                 120         527        (640)

       Non-cash change in exit activities and restructuring liability                                      272                                                 165         619          536

       Non-cash change in deferred rent                                                                  (516)                                              (386)    (1,000)       (788)

       Deferred taxes                                                                                     (38)                                              (211)         39        (157)

       Payment of debt lender fees                                                                     (1,716)                                                  -    (1,716)           -

       Other, net                                                                                         (15)                                                263         186           19

    Changes in operating assets and liabilities:

       Accounts receivable                                                                               1,165                                                  77       1,702      (1,647)

       Prepaid expenses, deposits and other assets                                                       2,660                                                 582       4,606        (962)

       Accounts payable                                                                                  4,084                                               (510)      2,269      (8,162)

       Accrued and other liabilities                                                                   (2,028)                                              (651)    (3,931)     (1,554)

       Deferred revenues                                                                                  (97)                                              1,409          94        1,153

       Exit activities and restructuring liability                                                       (775)                                              (679)    (1,579)     (1,342)

       Asset retirement obligation                                                                           -                                                  -      (174)           -

       Other liabilities                                                                                     8                                                  17        (35)          35

    Net cash flows provided by operating activities                                                     14,019                                              13,072      24,801       11,564
                                                                                                        ------                                              ------      ------       ------


    Cash Flows from Investing Activities:

    Purchases of property and equipment                                                               (14,032)                                           (15,699)   (26,314)    (30,689)

    Additions to acquired and developed technology                                                       (370)                                               (98)      (769)       (810)

    Net cash flows used in investing activities                                                       (14,402)                                           (15,797)   (27,083)    (31,499)
                                                                                                       -------                                             -------     -------      -------


    Cash Flows from Financing Activities:

    Proceeds from credit agreements                                                                      3,000                                               4,000       4,500       17,000

    Principal payments on credit agreements                                                              (750)                                              (750)    (1,500)     (1,500)

    Payments on capital lease obligations                                                              (2,468)                                            (1,947)    (4,827)     (3,717)

    Proceeds from exercise of stock options                                                                675                                               1,906         675        4,489

    Acquisition of common stock for income tax withholdings                                              (127)                                              (250)      (343)       (868)

    Other, net                                                                                           (116)                                               (37)      (192)         943

    Net cash flows (used in) provided by financing activities                                              214                                               2,922     (1,687)      16,347
                                                                                                           ---                                               -----      ------       ------

    Effect of exchange rates on cash and cash equivalents                                                  139                                                 (4)         65         (84)
                                                                                                           ---                                                 ---         ---          ---

    Net decrease in cash and cash equivalents                                                             (30)                                                193     (3,904)     (3,672)

    Cash and cash equivalents at beginning of period                                                    13,898                                              16,219      17,772       20,084

    Cash and cash equivalents at end of period                                                         $13,868                                             $16,412     $13,868      $16,412
                                                                                                       =======                                             =======     =======      =======

INTERNAP 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 and adjusted EBITDA margin, normalized net loss, normalized diluted shares outstanding, segment profit and segment margin, levered free cash flow and cash operating expense. The most directly comparable GAAP equivalent to adjusted EBITDA and normalized net 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 (gain) on disposals of property and equipment, exit
        activities, restructuring and impairments, stock-based compensation,
        strategic alternatives and related costs, organizational realignment
        costs and acquisition costs.
    --  Adjusted EBITDA margin is adjusted EBITDA as a percentage of revenues.
    --  Normalized net loss is net loss plus exit activities, restructuring and
        impairments, stock-based compensation, acquisition costs and strategic
        alternatives and related costs.
    --  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 loss per share is normalized net loss divided by basic
        and normalized diluted shares outstanding.
    --  Segment profit is segment revenues less direct costs of 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 or any
        depreciation or amortization associated with direct costs.
    --  Segment margin is segment profit as a percentage of segment revenues.
    --  Levered free cash flow is adjusted EBITDA less capital expenditures, net
        of equipment sale-leaseback transactions and cash paid for interest.
    --  Cash operating expense is GAAP operating expense less direct cost of
        sales and services, depreciation and amortization, loss (gain) on
        disposals of property and equipment, exit activities, restructuring and
        impairments, stock-based compensation, acquisition costs and strategic
        alternatives and related costs.

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 our 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.

We believe that exit activities, restructuring and impairment charges, strategic alternatives and related costs and organizational realignment costs 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 our 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.

INTERNAP CORPORATION
NON-GAAP (ADJUSTED) FINANCIAL MEASURES (Continued)

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 loss and normalized net loss per share, excluding the effect of exit activities, restructuring and impairments, stock-based compensation and acquisition costs 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.

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 and 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.

INTERNAP CORPORATION
NON-GAAP (ADJUSTED) FINANCIAL MEASURES (Continued)

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.

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
                                                        ------------------

                                                    June 30, 2016               March 31, 2016           June 30, 2015
                                                    -------------               --------------           -------------

    Loss from operations (GAAP)                                        $(2,474)                $(2,201)                $(5,838)

    Depreciation and amortization                                        19,217                   19,113                   22,566

    Loss on disposal of property and equipment, net                          31                       28                      137

    Exit activities, restructuring and impairments                          152                      201                       59

    Stock-based compensation                                              1,542                    1,922                    2,185

    Strategic alternatives and related costs                                282                      141                        -

    Organizational realignment costs                                      1,417                    1,272                        -

    Adjusted EBITDA (non-GAAP)                                          $20,167                  $20,476                  $19,109
                                                                        =======                  =======                  =======

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

Reconciliations of (1) net loss, the most directly comparable GAAP measure, to normalized net 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 loss per share for each of the periods indicated is as follows (in thousands, except per share data):



                                                                           Three Months Ended
                                                                           ------------------

                                                                        June 30, 2016            March 31, 2016           June 30, 2015
                                                                        -------------            --------------           -------------

    Net loss (GAAP)                                                                    $(10,693)                $(9,644)                $(12,534)

    Exit activities, restructuring and impairments                                           152                      201                        59

    Stock-based compensation                                                               1,542                    1,922                     2,185

    Strategic alternatives and related costs                                                 282                      141                         -

    Organizational realignment costs                                                       1,417                    1,272                         -

    Normalized net loss (non-GAAP)                                                      $(7,300)                $(6,108)                $(10,290)
                                                                                         =======                  =======                  ========


    Weighted average shares outstanding used in per share calculation:

    Basic and diluted (GAAP)                                                              52,062                   51,774                    51,579

    Add potentially dilutive securities                                                        -                       -                        -

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

     stock method


    Normalized diluted shares (non-GAAP)                                                  52,062                   51,774                    51,579
                                                                                          ======                   ======                    ======


    Loss per share (GAAP):

    Basic and diluted                                                                    $(0.21)                 $(0.19)                  $(0.24)
                                                                                          ======                   ======                    ======


    Normalized net loss per share (non-GAAP):

    Basic and diluted                                                                    $(0.14)                 $(0.12)                  $(0.20)
                                                                                          ======                   ======                    ======

INTERNAP CORPORATION
NON-GAAP (ADJUSTED) FINANCIAL MEASURES (Continued)

INTERNAP CORPORATION
SEGMENT PROFIT AND SEGMENT MARGIN

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





                                                        Three Months Ended
                                                        ------------------

                                                    June 30, 2016              March 31, 2016         June 30, 2015
                                                    -------------              --------------         -------------

    Revenues:

       Data center and network services:

          Company-controlled                                           $22,933                $22,357               $21,801

          Partner                                                        9,793                  9,938                10,711

          IP connectivity                                               17,733                 18,577                21,009

          Total data center and network services                        50,459                 50,872                53,521

       Cloud and hosting services                                       23,856                 25,052                26,911
                                                                                              ------

          Total                                                         74,315                 75,924                80,432
                                                                        ------                 ------                ------


    Direct cost of sales and services, exclusive of

          depreciation and amortization:

       Data center and network services:

          Company-controlled                                             9,994                  9,712                 9,510

          Partner                                                        7,051                  7,172                 7,963

          IP connectivity                                                7,605                  7,489                 8,643

          Total data center and network services                        24,650                 24,373                26,116

       Cloud and hosting services                                        6,720                  6,704                 6,862

          Total                                                         31,370                 31,077                32,978
                                                                        ------                 ------                ------


    Segment Profit:

       Data center and network services

          Company-controlled                                            12,939                 12,645                12,291

          Partner                                                        2,742                  2,766                 2,748

          IP connectivity                                               10,128                 11,088                12,366

          Total data center and network services                        25,809                 26,499                27,405

       Cloud and hosting services                                       17,136                 18,348                20,049

          Total                                                        $42,945                $44,847               $47,454
                                                                       =======                =======               =======


    Segment Margin:

       Data center and network services

          Company-controlled                                             56.4%                 56.6%                56.4%

          Partner                                                        28.0%                 27.8%                25.7%

          IP connectivity                                                57.1%                 59.7%                58.9%

          Total data center and network services                         51.1%                 52.1%                51.2%

       Cloud and hosting services                                        71.8%                 73.2%                74.5%
                                                                          ----                   ----                  ----

          Total                                                          57.8%                 59.1%                59.0%
                                                                          ====                   ====                  ====

INTERNAP CORPORATION
NON-GAAP (ADJUSTED) FINANCIAL MEASURES (Continued)

LEVERED FREE CASH FLOW

Levered free cash flow is a non-GAAP measure and is adjusted EBITDA less capital expenditures, net of equipment sale-leaseback transactions and cash paid for interest (in thousands):



                                                                          Three Months Ended
                                                                          ------------------

                                                                       June 30, 2016              March 31, 2016           June 30, 2015
                                                                       -------------              --------------           -------------

    Adjusted EBITDA (non-GAAP)                                                            $20,167                  $20,476                  $19,109

    Capital expenditures, net of equipment sale-leaseback transactions                   (14,402)                (12,681)                (15,797)
                                                                                          -------                  -------                  -------

    Unlevered free cash flow (non-GAAP)                                                     5,765                    7,795                    3,312


    Cash interest expense                                                                 (7,816)                 (6,540)                 (6,602)

    Levered free cash flow (non-GAAP)                                                    $(2,051)                  $1,255                 $(3,290)
                                                                                          =======                   ======                  =======

CASH OPERATING EXPENSE

Cash operating expense is a non-GAAP measure and is operating expense defined by GAAP, less direct costs of sales and services, depreciation and amortization, (loss) gain on disposal of property and equipment, exit activities, restructuring and impairments, stock-based compensation, acquisition costs and strategic alternatives and related costs (in thousands):



                                                                                      Three Months Ended
                                                                                      ------------------

                                                                                   June 30, 2016              March 31, 2016           June 30, 2015
                                                                                   -------------              --------------           -------------

    Total operating costs and expenses                                                                $76,789                  $78,125                  $86,270

    Direct costs of sales and services, exclusive of depreciation and amortization                   (31,370)                (31,077)                (32,978)

    Depreciation and amortization                                                                    (19,217)                (19,113)                (22,566)

    Loss on disposal of property and equipment, net                                                      (31)                    (28)                   (137)

    Exit activities, restructuring and impairments                                                      (152)                   (201)                    (59)

    Stock-based compensation                                                                          (1,542)                 (1,922)                 (2,185)

    Strategic alternatives and related costs                                                            (282)                   (141)                       -

    Organizational realignment costs                                                                  (1,417)                 (1,272)                       -

    Cash operating expense (non-GAAP)                                                                 $22,778                  $24,371                  $28,345
                                                                                                      =======                  =======                  =======

To view the original version on PR Newswire, visit:http://www.prnewswire.com/news-releases/internap-reports-second-quarter-2016-financial-results-300309466.html

SOURCE Internap Corporation