• Revenue of $84.1 million, up 20% versus the second quarter of 2013
  • Data center services revenue of $61.4 million, up 35% versus the second quarter of 2013
  • Segment margin1 of 56.5%, up 320 basis points year-over-year
  • Adjusted EBITDA2 of $18.5 million increased 32% versus the second quarter of 2013
  • Adjusted EBITDA margin2 of 22.0%, up 190 basis points year-over-year

ATLANTA, GA - July 29, 2014 - Internap Network Services Corporation (NASDAQ: INAP), a provider of high-performance Internet infrastructure services, today announced financial results for the second quarter of 2014.
"We delivered solid financial results for the second quarter of 2014 driven by strong growth in our core data center services business. The continued execution of our strategy to provide high-performance hybrid Internet infrastructure services is reflected in the revenue growth, segment margin expansion and record adjusted EBITDA margin for the quarter," said Eric Cooney, President and Chief Executive Officer of Internap. "With greater clarity on the future New York data center migration and IP services segment margin, we move into the second half of 2014 with a simplified focus to leverage our performance-based differentiation in support of long-term profitable growth and stockholder value creation."

Second Quarter 2014 Financial Summary
Revenue

  • Revenue totaled $84.1 million in the second quarter, an increase of 20% year-over-year and 3% sequentially. The increase in revenue was due to growth in our data center services segment, which includes $11.5 million of revenue attributable to iWeb, which we acquired in November 2013.
  • Data center services revenue totaled $61.4 million in the second quarter, an increase of 35% year-over-year and 5% sequentially. Both increases were attributable to increased sales of core data center services including iWeb.
  • IP services revenue totaled $22.7 million in the second quarter, a decrease of 7% year-over-year and 4% sequentially. Both decreases were driven by per unit price declines in IP and the loss of legacy contracts at higher effective prices, partially offset by an increase in overall traffic.

Net Loss

  • GAAP net loss was $(11.2) million, or $(0.22) per share, compared with $(3.7) million, or $(0.07) per share, in the second quarter of 2013 and $(10.7) million, or $(0.21) per share, in the first quarter of 2014.
  • Normalized net loss was $(7.7) million, or $(0.15) per share, compared with normalized net loss of $(1.3) million, or $(0.03) per share, in the second quarter of 2013, and normalized net loss of $(7.3) million, or $(0.14) per share, in the first quarter of 2014.

Segment Profit and Adjusted EBITDA

  • Segment profit totaled $47.5 million in the second quarter, a 27% increase compared with the second quarter of 2013 and a 3% increase from the first quarter of 2014. Segment margin was 56.5%, an increase of 320 basis points year-over-year and 10 basis points sequentially.
  • Data center services segment profit totaled $34.8 million in the second quarter, a 52% increase compared with the second quarter of 2013 and an 8% increase from the first quarter of 2014. Data center services segment margin was 56.7% in the second quarter, up 640 basis points year-over-year and 110 basis points sequentially. An increasing proportion of higher-margin services, specifically colocation sold in company-controlled data centers, hosting and cloud services and the contribution from iWeb drove data center services segment profit and margin higher.
  • IP services segment profit totaled $12.7 million in the second quarter, a 12% decrease compared with the second quarter of 2013 and an 8% decrease from the first quarter of 2014. IP services segment margin was 55.9% in the second quarter, down 310 basis points year-over-year and 240 basis points sequentially. Lower IP transit revenue and the loss of legacy contracts led to a decrease in IP services segment profit and margin.
  • Adjusted EBITDA totaled $18.5 million in the second quarter, a 32% increase compared with the second quarter of 2013 and a 4% increase from the first quarter of 2014. Adjusted EBITDA margin was 22.0% in the second quarter, up 190 basis points year-over-year and 30 basis points sequentially. Both the year-over-year and sequential increases in adjusted EBITDA and adjusted EBITDA margin were attributable to increased segment profit in our data center services segment, including iWeb.

Balance Sheet and Cash Flow Statement

  • Cash and cash equivalents totaled $27.9 million at June 30, 2014. Total debt was $355.4 million, net of discount, at the end of the quarter, including $60.6 million in capital lease obligations.
  • Cash generated from operations for the three months ended June 30, 2014 was $11.1 million. Capital expenditures over the same period were $13.1 million.

Recent Operational Highlights
Historical trends of key financial and operational metrics can be found in a supplementary data schedule on Internap's website athttp://ir.internap.com/results.cfm.

  • We expanded our bare-metal public cloud service to London and Hong Kong. Internap's expanded bare-metal cloud footprint - which includes existing locations in Amsterdam, Singapore, Dallas, New York Metro and Santa Clara, California - addresses growing demand for cloud services that can meet the high-performance requirements of globally distributed, real-time, data-intensive applications, like big data analytics, mobile and digital advertising and online gaming.
  • Internap launched the general availability of our next-generation OpenStack powered public cloud, AgileCLOUD. It is a massively scalable, flexible and cost-efficient public cloud platform designed to meet the demands of large-scale, performance-intensive application environments.
  • Internap's Atlanta data center recently received ENERGY STAR certification, a program run by the U.S. Environmental Protection Agency to identify ways in which energy efficiency can be measured, documented and implemented in data centers.
  • We had approximately 12,000 customers at June 30, 2014.

1Segment margin and segment profit are non-GAAP financial measures which we define in an attachment to this press release entitled "Non-GAAP (Adjusted) Financial Measures." Reconciliations between GAAP and non-GAAP information related to segment profit and segment margin are contained in the table entitled "Segment Profit and Segment Margin" in the attachment.
2Adjusted EBITDA, adjusted EBITDA margin and normalized net loss are non-GAAP financial measures which we define in an attachment to this press release entitled "Non-GAAP (Adjusted) Financial Measures." Reconciliations between GAAP information and non-GAAP information related to adjusted EBITDA and normalized net loss are contained in the tables entitled "Reconciliation of Loss from Operations to Adjusted EBITDA," and "Reconciliation of Net Loss and Basic and Diluted Net Loss Per Share to Normalized Net Loss and Basic and Diluted Normalized Net Loss Per Share" in the attachment.

Conference Call Information
Internap's second quarter 2014 conference call will be held today at 5:00 p.m. ET. Listeners may connect to a webcast of the call, which will include accompanying presentation slides, on the investor relations section of Internap's web site athttp://ir.internap.com/events.cfm. The call can be also accessed by dialing 866-515-9839. International callers should dial 631-813-4875. An online archive of the webcast presentation will be available for one month following the call. An audio-only replay will be accessible from Tuesday, July 29, 2014 at 8 p.m. ET through Monday, August 4, 2014 at 855-859-2056 using replay code 72250083. 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, visitwww.internap.com.

Forward-Looking Statements
This press release contains forward-looking statements. These forward-looking statements include statements related to our ability to drive long-term profitable growth and create stockholder value. Because such statements are not guarantees of future performance and involve risks and uncertainties, there are important factors that could cause Internap's actual results to differ materially from those in the forward-looking statements. These factors include our ability to execute on our business strategy; the robustness of the IT infrastructure services market; our ability to achieve or sustain profitability; our ability to expand margins and drive higher returns on investment; our ability to sell into new data center space; the actual performance of our IT infrastructure services; our ability to maintain current customers and obtain new ones, whether in a cost-effective manner or at all; our ability to correctly forecast capital needs, demand planning and space utilization; our ability to respond successfully to technological change and the resulting competition; the availability of services from Internet network service providers or network service providers providing network access loops and local loops on favorable terms, or at all; failure of third party suppliers to deliver their products and services on favorable terms, or at all; failures in our network operations centers, data centers, network access points or computer systems; our ability to provide or improve Internet infrastructure services to our customers; and our ability to protect our intellectual property, as well as other factors discussed in our filings with the Securities and Exchange Commission. Given these risks and uncertainties, investors should not place undue reliance on forward-looking statements as a prediction of actual results. We undertake no obligation to update, amend or clarify any forward-looking statement for any reason.

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Press Contact
Mariah Torpey
Davies Murphy Group
781.418.2404
internap@daviesmurphy.com

Investor Contact
Michael Nelson
404.302.9700
ir@internap.com

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