Internap Reports Third Quarter 2012 Financial Results

            Internap Reports Third Quarter 2012 Financial Results

-- Revenue of $68.1 million up 10 percent versus the third quarter of 2011;

-- Adjusted EBITDA(1) of $12.5 million up 11 percent versus the third quarter
of 2011;

-- Premium, company-controlled data center space deployed in Los Angeles and
Atlanta in the third quarter of 2012;

-- Announces intention to construct a new premium, company-controlled data
center in the New York Metro market.

PR Newswire

ATLANTA, Oct. 25, 2012

ATLANTA, Oct.25, 2012 /PRNewswire/ --Internap Network Services Corporation
(NASDAQ: INAP), a provider of intelligent IT Infrastructure services, today
announced financial results for the third quarter of 2012.

"Continued growth in our data center services segment combined with a keen
focus on operational excellence enabled the solid growth in Adjusted EBITDA
profitability during the third quarter of 2012," said Eric Cooney, President
and Chief Executive Officer of Internap. "As the successful sale of our
colocation, hosting and cloud services fills capacity in our existing NY metro
data centers, we have made the decision to expand to support continued growth
in this key metro market. We are announcing today that we have secured a
property and expect to bring a new premium data center on-line in the NY metro
market during the fourth quarter of 2013."

Third Quarter 2012 Financial Summary

                                                             YoY     QoQ
                         3Q 2012     3Q 2011     2Q 2012     Growth  Growth
 Revenues:
      Data center        $ 42,139   $ 34,114   $ 41,493   24%     2%
      services
      IP services        25,990      27,900      27,194      -7%     -4%
           Total         $ 68,129   $ 62,014   $ 68,687   10%     -1%
           Revenues
 Operating Expenses      $ 68,213   $ 62,439   $ 68,596   9%      -1%
 GAAP Net Loss           $ (2,450)  $ (1,788)  $ (1,997)  37%     23%
 Normalized Net          $         $         $        n/m     n/m
 (Loss)Income^2          (963)      (575)      263
 Segment Profit          $ 34,556   $ 31,227   $ 36,046   11%     -4%
 Segment Profit Margin   50.7%       50.4%       52.5%       30 BPS  -180 BPS
 Adjusted EBITDA         $ 12,467   $ 11,263   $ 12,190   11%     2%
 Adjusted EBITDA Margin  18.3%       18.2%       17.7%       10 BPS  60 BPS

Revenue

  oRevenue totaled $68.1 million compared with $62.0 million in the third
    quarter of 2011 and $68.7 million in the second quarter of 2012. Revenue
    from data center services increased year-over-year and sequentially. IP
    services revenue decreased compared with both the third quarter of 2011
    and the second quarter of 2012.
  oData center services revenue improved 24 percent year-over-year and 2
    percent sequentially to $42.1 million. The year-over-year revenue increase
    was attributable to organic growth in the data center services segment and
    to the fourth quarter 2011 acquisition of Voxel. The sequential increase
    was driven by increased sales of colocation in company-controlled data
    centers and favorable growth in hosting services.
  oIP services revenue totaled $26.0 million, a decrease of 7 percent
    compared with the third quarter of 2011 and 4 percent sequentially, as
    traffic growth was offset by per unit price declines in IP. The sequential
    decline was also a result of higher non-recurring IP equipment sales in
    the second quarter of 2012.

Net (Loss) Income

  oGAAP net loss was $(2.5) million, or $(0.05) per share, compared with
    $(1.8) million, or $(0.04) per share, in the third quarter of 2011 and
    $(2.0) million, or $(0.04) per share, in the second quarter of 2012.
  oNormalized net loss, which excludes the impact of stock-based compensation
    expense and items that management considers non-recurring, was $(1.0)
    million, or $(0.02) per share, compared with $(0.6) million, or $(0.01)
    per share, in the third quarter of 2011. Normalized net income was $0.3
    million or $0.01 per share, in the second quarter of 2012.

Segment Profit and Adjusted EBITDA

  oSegment profit totaled $34.6 million in the third quarter, an increase of
    11 percent year-over-year. Sequentially, segment profit declined 4
    percent. Segment margin^2 was 50.7 percent, increasing 30 basis points
    compared with the third quarter of 2011. Segment margin decreased 180
    basis points compared with the second quarter of 2012.
  oSegment profit in data center services was $18.6 million, or 44.1 percent
    of data center services revenue. IP services segment profit was $16.0
    million, or 61.4 percent of IP services revenue. An increasing proportion
    of higher-margin services, specifically colocation sold in company
    controlled data centers and hosting services, benefited data center
    services segment profit compared with the third quarter of 2011. Higher
    seasonal power costs drove a decrease in data center segment profit
    compared with the second quarter of 2012. Data center services segment
    margin increased 410 basis points year-over-year and decreased 130 basis
    points sequentially to 44.1 percent. IP services segment profit decreased
    9 percent compared with the third quarter of 2011. Sequentially, IP
    segment profit decreased 7 percent. Lower non-recurring IP equipment sales
    and IP transit revenue drove the year-over-year and sequential decreases
    in segment margins. IP services segment margin decreased 170 basis points
    year-over-year and 190 basis points sequentially to 61.4 percent.
  oAdjusted EBITDA totaled $12.5 million in the third quarter, an 11 percent
    increase compared with the third quarter of 2011 and a 2 percent increase
    over the second quarter of 2012. Adjusted EBITDA margin was 18.3 percent
    in the third quarter of 2012, up 10 basis points year-over-year and 60
    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 lower
    cash operating expenses.

Balance Sheet and Cash Flow Statement

  oCash and cash equivalents totaled $26.4 million at September 30, 2012.
    Total debt was $137.6 million, net of discount, at the end of the quarter,
    including $49.5 million in capital lease obligations.
  oCash generated from operations for the three months ended September 30,
    2012 was $7.8 million. Capital expenditures over the same period were
    $25.1 million.

Recent Operational Highlights

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

  oWe had approximately 3,700 customers at September 30, 2012.
  oIn September, we opened our Los Angeles premium data center, which
    provides the highest levels of scalability, redundancy and energy
    efficiency. This facility will total 55,000 net sellable square feet at
    full deployment and features the latest in data center technology
    including a concurrently maintainable N+1 architecture, high-power density
    and award winning green initiatives. State-of-the art technology provides
    for high-power density configurations of up to 12kW per rack and high
    efficiency cooling options.
  oWe expanded our Atlanta premium data center, which features the latest in
    data center design elements including modular Uninterruptible Power Supply
    units and high-efficiency cooling solutions to enable power configurations
    of up to 12kW per rack. This facility will add an incremental 31,000 net
    sellable square feet at full deployment and is designed to seamlessly
    connect colocation, managed hosting and cloud environments through a
    secure Layer 2 Virtual Local Area Network.
  oWe announced that we will construct a new premium, company-controlled data
    center in the New York Metro market that we expect to be operational in
    the fourth quarter of 2013. Like Internap's other company-controlled data
    centers, this facility will offer customers a highly-reliable and flexible
    IT Infrastructure platform. It will maintain a full range of customer
    amenities and will feature a modular power design that enables our
    customers to increase their power densities to over 12kW per rack without
    taking on additional space.
  oIn August, we amended our credit facility to increase borrowing capacity
    by $30 million, bringing our total bank facility to $137.25 million.
  oInternap won top honors in the Golden Bridge Awards for our Agile Hosting
    Service, selected as Best Cloud Computing Service in the New Products and
    Innovations category.
  oInternap received the 2012 Cloud Computing Excellence Award for our Agile
    Hosting Service.
  oThe U.S. Green Building Council recently awarded Leadership in Energy and
    Environmental Design (LEED) Gold certification to our Dallas data center.
    In addition to receiving LEED certification, this facility became the
    first commercial data center in Texas to achieve the Green Building
    Initiative's Green Globe® certification in February 2012.
  oInternap was named to the InformationWeek 500 List of Top Technology
    Innovators for Green Achievements. Ranked number 65 on the list, we were
    recognized for energy efficiency and sustainability practices at our
    state-of-the-art Santa Clara, California data center.

1 Adjusted EBITDA and Normalized Net Income (Loss) are non-GAAP financial
measures and are defined 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) Income are contained in the tables entitled "Reconciliation of Loss
from Operations to Adjusted EBITDA," and "Reconciliation of Net (Loss) Income
and Basic and Diluted Net (Loss) Income Per Share to Normalized Net (Loss)
Income and Basic and Diluted Normalized Net (Loss) Income Per Share" in the
attachment.

2 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 information 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 third quarter 2012 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 services 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, October 25, 2012 at 8 p.m. ET through Wednesday, October 31,
2012 at 855-859-2056 using the replay code 40810615. 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 combine
unmatched performance and platform flexibility to enable our customers to
focus on their core business, improve service levels and lower the cost of IT
operations. Our unique trio of route-optimized enterprise IP, TCP acceleration
and a global content delivery network improves website performance and
delivers superior end-user experiences. Our scalable colocation, hosting,
private cloud, public cloud and hybrid offerings provide enterprises the
flexibility to adapt to changing business needs and future-proof their IT
Infrastructure. Since 1996, thousands of companies have entrusted Internap
with the protection and delivery 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 our expectations regarding the
expansion of our company-controlled data centers and the timing for bringing
new space online. 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 achieve
or sustain profitability; our ability to expand margins and drive higher
returns on investment; our ability to successfully integrate Voxel into our
business; our ability to complete expansion of company-controlled data centers
within the expected timeframe; 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.

Press Contact:            Investor Contact:
Mariah Torpey             Michael Nelson
(781) 418-2404            (404) 302-9700
internap@daviesmurphy.com ir@internap.com



INTERNAP NETWORK SERVICES CORPORATION
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
AND COMPREHENSIVE LOSS
(In thousands, except per share amounts)
                                            Three Months Ended September 30,
                                            2012               2011
Revenues:
 Data center services                     $ 42,139           $ 34,114
 Internet protocol (IP) services          25,990             27,900
 Total revenues                       68,129             62,014
Operating costs and expenses:
 Direct costs of network, sales and
services, exclusive of
 depreciation and amortization, shown
below:
 Data center services               23,539             20,480
 IP services                        10,034             10,307
 Direct costs of customer support         6,898              5,407
 Direct costs of amortization of acquired 1,179              875
technologies
 Sales and marketing                      7,569              7,314
 General and administrative               8,985              8,333
 Depreciation and amortization            9,885              9,647
 Gain on disposal of property and         -                  (47)
equipment, net
 Restructuring and impairments            124                123
Total operating costs and expenses          68,213             62,439
Loss from operations                        (84)               (425)
Non-operating expenses:
 Interest expense                         1,996              1,166
 Other, net                               118                20
Total non-operating expenses               2,114              1,186
Loss before income taxes and equity in
(earnings) of
 equity method investment                 (2,198)            (1,611)
Provision for income taxes                  289                275
Equity in (earnings) of equity-method       (37)               (98)
investment, net of taxes
Net loss                                    (2,450)            (1,788)
Other comprehensive income:
 Foreign currency translation adjustment, 221                12
net of taxes
Comprehensive loss                          $ (2,229)          $ (1,776)
Basic and diluted net loss per share        $  (0.05)         $  (0.04)
Weighted average shares outstanding used in
computing
 basic and diluted net loss per share    50,572             50,217



INTERNAP NETWORK SERVICES CORPORATION
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
 (In thousands, except
par value amounts)
                                       September 30,       December 31,
                                       2012                2011
ASSETS
Current assets:
Cash and cash equivalents              $      26,375  $     29,772
Accounts receivable, net of allowance
for doubtful accounts of $1,963 and    21,002              18,539
$1,668, respectively
Prepaid expenses and other assets      13,204              13,270
Total current assets                   60,581              61,581
Property and equipment, net            247,305             198,369
Investment in joint venture           3,137               2,936
Intangible assets, net                 22,728              26,886
Goodwill                               59,605              59,471
Deposits and other assets              5,653               5,371
Deferred tax asset, net                1,821               2,096
Total assets                           $     400,830   $    356,710
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable                       $      26,285  $     21,746
Accrued liabilities                    9,907               9,152
Deferred revenues                      2,801               2,475
Revolving credit facility              -                   100
Capital lease obligations              4,294               2,154
Term loan, less discount of $240 and   3,461               2,794
$206, respectively
Restructuring liability                2,567               2,709
Accrued contingent consideration       4,945               -
Other current liabilities              166                 151
Total current liabilities              54,426              41,281
Deferred revenues                      2,662               2,323
Capital lease obligations              45,193              38,923
Revolving credit facility              22,329              -
Term loan, less discount of $446 and   62,353              55,383
$367, respectively
Accrued contingent consideration       -                   4,626
Restructuring liability                3,540               4,884
Deferred rent                          15,372              16,100
Other long-term liabilities            933                 1,020
Total liabilities                      206,808             164,540
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; 53,436 and  54                  53
52,528 shares outstanding,
respectively
Additional paid-in capital             1,242,003           1,235,554
Treasury stock, at cost; 248 and 231   (1,717)             (1,266)
shares, respectively
Accumulated deficit                    (1,046,211)         (1,041,872)
Accumulated items of other             (107)               (299)
comprehensive loss
Total stockholders' equity             194,022             192,170
Total liabilities and stockholders'    $     400,830   $    356,710
equity



INTERNAP NETWORK SERVICES CORPORATION
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
                                              Nine Months Ended September 30,
                                              2012               2011
Cash Flows from Operating Activities:
Net loss                                      $ (4,339)          $ (5,900)
Adjustments to reconcile net loss to net cash
provided by operating activities:
 Depreciation and amortization              30,001             29,093
 Loss on disposal of property and           -                  37
equipment, net
 Impairment of capitalized software         258                -
 Stock-based compensation expense, net of   4,382              2,990
capitalized amount
 Equity in (earnings) from equity-method    (197)              (333)
investment
 Provision for doubtful accounts            833                793
 Non-cash changes in capital lease          669                624
obligations
 Non-cash change in accrued contingent      319                -
consideration
 Non-cash changes in deferred rent          (727)              (345)
 Deferred income taxes                      292                334
 Other, net                                 440                224
Changes in operating assets and liabilities:
 Accounts receivable                        (3,296)            (2,103)
 Prepaid expenses, deposits and other       (297)              (1,338)
assets
 Accounts payable                           4,540              5,206
 Accrued and other liabilities              826                (1,106)
 Deferred revenues                          664                (775)
 Restructuring liability                    (1,486)            (364)
Net cash flows provided by operating          32,882             27,037
activities
Cash Flows from Investing Activities:
Purchases of property and equipment           (64,614)           (50,909)
Net cash flows used in investing activities   (64,614)           (50,909)
Cash Flows from Financing Activities:
Principal payments on term loan               (2,375)            (750)
Proceeds from term loan                       10,000             -
Proceeds from revolving credit facility       22,229             -
Payment of debt issuance costs                (543)              -
Payments on capital lease obligations         (2,296)            (903)
Proceeds from exercise of stock options       2,245              1,062
Tax withholdings related to net share         (956)              (691)
settlements of restricted stock awards
Other, net                                    (90)               (100)
Net cash flows provided by (used in)          28,214             (1,382)
financing activities
Effect of exchange rates on cash and cash     121                (39)
equivalents
Net decrease in cash and cash equivalents     (3,397)            (25,293)
Cash and cash equivalents at beginning of     29,772             59,582
period
Cash and cash equivalents at end of period    $ 26,375           $ 34,289

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:

  oAdjusted EBITDA is loss from operations plus depreciation and
    amortization, loss on disposals of property and equipment, impairments and
    restructuring and stock-based compensation.
  oAdjusted EBITDA margin is adjusted EBITDA as a percentage of revenues.
  oNormalized net income (loss) is net income (loss) plus impairments and
    restructuring and stock-based compensation.
  oNormalized 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.
  oNormalized net income (loss) per share is normalized net income (loss)
    divided by basic and normalized diluted shares outstanding.
  oSegment 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 toour 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.
  oSegment margin is segment profit as a percentage of segment revenues.

We detail reconciliations ofour 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:

  oEBITDA 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
  oinvestors 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:

  oas a measure of operating performance to assist in comparing performance
    from period-to-period on a consistent basis;
  oas a measure for planning and forecasting overall expectations and for
    evaluating actual results against such expectations; and
  oin 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,      June 30,     September 30,
                               2012               2012         2011
 (Loss) income from operations $          $       $       
 (GAAP)                             (84)        91         (425)
 Stock-based compensation     1,363              1,615        1,090
 Depreciation and
 amortization, including       11,064             9,843        10,522
 amortization of acquired
 technologies
 Gain on disposal of property  -                  (4)          (47)
 and equipment, net
 Restructuring and impairments 124                645          123
 Adjusted EBITDA (non-GAAP)    $          $       $       
                                 12,467        12,190          11,263



INTERNAP NETWORK SERVICES CORPORATION
RECONCILIATION OF NET (LOSS) INCOME AND BASIC AND DILUTED
NET (LOSS) INCOME PER SHARE TO NORMALIZED NET (LOSS) INCOME AND
BASIC AND DILUTED NORMALIZED NET (LOSS) INCOME 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,    June 30, 2012  September 30,
                               2012                            2011
 Net loss (GAAP)               $         $         $       
                                  (2,450)   (1,997)          (1,788)
 Restructuring and impairments 124              645            123
 Stock-based compensation      1,363            1,615          1,090
 Normalized net (loss) income  (963)            263            (575)
 (non-GAAP)
 Normalized net loss allocable
 to participating securities   -                (6)            -
 (non-GAAP)
 Normalized net (loss) income  $         $        $       
 available to common                (963)   257              (575)
 stockholders (non-GAAP)
 Weighted average shares
 outstanding used in per share
 calculation:
 Basic (GAAP)                  50,572           50,453         50,217
 Participating securities      1,117            1,128          1,074
 (GAAP)
 Diluted (GAAP)                50,572           50,453         50,217
 Add potentially dilutive      -                709            -
 securities
 Less dilutive effect of
 stock-based compensation      -                (251)          -
 under the treasury stock
 method
 Normalized diluted shares     50,572           50,911         50,217
 (non-GAAP)
 Loss per share (GAAP):
 Basic and diluted             $         $        $       
                                   (0.05)  (0.04)            (0.04)
 Normalized net (loss) income
 per share (non-GAAP):
 Basic and diluted             $         $        $       
                                   (0.02)   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,      June 30,     September 30,
                                 2012               2012         2011
 Revenues:
  Data center services         $          $       $     
                                   42,139        41,493       34,114
  IP services                  25,990             27,194       27,900
  Total                   68,129             68,687       62,014
  Direct cost of network,
 sales and services, exclusive
 of depreciation and
 amortization:
  Data center services   23,539             22,649       20,480
  IP services            10,034             9,992        10,307
  Total                   33,573             32,641       30,787
 Segment Profit:
  Data center services         18,600             18,844       13,634
  IP services                  15,956             17,202       17,593
  Total                   $          $       $     
                                   34,556        36,046       31,227
 Segment Margin:
  Data center services         44.1%              45.4%        40.0%
  IP services                  61.4%              63.3%        63.1%
  Total                   50.7%              52.5%        50.4%

(Logo: http://photos.prnewswire.com/prnh/20120426/CL95398LOGO )

SOURCE Internap Network Services Corporation

Website: http://www.internap.com
 
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