Internap Reports Fourth Quarter and Full-year 2008 Results

• Record revenue of $254.0 million for 2008, an increase of 8.5 percent over 2007;
• 2008 Adjusted EBITDA(1) of $34.2 million;
• 2008 Adjusted EBITDA margin (1) of 13.5 percent;
• Deployed 17,000 square feet of company-controlled data center space in 2008.

ATLANTA,March 12, 2009) — Internap Network Services Corporation (NASDAQ: INAP), a global provider of fast, reliable, end-to-end Internet business solutions, today reported fourth quarter and full year 2008 results. Highlights for the year included record revenue, solid adjusted EBITDA, and a successful build-out of an additional 17,000 square feet of enterprise-grade data center space. The company ended the year with 121,000 square feet of company-controlled square footage.

“Despite a tough economic environment, Internap grew revenue, generated significant cash, and substantially completed the largest organic data center expansion in the company’s history in 2008,” said Jim DeBlasio, Internap’s President and Chief Executive Officer. “With very little debt and ample cash, the company has a strong balance sheet and continues to be on a solid financial foundation as we enter 2009.”

Revenue in 2008 was $254.0 million, up $19.9 million, or 8.5 percent compared with revenue in 2007. Fourth quarter 2008 revenue was $64.2 million, an increase of 4.2 percent over the same quarter last year. Year-over-year revenue growth for the full year and the fourth quarter was driven by increases in data center services revenue which benefitted from the expansion of company-controlled and partner-controlled colocation footprint. Fourth quarter revenue declined 1.8 percent sequentially due to lower IP services revenue.

For the full-year 2008, GAAP net loss was $(104.8) million or $(2.13) per fully diluted share, compared with a net loss of $(5.6) million or $(0.12) per diluted share in 2007. The net loss in 2008 includes a non-cash $102.3 million impairment to goodwill and other intangibles taken in the third quarter. Fourth quarter 2008 GAAP net loss was $(0.9) million or $(0.02) per share.

Normalized net income(1), which excludes the impact of stock-based compensation expense and items that management considers non-recurring, totaled $6.0 million in 2008, compared with $16.1 million in 2007. On a fully-diluted share basis, 2008 normalized net income was $0.12 per share versus $0.34 per share in the prior year. In the fourth quarter, 2008 normalized net income was $1.2 million or $0.03 per fully-diluted share.

Internap’s adjusted gross profit(1) in 2008 was $118.1 million, an increase of 2.1 percent over the prior year. Increased data center services revenue was the driver of the year-over-year improvement. Fourth quarter 2008 adjusted gross profit declined $2.2 million compared with the prior year’s quarter and $1.4 million sequentially. The year-over-year decline in the fourth quarter was primarily due to lower adjusted gross margin in data center services and IP services. A decline in IP services adjusted gross margin was the principal contributor to the sequential decrease in the fourth quarter 2008.

Adjusted EBITDA (1) for the full-year 2008 totaled $34.2 million compared with $37.4 million in 2007. In the fourth quarter 2008, adjusted EBITDA (1) was $9.2 million, a decrease of 8.8 percent compared with the fourth quarter of 2007 and 8.1 percent versus the third quarter 2008. Full-year 2008 adjusted EBITDA margin (1) was 13.5 percent — down 250 basis points versus last year. Fourth quarter adjusted EBITDA margin (1) was 14.3 percent, down 200 basis points year-over-year and 90 basis points sequentially. The year-over-year decreases reflect anticipated lower data center gross margins which were impacted by the planned build-out of company-controlled data center space and a larger proportion of occupied partner square footage. The sequential decrease in the fourth quarter was driven by lower gross margin in the company’s IP Services segment.

Cash, cash equivalents, and short-term marketable securities totaled $54.1 million at December, 31 2008. Total interest-bearing debt was $20.0 million at year-end 2008.

Internap maintained 3,610 customers under contract in the fourth quarter of 2008, a net decrease of 61 customers compared with the third quarter 2008. The percentage of customers purchasing more than one service from Internap increased to 41 percent in the fourth quarter of 2008. New accounts this quarter included Carbonite and Active Video Networks.

Conference Call Information:

Internap’s fourth quarter and full-year 2008 conference call will be held today at 5:00 p.m., EDT.

Participants may access the call by dialing 888-599-4884. International callers should dial 913-312-0654. Listeners may also connect to the simultaneous webcast available from the Investor Services section of the company’s web site at https://ir.inap.com/events.cfm. A replay of the call will be accessible from Thursday, March 12 at 8 p.m. EDT through Wednesday, March 18 at 888-203-1112 using the replay code 4577308. International callers can access the archived event at 719-457-0820 with the same code.

(1) Reconciliations between GAAP information and non-GAAP information contained in this press release are provided in the tables below entitled “Reconciliation of Gross Margin to Adjusted Gross Margin,” “Reconciliation of Net (Loss) Income to Adjusted EBITDA,” and “Reconciliation of Net (Loss) Income and Basic and Diluted Net (Loss) Income Per Share to Normalized Net Income and Basic and Diluted Normalized Net Income Per Share.” This information is also available on our Web site under the Investor Services section of the company’s website.

INTERNAP NETWORK SERVICES CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share amounts)

INTERNAP NETWORK SERVICES CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In thousands, except per share amounts)

INTERNAP NETWORK SERVICES CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

INTERNAP NETWORK SERVICES CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)

(In thousands)

INTERNAP NETWORK SERVICES CORPORATION

NON-GAAP (ADJUSTED) FINANCIAL MEASURES

In addition to providing financial measurements based on generally accepted accounting principles 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, normalized diluted shares and adjusted gross margin. The most directly comparable GAAP equivalent to adjusted EBITDA and normalized net income is net (loss income. The most directly comparable GAAP equivalent to normalized diluted shares is diluted common shares outstanding. The most directly comparable GAAP equivalent to adjusted gross margin is gross margin.

We define non-GAAP measures as follows:

• Adjusted EBITDA is net (loss) income plus impairments and restructuring, stock-based compensation expense, depreciation and amortization, income taxes and interest expense less interest income
• Adjusted EBITDA margin is adjusted EBITDA as a percentage of revenues
• Normalized net income is net (loss) income plus impairments and restructuring and stock-based compensation expense
• Normalized diluted shares are diluted shares of common stock outstanding used in GAAP net (loss) income per share calculation, excluding the effect of SFAS No. 123R under the treasury stock method
• Normalized net income per share is normalized net income divided by basic and normalized diluted shares
• Adjusted gross profit is gross profit (GAAP) plus direct costs of customer support and depreciation and amortization included in and associated with costs of sales
• Adjusted gross margin is adjusted gross profit as a percentage of revenues

Reconciliations of each of our non-GAAP financial measures to the most directly comparable financial measure are detailed 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 as well as asset impairments and restructuring to calculate adjusted EBITDA provides supplemental information and an alternative presentation that is useful to investors’ understanding of the Company’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. Asset impairments relate to the Company’s write-down of goodwill and other intangible assets recorded in the acquisition of VitalStream Holdings, Inc. in February 2007. Restructuring reflects the recent and significant deterioration in the real estate market which caused us to increase our restructuring liability and a nominal adjustment for severance costs that were ultimately not paid. Management believes that such asset impairment and restructuring charges were unique costs that are not expected to recur on a regular basis, and consequently, does not consider these charges as a normal component of expenses related to current and ongoing operations.

Similarly, we believe that excluding the effects of share-based compensation from non-GAAP financial measures provides supplemental information and an alternative presentation useful to investors’ understanding of the Company’s core operating results and trends. Investors have indicated that they consider financial measures of our results of operations excluding share-based compensation expense 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, 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) income and net (loss) income per share information by providing normalized net income and normalized net income per share, excluding the effect of impairments and restructuring and stock-based compensation expense 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 overall performance of the Company 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, or used in, operating activities as defined by GAAP. Our statement of cash flows presents 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, 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 impairments, restructuring and stock-based compensation expense, 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, stockholders, analysts and investors concerning our financial performance.

Our presentation of adjusted gross margin excludes depreciation, amortization and direct costs of customer support in order to allow investors to see the business through the eyes of management. Direct costs of network, sales and services is viewed by management as generally non-controllable, external costs and the margin of revenues in excess of these direct costs is regularly monitored by management. 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 within our control and to some degree discretionary as we can adjust those costs by hiring and terminating employees.

Adjusted gross 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 adjusted gross 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.

Depreciation and amortization have also been excluded from adjusted gross 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 the Company’s 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 NET (LOSS) INCOME TO ADJUSTED EBITDA

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

*The three month period ended September 30, 2008 includes $1,850 impairment for developed technology that is included in the caption “Direct costs of amortization of acquired technologies” on our statements of operations.

**Excludes $1,850 impairment for developed technology, noted above.

INTERNAP NETWORK SERVICES CORPORATION

RECONCILIATION OF NET (LOSS) INCOME AND BASIC AND DILUTED

NET (LOSS) INCOME PER SHARE TO NORMALIZED NET INCOME AND

BASIC AND DILUTED NORMALIZED NET INCOME PER SHARE

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

*The three month period ended September 30, 2008 includes $1,850 impairment for developed technology that is included in the caption “Direct costs of amortization of acquired technologies” on our statements of operations.

INTERNAP NETWORK SERVICES CORPORATION

RECONCILIATION OF GROSS MARGIN TO ADJUSTED GROSS MARGIN

A reconciliation of gross margin, the most directly comparable GAAP measure, to adjusted gross margin, for each of the fiscal periods indicated is as follows (in thousands):

About Internap

Internap is a leading Internet solutions company that provides The Ultimate Online Experience™ by managing, delivering and distributing applications and content with 100% performance and reliability. With a global platform of data centers, managed Internet services and a content delivery network (CDN), Internap frees its customers to innovate their business, improve service levels, and lower the cost of IT operations. More than 3,000 companies across the globe trust Internap to help them achieve their Internet business goals. For more information, visit internap.josh.ux.voxel.net.

Internap “Safe Harbor” Statement

Certain information included in this press release constitutes forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. All statements, other than statements of historical facts, including, among others, statements regarding the performance of our products, business strategy, projected levels of growth and projected costs, are forward-looking statements. Those statements include statements regarding the intent, belief or current expectations of Internap and members of our management team, as well as the assumptions on which such statements are based. Forward-looking statements are not guarantees of future performance and involve risks and uncertainties that actual results may differ materially from those contemplated by forward-looking statements. Other important factors that may affect Internaps business, products, results of operations and financial condition include, but are not limited to: our ability to sustain profitability; our ability to respond successfully to technological change; 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, network access points or computer systems; and our ability to protect our intellectual property.

Our Annual Report on Form 10-K/A, Quarterly Reports on Form 10-Q, recent Current Reports on Form 8-K and other Securities and Exchange Commission filings discuss the foregoing risks, as well as other important risk factors that could contribute to such differences or otherwise affect our business, results of operations and financial condition. We undertake no obligation to revise or update any forward-looking statement for any reason.