Internap Reports Strong Year-Over-Year Adjusted EBITDA Growth and Adjusted EBITDA Margin Expansion

Highest Levels of Adjusted EBITDA and Adjusted EBITDA Margin for a First Quarter in Company History

• Revenue of $75.9 million, down 6% versus the first quarter of 2015
• Data Center and Network Services revenue of $50.9 million, down 6% versus the first quarter of 2015
• Cloud and Hosting Services revenue of $25.1 million, down 6% versus the first quarter of 2015
• Segment margin1 of 59.1%, up 40 basis points year-over-year
• Adjusted EBITDA2 of $20.5 million increased 14% versus the first quarter of 2015
• Adjusted EBITDA margin2 of 27.0%, up 480 basis points year-over-year
• Levered free cash flow3 of $1.3 million

ATLANTA, GA – (May 5, 2016) Internap Corporation (NASDAQ: INAP), a provider of high-performance Internet infrastructure services, today announced financial results for the first quarter of 2016.

“We delivered solid financial results for the first quarter of 2016 with adjusted EBITDA and adjusted EBITDA margin representing the highest levels for a first quarter in company history. We completed the transition into two distinct business units, which better aligns our cost structure and will enable us to respond better to customers and to grow faster as a result,” said Michael Ruffolo, President and Chief Executive Officer of Internap. “Consistent with our guidance provided last quarter, churn from a small number of large customers created a headwind to first quarter revenue. With churn expected to decline in the second quarter of 2016, we believe we are positioned to accelerate profitable growth as we progress through 2016 and are excited by the implications for long-term shareholder value.”

First Quarter 2016 Financial Summary

	1Q 2016	1Q 2015	4Q 2015	YoY Growth	QoQ Growth
Data Center & Network Services	$50,872	$54,068	$53,010	-6%	-4%
Cloud & Hosting Services	$25,052	$26,718	$25,746	-6%	-3%
Total Revenues	$75,924	$80,786	$78,756	-6%	-4%
Operating Expenses	$78,125	$84,905	$85,509	-8%	-9%
GAAP Net Loss	$(9,644)	$(10,442)	$(11,269)	8%	-14%
Normalized Net Loss2	$(6,108)	$(8,598)	$(7,409)	29%	-18%
Segment Profit1	$44,847	$47,440	$47,322	-5%	-5%
Segment Profit Margin	59.1%	58.7%	60.1%	40 BPS	-100 BPS
Adjusted EBITDA	$20,476	$17,918	$22,810	14%	-10%
Adjusted EBITDA Margin	27.0%	22.2%	29.0%	480 BPS	-200 BPS

Revenue

• Revenue totaled $75.9 million in the first quarter, a decrease of 6% year-over-year and 4% sequentially. Both decreases were driven by churn from a small number of large customers.
• Data Center and Network Services revenue totaled $50.9 million in the first quarter, a decrease of 6% year-over-year and 4% sequentially. The year-over-year decrease was attributable to lower IP connectivity revenue related to the continued decline in pricing for new and renewing customers and the loss of legacy contracts, a decrease in partner colocation revenue, partially offset by an increase in company-controlled colocation revenue. The sequential decrease was primarily attributable to similar trends for IP connectivity and anticipated churn from a significant company-controlled colocation customer.
• Cloud and Hosting Services revenue totaled $25.1 million in the first quarter, a decrease of 6% year-over-year and 3% sequentially. Both decreases were driven by churn from a small number of large customers.

Net Loss

• GAAP net loss was $(9.6) million, or $(0.19) per share, compared with $(10.4) million, or $(0.20) per share, in the first quarter of 2015 and $(11.3) million, or $(0.22) per share, in the fourth quarter of 2015.
• Normalized net loss was $(6.1) million, or $(0.12) per share, compared with normalized net loss of $(8.6) million, or $(0.17) per share, in the first quarter of 2015, and normalized net loss of $(7.4) million, or $(0.14) per share, in the fourth quarter of 2015.

Segment Profit and Adjusted EBITDA

• Segment profit totaled $44.8 million in the first quarter, a 5% decrease compared with the first quarter of 2015 and a 5% decrease from the fourth quarter of 2015. Segment margin was 59.1%, an increase of 40 basis points year-over-year and a decrease of 100 basis points sequentially.
• Data Center and Network Services segment profit totaled $26.5 million in the first quarter, a 4% decrease compared with the first quarter of 2015 and a 6% decrease from the fourth quarter of 2015. Data Center and Network Services segment margin was 52.1% in the first quarter, up 110 basis points year-over-year and down 120 basis points sequentially. Year-over-year, 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. Lower IP connectivity costs and a favorable mix shift of higher company-controlled colocation revenue drove data center and network services segment margin higher. Sequentially, lower data center and network services revenue resulted in declines in segment profit and segment margin.
• Cloud and Hosting Services segment profit totaled $18.3 million in the first quarter, an 8% decrease compared with the first quarter of 2015 and a 4% decrease from the fourth quarter of 2015. Cloud and Hosting Services segment margin was 73.2% in the first quarter, down 110 basis points year-over-year and 90 basis points sequentially. Decreased Cloud and Hosting Services revenue resulted in declines in segment profit and segment margin.
• Adjusted EBITDA totaled $20.5 million in the first quarter, a 14% increase compared with the first quarter of 2015 and a 10% decrease from the fourth quarter of 2015. Adjusted EBITDA margin was 27.0% in the first quarter, up 480 basis points year-over-year and down 200 basis points sequentially. The year-over-year increase in adjusted EBITDA and adjusted EBITDA margin was attributable to lower cash operating expense4 primarily from optimizing the Company’s cost structure, reduced discretionary spending 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 and seasonally higher normalized cash operating expense weighed on adjusted EBITDA and adjusted EBITDA margin.

Balance Sheet and Cash Flow Statement

• Cash and cash equivalents totaled $13.9 million at March 31, 2016. Total debt was $378.0 million, net of discount and prepaid costs, at the end of the quarter, including $59.3 million in capital lease obligations.
• Cash generated from operations for the three months ended March 31, 2016 was $10.8 million. Capital expenditures over the same period were $12.7 million.

Business Outlook

We are reaffirming the following guidance for full-year 2016:

Revenue	$310 million – $320 million
Adjusted EBITDA	$80 million – $90 million
Capital Expenditures	$40 million – $50 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 https://ir.inap.com/results.cfm.

• Internap announced the launch of China Performance IP™, a direct connection between the company’s Hong Kong private network access point (PNAP) and mainland Chinese Internet providers. This direct, route-optimized connection between Hong Kong and China enables enterprises to gain low latency access to the mainland’s fast-growing markets from Hong Kong, removing the complexity, cost and time required to set up operations on the mainland or engage directly with China’s Internet providers.
• Internap announced the expansion of its OpenStack-based bare-metal Infrastructure-as-a-Service offering, AgileSERVER 2.0, to its data centers in Amsterdam, Dallas and Santa Clara, Calif. Launched in 2015 out of Internap’s New York Metro data center in Secaucus, N.J., AgileSERVER 2.0 is now available in four locations globally, enabling enterprises and devops teams running mission-critical applications and big data workloads to build scale-out infrastructure environments that are higher performing and more cost-effective than commodity public cloud platforms.

1. 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.
2. 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.
3. Levered free cash flow is a non-GAAP measure 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 levered free cash flow is contained in the table entitled “Levered Free Cash Flow” in the attachment.
4. Cash operating expense is a non-GAAP measure 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 cash operating expense is contained in the table entitled “Cash Operating Expense” in the attachment.

Conference Call Information:

Internap’s first 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 https://ir.inap.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, May 5, 2016 at 8:00 p.m. ET through Wednesday, May 11, 2016 at 855-859-2056 using replay code 91208532. 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 (a) our expectations for the benefits to be achieved from the establishment of two distinct business units, including customer service improvements and our ability to grow faster; (b) our expectations for customer churn; (c) our ability to accelerate profitable growth and drive long-term shareholder value; and (d) our expectations for full-year 2016 revenue, adjusted EBITDA and capital expenditures. 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.

Media Contact:

Mariah Torpey
LEWIS
781-418-2404
internap@teamlewis.com
www.teamlewis.com

Investor Contact

Michael Nelson
404.302.9700
ir@internap.com