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Internap Reports First Quarter 2012 Financial Results

ATLANTA, April 26, 2012 /PRNewswire/ --

    --  Revenue of $67.0 million compared with $59.4 million in the first
        quarter of 2011;
    --  Segment profit(()(1)) of $35.9 million; segment margin(()(1)) of 53.5
        percent, up 240 basis points year-over-year;
    --  Adjusted EBITDA(()(2)) of $12.2 million; adjusted EBITDA margin(()(2))
        of 18.3 percent;
    --  Announces launch of Agile Hosting offering, a global on-demand hosting
        service and self-service configurator.

Internap Network Services Corporation (NASDAQ: INAP), a leading provider of IT infrastructure services, today announced financial results for the first quarter of 2012.

"We were pleased with the solid revenue growth we generated in the first quarter. We drove sequential and year over year increases in our organic core data center business as well as in the newly acquired services from Voxel, which remains well on track to deliver 25 percent annual revenue growth," said Eric Cooney, President and Chief Executive Officer of Internap. "With our collective efforts set squarely on deploying high-value data center services, we were able to quickly reach a key Voxel integration milestone with today's launch of Agile Hosting services, our new e-commerce IT Infrastructure offering."

First Quarter 2012 Financial Summary

                           1Q 2012 1Q 2011 4Q 2011           YoY              QoQ
                                                            Growth          Growth
                                                            ------          ------
    Revenues:
    Data center services           $39,938         $31,542         $35,316            27%        13%
    IP services                     27,090          27,862          27,484            -3%        -1%
                                    ------          ------          ------
    Total Revenues                 $67,028         $59,404         $62,800            13%         7%

    Operating Expenses             $65,320         $60,292         $63,739             8%         2%


    GAAP Net Income (Loss)            $107         $(1,500)         $4,198           n/m        n/m

    Normalized Net Income
     (Loss)(2)                      $1,554           $(400)           $269           n/m        n/m

    Segment Profit                 $35,874         $30,374         $32,876            18%         9%
    Segment Margin                    53.5%           51.1%           52.4%        240
                                                                                   BPS    110 BPS

    Adjusted EBITDA                $12,233          $9,213         $12,605            33%        -3%
    Adjusted EBITDA Margin            18.3%           15.5%           20.1%        280
                                                                                   BPS    -180 BPS

Revenue

    --  Revenue totaled $67.0 million compared with $59.4 million in the first
        quarter of 2011 and $62.8 million in the fourth quarter of 2011. Revenue
        from Data center services increased year-over-year and sequentially.  IP
        services revenue decreased compared with both the first quarter of 2011
        and the fourth quarter of 2011.
    --  Data center services revenue improved 27 percent year-over-year and 13
        percent sequentially to $39.9 million. Both the year-over-year and the
        sequential increases were attributable to the fourth quarter 2011
        acquisition of Voxel as well as growth in core Data center services.
    --  IP services revenue totaled $27.1 million, a decrease of 3 percent
        compared with the first quarter of 2011 and 1 percent sequentially, as
        traffic growth was more than offset by per unit price declines in IP.

Net (Loss) Income

    --  GAAP net income was $0.1 million, or $0.00 per share, compared with GAAP
        net loss of $(1.5) million, or $(0.03) per share, in the first quarter
        of 2011 and GAAP net income of $4.2 million, or $0.08 per share, in the
        fourth quarter of 2011.
    --  Normalized net income, which excludes the impact of stock-based
        compensation expense and items that management considers non-recurring,
        was $1.6 million, or $0.03 per share.  Normalized net loss was $(0.4)
        million, or $(0.01) per share, in the first quarter of 2011, and $0.3
        million or $0.01 per share, in the fourth quarter of  2011.

Segment Profit and Adjusted EBITDA

    --  Segment profit totaled $35.9 million in the first quarter, an increase
        of 18 percent year-over-year and 9 percent sequentially.  Segment margin
        was 53.5 percent, increasing 240 basis points compared with the first
        quarter of 2011 and 110 basis points over the fourth quarter of 2011.
    --  Segment profit in Data center services was $19.0 million, or 47.5
        percent of Data center services revenue. IP services segment profit was
        $16.9 million, or 62.4 percent of IP services revenue. Increasing
        proportions of higher-margin services, specifically colocation sold in
        company controlled data centers and hosting services, benefited Data
        center services segment profit compared with both the first quarter of
        2011 and the fourth quarter of 2011.  Data center services segment
        margin increased 620 basis points year-over-year and 460 basis points
        sequentially to 47.5 percent.  IP services segment profit decreased 3
        percent compared with the first quarter of 2011.  Sequentially, IP
        segment profit decreased 5 percent.   Lower revenue drove the
        year-over-year and sequential decreases in segment margins.  IP services
        segment margin increased 10 basis points year-over-year and decreased
        210 basis points sequentially to 62.4 percent.
    --  Adjusted EBITDA totaled $12.2 million in the first quarter, a 33 percent
        increase compared with the first quarter of 2011 and down 3 percent
        relative to Adjusted EBITDA in the fourth quarter of 2011.  Adjusted
        EBITDA margin was 18.3 percent in the first quarter of 2012, up 280
        basis points year-over-year and a decrease of 180 basis points
        sequentially.  Higher operating costs in the first quarter were more
        than offset by improved segment profit relative to the first quarter of
        2011.  Sequentially, seasonally higher general and administrative costs
        outweighed the quarter-over-quarter increase in segment profit.

Balance Sheet and Cash Flow Statement

    --  Cash and cash equivalents totaled $30.8 million at March 31, 2012. Total
        debt was $106.9 million, net of discount, at the end of the quarter,
        including $48.2 million in capital lease obligations.
    --  Cash generated from operations for the three months ended March 31, 2012
        was $18.5 million. Capital expenditures over the same period were $16.8
        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.

    --  We had approximately 3,700 customers under contract at the end of the
        first quarter 2012.
    --  Today, we announced the availability of our global Agile Hosting
        offering, which marks one of the first key technology deliverables
        resulting from the combination of Internap and Voxel.  Combining
        Internap's premium data center footprint and Performance IP(TM) with
        Voxel's unified hosting platform, our Agile Hosting service allows
        enterprises to instantly scale high-performance physical and cloud
        infrastructure through a new self-service configurator.
    --  In March, Forbes magazine and GMI, an independent financial analytics
        company in Los Angeles, rated Internap as one of America's Most
        Trustworthy Companies, in the small-cap category.  Now in its fifth
        year, the list identifies 100 organizations publicly traded on U.S.
        exchanges - from an initial group of more than 8,000 - that have
        consistently demonstrated transparent and conservative accounting
        practices and solid corporate governance and management.

(1) 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.

(2) 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 Income (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 Income (Loss) and Basic and Diluted Normalized Net Income (Loss) Per Share" in the attachment.

Conference Call Information:

Internap's first quarter 2012 conference call will be held today at 5:00 p.m. EDT. 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, April 26, 2012 at 8 p.m. EDT through Wednesday, May 2, 2012 at 855-859-2056 using the replay code 70585644. International callers can listen to the archived event at 404-537-3406 with the same code.

About Internap

Transform your IT Infrastructure into a competitive advantage with IT IQ from Internap, intelligent IT Infrastructure solutions that combine unmatched performance and platform flexibility. Since 1996, thousands of enterprises have entrusted Internap to deliver their online applications across our portfolio of connectivity, colocation, managed hosting, cloud and hybrid services. For more information, visit 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 strategy to drive long-term profitable growth, our expectations regarding the expansion of our hosting capabilities and our efforts to integrate Voxel into our business. 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             Andrew McBath
    (781) 418-2404            (404) 302-9700
    internap@daviesmurphy.com ir@internap.com
    ------------------------- ---------------

               INTERNAP NETWORK SERVICES CORPORATION
    UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                  AND COMPREHENSIVE INCOME (LOSS)
             (In thousands, except per share amounts)


                                                 Three Months Ended
                                                      March 31,
                                                -------------------
                                                    2012               2011
                                                    ----               ----
    Revenues:
       Data center
        services                                 $39,938            $31,542
       Internet
        protocol (IP)
        services                                  27,090             27,862
                                                  ------             ------
           Total revenues                         67,028             59,404
                                                  ------             ------

    Operating costs and expenses:
       Direct costs of network, sales and
        services, exclusive of
          depreciation and amortization, shown
           below:
             Data center
              services                            20,970             18,530
             IP services                          10,184             10,500
       Direct costs of
        customer
        support                                    6,728              5,110
       Direct costs of
        amortization of
        acquired
        technologies                               1,179                875
       Sales and
        marketing                                  8,090              7,833
       General and
        administrative                            10,227              9,129
       Depreciation and
        amortization                               7,915              8,053
       (Gain) loss on
        disposal of
        property and
        equipment, net                               (16)                73
       Restructuring                                  43                189
                                                     ---                ---

    Total operating
     costs and
     expenses                                     65,320             60,292
                                                  ------             ------

    Income (loss)
     from operations                               1,708               (888)
                                                   -----               ----


    Non-operating expense (income):
       Interest expense                            1,581                648
       Other, net                                     45                 38
                                                     ---                ---
    Total non-
     operating
     expense
     (income)                                      1,626                686
                                                   -----                ---

    Income (loss) before income taxes and
     equity in (earnings) of
       equity method
        investment                                    82             (1,574)
    Provision for
     income taxes                                     35                 73
    Equity in
     (earnings) of
     equity-method
     investment, net
     of taxes                                        (60)              (147)
                                                     ---               ----

    Net income
     (loss)                                          107             (1,500)
                                                     ---             ------

    Other comprehensive income:
       Foreign currency
        translation
        adjustment                                    85                200
                                                     ---                ---

    Comprehensive
     income (loss)                                  $192            $(1,300)
                                                    ====            =======

    Basic and
     diluted net
     income (loss)
     per share                                     $0.00             $(0.03)
                                                   =====             ======

    Weighted average shares outstanding
     used in computing
        basic net income
         (loss) per
         share                                    50,336             50,124
                                                  ======             ======

    Weighted average shares outstanding
     used in computing
        diluted net
         income (loss)
         per share                                51,033             50,124
                                                  ======             ======

                                          INTERNAP NETWORK SERVICES CORPORATION
                                     UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
                                     (In thousands, except par value amounts)


                                                         March 31,                   December 31,
                                                                        2012                          2011
                                                                        ----                          ----

                      ASSETS
    Current assets:
    Cash and cash equivalents                                        $30,849                       $29,772
    Accounts receivable, net of
     allowance for doubtful
     accounts of $1,750 and
     $1,668, respectively                                             17,886                        18,539
    Prepaid expenses and other
     assets                                                           12,172                        13,270
                                                                      ------                        ------

    Total current assets                                              60,907                        61,581

    Property and equipment, net                                      215,027                       198,369
    Investment in joint venture                                        2,904                         2,936
    Intangible assets, net                                            25,501                        26,886
    Goodwill                                                          59,675                        59,471
    Deposits and other assets                                          5,400                         5,371
    Deferred tax asset, net                                            2,117                         2,096
                                                                       -----                         -----
    Total assets                                                    $371,531                      $356,710
                                                                    ========                      ========

                  LIABILITIES AND
                STOCKHOLDERS' EQUITY
    Current liabilities:
    Accounts payable                                                 $27,204                       $21,746
    Accrued liabilities                                               10,112                         9,152
    Deferred revenues                                                  2,485                         2,475
    Capital lease obligations                                          3,271                         2,154
    Term loan, less discount of
     $204 and $206,
     respectively                                                      3,546                         2,794
    Restructuring liability                                            2,626                         2,709
    Other current liabilities                                            156                           151
                                                                         ---                           ---
    Total current liabilities                                         49,400                        41,181

    Deferred revenues                                                  2,447                         2,323
    Capital lease obligations                                         44,893                        38,923
    Revolving credit facility                                            509                           100
    Term loan, less discount of
     $317 and $367,
     respectively                                                     54,683                        55,383
    Accrued contingent
     consideration                                                     4,626                         4,626
    Restructuring liability                                            4,306                         4,884
    Deferred rent                                                     15,859                        16,100
    Other long-term liabilities                                        1,004                         1,020
                                                                       -----                         -----
    Total liabilities                                                177,727                       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; 53,068 and
     52,528 shares
    outstanding, respectively                                             53                            53
    Additional paid-in capital                                     1,237,717                     1,235,554
    Treasury stock, at cost;
     327 and 231 shares,
     respectively                                                     (1,987)                       (1,266)
    Accumulated deficit                                           (1,041,765)                   (1,041,872)
    Accumulated items of other
     comprehensive loss                                                 (214)                         (299)
                                                                        ----                          ----
    Total stockholders' equity                                       193,804                       192,170
                                                                     -------                       -------
    Total liabilities and
     stockholders' equity                                           $371,531                      $356,710
                                                                    ========                      ========

                                 INTERNAP NETWORK SERVICES CORPORATION
                       UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                             (In thousands)

                                           Three Months Ended
                                                March 31,
                                          -------------------
                                                           2012                     2011
                                                           ----                     ----
    Cash Flows from
     Operating
     Activities:
    Net income (loss)                                      $107                  $(1,500)
    Adjustments to
     reconcile net
     income (loss) to
     net cash provided
     by operating
     activities:
       Depreciation and
        amortization                                      9,094                    8,928
       Gain (loss) on
        disposal of
        property and
        equipment, net                                      (16)                      73
       Stock-based
        compensation
        expense                                           1,404                      911
       Equity in
        (earnings) from
        equity-method
        investment                                          (60)                    (147)
       Provision for
        doubtful accounts                                    79                      165
       Non-cash changes
        in deferred rent                                   (240)                     (70)
       Deferred income
        taxes                                                 -                      (45)
       Other, net                                           461                      156
    Changes in
     operating assets
     and liabilities:
       Accounts
        receivable                                          575                      963
       Prepaid expenses,
        deposits and
        other assets                                        820                     (657)
       Accounts payable                                   5,505                   (6,973)
       Accrued and other
        liabilities                                       1,323                   (1,086)
       Deferred revenues                                    134                     (130)
       Accrued
        restructuring
        liability                                          (661)                    (497)
                                                           ----                     ----
    Net cash flows
     provided by
     operating
     activities                                          18,525                       91
                                                         ------                      ---

    Cash Flows from
     Investing
     Activities:
    Purchases of
     property and
     equipment                                          (16,824)                 (12,646)
                                                        -------                  -------
    Net cash flows
     used in investing
     activities                                         (16,824)                 (12,646)
                                                        -------                  -------

    Cash Flows from
     Financing
     Activities:
    Principal payments
     on credit
     agreement                                                -                     (250)
    Payments on
     capital lease
     obligations                                           (612)                    (361)
    Proceeds from
     exercise of stock
     options                                                628                      365
    Tax withholdings
     related to net
     share settlements
     of restricted
     stock awards                                          (721)                    (480)
    Other, net                                              (35)                     (33)
                                                            ---                      ---
    Net cash flows
     used in financing
     activities                                            (740)                    (759)
                                                           ----                     ----
    Effect of exchange
     rates on cash and
     cash equivalents                                       116                       30
                                                            ---                      ---
    Net increase
     (decrease) in
     cash and cash
     equivalents                                          1,077                  (13,284)
    Cash and cash
     equivalents at
     beginning of
     period                                              29,772                   59,582
                                                         ------                   ------
    Cash and cash
     equivalents at
     end of period                                      $30,849                  $46,298
                                                        =======                  =======

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:

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

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 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 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:

    --  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, 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
                                                         ------------------
                                                          March 31,           December 31,          March 31,
                                                                     2012                     2011            2011
                                                                     ----                     ----            ----
      Income (loss) from operations
      (GAAP)                                                       $1,708                    $(939)          $(888)
     Stock-based compensation                                       1,404                      994             911
      Depreciation and amortization,
      including amortization of acquired
      technologies                                                  9,094                   11,333           8,928
      (Gain) loss on disposal of property
      and equipment, net                                              (16)                       -              73
     Restructuring and impairments                                     43                    1,217             189
                                                                      ---                    -----             ---
     Adjusted EBITDA (non-GAAP)                                   $12,233                  $12,605          $9,213
                                                                  =======                  =======          ======

            INTERNAP NETWORK SERVICES CORPORATION
       RECONCILIATION OF NET LOSS AND BASIC AND DILUTED
      NET LOSS PER SHARE TO NORMALIZED NET INCOME (LOSS)
                              AND
      BASIC AND DILUTED NORMALIZED NET INCOME (LOSS) 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
                                                           ------------------
                                                         March 31,               December 31,         March 31,
                                                                    2012                        2011             2011
                                                                    ----                        ----             ----
     Net income (loss) (GAAP)                                       $107                      $4,198          $(1,500)
     Restructuring and impairments                                    43                       1,217              189
     Stock-based compensation                                      1,404                         994              911
      Deferred income tax benefit
      related to Voxel                                                 -                      (6,140)               -
                                                                     ---                      ------              ---
      Normalized net income (loss) (non-
      GAAP)                                                        1,554                         269             (400)

      Normalized net income allocable to
      participating securities (non-
      GAAP)                                                          (38)                         (5)               -
      Normalized net income (loss)
      available to common stockholders
      (non-GAAP)                                                  $1,516                        $264            $(400)
                                                                  ======                        ====            =====

      Weighted average shares
      outstanding used in per share
      calculation:
     Basic (GAAP)                                                 50,336                      50,229           50,124
     Participating securities (GAAP)                               1,255                       1,046            1,087
     Diluted (GAAP)                                               51,033                      50,679           50,124
      Add potentially dilutive
      securities                                                       -                           -                -
      Less dilutive effect of stock-
      based compensation under the
      treasury stock method                                         (323)     45                (107)               -
                                                                    ----                        ----              ---
      Normalized diluted shares (non-
      GAAP)                                                       50,710                      50,572           50,124
                                                                  ======                      ======           ======

     Income (loss) per share (GAAP):
     Basic and diluted                                             $0.00                       $0.08           $(0.03)
                                                                   =====                       =====           ======

      Normalized net income (loss) per
      share (non-GAAP):
     Basic                                                         $0.03                       $0.01           $(0.01)
                                                                   =====                       =====           ======
     Diluted                                                       $0.03                       $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
                                                           ------------------
                                                          March 31,           December 31,          March 31,
                                                                       2012                   2011               2011
                                                                       ----                   ----               ----
     Revenues:
        Data center services                                        $39,938                $35,316            $31,542
        IP services                                                  27,090                 27,484             27,862
                                                                     ------                 ------             ------
            Total                                                    67,028                 62,800             59,404
                                                                     ------                 ------             ------

        Direct cost of network, sales
         and services, exclusive of
           depreciation and amortization:
              Data center services                                   20,970                 20,164             18,530
              IP services                                            10,184                  9,760             10,500
                                                                     ------                  -----
            Total                                                    31,154                 29,924             29,030
                                                                     ------                 ------             ------

     Segment Profit:
        Data center services                                         18,968                 15,152             13,012
        IP services                                                  16,906                 17,724             17,362
            Total                                                   $35,874                $32,876            $30,374
                                                                    =======                =======            =======

     Segment Margin:
        Data center services                                           47.5%                  42.9%              41.3%
        IP services                                                    62.4%                  64.5%              62.3%
            Total                                                      53.5%                  52.4%              51.1%
                                                                       ====                   ====               ====

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SOURCE Internap Network Services Corporation

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