UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
 


FORM 8-K
 

 
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

Date of Report (Date of earliest event reported):

August 2, 2018
 

 
Internap Corporation
(Exact Name of Registrant as Specified in Charter)
 

 
Delaware
001-31989
91-2145721
(State or Other Jurisdiction of Incorporation)
(Commission File Number)
(IRS Employer Identification Number

12120 Sunset Hills Road, Suite 330, Reston, Virginia
 
20190
(Address of Principal Executive Offices)
 
(Zip Code)

Registrant’s telephone number, including area code: (404) 302-9700

Not applicable
(Former Name or Former Address, if Changed Since Last Report)
 

 
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

Soliciting material pursuant to Rule 14a-12 under the Securities Act (17 CFR 240.14a-12)

Pre-commencement communications pursuant to Rule 14d-2(b) under the Securities Act (17 CFR 240.14d-2(b))

Pre-commencement communications pursuant to Rule 13e-4(c) under the Securities Act (17 CFR 240.13e-2(c))

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company  

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  
 


Item 2.02
Results of Operations and Financial Condition.

On August 2, 2018, Internap Corporation (the “Company”) issued a press release announcing its financial results for the quarter ended June 30, 2018. A copy of the press release is attached hereto as Exhibit 99.1 and is incorporated herein by reference.

On August 2, 2018, the Company will host a conference call to discuss its results for the quarter ended June 30, 2018.  A copy of the presentation to be used during the conference call is attached hereto as Exhibit 99.2 and is incorporated herein by reference.

Copies of the press release and the presentation were posted to the Investor Relations section of the Company’s website at http://www.INAP.com on August 2, 2018.

The information contained herein and in the accompanying exhibits shall not be incorporated by reference into any filing of the Company, whether made before or after the date hereof, regardless of any general incorporation language in such filing, unless expressly incorporated by specific reference to this or such filing. The information in this report, including the exhibits hereto, shall be deemed to be “furnished” and therefore shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that section or Sections 11 and 12(a)(2) of the Securities Act of 1933, as amended.

Item 7.01
Regulation FD Disclosure.

The information in Item 2.02 is incorporated by reference herein.

The information contained herein and in the accompanying exhibits shall not be incorporated by reference into any filing of the Company, whether made before or after the date hereof, regardless of any general incorporation language in such filing, unless expressly incorporated by specific reference to this or such filing. The information in this report, including the exhibits hereto, shall be deemed to be “furnished” and therefore shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that section or Sections 11 and 12(a)(2) of the Securities Act of 1933, as amended.

Item 9.01
Financial Statements and Exhibits.

(d)
Exhibits

The following exhibits are furnished with this Current Report on Form 8-K:

Exhibit No.
 
Description
     
 
Press Release, dated August 2, 2018
     
 
Presentation, dated August 2, 2018
 

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 
INTERNAP CORPORATION
   
Date: August 2, 2018
By:
/s/ James C. Keeley
   
James C. Keeley
   
Chief Financial Officer
 
 


Exhibit 99.1
 
INAP Reports Second Quarter 2018 Financial Results

Reported Revenue of $82.0 Million up 10.5% Sequentially and 17.7% Year-over-Year
INAP US, comprising 78% of Revenue, up 12.2% Sequentially and 18.4% Year-over-Year
INAP INTL, comprising 22% of Revenue, up 4.5% Sequentially and 15.2% Year-over-Year
GAAP Net Loss of $(13.9) Million, or GAAP Net Loss Margin of (17.0)%, with Adjusted EBITDA of $28.5 Million up 10.9% Sequentially and 23.4% Year-over-Year; Adjusted EBITDA Margin of 34.7% Up 10 Basis Points Quarter-over-Quarter and up 160 Basis Points Year-over-Year
Cash Flow from Operations was $15.3 Million, with Capital Expenditures of $11.1 Million
Raising Adjusted EBITDA Guidance Range to $110-$120 Million, Reaffirming Revenue of $320-330 Million and Capital Expenditures of $40-$45 Million
INAP Adds New Flagship Data Center in Phoenix, a Key Strategic Market

RESTON, VA - (August 2, 2018) Internap Corporation (NASDAQ: INAP), a leading provider of high-performance data center services, including colocation, cloud and network, announced today financial results for the second quarter of 2018.

“INAP has entered the next phase of our development, with 2018 turnaround projects winding down and our prospects for revenue growth and increased scale already in progress,” stated Peter D. Aquino, President and CEO. “We are now closing larger high-density deals, offering innovative cloud solutions, and overlaying a more robust network to serve our customers.  Revenue growth and increased scale are being fueled by a combination of new organic Cloud sales, less overall churn, and new business development.  Net of non-core planned closures that we called out in past quarters, we have stabilized the top line and are generating pockets of growth that we expect will continue to expand.  Given our repeated success in high absorption markets such as the greater Phoenix market, we are expanding once again.  We recently announcing a second facility in the market with Bank of America as an anchor tenant in our new flagship.  Our enhanced profile is also making us an attractive partner, and we are pleased to announce our global cross-selling arrangement with COLT Data Centre Services.  We are very excited about our progress to date and declare that INAP 2.0 is now on offense.”

Revenue
 
2018 results include SingleHop operations as of March 1, 2018, and are therefore not comparable to prior periods.   For the second quarter:

·
Revenue totaled $82.0 million in the second quarter of 2018, an increase of 10.5% sequentially and 17.7% year- over-year. The sequential increase was primarily due to a full quarter’s impact of SingleHop and an increase in Cloud revenues. Our backlog remains strong, replenishing completed installs in the second quarter.
 
Beginning with the first quarter of 2018, INAP redefined its segment reporting by geography into INAP US and INAP International.
 
o
INAP US revenue totaled $64.1 million in the second quarter of 2018, an increase of 12.2% sequentially and 18.4% year-over-year. The sequential increase was primarily due to a full quarter’s impact of SingleHop and an increase in Cloud revenues.
 

1

o
INAP International revenue totaled $17.9 million in the second quarter of 2018, an increase of 4.5% sequentially and 15.2% year-over-year. The sequential increase was primarily due to an increase in Cloud revenues of $1.0 million, which includes organic growth and the full quarter’s impact from SingleHop.

Second Quarter 2018 Financial Summary
 
($ in thousands)
                   
QoQ
   
YoY
 
   
2Q 2018
   
1Q 2018
   
2Q 2017
   
Growth
   
Growth
 
                               
Net Revenues
 
$
81,962
   
$
74,201
   
$
69,642
     
10.5
%
   
17.7
%
Operating Costs and Expenses
 
$
79,835
   
$
73,322
   
$
71,695
     
8.9
%
   
11.4
%
Depreciation and Amortization
 
$
22,590
   
$
21,077
   
$
18,934
     
7.2
%
   
19.3
%
Acquisition Costs
 
$
306
   
$
2,558
   
$
     
(88.0
)%
   
 
All Other Operating Costs and Expenses
 
$
56,939
   
$
49,687
   
$
52,761
     
14.6
%
   
7.9
%
                                         
GAAP Net Loss Attributable to INAP Shareholders
 
$
(13,923
)
 
$
(14,060
)
 
$
(19,283
)
   
1.0
%
   
27.8
%
GAAP Net Loss Margin
   
(17.0
)%
   
(18.9
)%
   
(27.7
)%
               
                                         
Minus Stock-Based Compensation and Other Items
 
$
3,830
   
$
3,690
   
$
13,378
     
3.8
%
   
(71.4
)%
Normalized Net Loss2
 
$
(10,093
)
 
$
(10,370
)
 
$
(5,905
)
   
2.7
%
   
(70.9
)%
                                         
Adjusted EBITDA1
 
$
28,454
   
$
25,665
   
$
23,051
     
10.9
%
   
23.4
%
Adjusted EBITDA Margin1
   
34.7
%
   
34.6
%
   
33.1
%
               
                                         
Capital Expenditures (CapEx)
 
$
11,083
   
$
6,359
   
$
6,748
     
74.3
%
   
64.2
%
Adjusted EBITDA less CapEx1
 
$
17,371
   
$
19,306
   
$
16,303
     
(10.0
)%
   
6.6
%
 
Net Loss, Normalized Net Loss, Adjusted EBITDA and Business Unit Contribution

·
GAAP net loss attributable to INAP shareholders was $(13.9) million, or $(0.69) per share in the second quarter of 2018 compared with $(14.1) million, or $(0.70) per share in the first quarter of 2018, including $2.6 million of costs associated with acquisition costs. GAAP net loss in second quarter of 2017 was $(19.3) million.

·
Normalized net loss was $(10.1) million in the second quarter of 2018 compared with $(10.4) million in the first quarter of 2018 and $(5.9) million in the second quarter of 2017.

·
Adjusted EBITDA totaled $28.5 million in the second quarter of 2018, an increase of 10.9% compared with $25.7 million in the first quarter of 2018, and a 23.4% increase compared with $23.1 million in the second quarter of 2017. Adjusted EBITDA margin was 34.7% in the second quarter, up 10 basis points compared to 34.6% in the first quarter, and up 160 basis points compared to 33.1% in second quarter 2017. The increase in Adjusted EBITDA were primarily driven by continued focus on cost savings in real estate and network facilities, INAP’s initiative to exit less profitable data center sites, and the addition of SingleHop.

Business Unit Contribution3 - INAP US and INAP International business unit contribution for second quarter 2018 is as follows:

INAP US, includes colocation, cloud, and network services. Cloud contains AgileCloud, Managed Hosting, and SingleHop.

2

o
INAP US business unit contribution totaled $29.2 million in the second quarter, a 10.0% increase compared to the first quarter of 2018 and a 36.8% increase from the second quarter of 2017. As a percent of revenue, INAP US business unit contribution margin was 45.6% in the second quarter of 2018 down 90 basis points sequentially and up 620 basis points year-over-year. The year-over-year business unit contribution increase reflects continued focus on cost savings in real estate and network facilities, INAP's initiative to exit non-core data center sites, and the addition of SingleHop.

INAP INTL, includes colocation, cloud, and network services. Cloud contains AgileCloud, Managed Hosting, Ubersmith, iWeb, and SingleHop.

o
INAP INTL business unit contribution totaled $6.0 million in the second quarter of 2018, a 0.5% increase compared with the first quarter of 2018 and a 14.8% decrease from the second quarter of 2017. As a percent of revenue, INAP INTL business unit contribution margin was 33.7% in the second quarter of 2018, down 130 basis points sequentially and 1180 basis points year-over-year. The year-over-year decrease is primarily due to costs from INAP Japan, and higher space and power costs.

“We are now at an exciting inflection point that gives us confidence to increase our Adjusted EBITDA guidance as additional scale and deal synergies are all beginning to pass through to the bottom line,” said Jim Keeley, Chief Financial Officer.  “Investments made in rebuilding our sales force, increasing marketing resources, and developing partnerships are beginning to have an impact. We remain focused on execution and delivering returns across all our markets.”

Balance Sheet and Cash Flow Statement
 
·
Cash and cash equivalents totaled $14.7 million at June 30, 2018. Total debt was $662.7 million, net of discount and prepaid costs, at the end of the second quarter 2018, including $231.0 million in capital lease obligations. As previously reported, on April 9, 2018, INAP entered into a Fourth Amendment to Company’s Credit Agreement, which amended the Credit Agreement, dated as of April 6, 2017 to lower the interest rate margin applicable to outstanding term loans under the Credit Agreement by 1.25%.

·
Cash generated from operations for the three months ended June 30, 2018 was $15.3 million compared to $3.5 million in first quarter of 2018, and $14.8 million in the second quarter 2017. Capital expenditures over the same periods were $11.1 million, compared to $6.4 million and $6.7 million, respectively. Adjusted EBITDA less CapEx1 was $17.4 million, compared to $19.3 million in first quarter of 2018 and $16.3 million in second quarter of 2017. Free cash flow4 over the same periods was $4.3 million, compared to $(2.8) million and $8.0 million, respectively.  Unlevered free cash flow4 was $19.8 million for the second quarter 2018, compared to $10.2 million in first quarter 2018 and $15.6 million in second quarter 2017.
 
Business Outlook

INAP's outlook for 2018, as noted above, includes projected results of acquired SingleHop operations as of March 1, 2018. The Company is reiterating its full-year 2018 revenue and capital expenditures, and raising its Adjusted EBITDA guidance range, as shown in the table below. Additionally, the Company’s sales momentum is expected to contribute to organic growth, offset by select planned closures of certain data center facilities.

   
Full-Year 2018 Expected Range
 
Previous Guidance
 
Current Guidance
Revenue
 
$320 million - $330 million
 
$320 million - $330 million
Adjusted EBITDA (non-GAAP)
 
$105 million - $115 million
 
$110 million - $120 million
Capital Expenditures
 
$40 million - $45 million
 
$40 million - $45 million


3

1.
Adjusted EBITDA, Adjusted EBITDA margin and Adjusted EBITDA less CapEx 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 Adjusted EBITDA margin are contained in the table entitled “Reconciliation of GAAP Net Loss to Adjusted EBITDA and Forward Looking Adjusted EBITDA.” Adjusted EBITDA margin is Adjusted EBITDA as a percentage of revenue. A reconciliation between GAAP information and non-GAAP information related to Adjusted EBITDA less CapEx is contained in the table entitled “Reconciliation of GAAP Net Cash Flows provided by Operating Activities to Adjusted EBITDA less CapEx."
 
2.
Normalized net loss is a non-GAAP financial measure 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 normalized net loss are contained in the table entitled “Reconciliation of Net Loss Attributable to INAP Shareholders to Normalized Net Loss to INAP Shareholders.”
 
3.
Business unit contribution and business unit contribution margin 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 business unit contribution and business unit contribution margin are contained in the table entitled “Business Unit Contribution and Business Unit Contribution Margin” in the attachment. Business unit contribution margin is business unit contribution as a percentage of revenue.
 
4.
Free cash flow and unlevered free cash flow are non-GAAP financial measures which we define in the attachment to the press release entitled “Non-GAAP (Adjusted) Financial Measures.” Reconciliations between GAAP and non-GAAP information related to free cash flow and unlevered free cash flow are contained in the table entitled “Free Cash Flow and Unlevered Free Cash Flow.”

Conference Call Information

INAP's second quarter 2018 conference call will be held today at 8:30 a.m. ET. Listeners may connect to a simultaneous webcast of the call, which will include accompanying presentation slides, on the Investor Relations section of INAP’s web site at http://ir.inap.com/events-and-presentations.

The call can also be accessed by dialing 877-334-0775. International callers should dial 631-291-4567. An online archive of the webcast will be archived in the Investor Relations section of the Company’s website.  An audio-only telephonic replay will be accessible from Thursday, August 2, 2018 at 11:30 AM ET through Wednesday, August 8, 2018 at 855-859-2056 using replay code 6275639. International callers can listen to the archived event at 404-537-3406 with the same code.
 

4

About INAP

Internap Corporation (NASDAQ: INAP) is a leading provider of high-performance data center services, including colocation, cloud and network. INAP partners with its customers, who range from the Fortune 500 to emerging start-ups, to create secure, scalable and reliable IT infrastructure solutions that meet the customer’s unique business requirements. INAP operates in 56, primarily Tier 3, data centers in 21 metropolitan markets and has 99 POPs around the world. INAP has over 1 million gross square feet in its portfolio, and nearly 600,000 square feet of sellable data center space. For more information, visit www.inap.com.

Forward-Looking Statements

This press release contains forward-looking statements. These forward-looking statements include statements related to sales, backlog, profitability, margins, operations improvement, cost reductions, participation in strategic transactions, and our expectations for 2018 revenue, Adjusted EBITDA, capital expenditures and Adjusted EBITDA less Capex. 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 IT infrastructure services and customer levels. These assumptions may prove inaccurate in the future. Because such forward-looking statements are not guarantees of future performance or results and involve risks and uncertainties, there are important factors that could cause INAP’s actual results to differ materially from those expressed or implied in the forward-looking statements, due to a variety of important factors. Such important factors include, without limitation: to drive growth while reducing costs; 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 and improving operations; 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 geographic concentration of the company’s data centers in certain markets and any adverse developments in local economic conditions or the demand for data center space in these markets; ability to identify any suitable strategic transactions; INAP's ability to realize anticipated revenue, growth, synergies and cost savings from the acquisition of SingleHop; INAP's ability to successfully integrate SingleHop’s sales, operations, technology, and products generally; 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; our ability to protect our intellectual property; our substantial amount of indebtedness, our possibility to raise additional capital when needed, on attractive terms, or at all, our ability to service existing debt or maintain compliance with financial and other covenants contained in our credit agreement; our compliance with and changes in complex laws and regulations in the U.S. and internationally; our ability to attract and retain qualified management and other personnel; and volatility in the trading price of INAP common stock.

These risks and other important factors discussed under the caption “Risk Factors” in our most recent Annual Report on Form 10-K filed with the Securities and Exchange Commission (“SEC”), and our other reports filed with the SEC could cause actual results to differ materially from those indicated by the forward-looking statements made in this press release.

Given these risks and uncertainties, investors should not place undue reliance on forward-looking statements as a prediction of actual results. All forward-looking statements attributable to INAP or persons acting on its behalf are expressly qualified in their entirety by the foregoing forward-looking statements. All such statements speak only as of the date made, and INAP undertakes no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise.


5

###

Investor Contacts
 
Richard Ramlall
Carolyn Capaccio/Jody Burfening
VP, IR & PR INAP
LHA
404-302-9982
212-838-3777
ir@inap.com
inap@lhai.com

6

INTERNAP CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
AND COMPREHENSIVE LOSS
(In thousands, except per share amounts)
(Unaudited)
 
   
Three Months Ended
June 30,
   
Six Months Ended
June 30,
 
   
2018
   
2017
   
2018
   
2017
 
Net revenues
 
$
81,962
   
$
69,642
   
$
156,163
   
$
141,775
 
                                 
Operating costs and expenses:
                               
Costs of sales and services, exclusive of depreciation and amortization
   
27,976
     
26,429
     
53,013
     
55,474
 
Costs of customer support
   
8,841
     
6,133
     
16,228
     
13,397
 
Sales, general and administrative
   
19,602
     
15,571
     
39,456
     
32,135
 
Depreciation and amortization
   
22,590
     
18,934
     
43,667
     
36,679
 
Exit activities, restructuring and impairments
   
826
     
4,628
     
793
     
5,651
 
Total operating costs and expenses
   
79,835
     
71,695
     
153,157
     
143,336
 
Income (loss) from operations
   
2,127
     
(2,053
)
   
3,006
     
(1,561
)
                                 
Interest expense
   
15,860
     
17,145
     
30,887
     
25,282
 
Loss (gain) on foreign currency, net
   
26
     
191
     
(189
)
   
288
 
Total non-operating expenses
   
15,886
     
17,336
     
30,698
     
25,570
 
                                 
Loss before income taxes and equity in earnings of equity-method investment
   
(13,759
)
   
(19,389
)
   
(27,692
)
   
(27,131
)
Provision (benefit) for income taxes
   
141
     
(50
)
   
241
     
468
 
Equity in earnings of equity-method investment, net of taxes
   
     
(56
)
   
     
(86
)
                                 
Net loss
   
(13,900
)
   
(19,283
)
   
(27,933
)
   
(27,513
)
Less net income attributable to non-controlling interests
   
23
     
     
50
     
 
Net loss attributable to INAP stockholders
   
(13,923
)
   
(19,283
)
   
(27,983
)
   
(27,513
)
Other comprehensive income:
                               
Foreign currency translation adjustment
   
61
     
32
     
122
     
105
 
Unrealized gain on foreign currency contracts
   
     
60
     
     
145
 
Total other comprehensive income
   
61
     
92
     
122
     
250
 
                                 
Comprehensive loss
 
$
(13,862
)
 
$
(19,191
)
 
$
(27,861
)
 
$
(27,263
)
                                 
Basic and diluted net loss per share
 
$
(0.69
)
 
$
(0.96
)
 
$
(1.40
)
 
$
(1.52
)
                                 
Weighted average shares outstanding used in computing basic and diluted net loss per share
   
21,300
     
19,876
     
21,044
     
17,992
 

 
7

INTERNAP CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except par value amounts)
(Unaudited)
 
   
June 30,
2018
   
December 31,
2017
 
ASSETS
           
Current assets:
           
Cash and cash equivalents
 
$
14,739
   
$
14,603
 
Accounts receivable, net of allowance for doubtful accounts of $1,689 and $1,487, respectively
   
20,251
     
17,794
 
Contract assets
   
8,474
     
 
Prepaid expenses and other assets
   
9,689
     
8,673
 
Total current assets
   
53,153
     
41,070
 
                 
Property and equipment, net
   
452,958
     
458,565
 
Intangible assets, net
   
77,112
     
25,666
 
Goodwill
   
116,705
     
50,209
 
Non-current contract assets
   
12,760
     
 
Deposits and other assets
   
12,019
     
11,015
 
Total assets
 
$
724,707
   
$
586,525
 
LIABILITIES AND STOCKHOLDERS’ DEFICIT
               
Current liabilities:
               
Accounts payable
 
$
29,806
   
$
20,388
 
Accrued liabilities
   
17,059
     
15,908
 
Deferred revenues
   
5,837
     
4,861
 
Capital lease obligations
   
10,246
     
11,711
 
Revolving credit facility
   
16,000
     
5,000
 
Term loan, less discount and prepaid costs of $3,995 and $2,133, respectively
   
362
     
867
 
Exit activities and restructuring liability
   
2,968
     
4,152
 
Other current liabilities
   
4,050
     
1,707
 
Total current liabilities
   
86,328
     
64,594
 
Capital lease obligations
   
220,721
     
223,749
 
Term loan, less discount and prepaid costs of $11,546 and $7,655, respectively
   
415,418
     
287,845
 
Exit activities and restructuring liability
   
284
     
664
 
Deferred rent
   
907
     
1,310
 
Deferred tax liability
   
1,928
     
1,651
 
Other long-term liabilities
   
4,142
     
7,744
 
Total liabilities
   
729,728
     
587,557
 
Commitments and contingencies
               
Stockholders’ deficit:
               
Preferred stock, $0.001 par value; 5,000 shares authorized; no shares issued or outstanding
   
     
 
Common stock, $0.001 par value; 30,000 shares authorized; 21,256 and 20,804 shares outstanding, respectively
   
21
     
21
 
Additional paid-in capital
   
1,329,368
     
1,327,084
 
Treasury stock, at cost, 328 and 293 shares, respectively
   
(7,630
)
   
(7,159
)
Accumulated deficit
   
(1,328,502
)
   
(1,323,723
)
Accumulated items of other comprehensive loss
   
(1,202
)
   
(1,324
)
Total INAP stockholders’ deficit
   
(7,945
)
   
(5,101
)
Non-controlling interests
   
2,924
     
4,069
 
Total stockholders’ deficit
   
(5,021
)
   
(1,032
)
Total liabilities and stockholders’ deficit
 
$
724,707
   
$
586,525
 


8

INTERNAP CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
 
   
Six Months Ended June 30,
 
   
2018
   
2017
 
Cash Flows from Operating Activities:
           
Net loss
 
$
(27,933
)
 
$
(27,513
)
Adjustments to reconcile net loss to net cash provided by operating activities:
               
Depreciation and amortization
   
43,667
     
36,679
 
Gain on disposal of fixed asset
   
(29
)
   
 
Amortization of debt discount and issuance costs
   
1,712
     
1,292
 
Stock-based compensation expense, net of capitalized amount
   
2,232
     
1,132
 
Equity in earnings of equity-method investment
   
     
(86
)
Provision for doubtful accounts
   
604
     
520
 
Non-cash change in capital lease obligations
   
(371
)
   
258
 
Non-cash change in exit activities and restructuring liability
   
1,112
     
5,391
 
Non-cash change in deferred rent
   
(604
)
   
(1,199
)
Deferred taxes
   
60
     
150
 
Loss on extinguishment and modification of debt
   
     
6,785
 
Other, net
   
3
     
200
 
Changes in operating assets and liabilities:
               
Accounts receivable
   
(2,165
)
   
1,485
 
Prepaid expenses, deposits and other assets
   
(4,073
)
   
(1,039
)
Accounts payable
   
6,939
     
477
 
Accrued and other liabilities
   
(585
)
   
3,150
 
Deferred revenues
   
1,249
     
(697
)
Exit activities and restructuring liability
   
(2,676
)
   
(2,466
)
Asset retirement obligation
   
(188
)
   
103
 
Other liabilities
   
(85
)
   
12
 
Net cash provided by operating activities
   
18,869
     
24,634
 
                 
Cash Flows from Investing Activities:
               
Purchases of property and equipment
   
(16,102
)
   
(12,293
)
Proceeds from disposal of property and equipment
   
541
     
 
Business acquisition, net of cash acquired
   
(131,748
)
   
 
Acquisition of non-controlling interests
   
(1,130
)
   
 
Additions to acquired and developed technology
   
(1,340
)
   
(444
)
Net cash used in investing activities
   
(149,779
)
   
(12,737
)
                 
Cash Flows from Financing Activities:
               
Proceeds from credit agreements
   
146,000
     
295,500
 
Proceeds from stock issuance
   
     
40,162
 
Principal payments on credit agreements
   
(2,178
)
   
(326,500
)
Debt issuance costs
   
(7,696
)
   
(8,277
)
Payments on capital lease obligations
   
(4,760
)
   
(5,371
)
Proceeds from exercise of stock options
   
(108
)
   
36
 
Acquisition of common stock for income tax withholdings
   
(471
)
   
(210
)
Other, net
   
264
     
(240
)
Net cash provided by (used in) in financing activities
   
131,051
     
(4,900
)
Effect of exchange rates on cash and cash equivalents
   
(5
)
   
70
 
Net increase in cash and cash equivalents
   
136
     
7,067
 
Cash and cash equivalents at beginning of period
   
14,603
     
10,389
 
Cash and cash equivalents at end of period
 
$
14,739
   
$
17,456
 
                 
Supplemental Disclosures of Cash Flow Information:
               
Cash paid for interest
 
$
28,509
   
$
14,899
 
Non-cash acquisition of property and equipment under capital leases
   
214
     
147,788
 
Additions to property and equipment included in accounts payable
   
4,023
     
1,269
 

9

INTERNAP 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”), this earnings press release includes additional financial measures that are not prepared in accordance with GAAP (“non-GAAP”), including Adjusted EBITDA, Adjusted EBITDA margin, Adjusted EBITDA less CapEx, normalized net loss, business unit contribution, business unit contribution margin, free cash flow and unlevered free cash flow. A reconciliation of non-GAAP financial measures to the most directly comparable GAAP financial measures can be found below.

We define the following non-GAAP measures as follows:

Adjusted EBITDA is a non-GAAP measure and is GAAP net loss attributable to INAP shareholders plus depreciation and amortization, interest expense, provision (benefit) for income taxes, other expense (income), (gain) loss on disposal of property and equipment, exit activities, restructuring and impairments, stock-based compensation, non-income tax contingency, strategic alternatives and related costs, organizational realignment costs, pre-acquisition costs and claim settlement.

Adjusted EBITDA margin is Adjusted EBITDA as a percentage of revenues.

Adjusted EBITDA less CapEx is Adjusted EBITDA less capital expenditures with Adjusted EBITDA for this non-GAAP measure defined as net cash flow provided by operating activities plus cash paid for interest, cash paid for taxes, cash paid for exit activities and restructuring, cash paid for strategic alternatives and related costs, cash paid for organizational realignment costs, payment of debt lender fees and other working capital changes less capital expenditures.

Normalized net loss is net loss attributable to INAP shareholders plus exit activities, restructuring and impairments, stock-based compensation, non-income tax contingency, strategic alternatives and related costs, organizational realignment costs, pre-acquisition costs, claim settlement and debt extinguishment and modification expenses.

Business unit contribution is business unit revenues less direct costs of sales and services, customer support, and sales and marketing, exclusive of depreciation and amortization.

Business unit contribution margin is business unit contribution as a percentage of business unit revenue.

Free cash flow is net cash flows provided by operating activities minus capital expenditures.

Unlevered free cash flow is free cash flow plus cash interest expense.

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 (gain) 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 our current ongoing 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.

We believe that excluding interest expense, provision (benefit) for income taxes and other expense (income) from non-GAAP financial measures provides supplemental information and an alternative presentation useful to investors’ understanding of our core operating results and trends. Investors have indicated that they consider financial measures of our results of operations excluding interest expense, provision (benefit) for income taxes and other expense (income) as important supplemental information useful to their understanding of our historical results and estimating our future results.
 

10

INTERNAP CORPORATION
NON-GAAP (ADJUSTED) FINANCIAL MEASURES (Continued)

We also believe that, in excluding the effects of interest expense, provision (benefit) for income taxes and other expense (income), 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.

We believe that exit activities, restructuring and impairment charges, non-income tax contingency, strategic alternatives and related costs, organizational realignment costs, pre-acquisition costs, claim settlement costs, and debt extinguishment and modification expense are unique costs, 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 our current ongoing operating results and trends. Management believes that investors 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 by providing normalized net loss, excluding the effect of exit activities, restructuring and impairments, stock-based compensation, non-income tax contingency, strategic alternatives and related costs, organizational realignment cost, pre-acquisition costs, claim settlement costs, and debt extinguishment and modification expenses in all periods, is useful to investors because it enables additional and more meaningful period-to-period comparisons.

Adjusted EBITDA is not a measure of financial performance 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;
 

11

INTERNAP CORPORATION
NON-GAAP (ADJUSTED) FINANCIAL MEASURES (Continued)

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 business unit contribution and business unit contribution margin excludes depreciation and amortization in order to allow investors to see the business through the eyes of management.

We also have excluded depreciation and amortization from business unit contribution and business unit contribution 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.

Free cash flow and unlevered free cash flow are used in addition to and in conjunction with results presented in accordance with GAAP.  Free cash flow and unlevered free cash flow should not be relied upon to the exclusion of GAAP financial measures. Free cash flow and unlevered free cash flow reflect an additional way of viewing our liquidity that, when viewed with our GAAP results, provides a more complete understanding of factors and trends affecting our cash flows. Management strongly encourages investors to review our financial statements and publicly-filed reports in their entirety and to not rely on any single financial measure.

We use free cash flow and unlevered free cash flow, and ratios based on it, to conduct and evaluate our business because, although it is similar to cash flow from operations, we believe it is a useful measure of cash flows since capital expenditures are a necessary component of ongoing operations. In limited circumstances in which proceeds from sales of fixed assets exceed capital expenditures, free cash flow would exceed cash flow from operations. However, since we do not anticipate being a net seller of fixed assets, we expect free cash flow to be less than operating cash flows.

Free cash flow and unlevered free cash flow have limitations due to the fact that they do not represent the residual cash flow available for discretionary expenditures. For example, free cash flow does not incorporate payments made to service our debt or capital lease obligations. Therefore, we believe it is important to view free cash flow as a complement to our entire consolidated statements of cash flows.

Adjusted EBITDA less CapEx is used in addition to and in conjunction with results presented in accordance with GAAP.  Adjusted EBITDA less CapEx should not be relied upon to the exclusion of GAAP financial measures. Adjusted EBITDA less CapEx reflects an additional way of viewing our liquidity that, when viewed with our GAAP results, provides a more complete understanding of factors and trends affecting our cash flows. Management strongly encourages investors to review our financial statements and publicly-filed reports in their entirety and to not rely on any single financial measure.

We use Adjusted EBITDA less CapEx, and ratios based on it, to conduct and evaluate our business because, although it is similar to cash flow from operations, we believe it is a useful measure of cash flows since capital expenditures are a necessary component of ongoing operations.

Adjusted EBITDA less CapEx has limitations due to the fact that it does not represent the residual cash flow available for discretionary expenditures. Adjusted EBITDA less CapEx does not incorporate payments made to service our debt or capital lease obligations. Therefore, we believe it is important to view Adjusted EBITDA less CapEx as a complement to our entire consolidated statements of cash flows.

Adjusted EBITDA, as presented, may not be comparable to similarly titled measures of other companies.  Adjusted EBITDA is presented as we understand certain investors use it as one measure of our historical ability to service debt. Also Adjusted EBITDA is used in our debt covenants.

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.
 

12

INTERNAP CORPORATION
NON-GAAP (ADJUSTED) FINANCIAL MEASURES (Continued)
 
RECONCILIATION OF GAAP NET LOSS TO ADJUSTED EBITDA AND FORWARD LOOKING ADJUSTED EBITDA

A reconciliation of GAAP net loss to Adjusted EBITDA for each of the periods indicated is as follows (in thousands):

   
Three Months Ended
 
   
June 30, 2018
   
March 31, 2018
   
June 30, 2017
 
Reconciliation of GAAP Net Loss to Adjusted  EBITDA:
 
Amount
   
Percent
   
Amount
   
Percent
   
Amount
   
Percent
 
                                     
Net revenues
 
$
81,962
     
100.0
%
 
$
74,201
     
100.0
%
 
$
69,642
     
100.0
%
                                                 
Net loss (GAAP) attributable to INAP Shareholders
   
(13,923
)
   
(17.0
)%
   
(14,060
)
   
(18.9
)%
   
(19,283
)
   
(27.7
)%
Add:
                                               
Non-GAAP revenue
   
70
     
0.1
%
   
40
     
0.1
%
   
     
0.0
%
Depreciation and amortization
   
22,590
     
27.6
%
   
21,077
     
28.4
%
   
18,934
     
27.2
%
Interest expense
   
15,860
     
19.4
%
   
15,027
     
20.3
%
   
17,145
     
24.6
%
Provision (benefit) for income taxes
   
141
     
0.2
%
   
100
     
0.1
%
   
(50
)
   
(0.1
)%
Other expense (income)
   
31
     
0.0
%
   
(215
)
   
(0.3
)%
   
135
     
0.2
%
(Gain) loss on disposal of property and equipment, net
   
(75
)
   
(0.1
)%
   
46
     
0.1
%
   
(103
)
   
(0.1
)%
Exit activities, restructuring and impairments
   
826
     
1.0
%
   
(33
)
   
0.0
%
   
4,628
     
6.6
%
Stock-based compensation
   
1,374
     
1.7
%
   
858
     
1.2
%
   
534
     
0.8
%
Non-income tax contingency
   
800
     
1.0
%
   
     
0.0
%
   
     
0.0
%
Strategic alternatives and related costs
   
23
     
0.0
%
   
27
     
0.0
%
   
8
     
0.0
%
Organizational realignment costs
   
431
     
0.5
%
   
240
     
0.3
%
   
295
     
0.4
%
Acquisition costs
   
306
     
0.4
%
   
2,558
     
3.4
%
   
95
     
0.1
%
Claim settlement
   
     
0.0
%
   
     
0.0
%
   
713
     
1.0
%
Adjusted EBITDA (non-GAAP)
 
$
28,454
     
34.7
%
 
$
25,665
     
34.6
%
 
$
23,051
     
33.1
%

A reconciliation of forward looking Adjusted EBITDA for full-year 2018 is as follows (in millions):

   
Former Range
   
Updated Range
 
   
2018 Full-Year Guidance
   
2018 Full-Year Guidance
 
   
Low
   
High
   
Low
   
High
 
   
Amount
   
Amount
   
Amount
   
Amount
 
                         
Total Revenue
 
$
320
   
$
330
   
$
320
   
$
330
 
                                 
Net Loss (GAAP) attributable to INAP shareholders
 
$
(48
)
 
$
(38
)
 
$
(47
)
 
$
(37
)
Add:
                               
Depreciation and amortization
   
70
     
70
     
86
     
86
 
Interest expense
   
59
     
59
     
61
     
61
 
Provision for income taxes
   
1
     
1
     
0
     
0
 
Exit activities, restructuring and impairments
   
11
     
11
     
2
     
2
 
Stock-based compensation
   
11
     
11
     
4
     
4
 
Non-income tax contingency and acquisition costs
   
1
     
1
     
4
     
4
 
Other costs
   
0
     
0
     
0
     
0
 
Adjusted EBITDA (non-GAAP)
 
$
105
   
$
115
   
$
110
   
$
120
 

13

INTERNAP CORPORATION
NON-GAAP (ADJUSTED) FINANCIAL MEASURES (Continued)
 
RECONCILIATION OF GAAP NET CASH FLOWS PROVIDED BY OPERATING ACTIVITIES
TO ADJUSTED EBITDA LESS CAPEX

A reconciliation of GAAP Net Cash Flows Provided by Operating Activities to Adjusted EBITDA less CapEx for each of the periods indicated is as follows (in thousands):
 
   
Three Months Ended
 
Reconciliation of GAAP Net Cash Flows provided by Operating Activities to Adjusted EBITDA less CapEx:
 
June 30, 2018
   
March 31, 2018
   
June 30, 2017
 
                   
Net Cash Flow provided by operating activities:
 
$
15,342
   
$
3,527
   
$
14,787
 
                         
Add:
                       
Cash paid for interest
   
15,509
     
13,000
     
7,563
 
Cash paid for income taxes
   
126
     
108
     
148
 
Cash paid for exit activities and restructuring
   
1,287
     
1,389
     
1,080
 
Cash paid for strategic alternatives and related costs
   
23
     
27
     
171
 
Cash paid for organizational realignment costs
   
431
     
240
     
912
 
Cash paid for acquisition costs
   
306
     
2,558
     
 
Other working capital changes
   
(4,570
)
   
4,816
     
(1,610
)
Adjusted EBITDA (non-GAAP)
 
$
28,454
   
$
25,665
   
$
23,051
 
                         
Less:
                       
Capital Expenditures (CapEx)
 
$
11,083
   
$
6,359
   
$
6,748
 
Adjusted EBITDA less CapEx (non-GAAP)
 
$
17,371
   
$
19,306
   
$
16,303
 

14

INTERNAP CORPORATION
NON-GAAP (ADJUSTED) FINANCIAL MEASURES (Continued)

RECONCILIATION OF NET LOSS ATTRIBUTABLE TO INAP SHAREHOLDERS TO
NORMALIZED NET LOSS TO INAP SHAREHOLDERS

Reconciliations of net loss attributable to INAP Shareholders, the most directly comparable GAAP measure, to normalized net loss attributable to INAP Shareholders (in thousands):

   
Three Months Ended
 
   
June 30, 2018
   
March 31, 2018
   
June 30, 2017
 
Net loss (GAAP) attributable to INAP Shareholders
 
$
(13,923
)
 
$
(14,060
)
 
$
(19,283
)
Non GAAP revenue
   
70
     
40
     
 
Exit activities, restructuring and impairments, including goodwill impairment
   
826
     
(33
)
   
4,628
 
Stock-based compensation
   
1,374
     
858
     
534
 
Strategic alternatives, realignment, and related costs
   
454
     
267
     
303
 
Acquisition costs
   
306
     
2,558
     
95
 
Non-income tax contingency
   
800
     
     
 
Claim settlement
   
     
     
713
 
Debt extinguishment and modification expenses
   
     
     
7,105
 
Normalized net loss (non-GAAP)
 
$
(10,093
)
 
$
(10,370
)
 
$
(5,905
)

15

INTERNAP CORPORATION
NON-GAAP (ADJUSTED) FINANCIAL MEASURES (Continued)

BUSINESS UNIT CONTRIBUTION AND BUSINESS UNIT CONTRIBUTION MARGIN

Business unit contribution and business unit contribution margin, which includes direct costs of sales and service, customer support and sales and marketing for each of the periods indicated is as follows (in thousands):

   
Three Months Ended
 
   
June 30, 2018
   
March 31, 2018
   
June 30, 2017
 
Revenues:
                 
INAP US
 
$
64,067
   
$
57,076
   
$
54,113
 
INAP INTL
   
17,895
     
17,125
     
15,529
 
Total
   
81,962
     
74,201
     
69,642
 
Direct costs of sales and services, customer support and sales and marketing:
                       
INAP US
   
34,873
     
30,537
     
32,776
 
INAP INTL
   
11,872
     
11,133
     
8,463
 
Total
   
46,745
     
41,670
     
41,239
 
Business Unit Contribution:
                       
INAP US
   
29,194
     
26,539
     
21,337
 
INAP INTL
   
6,023
     
5,992
     
7,066
 
Total
 
$
35,217
   
$
32,531
   
$
28,403
 
Business Unit Contribution Margin:
                       
INAP US
   
45.6
%
   
46.5
%
   
39.4
%
INAP INTL
   
33.7
%
   
35.0
%
   
45.5
%
Total
   
43.0
%
   
43.8
%
   
40.8
%

16

INTERNAP CORPORATION
NON-GAAP (ADJUSTED) FINANCIAL MEASURES (Continued)

FREE CASH FLOW AND UNLEVERED FREE CASH FLOW

Free cash flow and unlevered free cash flow are non-GAAP measures. Free cash flow is net cash flows provided by operating activities minus capital expenditures. Unlevered free cash flow is free cash flow plus cash interest expense (in thousands):

   
Three Months Ended
 
   
June 30, 2018
   
March 31, 2018
   
June 30, 2017
 
Net cash flows provided by operating activities
 
$
15,342
   
$
3,527
   
$
14,787
 
Capital expenditures:
                       
Maintenance capital
   
(4,197
)
   
(1,796
)
   
(1,018
)
Growth capital
   
(6,886
)
   
(4,564
)
   
(5,730
)
Free cash flow (non-GAAP)
   
4,259
     
(2,833
)
   
8,039
 
                         
Cash paid for interest
   
15,509
     
13,000
     
7,563
 
Unlevered free cash flow (non-GAAP)
 
$
19,768
   
$
10,167
   
$
15,602
 

17

DATA CENTER PORTFOLIO
 
The following table presents an overview of the portfolio of data center properties that INAP leases as of June 30, 2018:
 
Market
Gross Square
Supporting
Office &
Data Center
Current Raised
Occupied
Occupied
 
 Feet (SF) 1
Infrustructure2
Other
Footprint SF 3
Floor SF 4
SF
SF %
Atlanta
212,898
64,248
75,344
73,306
49,462
33,096
67%
Los Angeles5
124,651
11,323
17,475
95,853
20,712
15,710
76%
Dallas
112,700
23,763
21,023
67,914
30,972
15,297
49%
New York/New Jersey
116,503
16,405
28,468
71,630
48,940
27,206
56%
Boston7
116,699
47,779
11,587
57,333
36,804
20,279
55%
Seattle
100,597
31,326
21,552
47,719
38,719
24,391
63%
Montreal6
126,965
34,572
46,833
45,560
25,050
23,890
95%
Santa Clara/San Jose8
88,882
23,852
23,667
41,363
41,038
21,973
54%
Houston
43,913
7,925
15,599
20,389
20,389
9,296
46%
Phoenix
23,907
2,257
21,668
21,601
21,411
99%
Chicago
14,027
1,551
12,476
12,076
10,529
87%
Other9
23,093
981
22,095
20,145
15,678
78%
Total
1,104,835
262,744
264,786
577,306
365,908
238,756
              65%

(1)  Represents total SF subject to our lease.
(2)  Represents total SF for mechanical and utility rooms.
(3)  Represents total SF that is currently leased or available for lease but excludes supporting infrastructure, office space, and common area.
(4)  Represents data center footprint SF less unbuilt SF.
(5)  Removed 4,343 SF due to data center exit.
(6)  Acquired new facility that will be built out in Q3 2018.
(7)  Removed 14,804 SF due to data center exit.
(8)  Site includes higher density power deployments which limits available capacity to approximately 10%.
(9)  Represents Miami, Northern Virginia, Oakland/San Francisco, London, Amsterdam, Frankfurt, Hong Kong, Singapore, Sydney, Tokyo, and Osaka.
 
 
18

Exhibit 99.2
 
   2nd Quarter 2018 Earnings Report  Peter D. AquinoPresident & Chief Executive OfficerJames C. KeeleyChief Financial OfficerAugust 2, 2018   
 

 FORWARD-LOOKING STATEMENTS  This presentation contains forward-looking statements. These forward-looking statements include statements related to sales, backlog, profitability, margins, operations improvement, cost reductions, participation in strategic transactions, and our expectations for 2018 revenue, Adjusted EBITDA, capital expenditures and Adjusted EBITDA less Capex. 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 IT infrastructure services and customer churn levels. These assumptions may prove inaccurate in the future. Because such forward-looking statements are not guarantees of future performance or results and involve risks and uncertainties, there are important factors that could cause INAP’s actual results to differ materially from those expressed or implied in the forward-looking statements, due to a variety of important factors. Such important factors include, without limitation: to drive growth while reducing costs; 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 and improving operations; 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 geographic concentration of the company’s data centers in certain markets and any adverse developments in local economic conditions or the demand for data center space in these markets; ability to identify any suitable strategic transactions; INAP's ability to realize anticipated revenue, growth, synergies and cost savings from the acquisition of SingleHop; INAP's ability to successfully integrate SingleHop’s sales, operations, technology, and products generally; 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 IT infrastructure services to our customers; our ability to protect our intellectual property; our substantial amount of indebtedness, our possibility to raise additional capital when needed, on attractive terms, or at all, our ability to service existing debt or maintain compliance with financial and other covenants contained in our credit agreement; our compliance with and changes in complex laws and regulations in the U.S. and internationally; our ability to attract and retain qualified management and other personnel; and volatility in the trading price of INAP common stock.These risks and other important factors discussed under the caption “Risk Factors” in our most recent Annual Report on Form 10-K filed with the Securities and Exchange Commission (“SEC”), and our other reports filed with the SEC could cause actual results to differ materially from those indicated by the forward-looking statements made in this presentation. Given these risks and uncertainties, investors should not place undue reliance on forward-looking statements as a prediction of actual results. All forward-looking statements attributable to INAP or persons acting on its behalf are expressly qualified in their entirety by the foregoing forward-looking statements. All such statements speak only as of the date made, and INAP undertakes no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise.   © 2018 Internap Corporation (INAP) 
 

 NON-GAAP MEASURES  In addition to results presented in accordance with GAAP, this presentation includes non-GAAP financial measures. INAP believes these non-GAAP financial measures provide additional information that is useful to investors in helping to understand our underlying performance and trends. Non-GAAP financial measures have inherent limitations, which are not required to be uniformly applied. Readers should be aware of these limitations and should be cautious with respect to the use of such measures. To compensate for these limitations, we use non-GAAP financial measures as comparative tools, together with GAAP financial measures, to assist in the evaluation of our operating performance or financial condition. Our method of calculating these non-GAAP financial measures may differ from methods used by other companies. These non-GAAP financial measures should not be considered in isolation or as a substitute for those financial measures prepared in accordance with GAAP.We have provided in this presentation reconciliations of the non-GAAP financial measures included in this presentation to the most directly comparable GAAP financial measures. Reconciliations of non-GAAP financial measures are also available in the attachment to our second quarter 2018 earnings press release available on our website at www.ir.inap.com.  © 2018 Internap Corporation (INAP) 
 

 INAP SECOND QUARTER HIGHLIGHTS  Reported 2Q results represent a solid performance Operations improvements are expanding marginsSales close rates are replenishing our backlog, producing organic growthClosure of non-core data centers will be completed by year-end Strategic deals and partnerships are now re-ignited:New flagship data center in greater Phoenix market, anchored by BofACross-selling services deal with COLT Data Centre Services  © 2018 Internap Corporation (INAP)  INAP Serves a Large Addressable Metro Footprint Worldwide 
 

 © 2018 Internap Corporation (INAP)  5         99 POPs On-Net  INAP OPERATES 56 DATA CENTERS IN 21 MARKETS    Effective as of August 1, 2018  INAP cross-selling with COLT in London, UK  Effective as of July 1, 2018  INAP adds New Flagshipin Phoenix, AZ   Indicates Recent Event      Note: INAP has 56 data centers, after four planned non-core closures in Atlanta, Boston, Dallas and Los Angeles.  
 

 CONSOLIDATED EARNINGS SUMMARY   *Reconciliation to GAAP on pages 13-19 © 2018 Internap Corporation (INAP)  Reported Revenue and Adjusted EBITDA Increased QoQ and YoY   
 

 INAP US BUSINESS UNIT RESULTS  *Reconciliation to GAAP on pages 13-19 © 2018 Internap Corporation (INAP)  INAP US Adjusted EBITDA Remains Strong Including Acquisition  COLOCATION  NETWORK  INAP US Business Unit Contribution (non-GAAP)* ($mm) and %   CLOUD  INAP US Revenue ($mm)  $54.1  $57.1  $64.1  $29.6  $30.9  $30.9  $19.6  $12.4  $9.4  $15.1  $13.8  $13.6  $21.3  $26.5  $29.2  39.4%  46.5%  45.6%      2Q’17  2Q’17  1Q’18  1Q’18  2Q’18  2Q’18 
 

 INAP INTL BUSINESS UNIT RESULTS  *Reconciliation to GAAP on pages 13-19 © 2018 Internap Corporation (INAP)  INAP INTL Cloud Revenue is Driving Growth  COLOCATION  NETWORK  INAP INTL Business Unit Contribution (non-GAAP)* ($mm) and %   CLOUD  $7.1  $6.0  $6.0  $1.3  $15  INAP INTL Revenue ($mm)  $15.5  $17.1  $17.9  $1.2  $1.5  $1.5  $12.8  $12.6  $13.6  $1.5  $3.0  $2.8  45.5%  35.0%  33.7%  1    2Q’18  2Q’18  2Q’17  1Q’18  2Q’17  1Q’18 
 

   CASH FLOW AND BALANCE SHEET SUMMARY  *Reconciliation to GAAP on pages 13-19© 2018 Internap Corporation (INAP)  Unlevered Free Cash Flow Up Significantly in Q2’18 
 

 SECOND QUARTER 2018 FINANCIAL GUIDANCE UPDATE  *Reconciliation to GAAP on pages 13-19 © 2018 Internap Corporation (INAP)  Raising Adjusted EBITDA Guidance 
 

 NEXT STEPS FOR SECOND HALF OF 2018  © 2018 Internap Corporation (INAP)  INAP is Transforming into a Growth Company and Gaining Scale  Management’s focus is to accelerate customer installation of our backlogSales to push for larger customer deals, fostering new organic growthINAP INTL to leverage cross-sell arrangements for data center servicesINAP US to invest in key markets to capture high demandGlobal Network Services to light metro rings and continue to lower costs Business development continues to supplement revenue growth into 2019 
 

 © 2018 Internap Corporation (INAP)  APPENDIX  Reconciliation of Non-GAAP Financial Measures 
 

 RECONCILIATION OF NON-GAAP FINANCIAL MEASURES  Normalized Net Loss Attributable to INAP Shareholders is a non-GAAP measure. Normalized Net Loss is net loss attributable to INAP shareholders plus non-GAAP revenue, exit activities, restructuring and impairments, stock-based compensation, non-income tax contingency, strategic alternatives and related costs, one time interest expense, and organizational realignment costs.($ in thousands, unaudited)  © 2018 Internap Corporation (INAP) 
 

 RECONCILIATION OF NON-GAAP FINANCIAL MEASURES  Business Unit Contribution and Business Unit Contribution Margin are non-GAAP measures. Business Unit Contribution is defined as business unit revenues less direct costs of sales and services, customer support, and sales and marketing, exclusive of depreciation and amortization. Business Unit Contribution Margin is Business Unit Contribution as a percentage of business unit revenues.($ in thousands, unaudited)  © 2018 Internap Corporation (INAP) 
 

 RECONCILIATION OF NON-GAAP FINANCIAL MEASURES  Adjusted EBITDA and Adjusted EBITDA Margin are non-GAAP measures. Adjusted EBITDA is GAAP net loss attributable to INAP Shareholders plus non-GAAP revenue, depreciation and amortization, interest expense, provision (benefit) for income taxes, other expense (income), (gain) loss on disposal of property and equipment, exit activities, restructuring and impairments, stock-based compensation, non-income tax contingency, strategic alternatives and related costs, organizational realignment costs, and acquisition costs. Adjusted EBITDA margin is adjusted EBITDA as a percentage of revenues.  © 2018 Internap Corporation (INAP)  ($ in thousands, unaudited) 
 

 RECONCILIATION OF NON-GAAP FINANCIAL MEASURES  Adjusted EBITDA less CapEx is a non-GAAP measure. Adjusted EBITDA less CapEx is Adjusted EBITDA less capital expenditures with Adjusted EBITDA for this non-GAAP measure defined as net cash flow provided by operating activities plus cash paid for interest, cash paid for taxes, cash paid for exit activities and restructuring, cash paid for strategic alternatives and related costs, cash paid for organizational realignment costs, payment of debt lender fees, cash paid for acquisition costs, and other working capital changes less capital expenditures.  © 2018 Internap Corporation (INAP)  ($ in thousands, unaudited) 
 

 RECONCILIATION OF NON-GAAP FINANCIAL MEASURES  © 2018 Internap Corporation (INAP)  Free Cash Flow and Unlevered Free Cash Flow are non-GAAP measures. Free Cash Flow is net cash flows provided by operating activities minus capital expenditures. Unlevered Free Cash Flow is Free Cash Flow plus cash interest expense.  ($ in thousands, unaudited) 
 

 RECONCILIATION OF NON-GAAP FINANCIAL MEASURES  Below is a reconciliation of GAAP net loss to forward looking Adjusted EBITDA for the period indicated:  © 2018 Internap Corporation (INAP)  ($ in millions, unaudited) 
 

 RECONCILIATION OF NON-GAAP FINANCIAL MEASURES  Below is a reconciliation of GAAP Net Cash Flows Provided by Operating Activities to forward-looking Adjusted EBITDA less CapEx for the period indicated below:  © 2018 Internap Corporation (INAP)  ($ in millions, unaudited)