Internap Corporation, a provider of high-performance Internet infrastructure services, today announced financial results for the second quarter of 2015. 

"We delivered solid financial results for the second quarter of 2015 with revenue and adjusted EBITDA within our guidance range. Data center services returned to sequential revenue growth, while a positive mix shift from higher core colocation, hosting and cloud services resulted in favorable margin expansion," said Michael Ruffolo, President and Chief Executive Officer of Internap. "Our strategy of providing an integrated platform of high-performance hybrid Internet infrastructure services continues to provide unique, compelling value to our customers. With a keen focus on improved execution, we are confident in our ability to accelerate top-line revenue growth, expand margins and create superior shareholder value."

Revenue

• Revenue totaled $80.4 million in the second quarter, a decrease of 4% year-over-year and flat sequentially. The year-over-year decrease was due to the loss of revenue resulting from customer attrition as we migrated out of the New York metro data center into another facility, the decrease in partner colocation revenue and lower IP revenue, partially offset by organic growth in core data center services revenue. Sequentially, data center services revenue growth offset the decrease in IP services.

• Data center services revenue totaled $59.4 million in the second quarter, a decrease of 3% year-over-year and an increase of 1% sequentially. The year-over-year decrease was primarily due to the loss of revenue from the New York metro data center migration, partially offset by organic growth in core revenues. Partner colocation revenue declined due to our strategy to focus on selling into our company-controlled data centers. The sequential increase was attributable to increased sales of colocation in company-controlled data centers, hosting and cloud services, partially offset by decreased sales in our partner data centers.

• IP services revenue totaled $21.0 million in the second quarter, a decrease of 7% year-over-year and 3% sequentially. Both decreases were driven by a decline in IP pricing for new and renewing customers and the loss of legacy contracts.

Net Loss

• GAAP net loss was $(12.5) million, or $(0.24) per share, compared with $(11.2) million, or $(0.22) per share, in the second quarter of 2014 and $(10.4) million, or $(0.20) per share, in the first quarter of 2015.

• Normalized net loss was $(10.3) million, or $(0.20) per share, compared with normalized net loss of $(7.7) million, or $(0.15) per share, in the second quarter of 2014, and normalized net loss of $(8.6) million, or $(0.17) per share, in the first quarter of 2015.

Segment Profit and Adjusted EBITDA

• Segment profit totaled $47.5 million in the second quarter, flat year-over-year and quarter-over-quarter. Segment margin was 59.0%, an increase of 250 basis points year-over-year and 30 basis points sequentially.

• Data center services segment profit totaled $35.1 million in the second quarter, a 1% increase compared with the second quarter of 2014 and a 1% increase from the first quarter of 2015. Data center services segment margin was 59.0% in the second quarter, up 230 basis points year-over-year and 10 basis points sequentially. An increasing proportion of higher-margin services, specifically colocation sold in company-controlled data centers, hosting and cloud services drove data center services segment profit and margin higher.

• IP services segment profit totaled $12.4 million in the second quarter, a 2% decrease compared with the second quarter of 2014 and a 2% decrease from the first quarter of 2015. IP services segment margin was 58.9% in the second quarter, up 300 basis points year-over-year and 80 basis points sequentially. Lower IP transit revenue and the loss of legacy contracts drove the decrease in segment profit. Lower network costs primarily contributed to the increase in segment margin. 

• Adjusted EBITDA totaled $19.1 million in the second quarter, a 3% increase compared with the second quarter of 2014 and a 7% increase from the first quarter of 2015. Adjusted EBITDA margin was 23.8% in the second quarter, up 180 basis points year-over-year and 160 basis points sequentially. Both the year-over-year and sequential increases in adjusted EBITDA and adjusted EBITDA margin were attributable to increased segment profit in our data center services segment and lower cash operating expense³, which outweighed $1.5 million in executive transition costs.

Balance Sheet and Cash Flow Statement

• Cash and cash equivalents totaled $16.4 million at June 30, 2015. Total debt was $372.1 million, net of discount, at the end of the quarter, including $56.9 million in capital lease obligations.

• Cash generated from operations for the three months ended June 30, 2015 was $13.1 million. Capital expenditures over the same period were $15.8 million.

Business Outlook

We are reaffirming the following guidance for full-year 2015:

• Revenue                            $331 million - $337 million

• Adjusted EBITDA               $87 million - $93 million

• Capital Expenditures          $70 million - $80 million