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Internap Network Services' CEO Discusses Q4 2010 Results - Earnings Call Transcript

As these statements are not guarantees of future performance and involve risks and uncertainties, they are important factors that could cause our actual results to differ materially from those in the forward-looking statements. These factors are discussed in our filings with the Securities and Exchange Commission. We undertake no obligation to amend, update, or clarify these statements.

In addition to reviewing our fourth quarter and full year 2010 results, we will also discuss recent developments.

Now, let me turn the call over to Eric Cooney.

J. Cooney

Thank you, Drew. And good afternoon, everyone. Thank you for listening to our fourth quarter and full year 2010 financial results presentation. I'll provide an overview and touch on the highlights of our fourth quarter and 2010 results before our Chief Financial Officer, George Kilguss, takes you through our financial results in detail. I'll then come back to conclude our prepared remarks with some key takeaways before we open up the call for your questions.

Slide 3 provides a snapshot of our fourth quarter financial results. In the fourth quarter, total revenue declined sequentially as modest growth in Data Center Services only partially offset a decline in the IP Services segment. On a year-over-year basis, total revenue declined $3.5 million with the majority of the decline being driven by our program to proactively churn low margin customer contracts within our Data Center business.

We continued to show strong improvement in company profitability. Fourth quarter segment profit and margin increased both year-over-year and sequentially. The successful execution of our Data Center Services strategy is largely underpinning these improvements in profitability, specifically the proactive churn program and the increasing proportion of our Data Center Services revenue that is generated from company-controlled facilities are both key elements of our profitable growth strategy.

Fourth quarter adjusted EBITDA increased 14% compared with the prior year and 12% sequentially to $10.3 million. Adjusted EBITDA showed substantial benefit from increased segment profit, as well as tight internal cost controls. Cash operating expense decreased 5% year-over-year in the quarter to $19.2 million despite a 6% increase in headcount over the same period.

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