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Internap Network Services' CEO Discusses Q1 2011 Results - Earnings Call Transcript

Because these statements are not guarantees of future performance and involve risks and uncertainties, important factors could cause our actual results to differ materially from those in the forward-looking statements. We discussed these factors in our filings with the Securities and Exchange Commission. We undertake no obligation to amend, update or clarify these statements. In addition to reviewing first quarter 2011 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 joining us for our first quarter 2011 financial results presentation.

I'll start off with a summary of our first quarter results and then George will detail our quarterly financial results and operating metrics. I will then conclude with a high-level summary, and we will open the call for your questions.

We've summarized revenue and segment profitability results in the period on Slide 3. Revenue decreased $4 million year-over-year and $0.6 million compared with the fourth quarter of 2010. The year-over-year and sequential declines were primarily driven by our initiative to exit low-margin and negative-margin contracts in select partner data centers. As I will detail in a moment, this program was completed in the fourth quarter of 2010, and the final revenue impact was evident in first quarter results. We expect that first quarter 2011 is the last quarter in which revenue is impacted by the now successfully completed proactive data center churn program.

Our segment profit and segment margin continues to improve steadily. Segment profit improved $0.9 million sequentially and $1.1 million over the same quarter last year. The combination of higher absolute segment profit on a smaller revenue base has significantly benefited our segment margin over the past year. Segment margin improved 490 basis points year-over-year. Sequentially, segment margin increased 200 basis points. Beyond the immediate benefit of higher segment profitability, the implication for future sales of company services into this significantly higher segment profit margin bodes well for the company's long-term profitable growth.

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