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Internap Network Services Management Discusses Q2 2012 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 discuss 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 the second quarter 2012 results, we will also discuss recent developments.

Now let me turn the call over to Eric Cooney.

J. Eric Cooney

Thank you, Michael, and good afternoon, everyone. We are pleased you could join us for our second quarter 2012 earnings presentation. I will was start the discussion with a summary of our results, and then turn the call over to John Maggard, our Interim Chief Financial Officer, to take you through our detailed financial results. From there, I will briefly wrap up our prepared remarks, and then we will open the call to take your questions.

Beginning on Slide 3, you will see we delivered total revenue for the quarter of $68.7 million, representing an increase of 14% year-over-year and 2% over the first quarter of 2012. Total revenue churn improved to 1.2% in the second quarter, representing an improvement of 20 basis points year-over-year and 30 basis points sequentially. These results provide further evidence of the company's ability to execute on our strategy of leveraging our company controlled colocation and hosting services.

Segment profit of $36 million increased 21% year-over-year and was essentially flat sequentially. Segment margin was 52.5%, an increase of 310 basis points year-over-year and decline of 100 basis points quarter-over-quarter as continued growth in higher-margin hosting services were offset by a higher seasonal power cost.

On Slide 4, you see the sources of revenue change in revenue from the first quarter of 2012 to the second quarter of 2012. Our core data center services including company controlled colocation and hosting services remain the engine for top line organic growth, representing over 90% of the sequential revenue increase. Total data center services contributed $1.6 million of incremental revenue while IP services provided an incremental $0.1 million of revenue in the second quarter. Nonrecurring IP equipment sales accounted for roughly $0.5 million of incremental IT revenue quarter-over-quarter.

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