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EarthLink Inc. Reports Operating Results (10-Q)

August 03, 2012 | About:
Gordon Pape

10qk

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EarthLink Inc. (ELNK) filed Quarterly Report for the period ended 2012-06-30.

Earthlink, Inc. has a market cap of $734.4 million; its shares were traded at around $6.35 with a P/E ratio of 16.1 and P/S ratio of 0.6. The dividend yield of Earthlink, Inc. stocks is 2.9%. Earthlink, Inc. had an annual average earning growth of 3.1% over the past 10 years.
This is the annual revenues and earnings per share of ELNK over the last 10 years. For detailed 10-year financial data and charts, go to 10-Year Financials of ELNK.


Highlight of Business Operations:

Total revenues were $338.2 million, a 7% decrease compared to the three months ended June 30, 2011, consisting of a $15.3 million decrease in Consumer Services revenue and a $10.1 million decrease in Business Services revenue

The decrease in Business Services revenue during the three months ended June 30, 2012 compared to the prior year period was due to a decline in revenues for certain legacy products, including traditional voice, web hosting and lower-end, single site broadband services. Revenues for these legacy products have been decreasing due to competition in the industry, the migration of customers to more advanced services and a decreased emphasis on selling these services. The decrease was partially offset by an increase in revenues from our newer products. The increase in Business Services revenue during the six months ended June 30, 2012 compared to the prior year period was primarily due to the inclusion of full period of revenues during 2012 from our acquired businesses, including One Communications and STS Telecom, compared to a partial period during 2011. On a pro forma basis for the acquisition of One Communications, Business Services revenue decreased $25.9 million, from $543.6 million during the six months ended June 30, 2011 to $517.7 million during the six months ended June 30, 2012. This was due to the decrease in revenues for certain legacy products, including traditional voice, web hosting and lower-end, single site broadband services.

discussed above. Partially offsetting the increase was a decline in cost of revenues resulting from network cost efficiencies and a decline in certain legacy products, including web hosting and lower-end, single site broadband services. On a pro forma basis for the acquisition of One Communications, Business Services cost of revenue decreased $1.4 million, from $274.8 million during the six months ended June 30, 2011 to $273.4 million during the six months ended June 30, 2012. This was due to the decrease in cost of revenues for certain legacy products, offset by the increase in reserves for various legal proceedings, regulatory audits and other disputes.

The decrease in selling, general and administrative expenses during the three months ended June 30, 2012 compared to the prior year period was due to cost savings recognized as a result of the workforce reductions and other synergies from integrating our businesses. The increase in selling, general and administrative expenses during the six months ended June 30, 2012 compared to the prior year period was primarily due to the inclusion of full period of selling, general and administrative expenses during 2012 from our acquired businesses, including One Communications and STS Telecom, compared to a partial period during 2011. On a pro forma basis for the acquisition of One Communications, selling, general and administrative expenses decreased $15.2 million, from $231.7 million during the six months ended June 30, 2011 to $216.5 million during the six months ended June 30, 2012. The decrease was due to cost savings realized from workforce reductions and other synergies from integrating our businesses, continued cost reduction initiatives, certain benefits as our overall consumer subscriber base has decreased and reduced discretionary sales and marketing spend. The decrease consisted primarily of decreases in personnel-related costs, stock-based compensation expense and occupancy expense, offset by an increase in professional fees.

The decrease in cash flows from investing activities was primarily due to a change in cash associated with investments in marketable securities. During the six months ended June 30, 2011, we received cash of $319.7 million for sales and maturities of investments in marketable securities as we converted our investments to cash equivalents during the period. During the six months ended June 30, 2012, we used cash of $18.9 million for purchases of marketable securities, net of sales and maturities. Also contributing to the decrease was a $15.8 million increase in capital expenditures, primarily due to the inclusion of capital expenditures of our acquired companies, network and technology center related projects and customer acquisition costs. We continue to focus on investments in our technology infrastructure to support our long-term strategic plans. The overall decrease

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