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Earthlink Reports Strong Fourth Quarter And Full Year 2015 Results

The following excerpt is from the company's SEC filing.

Revenue of $260.2 million for the fourth quarter of 2015 and $1,097.3 million for the full year 2015

Net loss of $(12.3) million, or $(0.12) per share, for the fourth quarter of 2015 and $(43.2) million, or $(0.42) per share, for the full year 2015

Adjusted EBITDA of $53.9 million for the fourth quarter of 2015 and $242.5 million for the full year 2015

Net cash provided by operating activities of $41.4 million for the fourth quarter of 2015 and $167.4 million for the full year 2015

Unlevered Free Cash Flow of $26.8 million for the fourth quarter of 2015 and $155.0 million for the full y ear 2015

Ending cash balance of $91.3 million

- EarthLink (EarthLink Holdings Corp., NASDAQ: ELNK), a leading network services provider dedicated to delivering great customer experiences, today announced financial results for its fourth quarter and full year 2015.

2015 was a year of significant progress for EarthLink, said EarthLink Chief Executive Officer and President Joseph F. Eazor. We executed on our business unit strategy and delivered strong financial performance as a result. Going into 2016 we are focusing on activities that pave the way to growth. Eazor also announced changes to EarthLinks Board of Directors. Today were also announcing that long-time EarthLink Directors David Koretz and Wayne Wisehart will be retiring from our Board of Directors prior to our annual stockholders meeting in April. We are grateful for their dedication and many contributions to EarthLink since 2008.

Fourth Quarter 2015 Financial Summary

Figures in US $ millions,

except per share

Change

Revenues

Enterprise/Mid-Market

Small Business

Carrier/Transport

Business Services

Consumer Services

Total Revenue

1,176.9

Gross Margin

Operating Expenses

Net Loss

Net Loss per share

Adjusted EBITDA (1)

Capital Expenditures

Gross Debt (2)

Net Cash Provided by Operating Activities

Unlevered Free Cash Flow (1)

(1) Adjusted EBITDA and Unlevered Free Cash Flow are non-GAAP measures, see definitions in Non-GAAP Measures below.

(2) Gross debt excludes unamortized debt issuance costs, unamortized debt discount and capital leases.

* During the third quarter of 2015, the Company implemented certain organizational, operational and reporting changes that resulted in the disaggregation of its Business Services segment into three separate reportable segments: enterprise/mid-market, small business and carrier/transport. Management determined it is impracticable to restate financial information prior to 2015 to conform to the new segment structure. See Consolidated Financial Highlights and Footnote 7 to the Consolidated Financial Highlights for more detail.

Revenue and Cost of Revenue

Total revenue was $260.2 million during the fourth quarter of 2015, a decline of 8.5% from the fourth quarter of 2014. Total revenue was $1,097.3 million during the full year 2015, a decline of 6.8% from the full year 2014.

Total Business Services revenue was $206.9 million during the fourth quarter of 2015, a decline of 8.3% from the fourth quarter of 2014. Total Business Services revenue was $877.9 million during the full year 2015, a decline of 5.7% from the full year 2014.

Total Business Services and company revenue during the fourth quarter of 2015 included $0.9 million of favorable settlements and adjustments compared to $3.9 million during the fourth quarter of 2014 and $1.2 million during the third quarter of 2015. Total company revenue during the full year 2015 included $5.9 million of favorable settlements and adjustments ($5.2 million in Business Services and $0.7 million in Consumer Services) compared to $10.7 million during the full year 2014 (all within Business Services).

Total company cost of revenue during the fourth quarter of 2015 included $2.2 million of favorable settlements and adjustments compared to $4.4 million of favorable settlements during the fourth quarter of 2014 and $3.9 million during the third quarter of 2015. Total company cost of revenue during the full year 2015 included $12.3 million of favorable settlements and adjustments ($13.0 million favorable in Business Services, offset by $0.7 million unfavorable in Consumer Services) compared to $14.8 million during the full year 2014 (all within Business Services).

Net Loss and Adjusted EBITDA

Net loss was $(12.3) million during the fourth quarter of 2015. This compares to a net loss of $(22.5) million in the fourth quarter of 2014 and $(10.5) million in the third quarter of 2015. Net loss was $(43.2) million for the full year 2015 compared to a net loss of $(72.8) million for the full year 2014.

Adjusted EBITDA (a non-GAAP measure, see definition in Non-GAAP Measures below) was $53.9 million in the fourth quarter of 2015, a 1.3% increase from the fourth quarter of 2014 and a 12.2% decrease from the third quarter of 2015. Adjusted EBITDA was $242.5 million for the full year 2015 compared to $213.0 million for the full year 2014.

Balance Sheet and Cash Flow

Net cash provided by operating activities was $41.4 million during the fourth quarter of 2015. This compared to net cash provided by operating activities of $38.7 million in the fourth quarter of 2014 and $74.0 million in the third quarter of 2015. Net cash provided by operating activities was $167.4 million for the full year 2015 compared to $140.0 million for the full year 2014.

Unlevered Free Cash Flow (a non-GAAP measure, see definition in Non-GAAP Measures below) was $26.8 million during the fourth quarter of 2015. This compared to Unlevered Free Cash Flow of $24.6 million in the fourth quarter of 2014 and $39.4 million in the third quarter of

2015. Unlevered Free Cash Flow was $155.0 million for the full year 2015 compared to $110.2 million for the full year 2014.

EarthLink ended the fourth quarter of 2015 with $91.3 million in cash. During the fourth quarter of 2015, EarthLink made net repayments on gross outstanding debt of $5.0 million and dividend payments of $5.2 million. During the full year 2015, EarthLink made net repayments on gross outstanding debt of $91.1 million and dividend payments of $26.4 million.

Adjusted EBITDA is defined as net income (loss) before interest expense and other, net, income taxes, depreciation and amortization, stock-based compensation expense, impairment of goodwill and long-lived assets, restructuring, acquisition and integration-related costs, loss on extinguishment of debt, and gain (loss) from discontinued operations, net of tax. Unlevered Free Cash Flow is defined as net income (loss) before interest expense and other, net, income taxes, depreciation and amortization, stock-based compensation expense, impairment of goodwill and long-lived assets, restructuring, acquisition and integration-related costs, loss on extinguishment of debt, and gain (loss) from discontinued operations, net of tax, less cash used for purchases of property and equipment.

Adjusted EBITDA and Unlevered Free Cash Flow are non-GAAP financial measures. They should not be considered in isolation or as an alternative to measures determined in accordance with U.S. generally accepted accounting principles. Please refer to the Consolidated Financial Highlights for a reconciliation of these non-GAAP financial measures to the most comparable measures reported in accordance with U.S. generally accepted accounting principles and Footnote 6 of the Consolidated Financial Highlights for a discussion of the presentation, comparability and use of such financial measures.

Conference Call for Analysts and Investors

EarthLinks Fourth Quarter 2015 Conference Call will be held on Thursday, February 18, 2016, at 8:30 a.m. ET and hosted by EarthLinks Chief Executive Officer and President Joseph F. Eazor and Executive Vice President and Chief Financial Officer Louis M. Alterman.

The dial-in number is: (866) 887-3882.

Participants should reference the conference ID number 27956447 or EarthLink Fourth Quarter 2015 Earnings Call and dial in 10 minutes prior to the scheduled start time.

Webcast

A live Webcast of the conference call will be available at: http://ir.earthlink.net/.

Presentation

An investor presentation to accompany the conference call and webcast will be available at: http://ir.earthlink.net/.

Replay

A webcast replay will be available from 11:30 a.m. ET on February 18, 2016 through midnight on March 17, 2016. Dial toll-free: (855) 859-2056. The replay confirmation code is 27956447. The Webcast will be archived on the companys website at: http://ir.earthlink.net/events.cfm.

About EarthLink

EarthLink (EarthLink Holdings Corp., NASDAQ: ELNK) is a leading network services provider dedicated to delivering great customer experiences in a cloud connected world. We help thousands of multi-location businesses securely establish critical connections in the cloud. Our solutions for cloud and hybrid networking, security and compliance, and unified communications provide the cost-effective performance and agility to serve customers anytime, anywhere, via any channel, or any device. We operate a nationwide network spanning 29,000+ fiber route miles, with 90 metro fiber rings and secure data centers that provide ubiquitous data and voice IP coverage. To learn why thousands of specialty retailers, restaurants, franchisors, financial institutions, healthcare providers, professional service firms, local governments, residential consumers and other carriers choose to connect with us, visit us at www.earthlink.com, @earthlink, on LinkedIn and Google+.

Cautionary Information Regarding Forward-Looking Statements

This press release includes forward-looking statements (rather than historical facts) that are subject to risks and uncertainties that could cause actual results to differ materially from those...


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