EarthLink Finishes Up a Higher Margin 2015

Finishing off a year of cost savings, streamlining, and retrenching, EarthLink posted its Q4 and full year 2015 numbers yesterday after the market closed.  Revenues of $260.2M and and loss per share of $0.12 were both pretty much where analysts thought they’d be.  Adjusted EBITDA and margin fell sequentially, but remained well above 2014 levels despite the reduced revenue base.

Earlier this month, EarthLink announced the sale of its IT services division to Synoptek, but that transaction won’t show up in the numbers until the next earnings report.   Looking ahead, though, they included the effects of that sale in revenue guidance of $950-975M with EBITDA of $205-220M, capital expenditures of $85-105M, and a bottom line of $(7)-1M in earnings.  That suggests a 2016 that is on a similar trajectory, with revenue declines balanced by more cost savings measures.  Earnings projections for 2016 just barely straddle break-even, a level above that which analysts were expecting and one that could reverse the losses of recent years.

The question remains, however, what other strategic alternatives they might pull the trigger on.   In recent years, they were looking at better monetizing the company’s fiber assets, but for 2016 it appears they’ve decided to invest in those rather than dispose of them.  Along with the recent lighting of a Chicago metro ring, in the investor presentation they revealed a 20 year, $10M dark fiber deal with an enterprise customer as part of their carrier/transport business.

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Categories: CLEC · Financials · Managed Services