Broadband boosts EarthLink results
The Internet service provider beats estimates as its first-quarter losses slow compared with a year ago and the number of high-speed customers grows.
EarthLink on Tuesday posted a net loss of $35.1 million, or 27 cents per share, excluding acquisition and merger-related charges and other write-offs. Analysts were expecting the company to post a loss of 36 cents per share on sales of $297 million, according to First Call.
Revenue for the quarter, ended March 31, grew to $294.9 million, up from $219 million in the year-ago quarter and $286.7 million in the fourth quarter.
EarthLink made its name by offering dial-up Internet access, but it has recently made a big move into the market for DSL (digital subscriber line) services, which offer a high-speed link over ordinary phone lines. According to brokerage Jeffries, EarthLink is the third-largest DSL provider.
This is the second quarter in a row that EarthLink has topped estimates. Looking ahead, the Atlanta-based company said it expects earnings before interest, taxes, depreciation and amortization (EBITDA) to show a profit by the last quarter of the year. For the year as a whole, the company expects to report revenue between $1.2 billion and $1.3 billion, in line with analysts' predictions, and to lose between $110 million and $135 million for the year on an EBITDA basis, with a net loss per share between 85 cents and $1.05.
For the second fiscal quarter, EarthLink said its revenue should grow slightly, to $300 million, and its losses before merger and acquisition costs should improve, coming in at between 24 cents and 27 cents per share. Analysts were expecting the company to report a loss of about 27 cents per share for the second quarter, according to First Call.
EarthLink said its growth is coming mainly from high-speed customers. It added more than 73,000 broadband subscribers in the first quarter. The total number of broadband subscribers is now 288,000, up 34 percent from the fourth quarter and more than 500 percent from the year-ago period. Broadband revenues were $32.4 million during the first quarter and now account for 11 percent of total revenue.
Executives partly attributed the narrowing EBITDA loss to improvements on spending. Sales and marketing expenses dropped to 35 percent of revenue, down from 41 percent in the fourth quarter, while general and administrative costs were reduced by $5.5 million with the completion and integration of OneMain.com.
Analysts cheered the company's ability to cut costs and said EarthLink could replicate its dial-up success in the broadband market.
"We remain confident that EarthLink will meet our full year 2001 estimates, driven by growth in the company's broadband business," said Fred Moran, an analyst with Jeffries.