MindSpring and EarthLink both posted better-than-expected earnings for the third quarter Wednesday, as their merger, expected to close during the first quarter of 2000, proceeds.
MindSpring Enterprises, Inc. (Nasdaq: MSPG) reported operating earnings Wednesday that beat expectations, but fell below previous quarters' results. The Internet service provider posted earnings of 5 cents a share, excluding goodwill amortization for the third quarter. First Call's expectation was for 3 cents a share.
MindSpring recorded income for the third quarter of $3.38 million well below the income of $7.52 million, or 11 cents a share, in the second quarter of 1999, and income of $4.7 million, or 9 cents a share, for the third quarter of 1998. The decline in earnings is a result of the planned increase in sales and marketing expenditures in the third quarter, MindSpring said.
In September, MindSpring launched the Company's first TV advertising campaign, "You'd be Happier Using MindSpring." The company, recognized for providing superior customer satisfaction, has continued its marketing despite a pending merger with Earthlink.
On Sept. 23, MindSpring and EarthLink Network, Inc. announced plans to merge in a transaction that will create the nation's second largest Internet Service provider after America Online (NYSE: AOL). The combined company will be called EarthLink.
Mindspring revenue for the third quarter was $88.2 million, up from $85.7 million for the prior quarter and $28.7 million for the third quarter 1998. Earnings before interest expense, taxes, depreciation and amortization (EBITDA) for the third quarter of 1999 was $9 million, or 14 cents a share, compared with $15.7 or 24 cents a share for the prior quarter and $6.7 million, or 12 cents a share, in the third quarter 1998
MindSpring had about 1.29 million customers at the end of the third quarter of 1999, up from 1.23 million at the end of the prior quarter.
EarthLink Network, Inc. (Nasdaq: ELNK) reported a net loss of 42 cents a share for its third quarter, scraping by First Call's expected loss of 43 cents a share.
EarthLink's net loss for the third quarter was $13.7 million, compared to $6.9 million for the second quarter of 1999. The losses incurred are prior to the amortization and other charges related to the June 1998 Sprint transaction.
Revenue was $89.6 million for the third quarter, an 80 percent increase over revenues of $49.8 million reported in the same quarter of 1998.
EarthLink achieved record levels in terms of revenue, new members added in both dial-up and broadband services, and incremental revenue and gross margins, according to the company's statement.
In the third quarter, EarthLink added 231,000 net new members, a 92 percent increase in its member base over the third quarter of 1998, and a 17 percent increase over the second quarter of 1999. Within EarthLink's entire member base of 1.57 million, the company has more than 12,300 broadband customers through its national and regional agreements with DSL partners UUNet, GTE, Sprint and Pacific Bell as well as cable partner Charter Communications.
EarthLink managed to add new members cost-effectively in the third quarter, a period considered to be seasonally slow. The company's growth is the result of marketing initiatives began last year. EarthLink continues to lead the industry with its low churn rate of 3.6 percent.
Aside from the MindSpring merger, EarthLink also announced the industry's first nationwide consumer DSL service with UUNet; the exclusive default ISP provider on Freemac.com computers; and a distribution agreement to co-brand the AOL Instant Messenger product;