Earthlink’s Integration Ahead of Schedule

October 27th, 2011 by · 1 Comment

Earthlink has been busy this year integrating its acquisitions, the largest of which were Deltacom and One Communications, and things seem to be going well.  The company reported its third quarter earnings this morning, with revenues declining less than expected to $357.3M.  Adjusted EBITDA rose slightly sequentially to $90.5M, meaning their adjusted EBITDA margins rose all the way to 25.3%.  Earnings per share of $0.07 were also ahead of analyst projections.  According to CEO Rolla Huff:

"We are executing on our integration plans and synergies ahead of schedule. Our focus now includes positioning our business for growth.  We are making a number of investments in network, capabilities and people to execute on that growth strategy, including launching new nationwide integrated products later this quarter and continuing to build out our managed services infrastructure and capabilities."

The integration progress was good enough to allow Earthlink to increase 2011 guidance:

Prior Guidance New Guidance
Adjusted EBITDA 315-320 325-330
Free Cash Flow 200-215 210-225
Capital Expenditures 105-115 105-115
Net Earnings 24-28 29-33

The profitability of the company's declining consumer business continues to power their earnings and margins of course, but their business division now generates 74% of the company's revenues.  Continued integration success increases the likelihood that Earthlink will make more CLEC and fiber purchases, although lately they have been completely happy to buy services and products to layer into their offerings.

Today, in fact, they made another such purchase, buying an IT solution center and hosted application business from western New York's Synergy Global Solutions.  They will also assume relationships with 120 VARs, and intend to offer the services to their entire customer base.

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Categories: CLEC · Financials

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  • Mr. Smith says:

    It appears Rolla and team are well on their way to building critical mass in areas of strategic growth such as consulting, managed services, hosted, security. The acquisitions done thus far outside of one comm, delta, STS, etc have all been super small and won’t give them too much size but i expect they will do something bigger soon. They have too … to compete. They have an obvious big hole in their network and need some help west of Mississippi.

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