While they reported a loss in Q3 and saw lower revenue and EBITDA, EarthLink once again managed to surprise the market to the upside.
Revenues of $270.9M were down 4.5% from the prior quarter, while adjusted EBITDA of $61.4M were down 7.1% and the company lost $0.10 per share. But analysts had been rather more pessimistic, with consensus down below $265M and a few pennies worse on EPS.
The quarter’s results were enough for EarthLink to raise 2015 guidance across the board to revenues of $1,085-1,092, adjusted EBITDA of $235-245, and net loss of $(48M)-$(44M). Capex guidance was cut to $80-90M. And EarthLink was also able to take its cash flow and pay off $30M in 8.875% debt and $15M in revolving credit.
Each quarter this year has seen EarthLink do quite well relative to some pretty low expectations. They are focusing on the carrier and multi-site enterprise businesses, looking to turn the corner on growth.
But at some point one has to do well on an absolute scale. It’s not clear how they do that with the assets and model they currently have, at least not yet. The alternative of course is to at least to stabilize the business and restore some value before selling it. That still seems like the most likely endgame to me.
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