EarthLink business drive continues in Q4 with $331.6 million in revenue

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EarthLink (Nasdaq: ELNK) on Tuesday reported Q4 revenue of $331.6 million for the fourth quarter of 2012 and $1.35 billion for the full year 2012 as it narrowed business service losses and grew retail service revenues.

Business services continue to make up a large portion of EarthLink's revenue mix with 77 percent of its overall revenue in Q4 2012. During the quarter, business service revenues declined year-over-year to $256.5 million. For the full year, the CLEC narrowed its business service segment revenue losses to 4.9 percent, down from the 7.8 percent decline in 2011 versus 2010.

The CLEC reported that its retail growth business reached an approximate $140 million annualized revenue run rate in the fourth quarter of 2012, with a year-over-year organic growth rate of approximately 21 percent.

Although the company has a number of legacy products in its retail business that are declining, other next-gen products such as MPLS, hosted voice and IT services continue to make up a larger portion of its retail growth business revenue.  

"While sales of our new growth products have been on track and churn continues to improve across all of our products, the rate of new bookings on some of our legacy CLEC products like usage, single T1s in small accounts, as well as simple low-end business Internet access, showed softness in the second half of 2012," said Rolla P. Huff, chairman, CEO and president of EarthLink, during the Q4 2012 earnings call.

A big plan for the company's business growth drive in 2013 is to focus more attention on larger markets that contain multi-site business customers in need of wider-scale IT service and networking service sets.

"We found that the bulk of our new bookings come from larger markets," Huff said. "These markets have a richer density of customers who have multiple location business models and higher propensity to buy IT services."

As a result, EarthLink will lay off about 220 employees, including a mix of salespeople and other support personnel who focused on the dozen or so smaller markets it served.

Huff said that despite the cuts, the company will "retain support organizations to continue to service our existing customers in these markets."

At the same time, the CLEC is consolidating its sales and marketing groups under Executive Vice President of Sales and Marketing Mike Toplisek.

In the consumer segment, revenue was $75.2 million for Q4 2012 and $317.7 million for the year 2012. Consumer subscriber churn decreased to 2.3 percent, down from 2.5 percent in Q3 2012 and 2.6 percent in Q4 2011. Broadband services made up 68 percent of consumer access revenue in Q4 2012.  

Looking forward, EarthLink has forecast 2013 revenue to be between $1.25 to $1.26 billion and capital expenditures of $140 to $155 million.

Shares of EarthLink were listed at $6.17, down 76 cents or 10.97 percent, in late day trading Tuesday on the NASDAQ stock exchange.

For more:
- see the release
- and the earnings transcript

Earnings roundup: Wireline telecom earnings in the fourth quarter of 2012

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