EarthLink grows Q1 existing business customer sales, narrows losses to 4.3 percent

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EarthLink reported that it narrowed its business service revenue losses to 4.3 percent to report a total of $234.3 million in revenues as its sales team made progress with extending the contracts with existing customers. This was an improvement over the 7.0 percent year-over-year decline the service provider reported in the fourth quarter of 2013.

Each segment of the business services unit had varying results.

In the CLEC segment, which serves mainly small businesses, revenues declined 11 percent to $151 million from $169 million in the first quarter of 2013. The company said it anticipates a decline rate of 11 percent in this segment this year due to the full year impact of elevated churn in mid-2013. However, it has forecast further improvement as it focuses on customer retention efforts.

Wholesale revenues declined 5 percent year-over-year to $36 million. Due to the impact of the Sprint/Nextel (NYSE: S) disconnect, EarthLink expects wholesale carrier/transport revenues to decline 1-3 percent but grow 0-2 percent in the long-term.  

One of the bright spots of growth in business services was Managed Network and Cloud & IT Services, where revenues rose 28 percent year-over-year from $36 million to $47 million. The company said it expects organic revenue growth of 20 percent for this segment.

Overall company revenue was $297.3 million, down 6.1 percent from the same period a year ago. The service provider said the revenue trajectory continued to show improvement versus the 8.2 percent year-over-year decline it reported in the fourth quarter of 2013.

On an adjusted basis, the net loss tripled, to 21 cents per share. EarthLink reduced capex sharply to $23.4 million, and free cash flow was up 39.5 percent to $26.5 million. The company finished the quarter with $108.5 million in cash remaining. EarthLink said the drop in revenue slowed in the quarter and it completed a strategic review to focus on its long-term opportunities. 

"The team has spent the last several months conducting a thorough strategic review," said Joseph F. Eazor, CEO and president of EarthLink, in the earnings release. "I'm confident the focus and prioritization we are instilling should drive continually improving long-term operating performance and support for the dividend."

Shares of EarthLink were trading at $3.42, up 7 cents or 2.09 percent, in Tuesday morning trading on the Nasdaq stock exchange.

For more:
- see the earnings release

Special report: Wireline telecom earnings in the first quarter of 2014

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