Another ISP (ELNK) reported great earnings after the close today:
Tuesday February 16, 5:13 pm Eastern Time
Company Press Release
EarthLink Announces Fourth-Quarter and Year-End Results
A Banner Year for EarthLink -- It More Than Doubles Its Revenue and Member Base, Increases Its Incremental Revenue and Gross Margins and Sets the Stage for Continued Growth in 1999
PASADENA, Calif.--(BUSINESS WIRE)--Feb. 16, 1999-- EarthLink Network Inc. (Nasdaq:ELNK - news) Tuesday announced record financial results for the fourth quarter of and year-end 1998.
''In 1998, we more than doubled our revenue and member base, increased our incremental non-access revenue by 1,600 percent from $270,000 to $4.7 million and improved our gross margins from 53 to 58 percent,'' said Garry Betty, president and CEO of EarthLink. ''Even as growth significantly accelerated during the fourth quarter, we continued to maintain our award-winning service levels, as evidenced by our monthly churn rate remaining at 3.6 percent. Our accelerated growth, improvement in gross margins and decline in costs, validate the investments we made early on in our infrastructure and resources.''
Revenues for the fourth quarter were $58.3 million, compared with $24.5 million in the fourth quarter of 1997, a 138 percent increase. Quarter over quarter, revenues increased 17 percent from $49.8 million in the third quarter of 1998.
For the year ended Dec. 31, 1998, revenues were $176 million, compared with $81 million in 1997, a 117 percent increase.
Even without the acquisition of Sprint's Internet Passport customers, EarthLink's member base more than doubled, growing from 420,000 members at the end of 1997, to more than 1 million at the end of 1998, a 138 percent increase. EarthLink's member base increased 23 percent from the third quarter to the fourth quarter of 1998. EarthLink accomplished this growth with the addition of several strategic marketing channels, including OEM, Sprint and several key affinity partners. This focus on demand creation positions the company for steady growth in 1999.
During the fourth quarter, EarthLink added 185,000 new members compared with 105,000 in the third quarter of 1998, a 76 percent sequential improvement. This rapid growth increased the company's overall sales and marketing expenses, although the company's cost to acquire each new member decreased. As a result, EBITDA was a negative $2.8 million in the fourth quarter compared with a positive EBITDA of $900,000 in the third quarter of 1998. This accelerated growth approach reflects the company's strategy of investing membership growth while deferring profitability.
EarthLink exceeded First Call's consensus estimates by 6 percent with its earnings per share for the fourth quarter of $(0.17). For 1998, EarthLink also surpassed estimates by 2 percent with earnings per share of $(0.66). Prior to the amortization and other charges related to the transaction, which resulted in the company's strategic alliance with Sprint, the net loss for the quarter was $4.9 million and for 1998 it was $17 million. The net loss for the fourth quarter of 1997 was $6.6 million or $0.29 per share and for 1997 the net loss for 1997 was $30 million or $1.50 per share.
During the year, consolidated gross margins improved five percentage points, from 53 to 58 percent. This increase reflects the progress the company has made in controlling its costs to deliver Internet services.
In the fourth quarter of 1997, EarthLink began reporting its incremental non-access revenue as a separate component of the total revenue. Year-over-year, advertising, commerce and similar revenues increased more than 1,600 percent, climbing from $270,000 at the end of 1997 to $4.7 million at the end of 1998. EarthLink's incremental non-access revenue increased 52 percent from the third quarter of $1.25 million to the fourth quarter of $1.9 million. This represents an average of $0.68 in incremental revenue per member per month. With more than 1 million members all under one single brand, EarthLink will continue to leverage this base to further increase incremental non-access revenues, and expects to hit the $1 per member per month mark in incremental revenues by mid-1999.
EarthLink attributes most of its incremental non-access revenue growth to the Premiere Partnerships it has signed with more than 25 of the Internet industry's leading companies. During the fourth quarter, the company expanded its list of such partners to include three additional strategic partners integrated into EarthLink's Personal Start Page. These include Amazon.com for books, Infospace.com for directory services and Travelscape for travel.
About EarthLink
EarthLink is one of the world's leading Internet service providers. Through its unified EarthLink Sprint Internet access service, the company makes the Internet relevant and productive to more than 1 million individuals and businesses every day. Headquartered in Pasadena, EarthLink provides a full range of innovative access and hosting solutions to thousands of communities internationally from more than 1,700 points of presence. EarthLink and Sprint Corporation (NYSE:FON - news) have formed a broad business relationship to create an Internet service with the potential to reach millions of new customers. Sprint is a global communications company and one of the world's largest carriers of Internet traffic. Information about EarthLink and EarthLink Sprint services is available by calling 800/395-8425 and through EarthLink's Web site at www.earthlink.net.
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