Earthlink 2014 Annual Report Download - page 37

Table of Contents
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Management's Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") is intended to provide a reader of our
financial statements with a narrative from the perspective of management. The following MD&A should be read in conjunction with audited
Consolidated Financial Statements and notes thereto included elsewhere in this Annual Report on Form 10-
K. Certain statements in this MD&A
are forward-looking statements. Important factors that could cause actual results to differ from estimates or projections contained in the forward-
looking statements are described under “Cautionary Note Concerning Factors That May Affect Future Results” in this Item 7.
Overview
EarthLink Holdings Corp. (“EarthLink” or the “Company”),
together with our consolidated subsidiaries, is a leading managed network, security
and cloud services provider to business and residential customers in the United States. We operate two reportable segments, Business Services
and Consumer Services. Our Business Services segment provides a broad range of data, voice and managed services to retail and wholesale
business customers. Our Consumer Services segment provides nationwide Internet access and related value-
added services to residential
customers. We operate an extensive network including more than 29,000 route miles of fiber, 90 metro fiber rings and secure enterprise-
class
data centers that provide data and voice IP service coverage across more than 90 percent of the United States.
2014 Highlights
Key developments in our business during 2014 are described below:
32
•
Conducted a thorough review of our strategy and established a more focused strategy for our company, which is more fully described
below.
•
Completed several key system integration activities, which will improve sales productivity, sales cycle time and customer satisfaction.
• Generated revenues of $1.2 billion in 2014, a 5%
decrease during the year primarily driven by declines in traditional voice and data
products. However, this was an improvement compared to the 7% decrease during 2013, with the improvement driven primarily by
increased sales of our growth products, targeted price increases, successful efforts to re-
term customers coming out of contract and
certain one-time favorable settlements.
• Reduced cost of revenues 7%
during 2014, primarily due to the decline in revenues noted above as well as a concentrated effort to
manage cost of revenues through network grooming, auditing invoices and and other cost saving initiatives.
• Generated a net loss of $72.8 million
in 2014, which reflects a decrease in restructuring, acquisition and integration costs due to the
winding down of acquisition and integration activities, a decrease in interest expense and a decrease in Adjusted EBITDA, as described
below.
• Generated Adjusted EBITDA (a non-GAAP measure, see “Non-GAAP Financial Measures” in this Item 7) of $213.0 million
in 2014, a
decrease from $227.1 million
in the prior year primarily due to the decrease in revenues from traditional voice and data products, offset
by improvements in our cost of revenues and operating expenses.
•
Declared dividends of $0.20 per share, resulting in $16.0 million of dividend payment to shareholders in 2014 and $5.1 million of
dividend payments to shareholders subsequent to the year end in January 2015.
•
Repurchased 0.7 million shares of our common stock pursuant to our share repurchase program for $2.2 million.
• Increased our ending cash balance by $17.5 million
in 2014, primarily due to a reduction in capital expenditures, management of
operating costs and the timing of our quarterly divided payment.