Earthlink 2012 Annual Report Download - page 41

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. MD&A is
presented in the following sections:
• Overview
• Consolidated Results of Operations
• Segment Results of Operations
• Liquidity and Capital Resources
• Non-GAAP Financial Measures
• Cautionary Note Regarding Factors That May Affect Future Results
Overview
EarthLink, Inc. (“EarthLink” or the “Company”),
together with its consolidated subsidiaries, is a leading network, communications and
IT 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 IT 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 approximately 28,800 route miles of fiber, 90 metro fiber rings and enterprise-
class data centers that
provide IP coverage across more than 90 percent of the United States.
Acquisitions
During 2010 and early 2011, we entered into two transactions that transformed our business from being primarily an ISP to residential
customers into a network and communications provider for business customers. During 2011, we also entered into other strategic transactions in
order to complement our business services and expand our IT services portfolio. We believe these transactions further established EarthLink as a
leading network, communications and IT services provider. The following is a summary of our transactions:
2012 Highlights
34
• In December 2010, we completed the acquisition of ITC^DeltaCom, Inc. (“ITC^DeltaCom”),
a provider of integrated communications
services to customers in the southeastern United States.
• In March 2011, we acquired Saturn Telecommunication Services Inc. and affiliates (“STS Telecom”), a privately-
held provider of
sophisticated Voice-over-Internet Protocol (“VoIP”) services.
• In April 2011, we completed the acquisition of One Communications Corp. (“One Communications”), a privately-
held integrated
telecommunications solutions provider serving customers in the northeast, mid-
Atlantic and upper midwest sections of the United
States.
• In May 2011, we acquired Logical Solutions.net, Inc. (“Logical Solutions”), a privately-
held provider of cloud computing, hosted
network and security services.
• In July 2011, we acquired Business Vitals, LLC., a privately-
held provider of national managed IT security and professional services.
•
In September 2011, we acquired the xDefenders assets of Synergy Global Solutions, Inc., a managed IT security provider.
•
In December 2011, we acquired an IT Solutions Center and application service from Synergy Global Solutions, Inc.
• Total revenues were $1.3 billion , a 3% increase compared to the prior year, consisting of a $93.0 million
increase in Business Services
revenue and a $58.1 million decrease in Consumer Services revenue
•
Net income was
$7.5 million , compared to net income of $34.6 million
during the prior year
• Adjusted EBITDA (a non-GAAP measure, see “Non-GAAP Financial Measures” in this Item 7) was $280.0 million
, a decrease from
$330.7 million
in the prior year primarily due to a decrease in revenues for legacy services, offset by the inclusion of a full period of
One Communications
•
Net cash provided by operating activities was
$191.1 million , an increase from $146.2 million
during the prior year