Earthlink 2014 Annual Report Download - page 47

Table of Contents
(a) Subscriber counts do not include new nonpaying customers. Customers receiving service under promotional programs that include periods of
free service at inception are not included in subscriber counts until they become paying customers.
(b) Average subscribers is calculated by averaging the ending monthly subscribers or accounts for the thirteen
months preceding and including
the end of the year.
(c) ARPU represents the average monthly revenue per user (subscriber). ARPU is computed by dividing average monthly revenue for the period
by the average number of subscribers for the period. Average monthly revenue used to calculate ARPU includes recurring service revenue as
well as nonrecurring revenues associated with equipment and other one-time charges associated with initiating or discontinuing services.
(d) Churn rate is used to measure the rate at which subscribers discontinue service on a voluntary or involuntary basis. Churn rate is computed
by dividing the average monthly number of subscribers that discontinued service during the period by the average subscribers for the period.
Consumer Services Operating Results
The following table sets forth operating results for our Consumer Services segment for the years ended December 31, 2012, 2013 and 2014 :
The decreases in Consumer Services operating income during the years ended December 31, 2013 and 2014 compared to the prior years were
primarily due to limited sales and marketing activities, the continued maturation of the market for Internet access and competitive pressures in
the industry. The decreases were partially offset by decreases in operating expenses as our consumer subscriber base has decreased and become
longer-tenured. Our longer tenured customers require less customer service and technical support and have a lower frequency of non-payment.
Liquidity and Capital Resources
The following table sets forth summarized cash flow data for the years ended December 31, 2012, 2013 and 2014 :
Operating activities
The decrease in cash provided by operating activities during the year ended December 31, 2013 compared to the prior year was primarily due to
the overall decrease in revenues as well as an increase in payments for restructuring, acquisition and integration-
related activities. The increase
in cash provided by operating activities during the year ended December 31, 2014 compared to the prior year was primarily due to reduced
payables resulting from favorable disputes with vendors, improved collection efforts on accounts receivables, lower payments for acquisition and
integration-related costs and a decrease in cash interest paid.
42
Year Ended December 31, 2013 vs 2012 2014 vs 2013
2012 2013 2014 $ Change % Change $ Change % Change
(dollars in thousands)
Revenues
$
317,710
$
276,379
$
245,964
$
(41,331
)
(13)%
$
(30,415
)
(11
)%
Cost of revenues
105,102
94,497
87,913
(10,605
)
(10)%
(6,584
)
(7
)%
Segment operating expenses
67,526
50,623
43,615
(16,903
)
(25)%
(7,008
)
(14
)%
Segment operating income
$
145,082
$
131,259
$
114,436
$
(13,823
)
(10)%
$
(16,823
)
(13
)%
Year Ended December 31, 2013 vs 2012 2014 vs 2013
2012 2013 2014 $ Change % Change $ Change % Change
(dollars in thousands)
Net cash provided by operating
activities
$
191,055
$
124,156
$
139,995
$
(66,899
)
(35)%
$
15,839
13
%
Net cash used in investing
activities
(163,836
)
(112,500
)
(102,777
)
51,336
31%
9,723
9
%
Net cash used in financing
activities
(81,381
)
(52,641
)
(19,721
)
28,740
35%
32,920
63
%
Net (decrease) increase in cash
and cash equivalents
$
(54,162
)
$
(40,985
)
$
17,497
$
13,177
24%
$
58,482
143
%