Atlanta, Georgia – (The Hosting News) – February 13, 2009 – Web hosting solutions and ISP company, EarthLink, has reported the company’s fourth quarter and full year financial results, ending December 31, 2008.

The report included income from continuing operations of $27.3 million, or $0.25 per share, versus $22.6 million, or $0.19 per share, in the fourth quarter of 2007.

Rolla P. Huff, Chairman and Chief Executive Officer of EarthLink noted, ”I am pleased to report that EarthLink generated $308.9 million in Adjusted EBITDA for the full year 2008, a 66 percent increase over 2007. During the course of 2008 we made meaningful progress in optimizing our business model around excellent customer service, continuous operating improvements and shareholder value creation.”

Highlights for the fourth quarter include:

• Income from continuing operations of $27.3 million, or $0.25 per share, versus $22.6 million, or $0.19 per share, in the fourth quarter of 2007
• Net income of $27.2 million, or $0.25 per share
• Adjusted EBITDA (a non-GAAP measure) of $72.4 million
• Free cash flow (a non-GAAP measure) of $70.1 million
• 2008 year-end cash and marketable securities balance of $534.4 million

Mr. Huff added, ”With a healthy balance sheet anchored by $534 million in cash and marketable securities, and a consumer access business that we expect will continue to generate significant cash flow, EarthLink is in a strong financial position. Our company’s financial strength and relative value in the technology industry have substantially improved over the past year. As a result, EarthLink has an expanded set of potential strategic alternatives that we are considering.”

EarthLink reported revenue of $216.1 million in the fourth quarter and $955.6 million for the full year 2008. This represents a 23 percent decrease over the prior year quarter and a 21 percent decrease compared to the 2007 full year result. The expected year over year variances were primarily driven by reductions in EarthLink’s narrowband and broadband customer base, given the company’s revised business focus on more tenured and profitable subscribers.

Total sales and marketing, operations, customer support, and general and administrative expenses for the fourth quarter and full year 2008, were $71.0 million and $328.9 million, respectively. This represents a decrease of 40 percent versus the prior year quarter, and a decrease of 49 percent versus the full year 2007 comparable expenses.

EarthLink realized $27.3 million, or $0.25 per share, and $198.1 million, or $1.80 per share, of income from continuing operations in the fourth quarter and full year 2008, respectively, compared to $22.6 million, or $0.19 per share, and a loss of $(54.8) million, or $(0.45) per share, in the fourth quarter and full year 2007, respectively. The fourth quarter and full year 2007 results included $31.2 million and $65.4 million, respectively, of facility exit and restructuring costs, compared to $5.0 million and $9.1 million, respectively, in the fourth quarter and full year 2008.

In addition, the fourth quarter and full year 2008 results included a $78.7 million non-cash impairment charge for goodwill and intangible assets, compared to a $4.3 million non-cash impairment charge in the prior year periods, and included an income tax benefit of $56.1 million and $32.2 million, respectively, compared to $1.6 million and $1.2 million, respectively, in the fourth quarter and full year 2007. The income tax benefit during 2008 was primarily due to the partial release of EarthLink’s valuation allowance related to its deferred tax assets. Net income was $27.2 million or $0.25 per share for the fourth quarter, and $189.6 million or $1.72 per share for the full year 2008, compared to a net loss of $(9.5) million, or $(0.08) per share, and $(135.1) million, or $(1.11) per share, for the fourth quarter and full year 2007, respectively.

Due to improvements in customer churn and better than expected passive subscriber additions, coupled with reductions in sales and marketing and back office support expenses, EarthLink generated Adjusted EBITDA (a non-GAAP measure, see definition in “Non-GAAP Measures” below) of $72.4 million for the fourth quarter of 2008, a 2 percent increase compared to the fourth quarter of 2007. EarthLink generated Adjusted EBITDA of $308.9 million for the full year 2008, a 66 percent increase compared to the full year 2007.

Free cash flow (a non-GAAP measure, see definition in “Non-GAAP Measures” below) was $70.1 million and $301.9 million during the fourth quarter and the full year 2008, respectively, compared to $59.1 million and $125.1 million during the fourth quarter and the full year 2007, respectively. The company had capital expenditures, including subscriber base acquisitions, of $2.2 million in the fourth quarter and $7.0 million for the full year 2008, down from $12.0 million and $60.8 million during the fourth quarter and full year 2007, respectively. EarthLink ended the fourth quarter with $534.4 million in cash and marketable securities, an increase of $245.8 million from December 31, 2007.

Adjusted EBITDA is defined as income (loss) from continuing operations before interest income (expense) and other, net, income taxes, depreciation and amortization, stock-based compensation expense under SFAS No. 123(R), net losses of equity affiliate, gain (loss) on investments, net, impairment of goodwill and intangible assets, and facility exit and restructuring costs. Free cash flow is defined as income from continuing operations before interest income (expense) and other, net, income taxes, depreciation and amortization, stock-based compensation expense under SFAS No. 123(R), net losses of equity affiliate, gain (loss) on investments, net, impairment of goodwill and intangible assets, and facility exit and restructuring costs, less cash used for purchases of property and equipment and purchases of subscriber bases. Adjusted EBITDA and free cash flow are non-GAAP financial performance measures. They should not be considered in isolation or as an alternative to measures determined in accordance with U.S. generally accepted accounting principles.

For full year 2009 management expects, Adjusted EBITDA of $210 million to $225 million is expected. The company is updating its previously presented guidance for free cash flow and income from continuing operations. EarthLink is increasing its full year guidance for free cash flow to $190 million to $215 million, based upon the aforementioned Adjusted EBITDA guidance along with estimated capital expenditures of between $10 million and $20 million. Additionally, EarthLink now expects income from continuing operations to be $75 million to $95 million for full year 2009, with the largest change from the prior guidance related to non-cash book tax rates following the company’s aforementioned valuation release in the fourth quarter of 2008.

EarthLink offers its web hosting business customers value-added tools for designing web sites, monitoring site visitor traffic, and encrypting sensitive information EarthLink Business Solutions is the business services unit of Atlanta- based EarthLink Inc. Together with New Edge Networks, EarthLink Business Solutions is a total business communications solutions provider. It is a single source provider for businesses, offering high-speed Internet access, web hosting, ecommerce, remote access to VPNs, and fully managed private wide area networks. Customers include single-location businesses as well as midsize and large enterprises with complex network requirements throughout the United States. EarthLink Business Solutions has offices in Atlanta, Vancouver, Wash., and Pasadena, California.

For more information about Earthlink Business Solutions, please visit: www.earthlink.biz.

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