Earthlink to Cut 900 Jobs in Restructuring

Citing weakness in its subscription model, Earthlink announced a corporate restructuring that includes the elimination of approximately 900 jobs. The company will close its Orlando, FL; Knoxville, TN; Harrisburg, PA and San Francisco, CA offices and substantially reduce its presence in Pasadena, CA, and Atlanta, GA. EarthLink expects to record facility exit and restructuring costs of $60 - $70 million associated with the plan.



Earthlink said it now expects industry-wide gross subscriber additions to decelerate in 2008, resulting in fewer gross subscriber additions for EarthLink. The company no longer will seek to add "new subscribers that do not yield a positive lifetime value for our shareholders." Additionally, as subscriber growth slows, the company expects to realize fewer migrations from narrowband to broadband.



EarthLink expects that as it reduces its marketing efforts aimed at acquiring new customers who have high early life churn characteristics, its overall churn will come down over time as its longer tenured existing customers become the predominant part of its base.



Additionally, EarthLink is modifying its previously issued revenue, adjusted EBITDA and net loss guidance for the third quarter and full year 2007. For the third quarter of 2007, EarthLink now expects revenue of $290 - $300 million. Excluding the one-time facility exit and restructuring charges, the company now expects adjusted EBITDA (a non-GAAP measure, see definition in "Non-GAAP Measures" below) of $30 - $35 million and a net loss of $(33) - $(43) million. For the full year 2007, Earthlink now expects to end the year with approximately 3.9 million subscribers, with revenue of $1.190 - $1.210 billion. Excluding the one-time facility exit and restructuring charges, the company expects full year 2007 adjusted EBITDA of $135 - $145 million and a net loss of $(79) - $(109) million.

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