EarthLink Holdings Corp.
Apr 27, 2010

EarthLink Announces First Quarter 2010 Results

Raises Full Year Guidance, Increases Quarterly Dividend

ATLANTA, April 27, 2010 /PRNewswire via COMTEX News Network/ -- EarthLink, Inc. (Nasdaq: ELNK) today announced financial results for its first quarter ended March 31, 2010. Highlights of today's announcement include:

"We are very pleased that our first quarter operating results and financial performance were ahead of expectations. The tenure of our customer base continues to increase as the vast majority of our consumer base has been an EarthLink customer for two years or more, and nearly half for five years or more. We are seeing the positive impact of this increasing tenure on substantially all of our key operating metric trend lines. The increased guidance we announced today reflects these latest trend lines," explained EarthLink Chairman and Chief Executive Officer Rolla P. Huff. "These positive trends across the business also reinforce our belief that our core access business will continue to generate meaningful cash well in to the future. We continue to manage this business for long-term value creation. Consistent with this strategy, today we announced that our Board of Directors approved a 14 percent increase in our regular quarterly dividend."

Financial and Operating Results

EarthLink reported revenue of $157.3 million in the first quarter of 2010, a 4 percent decline from the fourth quarter of 2009, and down 21 percent from the first quarter of 2009. Broadband services comprised 59 percent of EarthLink's revenue in the first quarter of 2010, up from 58 percent in the prior quarter and 55 percent in the year-ago quarter.

Similar to revenue, EarthLink's subscriber losses also continued to attenuate with net subscriber losses of 118,000 in the first quarter, an improvement from 137,000 in the fourth quarter of 2009 and 208,000 in the year-ago quarter. The increasing tenure of EarthLink's customer base continues to result in improvements in customer churn. In the first quarter of 2010, 86 percent of EarthLink's consumer narrowband and DSL customers had two or more years of tenure with the company and 46 percent had five or more years of tenure, up from 73 percent and 34 percent, respectively, in the year-ago quarter. As a result, monthly subscriber churn improved to 3.1 percent in the first quarter of 2010, down from 3.2 percent in the fourth quarter of 2009 and 3.9 percent in the year-ago quarter.

The company continues to aggressively manage expenses. Total sales and marketing, operations, customer support, and general and administrative expenses were $45.3 million for the first quarter of 2010, a 22 percent reduction from the fourth quarter of 2009 and a 29 percent reduction from expenses in the year-ago quarter.

Profitability and Other Financial Measures

For the first quarter of 2010, EarthLink's net income was $26.7 million, or $0.25 per share, as compared to net income of $32.5 million, or $0.30 per share, in the first quarter of 2009.

EarthLink's strong results in customer retention, combined with its ability to aggressively manage costs, resulted in the company generating Adjusted EBITDA (a non-GAAP measure, see definition in "Non-GAAP Measures" below) of $57.3 million in the first quarter of 2010, compared to Adjusted EBITDA of $50.9 million in the fourth quarter of 2009 and $68.9 million in the first quarter of 2009.

Balance Sheet and Cash Flow

EarthLink generated free cash flow (a non-GAAP measure, see definition in "Non-GAAP Measures" below) of $54.2 million during the first quarter of 2010, compared to $48.4 million in the fourth quarter of 2009 and $65.7 million in the first quarter of 2009.

Capital expenditures for the company were $3.1 million in the first quarter. EarthLink made $15.4 million of dividend payments in the quarter. EarthLink ended the first quarter of 2010 with $707.8 million in cash and marketable securities.

Business Outlook

The following statements are forward-looking, and actual results may differ materially. See comments under "Cautionary Information Regarding Forward-Looking Statements" below. EarthLink undertakes no obligation to update these statements.

Today EarthLink increased its guidance for the full year 2010. Management now expects 2010 Adjusted EBITDA of $194 million to $202 million; free cash flow of $178 million to $192 million, based upon the aforementioned Adjusted EBITDA guidance combined with $10 million to $16 million in estimated capital expenditures; and net income of $84 million to $92 million for the full year 2010.

Increased Dividend

EarthLink today announced that its Board of Directors has increased the amount of its quarterly cash dividend on its common stock from $0.14 per share to $0.16 per share. This increase will be reflected in the next quarterly dividend to be paid on June 28, 2010 to shareholders of record on June 14, 2010.

Non-GAAP Measures

Adjusted EBITDA is defined as net income before interest expense and other, net, income taxes, depreciation and amortization, stock-based compensation expense, gain (loss) on investments, net, impairment of goodwill and intangible assets, and facility exit and restructuring costs.

Free cash flow is defined as net income before interest expense and other, net, income taxes, depreciation and amortization, stock-based compensation expense, 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. Please refer to the Consolidated Financial Highlights for a reconciliation of these non-GAAP financial performance measures to the most comparable measures reported in accordance with U.S. generally accepted accounting principles and Footnote 3 of the Consolidated Financial Highlights for a discussion of the presentation, comparability and use of such financial performance measures.

Conference Call for Analysts and Investors



    Conference Call Details
    -----------------------
    Tuesday, April 27, 2010, at 8:30 a.m. EDT  hosted by EarthLink's Chairman
     and Chief Executive Officer, Rolla P. Huff and Chief Financial Officer,
     Bradley A. Ferguson.
    U.S. and Canada Dial-in Number            800-706-0730
    International Dial-in Number              706-634-5173
    Participants reference the EarthLink call and dial in 10 minutes prior to
     scheduled start time.

    Webcast
    -------
    A live Webcast of the conference call will be available at:  http://
     ir.earthlink.net/index.cfm

    Replay
    ------
    Replay available from 11:30 a.m. EDT on April 27 through midnight on May
     4.
    Dial 800-642-1687 from US and Canada, International callers dial
     706-645-9291.
    The replay confirmation code is 67961666.
    The Webcast will be archived on the company's website at: http://
     ir.earthlink.net/events.cfm


Special Notice to Noteholders

Under the terms of the indenture governing the Company's outstanding 3.25% Convertible Senior Notes due 2026 (the "Notes"), the Company's payment of the cash dividend described above requires an adjustment to the conversion rate for the Notes, which adjustment will be effective June 10, 2010. In addition, as a result of the adjustment, the Notes may be surrendered for conversion through June 9, 2010, for the consideration provided for in the indenture.

In order to convert a Note held in certificate form, a holder must (1) complete and sign a Conversion Notice in the form attached to the applicable indenture, with appropriate signature guarantee, on the back of the Note, (2) surrender the Note to the Conversion Agent, (3) furnish endorsements and transfer documents required by the Conversion Agent, (4) pay any accrued unpaid interest through the conversion date and (5) pay any tax or duty related to the conversion. If a holder holds a beneficial interest in a Global Security, a converting holder must comply with the applicable procedures of the Depositary, The Depository Trust Company.



                 The Conversion Agent is Wells Fargo Bank, N.A.:

                              Wells Fargo Bank, N.A.
                             Corporate Trust Services
                                  MAC N9311-110
                            625 Marquette Avenue South
                              Minneapolis, MN 55479
                             Attention: Lynn Steiner


A separate notice with additional information is being delivered to registered holders of Notes, the Conversion Agent and the Trustee.

About EarthLink

"EarthLink. We revolve around you(TM)." A leading Internet service provider, Atlanta-based EarthLink has earned an award-winning reputation for outstanding customer service and its suite of online products and services. EarthLink offers what every user should expect from their Internet experience: high-quality connectivity, minimal online intrusions and customizable features. Whether it's dial up, high speed, voice, web hosting or "EarthLink Extras" like home networking or security, EarthLink connects people to the power and possibilities of the Internet. Learn more about EarthLink by calling (800) EARTHLINK or visiting EarthLink's website at www.EarthLink.net.

Cautionary Information Regarding Forward-Looking Statements

This press release includes "forward-looking" statements (rather than historical facts) that are subject to risks and uncertainties that could cause actual results to differ materially from those described. Although we believe that the expectations expressed in these forward-looking statements are reasonable, we cannot promise that our expectations will turn out to be correct. Our actual results could be materially different from and worse than our expectations. We disclaim any obligation to update any forward-looking statements contained herein, except as may be required pursuant to applicable law. With respect to forward-looking statements in this press release, the company seeks the protections afforded by the Private Securities Litigation Reform Act of 1995. These risks include, without limitation, (1) that the continued decline of our consumer access subscribers, combined with the change in mix of our consumer access subscriber base from narrowband to broadband, will adversely affect our results of operations; (2) that we will have less ability in the future to implement cost reduction initiatives to offset our revenue declines, which will adversely affect our results of operations; (3) that we face significant competition which could reduce our profitability; (4) that adverse economic conditions may harm our business; (5) that we may not be able to execute our business strategy for our Business Services segment, which could adversely impact our results of operations and cash flows; (6) that our commercial and alliance arrangements may not be renewed or may not generate expected benefits, which could adversely affect our results of operations; (7) that our business is dependent on the availability of third-party telecommunications service providers; (8) that we may be unable to retain sufficient qualified personnel, and the loss of any of our key executive officers could adversely affect us; (9) that we may be unsuccessful in making and integrating acquisitions into our business, which could result in operating difficulties, losses and other adverse consequences; (10) that if we do not continue to innovate and provide products and services that are useful to subscribers, we may not remain competitive, and our revenues and operating results could suffer; (11) that our business may suffer if third parties used for customer service and technical support and certain billing services are unable to provide these services or terminate their relationships with us; (12) that interruption or failure of our network and information systems and other technologies could impair our ability to provide our services, which could damage our reputation and harm our operating results; (13) that government regulations could adversely affect our business or force us to change our business practices; (14) that privacy concerns relating to our business could damage our reputation and deter current and potential users from using our services; (15) that we may not be able to protect our intellectual property; (16) that we may be accused of infringing upon the intellectual property rights of third parties, which is costly to defend and could limit our ability to use certain technologies in the future; (17) that if we are unable to successfully defend against legal actions we could face substantial liabilities; (18) that our business depends on effective business support systems, processes and personnel; (19) that as a result of our continuing review of our business, we may have to undertake further restructuring plans that would require additional charges, including incurring facility exit and restructuring charges; (20) that we may be required to recognize additional impairment charges on our goodwill and intangible assets, which would adversely affect our results of operations and financial position; (21) that we may have exposure to greater than anticipated tax liabilities and the use of our net operating losses and certain other tax attributes could be limited in the future; (22) that we may change our cash return strategy; (23) that our stock price may be volatile; (24) that our indebtedness could adversely affect our financial health and limit our ability to react to changes in our industry; and (25) that provisions of our second restated certificate of incorporation, amended and restated bylaws and other elements of our capital structure could limit our share price and delay a change of management. These risks and uncertainties, as well as other risks and uncertainties that could cause our actual results to differ significantly from management's expectations, are not intended to represent a complete list of all risks and uncertainties inherent in our business, and should be read in conjunction with the more detailed cautionary statements and risk factors included in our Annual Report on Form 10-K for the year ended December 31, 2009.


                         EARTHLINK, INC.
    Unaudited Condensed Consolidated Statements Of Operations
              (in thousands, except per share data)


                                             Three Months Ended
                                                 March 31,
                                             ------------------
                                             2009            2010
                                             ----            ----
    Revenues:
      Access and service                 $178,698        $141,337
      Value-added services                 20,365          15,921
                                           ------          ------
        Total revenues                    199,063         157,258

    Operating costs and expenses:
      Cost of revenues                     75,565          60,814
      Sales and marketing                  17,022          11,301
      Operations and customer support      27,746          19,657
      General and administrative           18,622          14,374
      Amortization of intangible
       assets                               2,147           1,264
      Facility exit and restructuring
       costs (1)                              488           1,435
                                              ---           -----
        Total operating costs and
         expenses                         141,590         108,845

    Income from operations                 57,473          48,413
    Gain on investments, net                  259             418
    Interest expense and other, net        (4,291)         (5,292)
                                           ------          ------
        Income before income taxes         53,441          43,539
    Income tax provision                  (20,944)        (16,792)
                                          -------         -------
        Net income                        $32,497         $26,747
                                          =======         =======

    Net income per share
      Basic                                 $0.30           $0.25
                                            =====           =====
      Diluted                               $0.30           $0.25
                                            =====           =====

    Weighted average common shares
     outstanding
      Basic                               108,071         107,623
                                          =======         =======
      Diluted                             109,168         108,478
                                          =======         =======


                                EARTHLINK, INC.
              Reconciliation of Net Income to Adjusted EBITDA (3)
                                 (in thousands)


                                           Three Months Ended
                                           ------------------
                                      March 31,  December 31, March 31,
                                            2009          2009     2010
                                            ----          ----     ----

    Net income                           $32,497      $193,269  $26,747
    Income tax provision (benefit)        20,944      (181,839)  16,792
    Depreciation and amortization          6,509         5,352    4,748
    Stock-based compensation expense       4,390         2,679    2,667
    (Gain) loss on investments, net         (259)        1,626     (418)
    Interest expense and other, net        4,291         5,346    5,292
    Impairment of goodwill and
     intangible assets (2)                     -        24,145        -
    Facility exit and restructuring
     costs (1)                               488           297    1,435
                                             ---           ---    -----
      Adjusted EBITDA (3)                $68,860       $50,875  $57,263
                                         =======       =======  =======

    Depreciation - cost of revenues       $1,890        $2,293   $1,934
    Depreciation - other                   2,472         1,534    1,550
    Amortization of intangible assets      2,147         1,525    1,264
                                           -----         -----    -----
      Depreciation and amortization       $6,509        $5,352   $4,748
                                          ======        ======   ======



                                       EARTHLINK, INC.
                      Reconciliation of Net Income to Free Cash Flow (3)
                                        (in thousands)


                                                 Three Months Ended
                                                 ------------------
                                     March 31,      December 31,    March 31,
                                           2009             2009         2010
                                           ----             ----         ----

    Net income                          $32,497         $193,269      $26,747
    Income tax provision (benefit)       20,944         (181,839)      16,792
    Depreciation and amortization         6,509            5,352        4,748
    Stock-based compensation expense      4,390            2,679        2,667
    (Gain) loss on investments, net        (259)           1,626         (418)
    Interest expense and other, net       4,291            5,346        5,292
    Impairment of goodwill and
     intangible assets (2)                    -           24,145            -
    Facility exit and restructuring
     costs (1)                              488              297        1,435
    Purchases of property and
     equipment                           (3,133)          (2,471)      (3,072)
                                         ------           ------       ------
      Free cash flow (3)                $65,727          $48,404      $54,191
                                        =======          =======      =======



                       EARTHLINK, INC.
    Reconciliation of Guidance Provided in Non-GAAP Measures (3)
                        (in millions)


                                               Year
                                              Ending
                                             December
                                                31,
                                                  2010
                                                  ----
    Net income                               $84 - $92
    Income tax provision                            55
    Depreciation                                    16
    Amortization of intangible assets                4
    Stock-based compensation expense                12
    Interest expense and other, net                 21
    Facility exit and restructuring
     costs (1)                                       2
                                                   ---
      Adjusted EBITDA (3)                  $194 - $202
                                           ===========

                                               Year
                                              Ending
                                             December
                                                31,
                                                  2010
                                                  ----
    Net income                               $84 - $92
    Income tax provision                            55
    Depreciation                                    16
    Amortization of intangible assets                4
    Stock-based compensation expense                12
    Interest expense and other, net                 21
    Facility exit and restructuring
     costs (1)                                       2
    Purchases of property and
     equipment                             (16) - (10)
                                           -----------
      Free cash flow (3)                   $178 - $192
                                           ===========


                             EARTHLINK, INC.
          Supplemental Financial Data and Key Operating Metrics



                                      March       December     March
                                       31,           31,        31,
                                         2009          2009       2010
                                         ----          ----       ----
    Balance Sheet Data                        (in thousands)
    Cash and marketable securities   $565,841      $695,961   $707,777
    Convertible Senior Notes (4)      258,750       258,750    255,791
    Stockholders' equity              500,097       734,024    745,241

    Employee Data
    Number of employees at end of
     period (5)                           717           623        600


                                      March       December     March
                                       31,           31,        31,
                                         2009          2009       2010
                                         ----          ----       ----
    Subscriber Data (6)
    Consumer services
      Narrowband access subscribers
       (7)                          1,587,000     1,225,000  1,134,000
      Broadband access subscribers
       (8)                            856,000       804,000    781,000
                                      -------       -------    -------
        Total consumer subscribers  2,443,000     2,029,000  1,915,000

    Business services
      Narrowband access subscribers    14,000         8,000      8,000
      Broadband access subscribers     57,000        54,000     52,000
      Web hosting accounts             84,000        75,000     73,000
                                       ------        ------     ------
        Total business subscribers    155,000       137,000    133,000

    Total subscribers at end of
     period                         2,598,000     2,166,000  2,048,000
                                    =========     =========  =========




                                          Three Months Ended March
                                                     31,
                                          ------------------------
                                             2009             2010
                                             ----             ----
    Subscriber Activity
    Subscribers at beginning of
     period                             2,806,000        2,166,000
    Gross organic subscriber
     additions                            116,000           77,000
    Adjustment (9)                         (7,000)               -
    Churn                                (317,000)        (195,000)
    Subscribers at end of period        2,598,000        2,048,000
                                        =========        =========

    Churn Rate (10)                           3.9%             3.1%

    Consumer Data
    Average subscribers (11)            2,539,000        1,970,000
    ARPU (12)                              $20.95           $20.91
    Churn rate (10)                           4.0%             3.1%

    Business Data
    Average subscribers (11)              160,000          135,000
    ARPU (12)                              $82.37           $83.23
    Churn rate (10)                           3.1%             1.9%


                     EARTHLINK, INC.
    Supplemental Schedule of Segment Information (13)
                      (in thousands)


                                     Three Months Ended
                                          March 31,
                                     ------------------
                                      2009           2010
                                      ----           ----
    Consumer Services
      Revenues
        Access and service        $139,790       $108,198
        Value-added services        19,772         15,366
                                    ------         ------
        Total revenues             159,562        123,564
      Cost of revenues              52,334         40,461
                                    ------         ------
      Gross margin                 107,228         83,103
      Segment operating
       expenses                     37,206         23,965
      Segment income from
       operations                  $70,022        $59,138
                                   =======        =======

    Business Services
      Revenues
        Access and service         $38,908        $33,139
        Value-added services           593            555
                                       ---            ---
        Total revenues              39,501         33,694
      Cost of revenues              23,231         20,353
                                    ------         ------
      Gross margin                  16,270         13,341
      Segment operating
       expenses                     11,259          9,941
      Segment income from
       operations                   $5,011         $3,400
                                    ======         ======

    Consolidated
      Revenues
        Access and service        $178,698       $141,337
        Value-added services        20,365         15,921
                                    ------         ------
        Total revenues             199,063        157,258
      Cost of revenues              75,565         60,814
                                    ------         ------
      Gross margin                 123,498         96,444
      Direct segment operating
       expenses                     48,465         33,906
                                    ------         ------
      Segment income from
       operations                   75,033         62,538
      Stock-based compensation
       expense                       4,390          2,667
      Amortization of
       intangible assets             2,147          1,264
      Facility exit and
       restructuring costs (1)         488          1,435
      Other operating expenses      10,535          8,759
      Income from operations       $57,473        $48,413
                                   =======        =======


                                  EARTHLINK, INC.
                  Footnotes to Consolidated Financial Highlights

    1.   In August 2007, EarthLink adopted a restructuring plan (the "2007
         Plan") to reduce costs and improve the efficiency of the Company's
         operations. The 2007 Plan was the result of a comprehensive review
         of operations within and across the Company's functions and
         businesses. Under the 2007 Plan, the Company reduced its workforce
         by approximately 900 employees, closed office facilities in Orlando,
         Florida; Knoxville, Tennessee; Harrisburg, Pennsylvania; and San
         Francisco, California and consolidated its office facilities in
         Atlanta, Georgia and Pasadena, California. The 2007 Plan was
         primarily implemented during 2007 and 2008. However, since
         management continues to evaluate EarthLink's businesses, there have
         been and may continue to be supplemental provisions for new plan
         initiatives as well as changes in estimates to amounts previously
         recorded. EarthLink recorded $1.4 million of facility exit and
         restructuring costs during the first quarter of 2010 primarily as a
         result of further consolidation in its Atlanta, GA facility.

    2.   During the fourth quarter of 2009, EarthLink concluded that the
         goodwill and certain of the intangible assets recorded as a result
         of its April 2006 acquisition of New Edge Networks were impaired and
         recorded a non-cash impairment charge of $24.1 million. EarthLink
         concluded the carrying value of its goodwill and certain of the
         intangible assets related to the New Edge acquisition were impaired
         in conjunction with its annual test of goodwill and intangible
         assets deemed to have indefinite lives.

    3.   Adjusted EBITDA is defined as net income before interest expense and
         other, net, income taxes, depreciation and amortization, stock-
         based compensation, gain (loss) on investments, net, impairment of
         goodwill and intangible assets, and facility exit and restructuring
         costs.  Free cash flow is defined as net income before interest
         expense and other, net, income taxes, depreciation and amortization,
         stock-based compensation, gain (loss) on investments, net,
         impairment of goodwill and intangible assets, and facility exit and
         restructuring costs, less purchases cash used for of property and
         equipment and purchases of subscriber bases.

      Adjusted EBITDA and free cash flow are non-GAAP measures and are not
      determined in accordance with U.S. generally accepted accounting
      principles. These financial performance measures are not indicative
      of cash provided or used by operating activities and may differ from
      comparable information provided by other companies, and they should
      not be considered in isolation, as an alternative to, or more
      meaningful than measures of financial performance determined in
      accordance with U.S. generally accepted accounting principles. These
      financial performance measures are commonly used in the industry and
      are presented because EarthLink believes they provide relevant and
      useful information to investors. EarthLink utilizes these financial
      performance measures to assess its ability to meet future capital
      expenditures and working capital requirements. EarthLink also uses
      these financial performance measures to evaluate the performance of
      its business, for budget planning purposes and as factors in its
      employee compensation programs.

    4.   The principal amount of the Convertible Senior Notes was $258.8
         million, $258.8 million and $255.8 million as of March 31, 2009,
         December 31, 2009 and March 31, 2010, respectively. The unamortized
         discount was $36.0 million, $26.5 million and $22.9 million as of
         March 31, 2009, December 31, 2009 and March 31, 2010, respectively.
         The net carrying value was $222.8 million, $232.2 million and $232.8
         million as of March 31, 2009, December 31, 2009 and March 31, 2010,
         respectively.

    5.   Represents full-time equivalents.

    6.   Subscriber counts do not include 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.




    7.   Narrowband access subscribers include customers who subscribe to our
         premium and value priced dial-up Internet access services and
         customers who subscribe to our premium email only service.

    8.   Paying customers who subscribe to EarthLink DSL and Home Phone
         service are counted as both a broadband subscriber and a voice
         subscriber.

    9.   During the three months ended March 31, 2009, EarthLink removed
         approximately 7,000 satellite subscribers from its broadband
         subscriber count and total subscriber count as a result of the sale
         of these subscriber accounts.

    10.  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.

    11.  Average subscribers for the three month periods is calculated by
         averaging the ending monthly subscribers or accounts for the four
         months preceding and including the end of the quarterly period.

    12.  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.

    13.  The Company reports segment information along the same lines that its
         chief executive officer reviews its operating results in assessing
         performance and allocating resources. The Company operates two
         reportable segments, Consumer Services and Business Services. The
         Company's Consumer Services segment provides Internet access
         services and related value-added services to individual customers.
         These services include dial-up and high-speed Internet access and
         voice-over-Internet protocol services, among others. The Company's
         Business Services segment provides integrated communications
         services and related value-added services to businesses and
         communications carriers. These services include managed private IP-
         based wide area networks, dedicated Internet access and web hosting,
         among others.

      EarthLink evaluates performance of its operating segments based on
      segment income from operations. Segment income from operations
      includes revenues from external customers, related cost of revenues
      and operating expenses directly attributable to the segment, which
      include expenses over which segment managers have direct
      discretionary control, such as advertising and marketing programs,
      customer support expenses, site operations expenses, product
      development expenses, certain technology and facilities expenses,
      billing operation and provisions for doubtful accounts. Segment
      income from operations excludes other income and expense items and
      certain expenses that segment managers do not have discretionary
      control over. Costs excluded from segment income from operations
      include various corporate expenses (consisting of certain costs such
      as corporate management, human resources, finance and legal),
      amortization of intangible assets, stock-based compensation
      expense, impairment of goodwill and intangible assets and facility
      exit and restructuring costs, as they are not evaluated in the
      measurement of segment performance.


SOURCE EarthLink, Inc.

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