EarthLink sales up, but profit falls

But EarthLink also picked up all of One’s business problems, which remain a drag on the Atlanta-based telecom company.

Integrating One has been “a complete rebuild, just as we expected,” EarthLink CEO Rolla Huff said Thursday during an earnings conference call. And much of the effort at slowing the One-centered decline in EarthLink’s business services arm is starting to pay off, Huff said.

For the three months ending March 31, EarthLink had revenue of $344.4 million, up 42 percent from the same quarter a year earlier. The growth came from the April 2011 acquisition of Massachusetts-based One and a variety of small IT services companies throughout the past year, including LogicalSolutions.net and xDefenders Inc., both of Perinton, and parts of Synergy Global Solutions Inc., which is based in Amherst, Erie County, and also has employees in Victor.

EarthLink today employs more than 400 people locally and occupies a new building at the Alexander Park development on Monroe Avenue.

Despite the revenue gain, EarthLink profit took a big tumble. It made $7.3 million, or 7 cents a share, less than half of its net income a year earlier. The drop came as operating costs rose sizably. EarthLink spent $32 million during the quarter on capital expenditures, twice what it did a year ago.

Wall Street analysts surveyed by Bloomberg News had expected, on average, sales of $343.2 million and profit of $4 million.

EarthLink shares rose 10 cents Thursday to $8.01.

Huff said the company sees growth opportunities in various information technology services, such as cloud computing. “We’re focused on building a solid, growing business for the long term,” he said.

And in announcing the results, EarthLink pointed to a variety of upbeat signs, such as the declining turnover rate of its business services and consumer customers.

Huff said declines EarthLink has seen in its business services arm were centered on One Communications, and those declines are stabilizing. But in terms of integrating One fully into the company, “We’re in the very early stages,” he said. “The productivity in the Northeast isn’t even remotely where we’re going to get it.”

Chief Financial Officer Brad Ferguson said the company also expects consumer declines to lessen over time.

EarthLink is predicting the rest of 2012 will be challenging in terms of bottom-line results. According to earnings guidance the company put out Thursday, EarthLink is projecting profit of $7 million to $11 million this year due to higher non-cash expenses such as taxes and depreciation and amortization.