Earnings: EarthLink Announced Q1 Loss Due To Helio

Earthlink (Nasdaq: ELNK) has released its first quarter earnings for the three months ending March 31st. As a company it saw consolidated revenue of $324.4 million, an increase of 4.7 percent over the first quarter in 2006. Earthlink saw a loss of $30 million in Q1 compared to a profit for Q1 2006 $16.4 million, due mainly to money invested in Helio. Focusing on Helio:

Subscriber base: Earthlink expects to pass the 100,000 subscriber mark in the second quarter of this year, and hit 200,000 to 250,000 by the end of the year. It expects monthly ARPU to be $90-100, and during the conference call a comment was made that gross margins per user were similar to the total ARPU of other companies, around $45-50 per month.

Net Loss: Helio generated $30.4 million in revenue for the first quarter, and expects that Helio will more than triple its revenue to between $140.0 million to $170.0 million. Helio showed a net loss of $63.1 million during the quarter. Earthlink’s part of this was $29.3 million compared to a proportionate loss of $35.7 millino in Q4 2007. Earthlink expects the net loss for the full year to be between $330 million and $360 million, of which its share will be $160 million to $180 million. Earthlink expects Helio to be profitable around 2009.

Capital contributions: Earthlink expects to pump more money into Helio. It made a scheduled capital contribution of $13.5 million to Helio during the first quarter, and expects to invest another $50 million to $100 million during the rest of the year. If more investment is required after 2007 Earthlink will be looking for investment from third parties. During the conference call they were asked about the apparent lack of corresponding investment from SK Telecom, and responded that they continued to have a dialogue with the South Korean telco. As it turns out during its earnings call this morning SK Telecom indicated it planned to make a capital investment into Helio, but didn’t give any details as to how much or when.

Earnings Release