Disclosures

EarthLink, Inc.

I, Mike Crawford , certify that this report reflects my personal beliefs about this company and that no portion of my compensation was, is or will be directly or indirectly related to the specific recommendations or views discussed in this report.

Disclosure

  • B. Riley & Co., LLC, or any of its affiliates, does and seeks to do business with companies covered in its research reports.
  • A portion of this analyst’s compensation is based on the sales, trading and investment banking activities of B. Riley & Co., LLC.
  • This analyst, or a member of this analyst's household who is financially dependent on this analyst or vice versa, holds a long stock position in the security covered in this report.
  • This report may be distributed by FBR Capital Markets & Co., an affiliate of B. Riley & Co., LLC and as such constitutes third party research. For additional information, please visit http://www.fbr.com/disclosures.
Disclosure Chart

Initiated Coverage on 01/14/2008 with "Buy" Rating and Price Target of $10.60

Ratings Distribution as of August 22, 2017
Rating Number of Companies Percent of Total
Buy 146 74.9%
Neutral 48 24.6%
Sell 1 0.5%
Total 195 100%
% with Investment Banking Relationships
Rating Number of Companies Percent of Total
Buy 23 88.5%
Neutral 3 11.5%
Sell 0 0.0%
Total 26 100%

Explanation of B. Riley & Co. LLC's Rating System

  • Buy: We generally expect “Buy” rated stocks to have an above-average risk-adjusted total return over the next 12 months. We recommend that investors buy the securities at the current valuation.
  • Neutral: We generally believe “Neutral” rated stocks will have an average risk-adjusted total return over the next 12 months.
  • Sell: We generally expect “Sell” rated stocks to have a below-average risk-adjusted total return over the next 12 months. We recommend that investors reduce their positions until the valuation or fundamentals become more compelling.

Risks and Considerations

  • Acquisition/Integration - The Company actively evaluates potential acquisitions as part of its growth strategy. Acquisitions pursued by the Company could be dilutive to financial results and result in a difficult, dilutive or expensive integration.
  • Competition - The industry is highly competitive and many of the Company's competitors have greater resources.
  • Economy - Macro-economic issues such as increasing oil and gas prices and a possible drop in consumer spending could have a negative impact on the Company's business.
  • Execution - Management may not execute well on its restructuring efforts as it allocates capital and human resources towards acquisitions and related integration, possibly resulting in lower margins and cash flow.
  • Pricing Pressure - The Company's business could be affected by pricing pressure within the market.
  • General Industry - The Company could miss our estimates and/or their financial guidance.
  • Further Potential Risks - See the Company's SEC filings, particularly its 10-K filing, for a discussion of further potential risks.

Additional Risks and Considerations

    • Adaptation – If EarthLink is unable to adapt to changes in technology and customer demands, it may not remain competitive, and its revenues and operating results could suffer.
    • Execution - EarthLink may not be able to execute its strategy to successfully transition to a leading managed network, security and cloud services provider, which could adversely affect operating results and cash flow.
    • IP-Enabled Service Compliance - The current regulatory environment for broadband and VoIP services remains unclear, as the FCC has not decided whether VoIP is an “information service” or “telecommunications service,” and EarthLink must navigate shifting and/or uncertain rules pertaining to retail service delivery.
    • Telecom Regulation – EarthLink’s operating subsidiaries that provide telecommunications services subject to FCC authorizations are classified as non-dominant telecommunications carriers by the FCC and, as a result, the prices, terms and conditions of its interstate and international telecommunications services are subject to relatively limited FCC regulation.  The company still requires radio licenses and must uphold certain duties related to interconnection, resale, access, and the like.  Similarly, EarthLink is subject to various state and local laws and regulations.