• Income from continuing operations of $57.7 million, or $0.51 per share
• Net income of $53.3 million, or $0.48 per share
• Adjusted EBITDA (a non-GAAP measure) of $80.5 million
• Free cash flow (a non-GAAP measure) of $78.5 million
• Increased full year Adjusted EBITDA (a non-GAAP measure) guidance to $275 million - $290 million

"With our focus on customers' full internet access lifecycle, the strength of the EarthLink brand and our aggressive cost management, we delivered better than expected results across the board," said EarthLink's chairman and chief executive officer Rolla P. Huff. "We are seeing favorable trends in many areas of the business including better than expected passive subscriber additions, lower customer churn from a more tenured customer base and significantly reduced operational costs. As a result, we are once again raising guidance for the full year."

"As our revised guidance also indicates, while we expect to see continued improvements in the business, we do not expect them to be at the magnitude of the prior quarters. We have successfully implemented the vast majority of the larger scale cost reduction initiatives in the restructuring activities initiated last August to optimize our business."

Financial and Operating Results

Revenue

Total company revenues were $245.6 million, a 21.2 percent decrease compared to the second quarter 2007. This result was consistent with management's expectations, strategy and prior public comments that the company focus would be on loyalty and retention of its tenured Internet access subscribers. While this focus on higher value, but fewer subscribers resulted in a decline in revenues, these tenured users also demonstrated significantly lower support cost profiles as compared to newer subscribers. This contributed to the company generating significantly better operating margins and free cash flow (a non-GAAP measure), as noted below.

Profitability and Other Financial Measures

EarthLink continues to focus its business on a more profitable and tenured customer base. This allowed the company to realize a significant decrease in sales and marketing, as well as back office support expenses. EarthLink's sales and marketing expenses were reduced to $25.8 million in the quarter, versus $75.8 million in the second quarter of 2007. Also contributing to the year-over-year expense decrease were benefits realized from our 2007 restructuring activities.

Operations and customer service expense decreased 43.8 percent to $33.6 million compared to the second quarter of 2007. With the strategic focus on more tenured subscribers, EarthLink also benefited from lower bad debt and billing expense. This contributed to a decline in general and administrative expense to $23.8 million for the quarter, down 19.2 percent compared to the second quarter of 2007.

EarthLink reported $57.7 million, or $0.51 per share, in income from continuing operations in the second quarter of 2008, compared to a loss of $(7.0) million, or $(0.06) per share, in the second quarter of 2007. The significant improvement compared to the second quarter of 2007 was due to the revised strategy and focus noted above as well as $40.1 million in equity losses related to Helio that were recognized in the prior year quarter.

EarthLink generated Adjusted EBITDA (a non-GAAP measure, see definition in "Non-GAAP Measures" below) of $80.5 million for the second quarter of 2008, compared to $43.8 million in the second quarter of 2007. This increase was the result of the significant improvement in income from continuing operations noted above.

Net income was $53.3 million, or $0.48 per share, for the second quarter of 2008, compared to a net loss of $(16.3) million, or $(0.13) per share, for the second quarter of 2007. The company's second quarter 2008 results include a loss of ($4.4) million from discontinued operations for the municipal Wi-Fi assets, compared to a loss of $(9.3) million during the second quarter of 2007.

Balance Sheet and Cash Flow

Free cash flow (a non-GAAP measure, see definition in "Non-GAAP Measures" below) was $78.5 million during the second quarter of 2008 compared to $29.6 million during the second quarter of 2007. This improvement reflects the significant increase in Adjusted EBITDA in the second quarter 2008, coupled with a $12.2 million decrease in capital expenditures and subscriber acquisitions in the quarter compared to the prior year quarter.

EarthLink ended the second quarter with $441.6 million in cash and marketable securities, an increase of $121.6 million from March 31, 2008.

Non-GAAP Measures

Adjusted EBITDA is defined as income (loss) from continuing operations before interest income (expense) and other, net, income taxes, depreciation and amortization, stock-based compensation expense under SFAS No. 123( R ), net losses of equity affiliate, gain (loss) on investments in other companies, net, and facility exit, restructuring and other costs.

Free cash flow is defined as income from continuing operations before interest income (expense) and other, net, income taxes, facility exit, restructuring and other costs, stock-based compensation expense under SFAS No. 123( R ), net losses of equity affiliate, gain (loss) on investments in other companies, net, and depreciation and amortization, 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.

Business Outlook

These 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.

For the full year 2008, management is increasing its previously issued guidance. During the first six months of 2008, EarthLink's reputation for world-class customer service contributed to higher than expected passive subscriber additions and better than expected improvements in average monthly customer churn. Additionally, efforts to improve the company's cost structure have surpassed original expectations. As a result of these favorable developments but recognizing that the magnitude of cost improvements will be lower in the remainder of 2008, management now expects to generate income from continuing operations of $180 million to $195 million, Adjusted EBITDA of $275 million to $290 million, and free cash flow of $250 million to $270 million for the full year 2008.

Conference Call for Analysts and Investors

Investors in the U.S. and Canada interested in participating in the conference call on July 29, 2008 at 8:30 a.m. Eastern Daylight Time (EDT) may dial 1-800-706-0730 and reference the EarthLink call. Other international investors may dial 1-706-634-5173 and also reference the EarthLink call. EarthLink recommends dialing into the call approximately 10 minutes prior to the scheduled start time.

A replay will be available beginning at 10:30 a.m. EDT on July 29, 2008 through midnight on August 5, 2008 by dialing 1-800-642-1687. International callers should dial 1-706-645-9291. The replay confirmation code is 54998017.

The Webcast of this call will be archived on EarthLink's site at: http://ir.earthlink.net/events.cfm  

About EarthLink

"EarthLink. We revolve around you(TM)." As the nation's next generation 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 Web site at http://www.EarthLink.net .

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