Net revenues for the first quarter of 2007 totaled $120.2 million, an increase of $0.7 million from the $119.5 million reported for the fourth quarter of 2006, and an increase of $2.4 million from the $117.8 million reported for the first quarter of 2006.

Direct subscribers for the first quarter of 2007 contributed $43.4 million of net revenues, or 36.1 percent, as compared to $42.4 million, or 35.5 percent, for the fourth quarter of 2006, and $36.7 million, or 31.1 percent, for the first quarter of 2006. Wholesale subscribers for the first quarter of 2007 contributed $76.8 million of net revenues, or 63.9 percent, as compared to $77.1 million, or 64.5 percent, for the fourth quarter of 2006, and $81.1 million, or 68.9 percent, for the first quarter of 2006.

Subscription revenue from Growth products for the first quarter of 2007 totaled $50.2 million, an increase of $2.7 million, or 5.7 percent, from the fourth quarter of 2006, and an increase of $13.4 million, or 36.4 percent from the first quarter of 2006. Covad’s growth products are T-1, business ADSL, Line-Powered Voice Access (“LPVA”), Voice over Internet Protocol (“VoIP”) and wireless. The increase from the fourth quarter of 2006 was attributable to increases in broadband subscription revenue from T-1, business ADSL and LPVA of $2.1 million, VoIP subscription revenue of $0.5 million and Wireless subscription revenue of $0.1 million. The increase from the first quarter of 2006 was attributable to increases in broadband subscription revenue from T-1, business ADSL and LPVA of $8.4 million, VoIP subscription revenue of $2.9 million and wireless subscription revenue of $2.1 million. Subscription revenue from Growth products for the first quarter of 2007 contributed 45.7 percent of total subscription revenues, an increase of 2.4 percent from the fourth quarter of 2006 and an increase of 10.8 percent from the first quarter of 2006. Refer to the Selected Financial Data below, including Note 3, for additional information, including a summary of subscription revenue from Growth and Legacy products and a reconciliation of subscription revenue to the most directly comparable GAAP measure.

Subscription revenue from Legacy products for the first quarter of 2007 totaled $59.5 million, a decrease of $2.7 million, or 4.3 percent, from the fourth quarter of 2006, and a decrease of $9.1 million, or 13.3 percent from the first quarter of 2006. Covad’s legacy products, primarily sold through wholesale channels, are consumer ADSL, business SDSL, frame relay and high-capacity transport circuits. The decreases from the fourth quarter of 2006 and first quarter of 2006 were primarily attributable to decreases in broadband subscription revenue from consumer ADSL and business SDSL and frame relay products. Subscription revenue from Legacy products for the first quarter of 2007 contributed 54.3 percent of total subscription revenues, a decrease of 2.4 percent from the fourth quarter of 2006 and a decrease of 10.8 percent from the first quarter of 2006. Refer to the Selected Financial Data below, including Note 3, for additional information, including a summary of subscription revenue from Growth and Legacy products and a reconciliation of subscription revenue to the most directly comparable GAAP measure.

Revenue from business subscribers for the first quarter of 2007 contributed $94.8 million of net revenues, a 1.1 percent increase from the fourth quarter of 2006 and an 8.3 percent increase from the first quarter of 2006. Revenue from business subscribers comprised 78.9 percent of net revenues, up from 78.6 percent in the fourth quarter of 2006 and 74.3 percent in the first quarter of 2006. Revenue from consumer subscribers for the first quarter of 2007 contributed $25.4 million of net revenues compared to $25.6 million in the fourth quarter of 2006 and $30.2 million in the first quarter of 2006. Revenue from consumer subscribers for the first quarter of 2007 comprised 21.1 percent of net revenues, down from 21.4 percent in the fourth quarter of 2006 and 25.7 percent in the first quarter of 2006.

Adjusted earnings before interest, taxes, depreciation and amortization (“A-EBITDA”) for the first quarter of 2007 totaled $1.2 million, down from the $6.7 million A-EBITDA reported for the fourth quarter of 2006, and down from the $2.8 million A-EBITDA reported for the first quarter of 2006. A-EBITDA in the fourth quarter of 2006 includes the benefit of a transaction-based tax adjustment of approximately $2.3 million. Included in A-EBITDA for the first quarter of 2006 is $1.7 million from a software license agreement. Refer to the Selected Financial Data below, including Note 2, for additional information, including a reconciliation of this non-GAAP financial performance measure to the most directly comparable GAAP measure.

Net loss for the first quarter of 2007 totaled $14.5 million, or $0.05 loss per share, as compared to the $8.4 million net loss, or $0.03 loss per share, reported for the fourth quarter of 2006 and the $9.3 million net loss, or $0.03 loss per share, reported for the first quarter of 2006. As stated above, fourth quarter of 2006 includes the benefit of a transaction-based tax adjustment of approximately $2.3 million. Included in net loss for the first quarter of 2006 is $1.7 million from a software license agreement.

Cash, cash equivalents and short-term investments, and restricted cash and cash equivalents at the end of the first quarter of 2007 totaled $72.1 million, a decrease of $9.5 million when compared to the balance of $81.6 million at the end of the fourth quarter of 2006. This change in cash, cash equivalents and short-term investments, and restricted cash and cash equivalents for the first quarter of 2007 included $2.5 million of expenditures related to the LPVA build-out, which is being funded with the proceeds from the strategic agreement with EarthLink, a $6.8 million payment related to incentive programs accrued at the end of 2006, a $1.8 million semi-annual interest payment related our 3% convertible note, and $0.2 million related to the acquisition of DataFlo’s assets.