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WOW! Reports Third Quarter 2020 Results

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ENGLEWOOD, Colo., Nov. 5, 2020 /PRNewswire/ -- WideOpenWest, Inc. ("WOW!" or the "Company") (NYSE:WOW), one of the nation's leading broadband providers, with an efficient, high-performing network that passes more than three million residential, business and wholesale consumers, today announced financial and operating results for the third quarter ended September 30, 2020.

Third Quarter 2020 Highlights (1)

  • Total Revenue of $288.7 million; Net Income of $9.0 million; Diluted Earnings Per Share of $0.11
  • HSD Revenue totaled $142.6 million, an increase of $12.4 million or 9.5% compared to the prior-year period
  • Total Subscribers of 846,300, an increase of 28,700 compared to the prior-year period
  • Total HSD RGUs of 808,900, representing 4.5% growth in HSD RGUs compared to the prior-year period
  • Adjusted EBITDA was $113.5 million with an Adjusted EBITDA margin of 39.3%
  • Free Cash Flow in the third quarter totaled $21.7 million

"I'm thrilled at the progress we continue to make on our broadband-first strategy as we help our customers adapt and succeed in this ever changing environment," said Teresa Elder, WOW!'s CEO. "We continue to see growth in our high-speed data RGUs and on a year-to-date basis our high-speed data net adds are up 92% from last year totaling 27,369. Consumers continue to shift away from traditional video toward streaming and to higher HSD speed tiers as reliable and easy internet connections are seen as essential for the way we work, learn and play."

"Our 2.7% increase in subscription revenue over this time last year was driven by a 9.5% increase in high-speed data revenue," said John Rego, WOW!'s CFO. "We see this as affirmation that our broadband-first strategy is sound and we expect high-speed data revenue to grow over time, outpacing the decline in video and telephony revenue. This growth positions us to improve free cash flow and our overall leverage ratio."



(1)

Refer to "Non-GAAP Financial Measures and Operating Metrics," "Unaudited Reconciliations of GAAP Measures to Non-GAAP Measures," and "Unaudited Transaction Adjusted Condensed Consolidated Financial and Subscriber Information" in this Press Release for definitions and information related to Adjusted EBITDA and Transaction Adjusted financial information, reconciliation of such non-GAAP measures to the closest comparable GAAP measures and why our management thinks it is beneficial to present such non-GAAP measures.



Revenue
For the quarter ended September 30, 2020, Total Revenue increased $3.3 million, or 1.2%, to $288.7 million compared to the quarter ended September 30, 2019.

Total Subscription Revenue for the quarter ended September 30, 2020, was $269.5 million, up $7.1 million, or 2.7%, compared to the quarter ended September 30, 2019. This increase was driven by an increase in average revenue per unit ("ARPU") as HSD sell-in ARPU has increased coupled with periodic Video service rate increases and an increase in volume almost exclusively attributable to the addition of HSD subscribers. These increases were partially offset by a shift in service offering mix, as the Company continues to experience a reduction in Video and Telephony RGUs.

Other Business Services Revenue totaled $6.3 million for the quarter ended September 30, 2020, down $0.5 million compared to the quarter ended September 30, 2019.

Other Revenue totaled $12.9 million for the quarter ended September 30, 2020, down $3.3 million compared to the quarter ended September 30, 2019, primarily due to a decrease in advertising, late fee and line assurance revenue.

Costs and Expenses
Operating Expenses (excluding Depreciation and Amortization) totaled $140.8 million for the quarter ended September 30, 2020, up $2.0 million, or 1.4%, compared to the quarter ended September 30, 2019 primarily due to increases in hardware and software expense. Selling, General, and Administrative expenses totaled $45.0 million for the quarter ended September 30, 2020 up $4.4 million, or 10.8% compared to the quarter ended September 30, 2019 primarily due to increases in digital transformation initiatives and marketing expense.

Net Income and Earnings Per Share
Net Income for the quarter ended September 30, 2020, was $9.0 million, compared to $11.4 million for the quarter ended September 30, 2019. Diluted Earnings Per Share for the quarter ended September 30, 2020, was $0.11, compared to Diluted Earnings Per Share of $0.14 for the quarter ended September 30, 2019.

Adjusted EBITDA
Adjusted EBITDA for the three months ended September 30, 2020, was $113.5 million, a decrease of $0.7 million, or 0.6%, compared to the three months ended September 30, 2019. Adjusted EBITDA margin was 39.3% for the three months ended September 30, 2020, a decrease of 70 basis points compared to the three months ended September 30, 2019. 

Customers
WOW! reported Total Subscribers of 846,300 as of September 30, 2020, an increase of 28,700, or 3.5%, compared to September 30, 2019, up 1,800 compared to June 30, 2020. HSD RGUs totaled 808,900 as of September 30, 2020, an increase of 35,000, or 4.5%, compared to September 30, 2019, up 3,300 compared to June 30, 2020.

Edge-Outs
Edge-Out Projects reached a total of 190,800 homes passed and 46,300 Subscribers since inception.

The 2018 Edge-Out projects include 5,800 Customers, which represents 19.6% penetration on such nodes. The 2019 Edge-Out projects include 7,200 Customers, which represents 14.8% penetration on such nodes. The 2020 Edge-Out projects now reach 3,500 homes passed.

Capital Expenditures
Capital Expenditures, on a reported basis, totaled $51.1 million for the quarter ended September 30, 2020, representing a $12.3 million, or 19.4%, decrease compared to the quarter ended September 30, 2019. The decrease is primarily due to a decrease in edge-out capital expenditures as the Company shifts its focus to penetration within its current footprint. Capital Expenditures for the quarter ended September 30, 2020 equates to 17.7% of Total Revenue for the quarter ended September 30, 2020.

Liquidity and Leverage
As of September 30, 2020, the total outstanding amount of long-term debt and finance lease obligations was $2.3 billion, and cash and cash equivalents were $32.9 million. Total Net Leverage as of September 30, 2020, was 5.36X on a LTM Adjusted EBITDA basis, down from 5.39X at June 30, 2020, and undrawn revolver capacity totaled $235.6 million. Free Cash Flow was $21.7 million for the third quarter.

Estimated COVID-19 Impacts
Estimated EBITDA impacts due to COVID-19 for the nine months ended September 30, 2020 total $10.7 million.  

Webcast
WOW! will host a webcast on Thursday, November 5, 2020, at 5:00 p.m. Eastern to discuss the operating and financial results contained in this press release. The conference call and webcast will be broadcast live on the Company's investor relations website at ir.wowway.com. Those parties interested in participating can use the information as follows:







Call Date:

Thursday, November 5, 2020


Call Time:

5:00 p.m. Eastern


Dial In:

(866) 393-4306


International:

(734) 385-2616


Conf. ID:

5674684











A replay of the call will be available on November 5, 2020, at 8:00 p.m. ET, on the investor relations website or by telephone. To access the telephone replay, which will be available until November 19, 2020, at 11:59 p.m. ET, please dial (855) 859-2056 and use conference ID 5674684.

WIDEOPENWEST, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(unaudited)




September 30, 


December 31, 



2020


2019



(in millions, except share data)

Assets







Current assets







Cash and cash equivalents


$

32.9


$

21.0

Accounts receivable—trade, net of allowance for doubtful accounts of $8.1 and $7.5, respectively



67.2



65.8

Accounts receivable—other, net



3.1



9.8

Prepaid expenses and other



30.2



22.1

Total current assets



133.4



118.7

Right-of-use lease assets—operating



26.6



26.5

Property, plant and equipment, net



1,079.8



1,073.7

Franchise operating rights



799.5



799.5

Goodwill



408.8



408.8

Intangible assets subject to amortization, net



2.2



2.9

Other non-current assets



49.0



41.5

Total assets


$

2,499.3


$

2,471.6

Liabilities and stockholders' deficit







Current liabilities







Accounts payable—trade


$

45.9


$

47.1

Accrued interest



3.8



2.7

Current portion of long-term lease liability—operating



6.6



6.1

Accrued liabilities and other



96.9



95.6

Current portion of long-term debt and finance lease obligations



34.9



30.9

Current portion of unearned service revenue



45.9



45.0

Total current liabilities



234.0



227.4

Long-term debt and finance lease obligations—less current portion and debt issuance costs



2,252.1



2,259.5

Long-term lease liability—operating



23.1



23.4

Deferred income taxes, net



198.4



192.5

Other non-current liabilities



14.2



14.7

Total liabilities



2,721.8



2,717.5

Commitments and contingencies







Stockholders' deficit:







Preferred stock, $0.01 par value, 100,000,000 shares authorized; 0 shares issued and outstanding





Common stock, $0.01 par value, 700,000,000 shares authorized; 95,192,119 and 92,182,207 issued as of September 30, 2020 and December 31, 2019, respectively; 86,856,478 and 84,103,108 outstanding as of September 30, 2020 and December 31, 2019, respectively



0.9



0.9

Additional paid-in capital



331.1



322.8

Accumulated other comprehensive loss



(10.7)



(15.5)

Accumulated deficit



(463.1)



(474.4)

Treasury stock at cost, 8,335,641 and 8,079,099 shares as of September 30, 2020 and December 31, 2019, respectively



(80.7)



(79.7)

Total stockholders' deficit



(222.5)



(245.9)

Total liabilities and stockholders' deficit


$

2,499.3


$

2,471.6

 

WIDEOPENWEST, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited)




Three months ended


Nine months ended



September 30, 


September 30, 



2020


2019


2020


2019



(in millions, except per share data)

Revenue:













HSD


$

142.6


$

130.2


$

416.5


$

388.1

Video



103.9



106.4



309.8



327.0

Telephony



23.0



25.8



71.7



78.9

Total subscription services revenue



269.5



262.4



798.0



794.0

Other business services



6.3



6.8



19.2



21.0

Other



12.9



16.2



38.0



47.3

Total revenue



288.7



285.4



855.2



862.3














Costs and expenses:













Operating (excluding depreciation and amortization)



140.8



138.8



436.6



432.4

Selling, general and administrative



45.0



40.6



134.2



133.7

Depreciation and amortization



58.2



50.9



170.8



151.5

Loss on sale of operating assets, net





8.4





4.8




244.0



238.7



741.6



722.4

Income from operations



44.7



46.7



113.6



139.9

Other income (expense):













Interest expense



(32.2)



(35.8)



(98.1)



(107.4)

(Loss) gain on sale of assets, net



(0.3)





0.4



Other income, net



0.8



0.6



1.6



3.3

Income before provision for income tax



13.0



11.5



17.5



35.8

Income tax expense



(4.0)



(0.1)



(6.2)



(6.3)

Net income


$

9.0


$

11.4


$

11.3


$

29.5














Basic and diluted earnings per common share













      Basic


$

0.11


$

0.14


$

0.14


$

0.37

      Diluted


$

0.11


$

0.14


$

0.14


$

0.36

Weighted-average common shares outstanding













      Basic



81,771,279



80,885,244



81,475,814



80,639,099

      Diluted



83,030,056



81,104,905



82,533,287



81,064,688

 

WIDEOPENWEST, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)




Nine Months Ended



September 30, 



2020


2019



(in millions)

Cash flows from operating activities:







Net income


$

11.3


$

29.5

Adjustments to reconcile net income to net cash provided by operating activities:







Depreciation and amortization



170.8



151.5

Deferred income taxes



4.5



8.0

Provision for doubtful accounts



14.3



12.5

Loss on sale of operating assets, net





4.8

Gain on sale of assets, net



(0.4)



Amortization of debt issuance costs and discount



3.6



3.6

Non-cash compensation



8.3



7.8

Changes in operating assets and liabilities:







Receivables and other operating assets



(23.0)



(27.4)

Payables and accruals



10.7



(11.1)

Net cash provided by operating activities


$

200.1


$

179.2

Cash flows from investing activities:







Capital expenditures


$

(166.3)


$

(191.1)

Proceeds from sale of Chicago fiber assets





21.0

Other investing activities



(0.6)



(1.3)

Net cash used in investing activities


$

(166.9)


$

(171.4)

Cash flows from financing activities:







Proceeds from issuance of long-term debt


$

91.0


$

65.0

Payments on long-term debt and finance lease obligations



(111.3)



(75.2)

Purchase of shares



(1.0)



(1.5)

Net cash used in financing activities


$

(21.3)


$

(11.7)

Increase (decrease) in cash and cash equivalents



11.9



(3.9)

Cash and cash equivalents, beginning of period



21.0



13.2

Cash and cash equivalents, end of period


$

32.9


$

9.3

Supplemental disclosures of cash flow information:







Cash paid during the periods for interest


$

93.4


$

107.8

Cash (received) paid during the periods for income taxes, net


$

(3.4)


$

1.5

Insurance proceeds received for business interruption


$


$

9.6

Non-cash operating activities:







Operating lease additions


$

5.5


$

9.3

Non-cash financing activities:







Finance lease additions


$

13.3


$

18.0

Capital expenditure accounts payable and accruals


$

13.7


$

11.3

About WOW!
WOW! is a leading broadband services provider offering high-speed data ("HSD"), cable television ("Video"), and digital telephony ("Telephony") services to residential and business customers.  Our vision is connecting people to their world through the WOW! Experience: reliable, easy, and pleasantly surprising, every time. For more information, please visit www.wowway.com.

Cautionary Statement Regarding Forward-Looking Statements
Certain statements in this press release that are not historical facts contain "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended.  These forward-looking statements represent our goals, beliefs, plans and expectations about our prospects for the future and other future events. Forward-looking statements include all statements that are not historical fact and can be identified by terms such as "may," "intend," "might," "will," "should," "could," "would," "anticipate," "expect," "believe," "estimate," "plan," "project," "predict," "potential," or the negative of these terms. Although these forward-looking statements reflect our good-faith belief and reasonable judgment based on current information, these statements are qualified by important factors, many of which are beyond our control that could cause our actual results to differ materially from those in the forward-looking statements. These factors and other risks that could cause our actual results to differ materially are set forth in the section entitled "Risk Factors" in our Annual Report filed on Form 10-K with the Securities and Exchange Commission ("SEC") on March 4, 2020, in our Quarterly Report on Form 10-Q filed on May 4, 2020 and other reports subsequently filed with the SEC. Given these uncertainties, you should not place undue reliance on any such forward-looking statements. The forward-looking statements included in this report are made as of the date hereof or the date specified herein, based on information available to us as of such date. Except as required by law, we assume no obligation to update these forward-looking statements, even if new information becomes available in the future.

Non-GAAP Financial Measures
The Company has included certain non-GAAP financial measures in this release, including Adjusted EBITDA, Transaction Adjusted Capital Expenditures, Transaction Adjusted Capital Expenditures excluding Expansion Capital Expenditures and Free Cash Flow. These terms, as defined herein, are not intended to be considered in isolation, as a substitute for, or superior to, the financial information prepared and presented in accordance with generally accepted accounting principles in the United States of America ("GAAP"). These terms may vary from the use of similar terms by other companies in our industry due to different methods of calculation and therefore are not necessarily comparable.

We believe that these non-GAAP measures enhance an investor's understanding of our financial performance. We believe that these non-GAAP measures are useful financial metrics to assess our operating performance from period to period by excluding certain items that we believe are not representative of our core business. We believe that these non-GAAP measures provide investors with useful information for assessing the comparability between periods of our ability to generate cash from operations sufficient to pay taxes, to service debt and to undertake Capital Expenditures. We use these non-GAAP measures for business planning purposes and in measuring our performance relative to that of our competitors. We believe these non-GAAP measures are measures commonly used by investors to evaluate our performance and that of our competitors.

Adjusted EBITDA eliminates the impact of expenses that do not relate to overall business performance and is defined by WOW! as net income (loss) before net interest expense, income taxes, depreciation and amortization (including impairments), impairment losses on intangibles and goodwill, management fees to related party, the write-up or write-off of any asset, loss on early extinguishment of debt, integration and restructuring expenses and all non–cash charges and expenses (including stock compensation expense) and certain other income and expenses. Adjusted EBITDA should not be considered as an alternative to net income (loss), operating income or any other performance measures derived in accordance with GAAP as measures of operating performance, operating cash flows or liquidity.

Transaction Adjusted Capital Expenditures and Transaction Adjusted Capital Expenditures excluding Expansion Capital Expenditures give effect to the reimbursement of Chicago fiber asset build, and exclude the effects associated with Hurricane Michael and should not be considered as an alternative to capital expenditures

Free Cash Flow is defined as Net Cash Provided by Operating Activities less Capital Expenditures. Free Cash Flow presents the cash generated or used by the business in a given period.

Refer to "Reconciliations of GAAP Measures to Non-GAAP Measures" and the accompanying tables below for a reconciliation of Adjusted EBITDA to Net Income, and Net Cash Provided by Operating Activities to Free Cash Flow which are most directly comparable to their corresponding GAAP financial measure.

Subscriber Information
The Company uses the terms defined below throughout this release.

Homes passed are reported as the number of serviceable addresses, such as single residence homes, apartments and condominium units, and businesses passed by our broadband network and listed in our database.

We deliver multiple services to our customers, as such we report Total Subscribers as the number of Subscribers who receive at least one of our HSD, Video or Telephony services, without regard to which or how many services they subscribe. We define each of the individual HSD Subscribers, Video Subscribers and Telephony Subscribers as a Revenue Generating Unit ("RGU").

While we take appropriate steps to ensure subscriber information is presented on a consistent and accurate basis at any given balance sheet date, we periodically review our policies in light of the variability we may encounter across our different markets due to the nature and pricing of products and services and billing systems. Accordingly, we may from time to time make appropriate adjustments to our subscriber information based on such reviews.

WIDEOPENWEST, INC. AND SUBSIDIARIES

Reconciliations of GAAP Measures to Non-GAAP Measures

(unaudited)


The following table provides a reconciliation of Adjusted EBITDA to Net Income for the three and nine months ended September 30, 2020 and 2019:




Three months ended


Nine months ended



September 30, 


September 30, 



2020


2019


2020


2019



(in millions)

Net Income


$

9.0


$

11.4


$

11.3


$

29.5

Depreciation and amortization



58.2



50.9



170.8



151.5

Loss on sale of operating assets, net





8.4





4.8

Interest expense



32.2



35.8



98.1



107.4

Loss (gain) on sale of assets, net



0.3





(0.4)



Non-recurring professional fees, M&A integration and restructuring expense



8.0



5.3



21.2



22.2

Non-cash stock compensation



2.6



2.9



8.3



7.8

Other income, net



(0.8)



(0.6)



(1.6)



(3.3)

Income tax expense



4.0



0.1



6.2



6.3

Adjusted EBITDA (1)


$

113.5


$

114.2


$

313.9


$

326.2



(1)

Adjusted EBITDA for the three and nine months ended September 30, 2019 includes a transaction adjustment of $3.8 million for business interruption insurance proceeds received related to Hurricane Michael.    

The following table provides a reconciliation of Net Cash Provided by Operating Activities to Free Cash Flow for the three and nine months ended September 30, 2020 and 2019:




Three months ended


Nine months ended



September 30,


September 30,



2020


2019


2020


2019



(in millions)

Net Cash Provided by Operating Activities


$

72.8


$

60.2


$

200.1


$

179.2

Less: Transaction Adjusted Capital Expenditures



(51.1)



(61.4)



(166.3)



(177.3)

Transaction Adjusted Free Cash Flow


$

21.7


$

(1.2)


$

33.8


$

1.9

 

Unaudited Transaction Adjusted Condensed Consolidated Financial and Subscriber Information
The SEC requires that pro forma financial information be presented in a registrant's periodic filings when events occur for which disclosure would be material to investors, including significant business combinations or the disposition of a significant portion of the business. The significance of an acquired or disposed business is determined based on the "significant subsidiary" tests specified in Regulation S-X, Article 11, Rule 1-02(w). Although the Company has made certain acquisitions and divestitures, such transactions do not meet the "significant subsidiary" tests and, accordingly, the Company's historical financial information as filed with the SEC does not contain pro forma financial information relating to those transactions.

Nevertheless, we make certain adjustments in this release to the historical financial and subscriber information of the Company as filed with the SEC ("Transaction Adjusted") because we believe such information would be meaningful to investors by showing how such transactions might have affected the Company's historical financial statements. The unaudited Transaction Adjusted financial and subscriber information in this release has been prepared giving effect to the divestiture of a portion of our Chicago Fiber Network in December 2017, and the impact of Hurricane Michael in October 2018, as if such transactions had been completed at the beginning of the respective periods presented. The unaudited Transaction Adjusted financial and subscriber information is for informational purposes only and does not purport to represent what our results of operations, financial or subscriber information would have been if such transactions had occurred at any date, nor does such information purport to project the results of operations for any future period.

The unaudited Transaction Adjusted condensed consolidated financial and subscriber information in this release was prepared based on our books and records for the respective periods presented for the portion of the Chicago Fiber Network that was divested, and the impact of Hurricane Michael in October 2018. Such historical unaudited financial and subscriber information has been adjusted to give a Transaction Adjusted effect to events that are directly attributable to such transactions, factually supportable and expected to have a continuing impact on the results. The unaudited Transaction Adjusted financial information herein does not reflect non-recurring charges that have been incurred in connection with the transaction including legal fees, broker fees and accounting fees.

WIDEOPENWEST, INC. AND SUBSIDIARIES

Capital Expenditures and Subscriber Information

(unaudited)


The following table provides a reconciliation of Capital Expenditures to Transaction Adjusted Capital Expenditures for the three and nine months ended September 30, 2020 and 2019:




Three months ended


Nine months ended



September 30, 


September 30, 



2020


2019


2020


2019



(in millions)

Capital Expenditures


$

51.1


$

63.4


$

166.3


$

191.1

Transaction Adjustments:













Capital Expenditures related to the Chicago fiber network





(2.0)





(11.5)

Hurricane Michael impact









(2.3)

Transaction Adjusted Capital Expenditures


$

51.1


$

61.4


$

166.3


$

177.3

The following table provides an unaudited summary of our subscriber information:














September 30,


December 31,


March 31,


June 30,


September 30,



2019


2019


2020


2020


2020

Homes Passed


3,215,500


3,237,200


3,235,200


3,237,700


3,242,400

Total Subscribers


817,600


823,400


838,000


844,500


846,300

HSD RGUs


773,900


781,500


797,600


805,600


808,900

Video RGUs


380,800


373,800


365,800


351,700


328,000

Telephony RGUs


195,700


193,100


190,900


188,100


182,000

Total RGUs


1,350,400


1,348,400


1,354,300


1,345,400


1,318,900

 

Additional Information Available on Website:
The information in this press release should be read in conjunction with the financial statements and footnotes contained in the Company's Quarterly Report on Form 10-Q for the three and nine months ended September 30, 2020, which will be posted on of our investor relations website at ir.wowway.com, when it is filed with the Securities and Exchange Commission (the "SEC"). A slide presentation to accompany the conference call and a trending schedule containing historical customer and financial data will also be available on our website.

Contact:
Andrew Posen
VP and Head of Investor Relations
303-927-4935
andrew.posen@wowinc.com

Debra Havins
Senior Director of Corporate Communications
720-527-8214
debra.havins@wowinc.com

Cision View original content to download multimedia:http://www.prnewswire.com/news-releases/wow-reports-third-quarter-2020-results-301167425.html

SOURCE WideOpenWest, Inc.

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