NYSE:WOW WideOpenWest Q2 2023 Earnings Report $4.35 -0.07 (-1.58%) Closing price 04/28/2025 03:59 PM EasternExtended Trading$4.34 0.00 (-0.11%) As of 04/28/2025 04:39 PM Eastern Extended trading is trading that happens on electronic markets outside of regular trading hours. This is a fair market value extended hours price provided by Polygon.io. Learn more. Earnings HistoryForecast WideOpenWest EPS ResultsActual EPS-$0.01Consensus EPS -$0.02Beat/MissBeat by +$0.01One Year Ago EPSN/AWideOpenWest Revenue ResultsActual Revenue$172.60 millionExpected Revenue$173.40 millionBeat/MissMissed by -$800.00 thousandYoY Revenue GrowthN/AWideOpenWest Announcement DetailsQuarterQ2 2023Date8/8/2023TimeN/AConference Call DateTuesday, August 8, 2023Conference Call Time8:00AM ETUpcoming EarningsWideOpenWest's Q1 2025 earnings is scheduled for Tuesday, May 6, 2025, with a conference call scheduled at 8:00 AM ET. Check back for transcripts, audio, and key financial metrics as they become available.Q1 2025 Earnings ReportConference Call ResourcesConference Call AudioConference Call TranscriptSlide DeckPress Release (8-K)Quarterly Report (10-Q)Earnings HistoryCompany ProfileSlide DeckFull Screen Slide DeckPowered by WideOpenWest Q2 2023 Earnings Call TranscriptProvided by QuartrAugust 8, 2023 ShareLink copied to clipboard.There are 7 speakers on the call. Operator00:00:00You for standing by. My name is Robert MacArthur, and I'll be your conference operator today. At this time, I'd like to welcome everyone to the WideOpenWest Q2 2023 Earnings Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks. Operator00:00:17There will be a questions and answer session. If you'd like to withdraw your question, you can press star 1 again. Now I'd like to turn the call over to Andrew Posen, VP, Head of Investor Relations. Andrew, go ahead. Speaker 100:00:39Good morning, everyone, and thank you for joining our Q2 2023 earnings call. With me today is Teresa Elder, Wow! Chief Executive Officer and John Rego, Wow! Chief Financial Officer. Before we get started, I would like to remind everyone that during our call, we will make some forward looking statements about our expected operating results, our business strategy and other matters relating to our business. Speaker 100:01:03These forward looking statements are made in reliance on the Safe Harbor provisions of the federal securities laws that are subject to known and unknown risks, uncertainties and other factors that may cause our actual operating results, financial position or performance to be materially different from those expressed or implied in our forward looking statements. You are cautioned not to place undue reliance on such forward looking statements. We disclaim any obligation to update such forward looking statements. For additional information concerning factors that could affect our financial results For cause actual results to differ materially from our forward looking statements, please refer to our filings with the SEC, including the Risk Factors section of our Form 10 ks filed with the SEC as well as the Forward Looking Statements section of our press release. In addition, please note that on today's call and in the press release we issued this morning, we may refer to certain non GAAP financial measures. Speaker 100:02:01While the company believes these non GAAP financial measures provide useful information for investors, the presentation of this information is not intended to be considered in isolation or as a substitute for the financial information presented in accordance with GAAP. Reconciliations between GAAP and non GAAP metrics for our historical reported results can be found in our earnings releases and our trending schedules, which can be found on our website. We have also included a presentation this morning to complement our prepared remarks. Now I'll turn the call over to Wow! Chief Executive Officer, Teresa Elder. Speaker 200:02:38Thanks, Andrew. Welcome to Wow! 2nd quarter earnings call. Our results this quarter continued to reflect our strategic focus on market expansion, strengthening our legacy footprint and aggressively managing our customer our cost base. Wow! Speaker 200:02:57Is undergoing 2 significant transitions. 1st is our market expansion. We are committed to building 400,000 fiber greenfield homes by 2027, which accelerates our transition to a broadband business. Additionally, we are also increasing our Edge Out activity with both advanced HFC, which can enable DOCSIS 4.0 and 10 gs capability as well as fiber to the home edge outs in certain markets. We are pleased to share that as of the end of July, We have added 16,900 new homes passed so far this year in both Greenfield and Edge Out areas, which is more than we've added in the last 3 years combined. Speaker 200:03:48I'm pleased to share that we are on pace to achieve more than 50,000 new homes passed this year, more than the last 4 years combined. These market expansion initiatives continue to be central to our strategy and represent the core thesis of our growth and value proposition. In Q2, we saw success in improving our legacy footprint, while adding new homes passed in our greenfield and edge out markets. Importantly, the growth of new customers in these areas is meeting our expectations. Our second transition is primarily within our legacy base. Speaker 200:04:33We made the shift to broadband first a few years ago and we have seen our margin consistently grow While customers appreciate our high speeds and good value with great service, we listen to our customers and embraced streaming and the customers' desire to cut the cord on traditional video services. We just launched the next step in our transformation to a broadband business, which involves transitioning our low margin video business to a high margin streaming service. We believe this partnership with YouTube TV creates a competitive advantage and presents an excellent opportunity to offer customers what they want at an exceptional price point. YouTube TV gives customers a more robust choice of programming at savings of 100 of dollars annually over traditional cable. Customers get an additional account off of YouTube TV when they subscribe with Wow. Speaker 200:05:40They also get a discount on ad ads like the NFL Sunday Ticket, which is exclusive to YouTube TV. In addition to the benefits to our customers, we will be able to accelerate the reclamation of bandwidth previously used for our legacy video service. This allows Wow! To efficiently transition our network for DOCSIS 4.0 and serve the growing demand for customer usage without overbuilding our own network. YouTube TV also allows us to transition away from higher cost, low margin video to a high margin service with an even greater mix of channels. Speaker 200:06:24What we are doing is unique among cable operators and is giving customers more of what they really want at a much better price. These initiatives represent the next phase of the strategy that we articulated at the end of 2021. With regard to HSD subscribers, We saw a steady improvement as we make further progress in our base and continue to be on track to return to growth this year. During the Q2, we lost 900 high speed data RGUs, which was better than expected. And as of the end of the second quarter, We now have approximately 508,000 high speed data subscribers. Speaker 200:07:11Our video business declined further during the quarter, which we expect to continue as a significant number of customers are no longer taking traditional video and choosing to stream content instead. As mentioned, the new partnership with YouTube TV presents a fantastic opportunity to capitalize on this trend and we believe will also drive an increase in HSD subscribers. In fact, we are seeing an uptick in HSD Connects already just 1 week after launching YouTube TV. This new video model also will decrease our operating expenses over time, since we will see fewer truck rolls and calls into the call center than from our traditional video. We expect to see positive contribution this year to a limited extent and a more meaningful contribution next year. Speaker 200:08:07Our broadband first strategy continues to be reflected in our metrics as 87.1% of new customers purchased HSD only. This is the 12th consecutive quarter with an average sell in rate of approximately 87% or higher. Demand for higher speeds is not abating either. In fact, our record share of new customers is buying higher speeds than ever. Our high speed data only sell in mix show that a record high of 91% of our customers new customers are buying speeds of 200 meg or above and approximately 82% are taking speeds above 500 meg, including further momentum in customers taking 1.2 gig service. Speaker 200:09:01As we said before, this trend is even more pronounced in our new markets, where nearly 94% of customers are buying speeds of 500 meg and above. These statistics demonstrate the strong demand for faster and higher speeds and the superior quality and reliability of our network. It also reinforces our confidence in our ability to continue taking share in our new markets. High speed data ARPU increased to a record $70 reflecting the full effect of the rate increase that was introduced on March 1 for a small number of customers and to a greater extent customers purchasing higher data speeds. High speed data ARPU will continue to increase in the back half of the year as we see the impact of an HSD rate increase that was put into effect on July 1 to another portion of our base that weren't impacted in March. Speaker 200:10:02We also expect ARPU to grow as existing customers upgrade to higher speeds and from the addition of new fiber customers in Greenfield markets and new wedge outs. I would like to spend a few minutes providing an update on our expansion strategy, which is really starting to accelerate. Through June 30, we passed a total of 11,700 Greenfield Homes in Central Florida and in our Edge Outs. Since the end of June, we added another 5,200 homes, bringing the total number of new homes passed this year in Greenfield and Edge Ops to 16,900, which is nearly 6 times the number of new homes added in all of 2022. In fact, since the beginning of 2021, We have now passed nearly 22,000 new homes, of which nearly 78% were added this year. Speaker 200:11:04We expect the pace of adding homes passed to continue to increase throughout the year. As you can see in the slide, response to our entrance to these markets has been fantastic. The greenfield homes are built with the latest fiber to the home technology and our 2023 Edge Outs are utilizing either fiber to the home or new technology for HFC, which puts us on the road to DOCSIS 4.0 and 10 gs capability in those markets. The strength of these technologies is absolutely contributing to the strong penetration rates that we are seeing. The chart on the right hand side of the slide shows exactly how successful our expansion strategy is, with strong penetration rates across all of our vintages. Speaker 200:11:55Our 2023 vintage of Edge Outs are already at 23.4 percent penetration rate, while our 2021 2022 vintages also reported exceptionally strong penetration rates of 45% 31%, respectively. And while our greenfield markets At 20% penetration in aggregate, they are averaging penetration rates of 30% in 30 days from launch. Now that's a 1% increase in penetration per day. This is substantially than we expected in our original business case, which tells us we picked the right markets and our playbook is resonating with customers. Edge Outs are also performing very well with early penetration rates that exceed our expectations and demonstrate the extremely strong reception to Wow! Speaker 200:12:56High speed Internet, exceptional customer service and competitive value proposition. As we said before, our expansion strategy remains an engine of growth for our business and the performance supports our confidence and our ability to grow quickly in new markets. While we haven't externally announced a target for new homes passed for 2023 before, We now feel confident in saying that we will surpass 50,000 new homes in 2023 between Greenfield and Edge Out. To conclude before handing the call to John, we are in the midst of 2 major transformations of our business. 1st, the expansion of our homes passed through Greenfield and Edge Out. Speaker 200:13:44Already this year, we have built nearly 6 times more homes than all of last year and well more than the last 3 years combined. We are driving subscriber growth faster in those markets than we'd planned. 2nd, we are continuing to transform our legacy footprint through the next phase of broadband first through our unique partnership for a cable operator with YouTube TV, which gives us a lower cost, higher margin service that is more attractive to our customers and efficiently accelerates our path to DOCSIS 4.0. Our strategy, our plan and our execution continue to put us in a good position to deliver value to our customers, employees and shareholders as we look to the remainder of this year and into 2024. Now I'll turn the call over to John, who will go over our financial results in more detail. Speaker 300:14:44Thanks, Teresa. In the second quarter, Total revenue decreased 2% from the same period last year to $172,600,000 reflecting a 4% increase in high speed data revenue and a 12.8% and 6.2% reduction in video and telephony respectively. The increase in HSD revenue reflects a full quarter impact of last quarter's rate increase on a portion of the base, as well as new and existing customers upgrading to higher speed tiers. Adjusted EBITDA decreased 3.5% from the same period last year to $68,100,000 as we continue to invest in growing our expansion footprints in Central Florida, South Carolina and Edge Outs. There are upfront costs associated upfront operating costs, which we incur while developing a new market. Speaker 300:15:37Through June 30, Total market expansion operating expenses totaled $2,100,000 which was a drain on EBITDA as the expenses are incurred before the market goes live. This dynamic will start to normalize as we continue to increase our expansion subs. Our adjusted EBITDA margin was 39.5%. The incremental contribution margin increased sequentially and continued to grow year over year driven by the proportionate increase in HSD revenue, which increased to 62% of our total revenue this quarter, up from 58% in the same period last year. Incremental contribution margin increased by 2.7 percentage points from the same period last year. Speaker 300:16:21Now for a progress update on our cost structure alignment following the divestiture of the 5 service areas. We continue to be on pace to hit our target of $35,500,000 by the end of 2025. As of the Q2, our total savings equate to $24,000,000 which represents approximately 67% of the $35,500,000 we identified for cost reduction over the next few years. In addition to these measures, We've also implemented additional headcount reductions predominantly in our corporate and administrative areas that are reflected in integration and excluded from our adjusted EBITDA. We've made tremendous progress on realizing savings across the company and we will continue to be diligent as we manage cost despite the higher inflationary environment. Speaker 300:17:09We ended the quarter with total cash of $23,000,000 and total outstanding debt of 868,100,000 with our leverage ratio at 3.1 times. We reported total capital spend of $63,600,000 which is up $28,900,000 from last year. Our core CapEx efficiency increased to 19.2% of the 2nd quarter. Expansion CapEx increased $22,500,000 from the same period last year as we continue to heavily invest in our future growth and bring fiber to the homes of Central Florida and Greenfield, South Carolina. In the Q2, we spent $23,000,000 on greenfields, dollars 3,700,000 on edge outs and an additional three $700,000 on business services. Speaker 300:17:54Looking at the right side of the slide, our results for Q2 2023 on levered adjusted free cash flow, which we define as adjusted EBITDA less CapEx decreased to $4,500,000 down from $35,900,000 in Q2 of 2022, primarily driven by the share repurchase program and higher expansion spend predominantly on greenfields. This morning, we reported a net loss of $101,700,000 This is due to a non cash impairment charge that we took as a result of the decline in our stock price during the quarter. This charge, which is a non cash accounting adjustment, does not affect our ability to manage our business or alter In the Q2, we completed our share repurchase program and repurchased approximately 1,800,000 shares at an average price of $9.37 Treasurer. Finally, before we open the call for questions, I'd like to provide our outlook for the Q3 and full year. We expect our Q3 HSD revenue to be between $109,000,000 $112,000,000 and for the year to be between 4.37 and $441,000,000 Our transition to YouTube TV is impacting our outlook for total revenue. Speaker 300:19:16We just launched our new video offering, which is replacing our current video delivery service. This will result in lower total revenue because we will recognize the YouTube TV revenue on a net basis, unlike current video revenue, which is reported on a gross basis. In the near term, as we migrate our customers and add new subscribers, the impact will drive total revenue lower. As the business scales and grows, this transaction will have a significant and positive impact on our EBITDA and EBITDA margins. Over time, we anticipate our new video strategy will drive down calls to our call center and video related truck rolls. Speaker 300:19:59Today, we are lowering total revenue for the Q3 and for the full year and expect Q3 total revenue to be between $173,000,000 170 $6,000,000 and be between $691,000,000 $696,000,000 for the full year. We expect our 3rd quarter adjusted EBITDA to be between $70,000,000 $73,000,000 and be between $286,000,000 $290,000,000 for the full year. For HSD net adds, we are maintaining our expectations for the year. We are seeing significant progress in the pace of construction in new markets and we're excited by the increased number of homes passed and the penetration rates that we have been realizing as we light up those new homes. We're also seeing the benefits in our legacy markets as we see ARPU growth within our subscriber base and increasing HSD growth with the addition of YouTube TV as our streaming Coast. Speaker 300:20:51We expect 3rd quarter HSD net adds to be between negative 1500 and positive 500 and continue to expect the full year to be between 6,010,000 net adds. We believe that we are now at a true inflection point in our transition to a Broadband First Business. Our market expansion initiatives are now accelerating and delivering results as seen in the strong penetration rates. Our partnership with YouTube, which transitions our video business to a live TV streaming service, will give us a competitive advantage across our entire footprint and contribute to strong adjusted EBITDA and EBITDA margins as that business scales. With all of these initiatives underway and progressing well, We anticipate our business to achieve mid single digit EBITDA growth in the near future. Speaker 300:21:40And now we'd like to open up the line for some questions. Operator00:21:54The Q and Speaker 300:21:59A roster. Operator00:22:05Our first analyst is Frank Louthan from Raymond James. Frank, go ahead. Speaker 400:22:11Thank you. So you're Clearly having some good success with the Edge Outs in Greenfield. So talk to us about kind of what's going on with the base business that's still having the ads to go negative and what can you do to change that? And are you giving out any significant promotions or anything that's helping you get this pretty significant penetration in the greenfield. And then secondly on the balance sheet, as you've got $100,000,000 or so left on the revolver, how long is the revolver available? Speaker 400:22:36And then what about funding for next year running pretty close to breakeven on the free cash flow. What do you see as far as needs new funding and where do you see leverage topping out? Thanks. Speaker 200:22:47Thanks, Mike. I'll take the first question and then turn it over to John for the second half on the revolver. I'm actually really pleased by the things that we're starting to Within our legacy base, in addition to the good goodness that we're seeing from the greenfields as well. If you really break down the 2nd quarter adds. Our net adds would have been without the greenfields A net loss of just $13,000,000 which is a significant improvement from the previous quarter. Speaker 200:23:17And that is even with a rate increase that is in there. We're also seeing, I think, some good traction with the launch of YouTube TV. That is having an overall uplift effect on our HSD net adds. We have also had some success with some promotions that we've done. But yet with that, We're also able to bundle with other services and continue to drive that ARPU growth. Speaker 200:23:44So we're actually pleased by some of the goodness that we're seeing within our legacy footprint as well. Along with, the work that we're doing on cost efficiency, we see the operating statistics looking very good on legacy as well as in our greenfield business. John, do you want to talk about the revolver? Speaker 300:24:05Yes, excuse me. Yes, as you know, the revolver total capacity is $250,000,000 so we did dip into it. We're always in and out of the revolver, but we've dipped into it a bit. I think drivers In the past quarter were the Sprint settlement, that upfront payment that we had to make and quite frankly the cost Capital, as you guys know, with variable interest rates has been rising. So our expectation that we will start to take the revolver down as we blow through the second half of the year. Speaker 300:24:31It's It's also my expectation that the revolver excuse me, that the leverage ratio is not going to go above 3.5 times. So I think we see a path to do all the things we want But it's day by day. So we don't see any big need to push the revolver in excess 3.5 percent and I don't anticipate at this time going out to try to get capital. I think we can do this. Speaker 400:24:57Okay, great. Thank you very much. Speaker 200:25:00Thanks, Frank. Operator00:25:04Our next analyst is Brandon Nispel from KeyBanc. Brandon, go ahead. Speaker 500:25:09Great. Thanks for taking the questions. Can you maybe give us some more detail on the price increase? I think you mentioned there was 1 in March and there was 1 in July. Maybe could you unpack that in terms of percentage of customers receiving each an average rate, so we can understand the underlying growth in ARPU from just pure upselling. Speaker 500:25:28Then on the second half from a HSD net add perspective, it still implies 4th quarter and by far and away your best quarter and a big positive number after the 1st 3 quarters of the year expected to be negative. Speaker 200:25:42How Speaker 500:25:42do you get confident around that? It seems like a pretty healthy ramp. Thanks. Speaker 200:25:48Thanks, Brandon. Okay. On the rate increase, Our rate increases dollar wise are consistent with our competitors that are out there. So it still keeps us At the same kind of value proposition for customers as our competitors have also increased rate increase, Increase the high speed data rate. We had a small percentage of the customers in March. Speaker 200:26:13In July, it was the majority of our base was due for a rate increase. And so that started with July bills and is pretty well will work its way throughout this whole quarter then that they'll get that rate increase. In addition though, I can't emphasize enough the higher speed tiers that customers are taking. So we decided for the first time this quarter to share more about the percentage that is taking 500 meg and above of the new customers as well as up tiering among our existing base. So all of those things give us a lot of confidence as we look for the future. Speaker 200:26:55Speaking of confidence, I guess, for the future in terms of our high speed data adds for the remainder of this year, I think there are a number of really exciting things that are happening both in our legacy Edge Out and Greenfield areas. As we mentioned, we are seeing an uplift from YouTube TV in terms of our high speed data connects throughout all of our footprint, legacy as well as Edge Out and Greenfield. And then in our new areas, we are not only seeing much faster penetration than we anticipated, But the ARPUs being higher as customers take higher speeds. So all of this makes us feel good about our high Speed data numbers. All of this done with still very loyal customers and low churn. Speaker 200:27:45So We feel good about those components and believe that we can hit that full year HSD number for the year. Operator00:27:59Thank you, Brandon. Next up, we have Matthew Harrigan from Benchmark. Matthew, go ahead. Speaker 600:28:08Thank you. As you know, I've always been fascinated by your log in model, which seems to be working pretty well for determining what areas you go into for Greenfields. I know you haven't gone into that many areas, so you don't have that much of a cross sectional comparison. But what do you feel Like you're learning, I mean, you have to be really happy with the results you're getting thus far. And are there any implications for Accelerating the build, I know you're trying to remain sane on your spending and all that. Speaker 600:28:39But Is that still a moving target in terms of how active you're going to be, say, over a 3 year timeline on the Edge Outs given the evident success you have on the greenfields given the evident success you're having. Thank you. Speaker 200:28:55Thanks, Matt. I'd say we're learning a number of things. First of all, We feel very confident in the criteria that we're using for the selection process of new markets. We're delighted by what we're seeing. And part of that also is the playbook we use Once we've selected a market and that playbook is everything from making sure we have strong relationships with the local communities, The leaders of those communities, the city officials, the power companies, all of those things and those partners that you need to build out the market. Speaker 200:29:34In addition, we do a lot of pre work in terms of market awareness. And then, I think our sales packages and our strategies for addressing the market are very strong as evidenced by the results we're seeing of 30% penetration in 30 days, 1% penetration per day for those 1st 30 days. So we feel good about the whole playbook from selection through launch of the market. We do feel like we are probably on track to announce another market or 2, yes, this year. And for the first time today, we shared that we do plan to pass 50,000 homes between Greenfield and Edge Outs this year. Speaker 200:30:17And we're still on track to deliver our 400,000 homes that we have promised. So we feel good about the pace of what we're doing. As you can see from our trajectory from the Q1 to the Q2 and that we even tipped our hand and shared what we've been doing in July, The pace is picking up. There's a significant amount of pre work that needs to be done, but then you get the machine rolling. And I feel very good about, the way that our market expansion team has been really rolling out these new homes. Speaker 200:30:52It's a joint effort. It's very exciting. And in terms of the learnings as well, what's interesting is those things we're learning in our new markets, Those insights we're bringing back in the legacy if we're learning something that's a good best practice and vice versa. We have been competing against very strong operators, our entire existence and the learnings that we have as a challenger brand Continue to reinforce how we know how to compete in every market that we go into. So I would say, that's What we're learning and it's been a very exciting opportunity for our whole company. Speaker 200:31:32And we always are keeping an eye on the financials and the leverage to make sure that the pace is appropriate. Speaker 600:31:39So, the LLOG IT model is a living model like the U. S. Constitution is a living document. That's good to hear. Thank you. Speaker 200:31:47Absolutely. Yes, we're constantly feeding back in best practices, what we're learning, everything along the way. And that's how Wow works. We're always innovating, always learning, always trying to get better. And I think that's what Keeps it exciting here and keeps us a very formidable challenger brand. Speaker 600:32:05Great. Thanks, Theresa. Speaker 200:32:07Thanks, Matt. Operator00:32:10Teresa, that's the last of our questions. Speaker 300:32:13Can I Operator00:32:13turn it back over to you for some closing remarks? Speaker 200:32:16Absolutely. Thank you so much. And thank you all for joining us this morning. We appreciate your continued interest and support of Wow! Have a great day.Read morePowered by Conference Call Audio Live Call not available Earnings Conference CallWideOpenWest Q2 202300:00 / 00:00Speed:1x1.25x1.5x2x Earnings DocumentsSlide DeckPress Release(8-K)Quarterly report(10-Q) WideOpenWest Earnings HeadlinesWOW!'s Chief Executive Officer Named to "Cablefax 100" List For Seventh Consecutive ...April 16, 2025 | gurufocus.comWOW!'s Chief Executive Officer Named to "Cablefax 100" List For Seventh Consecutive Year as Company Continues Trajectory of Growth and InnovationApril 16, 2025 | prnewswire.comNow I look stupid. Real stupid... I thought what happened 25 years ago was a once- in-a-lifetime event… but how wrong I was. Because here we are, a quarter of a century later, almost to the exact day, and it’s happening again. April 29, 2025 | Porter & Company (Ad)A Look Back at Wireless, Cable and Satellite Stocks’ Q4 Earnings: WideOpenWest (NYSE:WOW) Vs The Rest Of The PackApril 16, 2025 | msn.comWOW!'s Senior Director of Talent Management and Senior Director of Total Rewards Join C2HR Advisory BoardApril 9, 2025 | prnewswire.comCybercrime Gang Says It Hacked This US ISP, Stole Info on 403K CustomersMarch 29, 2025 | msn.comSee More WideOpenWest Headlines Get Earnings Announcements in your inboxWant to stay updated on the latest earnings announcements and upcoming reports for companies like WideOpenWest? Sign up for Earnings360's daily newsletter to receive timely earnings updates on WideOpenWest and other key companies, straight to your email. Email Address About WideOpenWestWideOpenWest (NYSE:WOW) provides high speed data, cable television, and digital telephony services to residential and business services customers in the United States. The company's video services include basic cable services that comprise local broadcast television and local community programming; digital cable services; WOW tv+ that offers traditional cable video and cloud DVR functionality, voice remote with Google Assistant, and Netflix integration along with access to various streaming services and apps through the Google Play Store; and commercial-free movies, TV shows, sports, and other special event entertainment programs. Its telephony services consist of local and long-distance telephone services; business telephony and data services include fiber based, office-to-office metro Ethernet, session-initiated protocol trunking, colocation infrastructure, cloud computing, managed backup, and recovery services. The company was formerly known as WideOpenWest Kite, Inc. and changed its name to WideOpenWest, Inc. in March 2017. WideOpenWest, Inc. was founded in 2001 and is based in Englewood, Colorado.View WideOpenWest ProfileRead more More Earnings Resources from MarketBeat Earnings Tools Today's Earnings Tomorrow's Earnings Next Week's Earnings Upcoming Earnings Calls Earnings Newsletter Earnings Call Transcripts Earnings Beats & Misses Corporate Guidance Earnings Screener Earnings By Country U.S. Earnings Reports Canadian Earnings Reports U.K. Earnings Reports Latest Articles Alphabet Rebounds After Strong Earnings and Buyback AnnouncementMarkets Think Robinhood Earnings Could Send the Stock UpIs the Floor in for Lam Research After Bullish Earnings?Texas Instruments: Earnings Beat, Upbeat Guidance Fuel RecoveryMarket Anticipation Builds: Joby Stock Climbs Ahead of EarningsIs Intuitive Surgical a Buy After Volatile Reaction to Earnings?Seismic Shift at Intel: Massive Layoffs Precede Crucial Earnings Upcoming Earnings AstraZeneca (4/29/2025)Booking (4/29/2025)DoorDash (4/29/2025)Honeywell International (4/29/2025)Mondelez International (4/29/2025)PayPal (4/29/2025)Regeneron Pharmaceuticals (4/29/2025)Starbucks (4/29/2025)American Tower (4/29/2025)América Móvil (4/29/2025) Get 30 Days of MarketBeat All Access for Free Sign up for MarketBeat All Access to gain access to MarketBeat's full suite of research tools. 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There are 7 speakers on the call. Operator00:00:00You for standing by. My name is Robert MacArthur, and I'll be your conference operator today. At this time, I'd like to welcome everyone to the WideOpenWest Q2 2023 Earnings Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks. Operator00:00:17There will be a questions and answer session. If you'd like to withdraw your question, you can press star 1 again. Now I'd like to turn the call over to Andrew Posen, VP, Head of Investor Relations. Andrew, go ahead. Speaker 100:00:39Good morning, everyone, and thank you for joining our Q2 2023 earnings call. With me today is Teresa Elder, Wow! Chief Executive Officer and John Rego, Wow! Chief Financial Officer. Before we get started, I would like to remind everyone that during our call, we will make some forward looking statements about our expected operating results, our business strategy and other matters relating to our business. Speaker 100:01:03These forward looking statements are made in reliance on the Safe Harbor provisions of the federal securities laws that are subject to known and unknown risks, uncertainties and other factors that may cause our actual operating results, financial position or performance to be materially different from those expressed or implied in our forward looking statements. You are cautioned not to place undue reliance on such forward looking statements. We disclaim any obligation to update such forward looking statements. For additional information concerning factors that could affect our financial results For cause actual results to differ materially from our forward looking statements, please refer to our filings with the SEC, including the Risk Factors section of our Form 10 ks filed with the SEC as well as the Forward Looking Statements section of our press release. In addition, please note that on today's call and in the press release we issued this morning, we may refer to certain non GAAP financial measures. Speaker 100:02:01While the company believes these non GAAP financial measures provide useful information for investors, the presentation of this information is not intended to be considered in isolation or as a substitute for the financial information presented in accordance with GAAP. Reconciliations between GAAP and non GAAP metrics for our historical reported results can be found in our earnings releases and our trending schedules, which can be found on our website. We have also included a presentation this morning to complement our prepared remarks. Now I'll turn the call over to Wow! Chief Executive Officer, Teresa Elder. Speaker 200:02:38Thanks, Andrew. Welcome to Wow! 2nd quarter earnings call. Our results this quarter continued to reflect our strategic focus on market expansion, strengthening our legacy footprint and aggressively managing our customer our cost base. Wow! Speaker 200:02:57Is undergoing 2 significant transitions. 1st is our market expansion. We are committed to building 400,000 fiber greenfield homes by 2027, which accelerates our transition to a broadband business. Additionally, we are also increasing our Edge Out activity with both advanced HFC, which can enable DOCSIS 4.0 and 10 gs capability as well as fiber to the home edge outs in certain markets. We are pleased to share that as of the end of July, We have added 16,900 new homes passed so far this year in both Greenfield and Edge Out areas, which is more than we've added in the last 3 years combined. Speaker 200:03:48I'm pleased to share that we are on pace to achieve more than 50,000 new homes passed this year, more than the last 4 years combined. These market expansion initiatives continue to be central to our strategy and represent the core thesis of our growth and value proposition. In Q2, we saw success in improving our legacy footprint, while adding new homes passed in our greenfield and edge out markets. Importantly, the growth of new customers in these areas is meeting our expectations. Our second transition is primarily within our legacy base. Speaker 200:04:33We made the shift to broadband first a few years ago and we have seen our margin consistently grow While customers appreciate our high speeds and good value with great service, we listen to our customers and embraced streaming and the customers' desire to cut the cord on traditional video services. We just launched the next step in our transformation to a broadband business, which involves transitioning our low margin video business to a high margin streaming service. We believe this partnership with YouTube TV creates a competitive advantage and presents an excellent opportunity to offer customers what they want at an exceptional price point. YouTube TV gives customers a more robust choice of programming at savings of 100 of dollars annually over traditional cable. Customers get an additional account off of YouTube TV when they subscribe with Wow. Speaker 200:05:40They also get a discount on ad ads like the NFL Sunday Ticket, which is exclusive to YouTube TV. In addition to the benefits to our customers, we will be able to accelerate the reclamation of bandwidth previously used for our legacy video service. This allows Wow! To efficiently transition our network for DOCSIS 4.0 and serve the growing demand for customer usage without overbuilding our own network. YouTube TV also allows us to transition away from higher cost, low margin video to a high margin service with an even greater mix of channels. Speaker 200:06:24What we are doing is unique among cable operators and is giving customers more of what they really want at a much better price. These initiatives represent the next phase of the strategy that we articulated at the end of 2021. With regard to HSD subscribers, We saw a steady improvement as we make further progress in our base and continue to be on track to return to growth this year. During the Q2, we lost 900 high speed data RGUs, which was better than expected. And as of the end of the second quarter, We now have approximately 508,000 high speed data subscribers. Speaker 200:07:11Our video business declined further during the quarter, which we expect to continue as a significant number of customers are no longer taking traditional video and choosing to stream content instead. As mentioned, the new partnership with YouTube TV presents a fantastic opportunity to capitalize on this trend and we believe will also drive an increase in HSD subscribers. In fact, we are seeing an uptick in HSD Connects already just 1 week after launching YouTube TV. This new video model also will decrease our operating expenses over time, since we will see fewer truck rolls and calls into the call center than from our traditional video. We expect to see positive contribution this year to a limited extent and a more meaningful contribution next year. Speaker 200:08:07Our broadband first strategy continues to be reflected in our metrics as 87.1% of new customers purchased HSD only. This is the 12th consecutive quarter with an average sell in rate of approximately 87% or higher. Demand for higher speeds is not abating either. In fact, our record share of new customers is buying higher speeds than ever. Our high speed data only sell in mix show that a record high of 91% of our customers new customers are buying speeds of 200 meg or above and approximately 82% are taking speeds above 500 meg, including further momentum in customers taking 1.2 gig service. Speaker 200:09:01As we said before, this trend is even more pronounced in our new markets, where nearly 94% of customers are buying speeds of 500 meg and above. These statistics demonstrate the strong demand for faster and higher speeds and the superior quality and reliability of our network. It also reinforces our confidence in our ability to continue taking share in our new markets. High speed data ARPU increased to a record $70 reflecting the full effect of the rate increase that was introduced on March 1 for a small number of customers and to a greater extent customers purchasing higher data speeds. High speed data ARPU will continue to increase in the back half of the year as we see the impact of an HSD rate increase that was put into effect on July 1 to another portion of our base that weren't impacted in March. Speaker 200:10:02We also expect ARPU to grow as existing customers upgrade to higher speeds and from the addition of new fiber customers in Greenfield markets and new wedge outs. I would like to spend a few minutes providing an update on our expansion strategy, which is really starting to accelerate. Through June 30, we passed a total of 11,700 Greenfield Homes in Central Florida and in our Edge Outs. Since the end of June, we added another 5,200 homes, bringing the total number of new homes passed this year in Greenfield and Edge Ops to 16,900, which is nearly 6 times the number of new homes added in all of 2022. In fact, since the beginning of 2021, We have now passed nearly 22,000 new homes, of which nearly 78% were added this year. Speaker 200:11:04We expect the pace of adding homes passed to continue to increase throughout the year. As you can see in the slide, response to our entrance to these markets has been fantastic. The greenfield homes are built with the latest fiber to the home technology and our 2023 Edge Outs are utilizing either fiber to the home or new technology for HFC, which puts us on the road to DOCSIS 4.0 and 10 gs capability in those markets. The strength of these technologies is absolutely contributing to the strong penetration rates that we are seeing. The chart on the right hand side of the slide shows exactly how successful our expansion strategy is, with strong penetration rates across all of our vintages. Speaker 200:11:55Our 2023 vintage of Edge Outs are already at 23.4 percent penetration rate, while our 2021 2022 vintages also reported exceptionally strong penetration rates of 45% 31%, respectively. And while our greenfield markets At 20% penetration in aggregate, they are averaging penetration rates of 30% in 30 days from launch. Now that's a 1% increase in penetration per day. This is substantially than we expected in our original business case, which tells us we picked the right markets and our playbook is resonating with customers. Edge Outs are also performing very well with early penetration rates that exceed our expectations and demonstrate the extremely strong reception to Wow! Speaker 200:12:56High speed Internet, exceptional customer service and competitive value proposition. As we said before, our expansion strategy remains an engine of growth for our business and the performance supports our confidence and our ability to grow quickly in new markets. While we haven't externally announced a target for new homes passed for 2023 before, We now feel confident in saying that we will surpass 50,000 new homes in 2023 between Greenfield and Edge Out. To conclude before handing the call to John, we are in the midst of 2 major transformations of our business. 1st, the expansion of our homes passed through Greenfield and Edge Out. Speaker 200:13:44Already this year, we have built nearly 6 times more homes than all of last year and well more than the last 3 years combined. We are driving subscriber growth faster in those markets than we'd planned. 2nd, we are continuing to transform our legacy footprint through the next phase of broadband first through our unique partnership for a cable operator with YouTube TV, which gives us a lower cost, higher margin service that is more attractive to our customers and efficiently accelerates our path to DOCSIS 4.0. Our strategy, our plan and our execution continue to put us in a good position to deliver value to our customers, employees and shareholders as we look to the remainder of this year and into 2024. Now I'll turn the call over to John, who will go over our financial results in more detail. Speaker 300:14:44Thanks, Teresa. In the second quarter, Total revenue decreased 2% from the same period last year to $172,600,000 reflecting a 4% increase in high speed data revenue and a 12.8% and 6.2% reduction in video and telephony respectively. The increase in HSD revenue reflects a full quarter impact of last quarter's rate increase on a portion of the base, as well as new and existing customers upgrading to higher speed tiers. Adjusted EBITDA decreased 3.5% from the same period last year to $68,100,000 as we continue to invest in growing our expansion footprints in Central Florida, South Carolina and Edge Outs. There are upfront costs associated upfront operating costs, which we incur while developing a new market. Speaker 300:15:37Through June 30, Total market expansion operating expenses totaled $2,100,000 which was a drain on EBITDA as the expenses are incurred before the market goes live. This dynamic will start to normalize as we continue to increase our expansion subs. Our adjusted EBITDA margin was 39.5%. The incremental contribution margin increased sequentially and continued to grow year over year driven by the proportionate increase in HSD revenue, which increased to 62% of our total revenue this quarter, up from 58% in the same period last year. Incremental contribution margin increased by 2.7 percentage points from the same period last year. Speaker 300:16:21Now for a progress update on our cost structure alignment following the divestiture of the 5 service areas. We continue to be on pace to hit our target of $35,500,000 by the end of 2025. As of the Q2, our total savings equate to $24,000,000 which represents approximately 67% of the $35,500,000 we identified for cost reduction over the next few years. In addition to these measures, We've also implemented additional headcount reductions predominantly in our corporate and administrative areas that are reflected in integration and excluded from our adjusted EBITDA. We've made tremendous progress on realizing savings across the company and we will continue to be diligent as we manage cost despite the higher inflationary environment. Speaker 300:17:09We ended the quarter with total cash of $23,000,000 and total outstanding debt of 868,100,000 with our leverage ratio at 3.1 times. We reported total capital spend of $63,600,000 which is up $28,900,000 from last year. Our core CapEx efficiency increased to 19.2% of the 2nd quarter. Expansion CapEx increased $22,500,000 from the same period last year as we continue to heavily invest in our future growth and bring fiber to the homes of Central Florida and Greenfield, South Carolina. In the Q2, we spent $23,000,000 on greenfields, dollars 3,700,000 on edge outs and an additional three $700,000 on business services. Speaker 300:17:54Looking at the right side of the slide, our results for Q2 2023 on levered adjusted free cash flow, which we define as adjusted EBITDA less CapEx decreased to $4,500,000 down from $35,900,000 in Q2 of 2022, primarily driven by the share repurchase program and higher expansion spend predominantly on greenfields. This morning, we reported a net loss of $101,700,000 This is due to a non cash impairment charge that we took as a result of the decline in our stock price during the quarter. This charge, which is a non cash accounting adjustment, does not affect our ability to manage our business or alter In the Q2, we completed our share repurchase program and repurchased approximately 1,800,000 shares at an average price of $9.37 Treasurer. Finally, before we open the call for questions, I'd like to provide our outlook for the Q3 and full year. We expect our Q3 HSD revenue to be between $109,000,000 $112,000,000 and for the year to be between 4.37 and $441,000,000 Our transition to YouTube TV is impacting our outlook for total revenue. Speaker 300:19:16We just launched our new video offering, which is replacing our current video delivery service. This will result in lower total revenue because we will recognize the YouTube TV revenue on a net basis, unlike current video revenue, which is reported on a gross basis. In the near term, as we migrate our customers and add new subscribers, the impact will drive total revenue lower. As the business scales and grows, this transaction will have a significant and positive impact on our EBITDA and EBITDA margins. Over time, we anticipate our new video strategy will drive down calls to our call center and video related truck rolls. Speaker 300:19:59Today, we are lowering total revenue for the Q3 and for the full year and expect Q3 total revenue to be between $173,000,000 170 $6,000,000 and be between $691,000,000 $696,000,000 for the full year. We expect our 3rd quarter adjusted EBITDA to be between $70,000,000 $73,000,000 and be between $286,000,000 $290,000,000 for the full year. For HSD net adds, we are maintaining our expectations for the year. We are seeing significant progress in the pace of construction in new markets and we're excited by the increased number of homes passed and the penetration rates that we have been realizing as we light up those new homes. We're also seeing the benefits in our legacy markets as we see ARPU growth within our subscriber base and increasing HSD growth with the addition of YouTube TV as our streaming Coast. Speaker 300:20:51We expect 3rd quarter HSD net adds to be between negative 1500 and positive 500 and continue to expect the full year to be between 6,010,000 net adds. We believe that we are now at a true inflection point in our transition to a Broadband First Business. Our market expansion initiatives are now accelerating and delivering results as seen in the strong penetration rates. Our partnership with YouTube, which transitions our video business to a live TV streaming service, will give us a competitive advantage across our entire footprint and contribute to strong adjusted EBITDA and EBITDA margins as that business scales. With all of these initiatives underway and progressing well, We anticipate our business to achieve mid single digit EBITDA growth in the near future. Speaker 300:21:40And now we'd like to open up the line for some questions. Operator00:21:54The Q and Speaker 300:21:59A roster. Operator00:22:05Our first analyst is Frank Louthan from Raymond James. Frank, go ahead. Speaker 400:22:11Thank you. So you're Clearly having some good success with the Edge Outs in Greenfield. So talk to us about kind of what's going on with the base business that's still having the ads to go negative and what can you do to change that? And are you giving out any significant promotions or anything that's helping you get this pretty significant penetration in the greenfield. And then secondly on the balance sheet, as you've got $100,000,000 or so left on the revolver, how long is the revolver available? Speaker 400:22:36And then what about funding for next year running pretty close to breakeven on the free cash flow. What do you see as far as needs new funding and where do you see leverage topping out? Thanks. Speaker 200:22:47Thanks, Mike. I'll take the first question and then turn it over to John for the second half on the revolver. I'm actually really pleased by the things that we're starting to Within our legacy base, in addition to the good goodness that we're seeing from the greenfields as well. If you really break down the 2nd quarter adds. Our net adds would have been without the greenfields A net loss of just $13,000,000 which is a significant improvement from the previous quarter. Speaker 200:23:17And that is even with a rate increase that is in there. We're also seeing, I think, some good traction with the launch of YouTube TV. That is having an overall uplift effect on our HSD net adds. We have also had some success with some promotions that we've done. But yet with that, We're also able to bundle with other services and continue to drive that ARPU growth. Speaker 200:23:44So we're actually pleased by some of the goodness that we're seeing within our legacy footprint as well. Along with, the work that we're doing on cost efficiency, we see the operating statistics looking very good on legacy as well as in our greenfield business. John, do you want to talk about the revolver? Speaker 300:24:05Yes, excuse me. Yes, as you know, the revolver total capacity is $250,000,000 so we did dip into it. We're always in and out of the revolver, but we've dipped into it a bit. I think drivers In the past quarter were the Sprint settlement, that upfront payment that we had to make and quite frankly the cost Capital, as you guys know, with variable interest rates has been rising. So our expectation that we will start to take the revolver down as we blow through the second half of the year. Speaker 300:24:31It's It's also my expectation that the revolver excuse me, that the leverage ratio is not going to go above 3.5 times. So I think we see a path to do all the things we want But it's day by day. So we don't see any big need to push the revolver in excess 3.5 percent and I don't anticipate at this time going out to try to get capital. I think we can do this. Speaker 400:24:57Okay, great. Thank you very much. Speaker 200:25:00Thanks, Frank. Operator00:25:04Our next analyst is Brandon Nispel from KeyBanc. Brandon, go ahead. Speaker 500:25:09Great. Thanks for taking the questions. Can you maybe give us some more detail on the price increase? I think you mentioned there was 1 in March and there was 1 in July. Maybe could you unpack that in terms of percentage of customers receiving each an average rate, so we can understand the underlying growth in ARPU from just pure upselling. Speaker 500:25:28Then on the second half from a HSD net add perspective, it still implies 4th quarter and by far and away your best quarter and a big positive number after the 1st 3 quarters of the year expected to be negative. Speaker 200:25:42How Speaker 500:25:42do you get confident around that? It seems like a pretty healthy ramp. Thanks. Speaker 200:25:48Thanks, Brandon. Okay. On the rate increase, Our rate increases dollar wise are consistent with our competitors that are out there. So it still keeps us At the same kind of value proposition for customers as our competitors have also increased rate increase, Increase the high speed data rate. We had a small percentage of the customers in March. Speaker 200:26:13In July, it was the majority of our base was due for a rate increase. And so that started with July bills and is pretty well will work its way throughout this whole quarter then that they'll get that rate increase. In addition though, I can't emphasize enough the higher speed tiers that customers are taking. So we decided for the first time this quarter to share more about the percentage that is taking 500 meg and above of the new customers as well as up tiering among our existing base. So all of those things give us a lot of confidence as we look for the future. Speaker 200:26:55Speaking of confidence, I guess, for the future in terms of our high speed data adds for the remainder of this year, I think there are a number of really exciting things that are happening both in our legacy Edge Out and Greenfield areas. As we mentioned, we are seeing an uplift from YouTube TV in terms of our high speed data connects throughout all of our footprint, legacy as well as Edge Out and Greenfield. And then in our new areas, we are not only seeing much faster penetration than we anticipated, But the ARPUs being higher as customers take higher speeds. So all of this makes us feel good about our high Speed data numbers. All of this done with still very loyal customers and low churn. Speaker 200:27:45So We feel good about those components and believe that we can hit that full year HSD number for the year. Operator00:27:59Thank you, Brandon. Next up, we have Matthew Harrigan from Benchmark. Matthew, go ahead. Speaker 600:28:08Thank you. As you know, I've always been fascinated by your log in model, which seems to be working pretty well for determining what areas you go into for Greenfields. I know you haven't gone into that many areas, so you don't have that much of a cross sectional comparison. But what do you feel Like you're learning, I mean, you have to be really happy with the results you're getting thus far. And are there any implications for Accelerating the build, I know you're trying to remain sane on your spending and all that. Speaker 600:28:39But Is that still a moving target in terms of how active you're going to be, say, over a 3 year timeline on the Edge Outs given the evident success you have on the greenfields given the evident success you're having. Thank you. Speaker 200:28:55Thanks, Matt. I'd say we're learning a number of things. First of all, We feel very confident in the criteria that we're using for the selection process of new markets. We're delighted by what we're seeing. And part of that also is the playbook we use Once we've selected a market and that playbook is everything from making sure we have strong relationships with the local communities, The leaders of those communities, the city officials, the power companies, all of those things and those partners that you need to build out the market. Speaker 200:29:34In addition, we do a lot of pre work in terms of market awareness. And then, I think our sales packages and our strategies for addressing the market are very strong as evidenced by the results we're seeing of 30% penetration in 30 days, 1% penetration per day for those 1st 30 days. So we feel good about the whole playbook from selection through launch of the market. We do feel like we are probably on track to announce another market or 2, yes, this year. And for the first time today, we shared that we do plan to pass 50,000 homes between Greenfield and Edge Outs this year. Speaker 200:30:17And we're still on track to deliver our 400,000 homes that we have promised. So we feel good about the pace of what we're doing. As you can see from our trajectory from the Q1 to the Q2 and that we even tipped our hand and shared what we've been doing in July, The pace is picking up. There's a significant amount of pre work that needs to be done, but then you get the machine rolling. And I feel very good about, the way that our market expansion team has been really rolling out these new homes. Speaker 200:30:52It's a joint effort. It's very exciting. And in terms of the learnings as well, what's interesting is those things we're learning in our new markets, Those insights we're bringing back in the legacy if we're learning something that's a good best practice and vice versa. We have been competing against very strong operators, our entire existence and the learnings that we have as a challenger brand Continue to reinforce how we know how to compete in every market that we go into. So I would say, that's What we're learning and it's been a very exciting opportunity for our whole company. Speaker 200:31:32And we always are keeping an eye on the financials and the leverage to make sure that the pace is appropriate. Speaker 600:31:39So, the LLOG IT model is a living model like the U. S. Constitution is a living document. That's good to hear. Thank you. Speaker 200:31:47Absolutely. Yes, we're constantly feeding back in best practices, what we're learning, everything along the way. And that's how Wow works. We're always innovating, always learning, always trying to get better. And I think that's what Keeps it exciting here and keeps us a very formidable challenger brand. Speaker 600:32:05Great. Thanks, Theresa. Speaker 200:32:07Thanks, Matt. Operator00:32:10Teresa, that's the last of our questions. Speaker 300:32:13Can I Operator00:32:13turn it back over to you for some closing remarks? Speaker 200:32:16Absolutely. Thank you so much. And thank you all for joining us this morning. We appreciate your continued interest and support of Wow! Have a great day.Read morePowered by