WideOpenWest Q2 2025 Earnings Call Transcript

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August 11, 2025

Key Takeaways

  • Positive Sentiment: Wow! entered into a definitive all-cash $5.20 per share sale agreement with Digital Bridge and Crestview, representing a ~63% premium to the prior close, with closing expected by year-end or early 2026.
  • Positive Sentiment: Strong greenfield momentum continued as Wow! passed an additional 15,500 homes in Q2 (bringing the total to 91,100) while maintaining a 16% penetration rate in new fiber-to-the-home markets.
  • Positive Sentiment: Record ARPU of $75.30, up 4.9% year-over-year, was driven by a June rate increase and higher-speed tier adoption, with 76% of new HSD connects at 500 Mbps or above.
  • Negative Sentiment: Legacy traditional video subscribers declined 40.6% year-over-year to 42,500, prompting Wow! to transition to YouTube TV and realign operating expenses.
  • Neutral Sentiment: Wow! amended its revolving credit facility to extend maturities to 2026 and, upon transaction close, through September 2028, with full terms to be disclosed in an upcoming Form 8-K.
AI Generated. May Contain Errors.
Earnings Conference Call
WideOpenWest Q2 2025
00:00 / 00:00

There are 6 speakers on the call.

Operator

Thank you for standing by. My name is Kayla, I will be your conference operator today. At this time, I'd like to welcome everyone to the Wide Open West Second Quarter twenty twenty five Earnings Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session.

Operator

I would now like to turn the call over to Andrew Rosen, Vice President of Investor Relations. You may begin.

Speaker 1

Good afternoon, everyone, and thank you for joining our second quarter twenty twenty five earnings call. I'm joined today by Teresa Elder, Wow's Chief Executive Officer and John Rego, Wow's 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. These forward looking statements are made in reliance on the Safe Harbor provisions of the federal securities laws and 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.

Speaker 1

We disclaim any obligation to update such forward looking statements. For additional information concerning factors that could affect our financial results or 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 afternoon, we may refer to certain non GAAP financial measures. While 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 final 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.

Speaker 1

We have also included a presentation this afternoon to complement our prepared remarks. Now I'll turn the call over to Chief Executive Officer, Theresa Elder.

Speaker 2

Thanks, Andrew. Welcome to Wow! Second quarter earnings call. Before we review our second quarter results, I would like to spend a couple of minutes discussing this afternoon's announcement. Earlier this afternoon, we announced that we have entered into a definitive agreement under which affiliated investment funds of Digital Bridge Investments and Crestview Partners will acquire all of the outstanding shares of common stock of Wow!

Speaker 2

Not already owned by Crestview and its affiliates for $5.2 per share in an all cash transaction with an enterprise value of approximately 1,500,000,000 Crestview, our largest stockholder, has agreed to roll over all of the shares of Wow common stock that they own. Upon the unanimous recommendation of a special committee of the independent and disinterested directors formed to lead the evaluation of the potential transaction, the board unanimously approved this offer, which represents a premium of 37.2% to the unaffected price of $3.79 prior to the 05/02/2024 offer and the 63% premium to Friday's close, which we believe is a very good offer for investors. The transaction is expected to close by the end of the year or in the 2026, subject to the satisfaction of the closing conditions, including receipt of Wow stockholder approval and as required regulatory approval. More information will be available when we file the proxy materials in the near future. In addition, we also reached an agreement to amend and extend our current revolving credit facility.

Speaker 2

This amendment provides for our revolver to be extended for six months beyond the current term, which expires at the 2026. In addition, conditional on the closing of the sale to Digital Bridge and Crestview, the revolver will be further extended through 09/11/2028. The full terms of the amended agreement will be disclosed in an upcoming Form eight ks to be filed with the SEC. Now I would like to review our second quarter results, which reflects strong momentum in our greenfield markets building on the success we delivered in the first quarter. We maintained strong penetration rates of 16%, all while growing our footprint with an additional 15,500 new greenfield homes passed during the quarter.

Speaker 2

We're pleased with the progress of our all fiber new builds in Central Florida, Fernando Beach, Florida, Brighton, Michigan and Greenville, South Carolina, which has clearly demonstrated consumers' desire for exceptional fiber to the home broadband that delivers high speeds at lower cost with exceptional customer service. In the second quarter, high speed data revenue decreased slightly year over year to $104,800,000 Adjusted EBITDA of $70,300,000 increased slightly year over year, while adjusted EBITDA margin increased from the prior year to 48.8%. Momentum in our greenfield expansion efforts further drove growth in our footprint, all while maintaining a penetration rate of 16% in our greenfield market. During the second quarter, we passed an additional 15,500 homes in our greenfield market, bringing our total number of greenfield homes passed to 91,100. Our success in these markets includes strong sell in in the higher speed tiers, which demonstrates the high quality and value of the product we're bringing to market.

Speaker 2

The 2025 Edge Out Vintage passed an additional 3,500 new homes in the second quarter, bringing the total vintage to 5,000 homes, while growing penetration to 28%. Our 2024 Edge Out vintage increased its penetration rate of 45.8%, while the 2023 vintage remained flat at 31.4%. Our expansion efforts include both our greenfield and edge out markets are all performing extremely well, supporting our growth strategy as we move into the second half of the year. With regard to our HSD subscribers, we lost a total of 3,900 during the quarter. We added 2,300 HSD subscribers in our greenfield markets and 1,100 in our edge out expansion markets, which partially offset the drop in our legacy footprint.

Speaker 2

Importantly, we are now seeing the growth of subscribers in our greenfield market coupled with improving subscriber dynamics in our legacy markets pushing us significantly closer to hitting the inflection point where our net adds return to positive. The steps we introduced last year such as complementary speed upgrades and our simplified pricing plan, which include an optional price lock, modem included, no data caps and no contracts are continuing to benefit our business in both our legacy and expansion markets. The charts on the bottom half of the slide highlight a shift that reflects the growing success of our fiber expansion strategy as well as the impact of our initiatives to strengthen our legacy footprint. ARPU was another record high, increasing 4.9 year over year to $75.3 predominantly reflecting the impact of a rate increase that went into effect on June 1, as well as demand for higher speed tiers, which continues to grow with 76% of HSD only new connects purchasing 500 meg or higher during the second quarter, a 4% increase year over year. Overall, we continue to see the success of our simplified pricing strategy, which is showing particular strength in our greenfield market.

Speaker 2

As expected, our traditional video business declined further during the quarter and has now dropped to 42,500 subscribers, a 40.6% decrease from the same period last year. We anticipate this trend will continue as we transition to YouTube TV to align our total product offering with current market trends. As a result of our declining traditional video business, overall operating expenses decreased slightly year over year reflecting the lower number of video subscribers. The lower cost base in our legacy business enables us to maximize investment in our greenfield expansion initiative, which partially offsets the decrease in the legacy operating expenses and aligns our cost base with our core strategy. To conclude, before handing the call to John, I would like to emphasize how our results this quarter reflect momentum in our greenfield expansion as we continue to focus on our fiber to the home expansion while maintaining a commitment to cost discipline and effective pricing strategy that again resulted in a record high ARPU, while showing improvements in our HSD subscriber trends, moving us nearer to positive net add inflection point.

Speaker 2

I will now turn the call over to John, who will go over our financial results in more detail.

Speaker 3

Thank you, Theresa. In the second quarter, we reported $104,800,000 of ATSC revenue, which decreased 0.2% year over year, largely reflecting the decrease in HSE subscribers. Total revenue for the second quarter decreased 9.2% to $144,200,000 as video and telephony revenue dropped 39.910.3% respectively in addition to the slight decline in HSD revenue during the quarter. Adjusted EBITDA increased 0.4% for the same period last year to $70,300,000 while adjusted EBITDA margin remained strong at 48.8%. The year over year growth in our adjusted EBITDA reflects the impact of our continued approach to aggressively restructure our business away from our video platform.

Speaker 3

And although integration increased from the same period last year, we saw the benefit this quarter from the lower number of video subscribers, which is now reflected in lower programming costs and video support costs. As we said last quarter, costs associated with this restructuring will continue to come down as we execute our broadband strategy. The incremental contribution margin increased over two percentage points from the previous quarter and continued to grow year over year driven by the proportionate increase in HSE revenue, which increased to 72.7% of our total revenue this quarter, which is up from 66.1% in the same period last year. We ended the quarter with total cash of $31,800,000 and total outstanding debt of $1,050,000,000 with our leverage ratio at 3.5 times. We reported total capital spend of 47,900,000.0 down $3,200,000 from the same quarter last year.

Speaker 3

Our core CapEx efficiency was 18.9% in the second quarter. Expansion CapEx increased $3,000,000 from the same period last year and $5,900,000 from last quarter. In the second quarter, we spent $14,100,000 on greenfields and remain on track to spend between 60,000,000 and $70,000,000 in 2025. Additionally, we spent $4,300,000 on Edge Outs and $2,200,000 on Business Services. Our unlevered adjusted free cash flow, which we define as adjusted EBITDA less CapEx, was $22,400,000 for the second quarter, a decrease from last quarter driven by lower EBITDA and increased expansion CapEx spend.

Speaker 3

Finally, before we open the line for questions, due to this afternoon's transaction announcement, we will not be providing guidance for the third quarter. I thank you so much and we'll now open up the line for questions.

Operator

Your first question comes from the line of Frank Louthan with Raymond James. Your line is open.

Speaker 4

Great. Thank you and congratulations on getting the deal done. Going forward, what's the plan to continue with the greenfield builds or edge outs? Or is it going to be a broader expansion? Just curious what the longer term plan is for the business.

Speaker 2

Thanks, Frank. Yes. We I would redirect you to the press release that was put out right before this call. Our focus is now making sure we continue to run the business very well while also going through all of the appropriate approvals with stockholders and with the regulatory authorities to get us to the close. And then the the future really of the company, I will leave that to Digital Bridge and Crestview to talk about.

Speaker 2

And, once again, refer you to the quotes that are in the document.

Speaker 4

Okay. And what is the the I think you the the release had some time frames for the close. Is there anything that would, you know, would make that materially longer? Any any Any potential concerns you would have from a regulatory perspective or anything like that?

Speaker 2

Not that we know of right now, but I think what we referenced was it could be later this year or first quarter is our estimate. Of course, no one can completely predict, but that's the estimate.

Speaker 4

Okay. Thank you very much and congratulations. Thanks, I've been working on it for a long

Speaker 5

Frank. And

Operator

your next question comes from the line of Batya Levi with UBS. Your line is open.

Speaker 5

Great. Thank you. Theresa, can you provide a little bit more color on your strategic review since the initial unsolicited offer you got to bring you to this decision? And I think the deal implies maybe a low five multiple. The thoughts around that in terms of if you could give us maybe a fiber versus cable mix of the footprint would be helpful.

Speaker 5

And is there a breakup fee that we should consider?

Speaker 2

Yeah. I will have to direct you to the documents that will be filed as we put out the proxy. There will be lots of the detail in all of those. What I can tell you in terms of the process is, as you know, the nonbinding unsolicited purchase proposal came in from Digital Bridge and Crestview Partners in May. At that time, a special committee of Wow's board of directors was formed that included the non Crestview affiliated board members.

Speaker 2

And I can tell you the special committee had a very thorough and diligent process. And from that process, they unanimously recommended the offer presented by Digital Bridge and Crestview to the board, and then the board unanimously approved that. So there will be more detail as the proxy comes out.

Speaker 5

Got it. Thank you. Maybe just a quick one on CapEx. Should we assume that you will continue at least on this year's plans to build out to Edge Outs and Greenfield?

Speaker 2

Yes. There's no change in this year's, CapEx plan. And, I think, you know, the strategy of the company clearly was, reflected in the bid that we got and the comments from both companies.

Speaker 5

And all of your so roughly 2,000,000 homes passed. What percent is is directly fiber to the home?

Speaker 2

I'm not sure if we've broken that out. I can tell you certainly, all of the 91,100, I think, is where we're in as of the end of the second, the third quarter I'm sorry. The second quarter. All of those are, fiber to the home, and then we also have some within our legacy footprint as well. But the bulk of them are in our greenfield markets.

Speaker 5

Okay. Thank you very much. And

Operator

there are no further questions at this time. Teresa Elder, I'll turn the call back over to you.

Speaker 2

Okay. Well, thank you all so much for dialing in today. And before we close, I just want to thank the people of Wow! Whose passion for wowing our customers inspires me every day. And as always, we appreciate you joining our earnings call today, and we appreciate your interest in Wow!

Operator

This concludes today's conference call. You may now disconnect.

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