WOW! Reports First Quarter 2019 Results

ENGLEWOOD, Colo.–(BUSINESS WIRE)–lt;a href=”https://twitter.com/search?q=%24WOW&src=ctag” target=”_blank”gt;$WOWlt;/agt;–WideOpenWest, Inc. (“WOW!” or the “Company”) (NYSE: WOW), a leading,
fully integrated provider of residential and commercial high-speed data,
video and telephony services to customers in the United States, today
announced financial and operating results for the first quarter ended
March 31, 2019.

First Quarter 2019 Highlights
(1)

  • Total Revenue of $287.2 million; Net Income of $8.2 million; Diluted
    Earnings Per Share of $0.10
  • Total Revenue was up $1.7 million, or 0.6%, compared to the three
    months ended March 31, 2018
  • Adjusted EBITDA of $103.1 million, representing an increase of 7.1%
    over the first quarter of 2018
  • Adjusted Diluted Earnings Per Share of $0.18
  • Adjusted EBITDA margin of 35.9% represents expansion of more than 200
    basis points over the first quarter of 2018
  • First quarter subscriber churn was the best subscriber churn for any
    quarter in at least two years
  • HSD RGU net additions totaled 6,300 in the first quarter, bringing
    total HSD RGUs up to 765,900, a 3.0% increase in total HSD RGUs
    compared to the prior-year period
  • Organic HSD RGU net additions, which exclude net additions from
    Edge-Outs, totaled 5,100, representing the fifth consecutive quarter
    of positive Organic HSD RGU net additions
  • As of March 31, 2019, total subscribers increased by 14,000, or 1.8%,
    over the March 31, 2018, subscriber count, which represents the best
    annual growth in subscribers in at least four years
  • WOW! was selected as the preferred service provider for Clift Farm,
    northern Alabama’s new urban community in Madison, Alabama

“We are proud to share that WOW!’s results for the first quarter
continued to reflect the benefits of the investments we made in 2018,”
said Teresa Elder, chief executive officer of WOW! “We are executing
precisely on our transformation plan, which has resulted in ongoing
churn improvement, our fifth consecutive quarter of organic HSD RGU
growth, and an inflection to positive growth in Total Revenues for the
first quarter of 2019.”

“Adjusted EBITDA for the first quarter of 2019 totaled $103.1 million,
representing 7.1% growth on a year-over-year basis,” said Rich Fish,
chief financial officer of WOW! “As we previously indicated, we expect
Adjusted EBITDA to grow over the prior period throughout the year, and
we’re off to a strong start.”

_____________________

(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.

Financial Highlights

For the quarter ended March 31, 2019, WOW! reported Total Revenue of
$287.2 million, up $1.7 million, or 0.6%, compared to the quarter ended
March 31, 2018. The Company reported Net Income of $8.2 million and
Adjusted EBITDAof $103.1 million, up $6.8 million, or 7.1%,
compared to the quarter ended March 31, 2018.

Revenue

For the quarter ended March 31, 2019, Total Revenue increased 0.6% to
$287.2 million compared to the quarter ended March 31, 2018, which was
driven primarily by growth in Total Subscribers, increases in ARPU and
Business Services Subscription Revenue growth.

Total Subscription Revenue for the quarter ended March 31, 2019, was
$265.2 million, up $1.7 million, or 0.6%, compared to the quarter ended
March 31, 2018. Residential Subscription Revenue was $231.5 million,
down $0.6 million, or 0.3%, compared to the quarter ended March 31,
2018. Business Services Subscription Revenue totaled $33.7 million, up
$2.3 million, or 7.3%, compared to the quarter ended March 31, 2018.

Other Business Services Revenue totaled $7.1 million for the quarter
ended March 31, 2019, down $0.1 million compared to the quarter ended
March 31, 2018.

Other Revenue totaled $14.9 million for the quarter ended March 31,
2019, up $0.1 million compared to the quarter ended March 31, 2018.

Costs and Expenses

Operating Expenses (excluding Depreciation and Amortization) totaled
$149.2 million for the quarter ended March 31, 2019. Selling, General,
and Administrative expenses were $45.5 million for the quarter ended
March 31, 2019.

Net Income (Loss) and Earnings (Loss) per Share

Net Income for the quarter ended March 31, 2019, was $8.2 million,
compared to Net Loss of $162.0 million for the quarter ended March 31,
2018. Diluted Earnings Per Share for the quarter ended March 31, 2019,
was $0.10, compared to Loss Per Share of $1.92 for the quarter ended
March 31, 2018. The year-over-year increase in Net Income is
attributable to Impairment Losses on Intangibles and Goodwill recognized
in the quarter ended March 31, 2018. Adjusted Diluted Earnings Per Share
for the quarter ended March 31, 2019, was $0.18.

Adjusted EBITDA

Adjusted EBITDA for the quarter ended March 31, 2019, was $103.1
million, an increase of $6.8 million, or 7.1%, compared to the three
months ended March 31, 2018. Adjusted EBITDA margin was 35.9% for the
three months ended March 31, 2019, an increase of over 200 basis points
compared to the three months ended March 31, 2018.

Customers

WOW! reported Total Subscribers of 812,500 as of March 31, 2019, an
increase of 14,000, or 1.8%, compared to March 31, 2018, which was the
best yearly result in at least the last four years. HSD RGUs totaled
765,900 as of March 31, 2019, representing an increase of 22,000, or
3.0%, compared to March 31, 2018, which also was the best yearly result
in at least the last four years.

Edge-Outs

As of March 31, 2019, Edge-Out projects reached 147,400 homes passed as
part of the Company’s Edge-Out growth efforts started in 2016.

The Edge-Out projects begun in 2016 (“2016 Edge-Out nodes”) include
14,000 Customers on such nodes, which represents 33.6% penetration. The
Edge-Out projects begun in 2017 (“2017 Edge-Out nodes”) include 18,200
Customers on such nodes, which represents 27.5% penetration. The
Edge-Out projects begun in 2018 now include 4,200 Customers on such
nodes, which represents 13.9% penetration. The Edge-Out projects begun
in 2019 (“2019 Edge-Out nodes”) now reach 9,200 Homes Passed.

Capital Expenditures

Capital Expenditures, on a reported basis, totaled $66.0 million for the
quarter ended March 31, 2019. Transaction Adjusted Capital Expenditures
totaled $59.9 million for the quarter ended March 31, 2019. Transaction
Adjusted Strategic Capital Expenditures, defined as Edge-Out Capital
Expenditures and Business Services Capital Expenditures dedicated to
expansion of the Company’s network, were $15.1 million for the quarter
ended March 31, 2019. Excluding Transaction Adjusted Strategic Capital
Expenditures, Transaction Adjusted Capital Expenditures for the quarter
ended March 31, 2019, totaled $44.8 million, which equates to 15.6% of
Total Revenue for the quarter ended March 31, 2019.

Liquidity and Leverage

As of March 31, 2019, the total outstanding amount of long- term debt
and finance lease obligations was $2.329 billion, and cash and cash
equivalents were $16.9 million. Total Net Leverage as of March 31, 2019,
was 5.48X on a LTM Transaction Adjusted EBITDA basis, down from 5.54X at
December 31, 2018, and undrawn revolver capacity totaled $220.5 million.

Conference Call

WOW! will host a conference call on Tuesday, May 7, 2019, at 9:00 a.m.
Eastern to discuss the operating and financial results contained in this
press release. The conference call will be broadcast live on the
Company’s investor relations website at ir.wowway.com.
Those parties interested in participating via telephone can use the
conference call information as follows:

Call Date:     Tuesday, May 7, 2019             Call Time:     9:00 a.m. Eastern
Dial In: (877) 541-5069 International: (443) 842-7607
Conf. ID: 5795203

A recording of the conference call will be available approximately two
hours after the completion of the call until June 6, 2019. The dial-in
number for this replay is (855) 859-2056.

The following unaudited condensed consolidated statements of operations
summarizes information in the Company’s Form 10-Q for the periods
indicated, as filed on May 7, 2019, with the United States Securities
and Exchange Commission (“SEC”). For ease of use, references in this
release to “WOW!” means WideOpenWest, Inc. and its subsidiaries:

       

WideOpenWest, Inc.

Condensed Consolidated Statements of Operations (Unaudited)

($ in millions, except for per share data)

 
 
Three months ended
March 31,
2018(1) 2019

Revenue

Residential subscription $ 232.1 $ 231.5
Business services subscription   31.4   33.7
Total subscription 263.5 265.2
Other business services 7.2 7.1
Other   14.8   14.9
Total Revenue $ 285.5 $ 287.2
 

Costs and expenses

Operating (excluding depreciation and amortization) $ 157.9 $ 149.2
Selling, general and administrative 39.7 45.5
Depreciation and amortization 46.3 49.7
Impairment loss on intangibles and goodwill 216.3
Gain on sale of assets     (3.4)
$ 460.2 $ 241.0
 
Income (loss) from operations $ (174.7) $ 46.2
Other income (expense)
Interest expense (29.1) (35.6)
Other income, net 0.8
Income tax benefit (expense)   41.8   (3.2)
Net income (loss) $ (162.0) $ 8.2
 
Basic and diluted earnings (loss) per common shares
Basic $ (1.92) $ 0.10
Diluted $ (1.92) $ 0.10
Weighted-average common shares outstanding
Basic 84,479,896 80,348,870
Diluted 84,479,896 80,911,400
 

(1)

 

As previously disclosed, the Company identified past
errors in the accounting for deferred income tax liabilities and
goodwill that resulted from a 2006 merger transaction when
preparing the 2018 consolidated financial statements. In the 2018
Form 10-K, the Company restated its historical consolidated
financial statements to properly reflect the impact of 2006 merger
transaction, which resulted in adjustments to goodwill, deferred
tax liabilities and stockholders’ deficit in the affected periods.
The condensed consolidated financial statements for the three
months ended March 31, 2018, have been similarly restated to
reflect the correction of these errors and should be read in
conjunction with notes 1 and 20 to the Company’s consolidated
financial statements included in the 2018 Form 10-K.

 

About WOW!

WOW! is one of the nation’s leading providers of high-speed internet,
cable TV and phone serving communities in the U.S. 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.

Forward-Looking Statements

This press release contains 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. All
statements, other than statements of historical facts, included in this
release are forward-looking statements. Forward-looking statements
discuss our current expectations and projections relating to our
financial condition, results of operations, plans, objectives, future
performance and business. Forward-looking statements are not guarantees
of future performance and we caution you not to place undue reliance on
such statements. Forward-looking statements are generally identifiable
by the use of the words “may,” “will,” “should,” “expect,” “anticipate,”
“estimate,” “believe,” “intend,” “project,” “continue,” or the negative
of these words, or other similar words or terms. The forward-looking
statements included in this release are made as of the date hereof. We
assume no obligation to publicly update any forward-looking statement,
even if new information becomes available in the future or if experience
or future changes make it clear that any projected results expressed or
implied in such statements will not be realized. If we do update one or
more forward-looking statements, no inference should be made that we
will make additional updates with respect to those or other
forward-looking statements. Actual results may differ materially from
those expected because of various risks and uncertainties, many of which
are beyond our control, including the wide range of competition we face
in our business; competitors that are larger and possess more resources;
dependence upon a business services strategy; conditions in the economy,
including potentially uncertain economic conditions; our ability to
secure new businesses as customers; demand for our bundled broadband
communications services may be lower than we expect; our ability to
respond to rapid technological change; increases in programming and
retransmission costs; a decline in advertising revenues; the effects of
regulatory changes in our business; our substantial level of
indebtedness; certain covenants in our debt documents; programming
exclusivity in favor of our competitors; inability to obtain necessary
hardware, software and operational support; strain on business and
resources from future acquisitions, or the inability to identify
suitable acquisitions; the occurrence of natural disasters, including
hurricanes, in one or more of our geographic markets; potential negative
reactions to our recent restatement of certain previously-issued
financial statements and other factors that are described from time to
time in our filings with the SEC. All forward-looking statements are
expressly qualified in their entirety by these cautionary statements.

Non-GAAP Financial Measures and Operating
Metrics

We have included certain non-GAAP financial measures in this release,
including Adjusted EBITDA, Transaction Adjusted Capital Expenditures,
Transaction Adjusted Capital Expenditures excluding Transaction Adjusted
Strategic Capital Expenditures and Adjusted Diluted EPS. The
presentation of these financial measures is not intended to be
considered in isolation or 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”).

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.

Transaction Adjusted Capital Expenditures and Transaction Adjusted
Capital Expenditures excluding Transaction Adjusted Strategic Capital
Expenditures give effect to the reimbursement of Chicago fiber asset
build, and exclude the effects associated with Hurricane Michael and is
included herein because it’s a key metric used by management and our
Board of Directors to assess our financial performance. The presentation
of this metric is not made in accordance with GAAP and our use of this
term herein varies from the use of similar terms by other companies in
our industry due to different methods of calculation and therefore are
not necessarily comparable. This non-GAAP measure should not be
considered as an alternative to capital expenditures or any other
performance measures derived in accordance with GAAP as measures of
operating performance.

Adjusted EBITDA is included herein because it is a key metric used by
management and our Board of Directors to assess our financial
performance. We believe that Adjusted EBITDA is an appropriate measure
of operating performance because it eliminates the impact of expenses
that do not relate to business performance, and that the presentation of
this measure enhances an investor’s understanding of our financial
performance.

Adjusted EBITDA 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. The presentation of Adjusted
EBITDA is not made in accordance with GAAP and our use of the term
Adjusted EBITDA may vary from others in our industry. 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.

Adjusted EBITDA has important limitations as an analytical tool. For
example, adjusted EBITDA:

  • excludes certain tax payments that may represent a reduction in cash
    available to us;
  • does not reflect any cash capital expenditure requirements for the
    assets being depreciated and amortized that may have to be replaced in
    the future;
  • does not reflect changes in, or cash requirements for, our working
    capital needs; and
  • does not reflect the significant interest expense, or the cash
    requirements necessary to service interest or principal payments on
    our debt.

Adjusted Diluted Earnings Per Share (EPS) is included herein because it
is a key metric used by management and our Board of Directors to assess
our financial performance. Adjusted Diluted EPS is a non-GAAP financial
measure that eliminates the effect of loss on early extinguishment of
debt, gain (loss) on sale of assets, impairment losses on intangibles
and goodwill, non-recurring professional fees, M&A integration and
restructuring expense, non-cash stock compensation, and other (income)
and expenses. We then add or subtract an estimated incremental income
tax effect applicable to those items. We believe that this measurement
is useful to investors as an additional way to analyze the underlying
trends in our business consistently across the periods presented.

The presentation of Adjusted Diluted EPS is not made in accordance with
GAAP and our use of the term Adjusted Diluted EPS herein varies from the
use of similar terms by other companies in our industry due to different
methods of calculation and is not necessarily comparable. Adjusted
Diluted EPS should not be considered as an alternative to Diluted EPS or
any other performance measures derived in accordance with GAAP as
measures of operating performance.

See “Unaudited Reconciliations of GAAP Measures to Non-GAAP Measures
and the accompanying tables below for a reconciliation of Adjusted
EBITDA to our Net Income (Loss), which is the most directly comparable
GAAP financial measure and a reconciliation of Adjusted Earnings Per
Share to Diluted Earnings Per Share, which is the most directly
comparable GAAP financial measure.

In addition, we use the following subscriber information in this release:

  • Homes Passed – We report homes passed 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.
  • Subscribers – Because we deliver multiple
    services to our customers, 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.

Unaudited Reconciliations of GAAP Measures to
Non-GAAP Measures

The following table provides unaudited reconciliations of GAAP measures
to non-GAAP measures used herein for the periods indicated:

       

WideOpenWest, Inc.

Reconciliation of GAAP Measures to Non-GAAP Measures (Unaudited)

($ in millions, except for per share data)

 
Three months ended
March 31,
2018(1) 2019
Net income (loss) $ (162.0) $ 8.2
Depreciation and amortization 46.3 49.7
Impairment loss on intangibles and goodwill 216.3
Gain on sale of assets (3.4)
Interest expense 29.1 35.6
Non-recurring professional fees, M&A Integration and restructuring
expense
4.1 8.5
Non-cash stock compensation 4.3 2.1
Other income, net (0.8)
Income tax (benefit) expense   (41.8)   3.2
Adjusted EBITDA $ 96.3 $ 103.1
 

(1)

 

As previously disclosed, the Company identified past
errors in the accounting for deferred income tax liabilities and
goodwill that resulted from a 2006 merger transaction when
preparing the 2018 consolidated financial statements. In the 2018
Form 10-K, the Company restated its historical consolidated
financial statements to properly reflect the impact of 2006 merger
transaction, which resulted in adjustments to goodwill, deferred
tax liabilities and stockholders’ deficit in the affected periods.
The condensed consolidated financial statements for the three
months ended March 31, 2018, have been similarly restated to
reflect the correction of these errors and should be read in
conjunction with notes 1 and 20 to the Company’s consolidated
financial statements included in the 2018 Form 10-K.

 
   
Three months ended
March 31, 2019
(per share)
Diluted earnings per share $ 0.10
Gain on sale of assets (0.04)
Non-recurring professional fees, M&A integration and restructuring
expense
0.11
Non-cash stock compensation 0.03
Income tax applicable to adjustments, net(1)   (0.02)
Adjusted Diluted Earnings Per Share $ 0.18
 

(1)

 

The income tax impacts are determined using the applicable
rates in the taxing jurisdictions in which expense or income
occurred and includes both current and deferred income tax expense
(benefit) based on the nature of the non-GAAP performance measure.

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.

Contacts

Lucas Binder
VP Corporate Development &
Investor Relations
303-927-4951
[email protected]

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