WideOpenWest - Earnings Call - Q1 2025

Executive Summary

• Q1 2025 delivered mixed headline growth with sharp margin improvement: Revenue $150.0M, Adjusted EBITDA $76.7M, Adjusted EBITDA margin a record 51.1%, Net loss $13.9M; management highlighted cost reductions from the video exit and disciplined SG&A.
• Versus Wall Street consensus, WOW beat on revenue ($150.0M vs $148.17M*) and EBITDA ($76.7M vs $72.70M*), and posted a smaller loss per share than expected (-$0.17 vs -$0.192*)—a constructive setup despite top-line pressure from video declines. Values retrieved from S&P Global.
• Operationally, greenfield expansion reached 75.6k homes passed with 16.3% penetration; WOW added 2,000 greenfield HSD subs but lost 4,500 HSD RGUs overall, citing legacy-footprint churn and a video rate increase as near-term headwinds.
• Q2 2025 guidance implies sequential moderation: Revenue $141–$144M, Adjusted EBITDA $65–$68M, HSD net adds (-6,500)–(-4,500), broadly in line with consensus* (Rev ~$143.62M; EBITDA ~$67.69M). Values retrieved from S&P Global.
• A standing unsolicited acquisition proposal from DigitalBridge/Crestview remains an overhang and potential catalyst; management provided no update and won’t take questions on it.

What Went Well and What Went Wrong

What Went Well

• Record profitability: Adjusted EBITDA rose 13.8% YoY to $76.7M and margin reached 51.1%; CFO: “Effective cost management… led to Adjusted EBITDA growth… and record Adjusted EBITDA margins of 51.1%”.
• Greenfield execution: Homes passed hit 75,600 with 16.3% penetration; CEO: “Combined with low-churn and record ARPU, our expansion strategy continues to drive growth in our new markets”.
• ARPU strength: Management cited “record ARPU” at $75, supported by simplified pricing and higher-speed tier uptake, reinforcing the broadband-first strategy.

What Went Wrong

• Top-line pressure: Revenue fell 7.1% YoY to $150.0M, driven by video (-$8.9M YoY) and telephony (-$0.8M YoY) declines; HSD revenue dipped 0.8% YoY.
• Subscriber trends: HSD RGUs declined by 4,500 sequentially; total subscribers fell to ~473,800, continuing legacy-footprint weakness despite greenfield adds.
• Quality-of-earnings considerations: Non-recurring professional/M&A integration/restructuring expenses rose to $15.3M in Q1, a sizable add-back to Adjusted EBITDA; interest expense increased to $27.5M, reflecting higher debt costs and leverage (3.4x LTM).

Transcript

Operator (participant)

Thank you for standing by. My name is Rebecca, and I'll be your conference operator today. At this time, I would like to welcome everyone to the WideOpenWest Q1 2025 earnings call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question-and-answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, press star one again. Thank you. I will now turn the call over to Andrew Posen, Vice President of Investor Relations. Please go ahead.

Andrew Posen (VP of Investor Relations)

Good afternoon, everyone, and thank you for joining our first quarter of 2025 earnings call. I'm joined today by Teresa Elder, WideOpenWest Chief Executive Officer, and John Rego, WideOpenWest 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 and 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 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-K filed with the SEC, as well as the forward-looking statement 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 a substitute for the financial information presented in accordance with GAAP. Reconciliations between GAAP and non-GAAP metrics for 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 afternoon to complement our prepared remarks. Now I'll turn the call over to WideOpenWest Chief Executive Officer, Teresa Elder.

Teresa Elder (CEO)

Thanks, Andrew. Welcome to WideOpenWest's first quarter earnings call. Our first quarter results reflect strong momentum in our greenfield markets, building on the success we delivered in the latter part of last year. We maintained strong penetration rates above 16%, all while growing our footprint with an additional 13,700 new greenfield homes passed. Our all-fiber new builds in Central Florida, Hernando Beach, Florida, Brighton, Michigan, and Greenville, South Carolina, have clearly demonstrated consumers' desire for exceptional fiber-to-the-home broadband that delivers higher speeds at lower costs with exceptional customer service. Our legacy markets continue to have low churn and high RPU, driven by customers upgrading to high-value services and continuing to migrate off of our video platform and, in many cases, subscribing to YouTube TV. Now I would like to discuss our first quarter results, which reflect continued momentum in our greenfield fiber expansion markets and strong cost management.

In the first quarter, high-speed data revenue decreased 0.8% year-over-year to $105.4 million. Adjusted EBITDA of $76.7 million increased 13.8% year-over-year with a record adjusted EBITDA margin of 51.1%. The continued improvement in adjusted EBITDA predominantly reflects the benefits accrued from continuing to drive efficiency into our business as we migrate our customers off our video platform and further align our relationship with YouTube TV. During the first quarter, our fiber expansion made further progress as we passed an additional 13,700 homes in our greenfield markets, bringing our total number of homes passed to 75,600 in these new markets. The penetration rates in our greenfield markets remained strong at 16.3%, reflecting a strong sell-in, especially in the higher speed tiers. The 2025 edge-out vintage also passed 1,500 new homes in the first quarter, while delivering a penetration rate close to 27%.

Our 2024 edge-out vintage increased almost five percentage points to a penetration rate of 44.6%, while the 2023 vintage increased half a percentage point to 31.4%. With regard to our HSD subscribers, we lost a total of 4,500 during the quarter. We added 2,000 HSD subscribers in our greenfield markets and 900 in our edge-out expansion markets, which partially offset the drop in our legacy footprint. The steps we introduced last year, such as complementary speed upgrades and our simplified pricing plans, which have an optional price lock, modem included, no data caps, and no contracts, are a continuing benefit to our business, especially in our 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.

RPU was a record high, increasing 3.7% year-over-year to $75. Overall, we continue to see the success of our simplified pricing strategy, which is showing particular strength in our greenfield markets. As expected, our traditional video business declined further during the quarter and has now dropped to 48,900 subscribers, a 38% decrease from the same period last year. We anticipate this trend will continue as we transition to YouTube TV, which grew significantly this past year. To conclude, before handing the call to John, I would like to emphasize how our results this quarter reflect momentum in our greenfield areas as we continue to focus on our fiber-to-the-home expansion initiative while maintaining our cost discipline, which resulted in another quarter of adjusted EBITDA growth with record adjusted EBITDA margins and record RPU.

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

John Rego (CFO)

Thank you, Teresa. In the first quarter, we reported $105.4 million of HSD revenue, which decreased 0.8% year-over-year, which is largely reflecting the decrease in HSD subscribers. Total revenue for the quarter decreased 7.1% to $150 million, as video and telephony revenue dropped 28% and 7.3%, respectively, in addition to the decline in HSD revenue. Adjusted EBITDA increased 13.8% from the same period last year to $76.7 million, with a record adjusted EBITDA margin of 51.1%. The growth in our adjusted EBITDA reflects the impact of our continued approach to aggressively restructure our business away from our video platform. 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-first strategy. The incremental contribution margin increased slightly from the previous quarter and continued to grow year-over-year, driven by the proportionate increase in HSD revenue, which increased to more than 70.3% of our total revenue this quarter, which is up from 65.8% in the same period last year. We ended the quarter with total cash of $28.8 million and total outstanding debt of $1.03 billion, with our leverage ratio at 3.4x. We reported total capital spend of $38.9 million, which is down $33.6 million from the same quarter last year. Our core CapEx efficiency was 16.1% in the first quarter. Expansion CapEx decreased $32.3 million from the same period last year and increased $5.3 million from last quarter.

In the first quarter, we spent $10.8 million on greenfields, which was slightly lower than expected, primarily due to weather issues in our new markets, which slowed us down on our construction. We still expect to spend between $60 million-$70 million in 2025 on greenfields. Additionally, we spent $1.9 million on edge-outs and $2 million on business services. Our unleveraged adjusted free cash flow, which we define as adjusted EBITDA less CapEx, was $37.8 million for the first quarter, an increase from last quarter, driven by hurricane remediation CapEx spent during the fourth quarter. Finally, I'd like to provide our guidance for the second quarter. We expect our HSD revenue to be between $101 million-$104 million, total revenue to be between $141 million-$144 million, and adjusted EBITDA to be between $65 million-$68 million.

We expect our HSD net adds to be between a -6,500 and a -4,500. Before we open the line for questions, I'd like to reiterate that we do not have any information to share regarding the unsolicited non-binding acquisition proposal from DigitalBridge and Crestview Partners at this time. While we will take questions at the end of our remarks, we'll not be taking any questions on this topic. Thank you so much, and now we'll open up the line for questions.

Operator (participant)

At this time, I would like to remind everyone, press star, then the number one on your telephone keypad. We'll pause for just a moment to compile the Q&A roster. At this time, there are no questions.

Teresa Elder (CEO)

Thank you for listening in on the call today. Before we close, I want to thank our people for their dedication to wowing our customers every day. Finally, thanks to all of you that listened to our call today.

John Rego (CFO)

Thank you.

Operator (participant)

At this time, my apologies. We do have a question that has come into queue.

Teresa Elder (CEO)

Okay.

Operator (participant)

We do have Brandon Nispel with KeyBanc Capital Markets.

Hi, this is Tyler On for Brandon. Thank you for taking our questions. Maybe a couple, if I could. First, could you talk about your pace of capital spending in the back half of the year and how that'll translate into new greenfield homes passed? Maybe secondly, what does the competitive landscape look like? Is competitive activity increasing? How are you thinking about the cadence of net adds throughout the remainder of the year? Maybe lastly, if you could maybe touch on the OurMobile products and any relevant stats you have there on adoption or if you have enough data on whether it's helping churn or maybe improving the HSD subs. Thank you.

Teresa Elder (CEO)

Okay. All right. Thanks, Tyler. John, do you want to start with the CapEx question, and then I'll let you do the other?

John Rego (CFO)

Let me start with the CapEx. We did, for first quarter, $10.8 million in greenfield CapEx. However, we're still calling for $60 million-$70 million spend for the year. Clearly, there's going to be more CapEx coming. It's going to be a little bit more back-end loaded. We did get a little bit slowed down, as we said in the prepared remarks, due to weather, so that slowed us down a little bit. The intention is to spend the full $60 million-$70 million this year. That is a lot. It's just going to take another quarter or so to start to see that coming into play.

Teresa Elder (CEO)

On the competitive landscape and net add question, we really are continuing to see similar competition to what we've seen before, especially in our legacy markets. As a reminder, really, for the 25 years that we've been in business, WOW has always been a challenger brand and known how to compete. We continue to have low churn that has been aided by our simplified pricing. One thing that I think is nice about our simplified pricing is not only does it give our customers no surprises, but it is not promotional pricing. We do not have the promo roll-offs that often are churn generators for customers who experience those. It really gives great value when paired with our YouTube TV product.

One of the things that we're also seeing, I guess, from a competitive standpoint, is that we are extremely competitive, especially in our greenfield and edge-out markets. Our penetration rates continue to outperform our original models that we put in place. As we look out for the second quarter, we are guiding to about where we were in the first quarter. We have done a video rate increase, which generates some churn. We will continue to see a little bit of that in the second quarter. One thing I'm excited about is the continued pace that we're seeing of new homes being added in both the greenfield areas as well as the edge-out areas. That will continue to drive growth throughout the business. We are looking forward to the second half of the year. I think your third question was around mobile.

We continue to have a mobile offering. I would say it is not a big driver of acquisition or necessarily churn reduction for our business. We really have focused on our core product of broadband along with our YouTube TV services and just the quality of the service we provide every day, which is continuing to give us extremely good churn levels. All in all, we feel good about our competitive position.

Great. Thank you.

Operator (participant)

I will now turn the call back over to Teresa Elder for closing remarks.

Teresa Elder (CEO)

Our employees, once again, deserve a shout-out for their dedication to wowing our customers every day. Once again, we appreciate all of you for listening in on the call.

Operator (participant)

Ladies and gentlemen, that concludes today's call. Thank you all for joining. You may now disconnect.