Earnings call transcript: WideOpenWest Q1 2025 sees revenue dip, EBITDA margin rise

WideOpenWest Inc. (WOW), a leading broadband provider, reported its first-quarter 2025 earnings with a notable decrease in total revenue but a record-high adjusted EBITDA margin. Despite the revenue drop, the company’s stock saw a positive aftermarket reaction, rising by 3.69% to $4.50. According to InvestingPro data, WOW’s market capitalization stands at $367 million, with the stock trading near its Fair Value. The company faces profitability challenges, having reported a loss over the last twelve months with a diluted EPS of -$0.72.

Key Takeaways

• Total revenue decreased by 7.1% to $150 million.
• Adjusted EBITDA increased by 13.8%, reaching $76.7 million.
• High-speed data (HSD) revenue now constitutes 70.3% of total revenue.
• Stock price increased by 3.69% in aftermarket trading.
• Guidance for Q2 2025 suggests further revenue and EBITDA adjustments.

Company Performance

WideOpenWest’s Q1 2025 results reflect a strategic shift towards high-speed data services, as evidenced by HSD revenue representing a larger portion of total revenue. The company’s transition from traditional video services to digital platforms like YouTube TV is ongoing, aligning with industry trends favoring streaming services over cable.

Financial Highlights

• Total revenue: $150 million, down 7.1% year-over-year.
• Adjusted EBITDA: $76.7 million, up 13.8% year-over-year.
• Adjusted EBITDA margin: 51.1%, a record high for the company.
• ARPU increased by 3.7% to $75.
• Cash reserves: $28.8 million; outstanding debt: $1.03 billion.

Earnings vs. Forecast

While the earnings per share (EPS) forecast was -$0.2067, the market’s reaction suggests a positive outlook on the company’s strategic shifts and financial health. The revenue forecast was set at $148.27 million, with actual results at $150 million, indicating a minor beat.

Market Reaction

Post-earnings, WideOpenWest’s stock rose by 3.69% to $4.50 in aftermarket trading. This movement contrasts with the day’s closing price of $4.35, reflecting investor optimism despite the revenue decline. The stock remains within its 52-week range of $4.025 to $5.8.

Outlook & Guidance

For Q2 2025, WideOpenWest projects HSD revenue between $101 million and $104 million, with total revenue guidance set at $141 million to $144 million. The company plans significant investment in greenfield market expansion, with expected spending between $60 million and $70 million for the year.

Executive Commentary

CEO Teresa Elder emphasized the company’s momentum in greenfield markets, stating, "Our first quarter results reflect strong momentum in our greenfield markets." CFO John Rego highlighted strategic investments, saying, "We expect to spend between $60,000,000 to $70,000,000 in 2025 on greenfields."

Risks and Challenges

• Subscriber loss: The company lost 4,500 HSD subscribers in Q1.
• High leverage: With a leverage ratio of 3.4x, managing debt remains crucial.
• Market competition: As a challenger brand, WOW faces stiff competition from larger providers.
• Transition challenges: Shifting from traditional video services to digital platforms may present operational hurdles.
• Economic pressures: Broader economic conditions could impact consumer spending and service adoption.

Q&A

During the earnings call, analysts inquired about the pace of capital spending and the strategic focus on broadband and YouTube TV. Executives confirmed these areas as priorities, with mobile offerings playing a lesser role in customer acquisition and churn reduction.

Full transcript - WideOpenWest Inc (WOW) Q1 2025:

Rebecca, Conference Operator: 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 Wide Open West Q1 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.

Thank you. I will now turn the call over to Andrew Poisson, Vice President of Investor Relations. Please go ahead.

Andrew Poisson, Vice President of Investor Relations, Wide Open West: Good afternoon, everyone, and thank you for joining our first quarter twenty twenty five earnings call. I’m joined today by Teresa Elder, 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. 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 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 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 Wow’s Chief Executive Officer, Theresa Elder.

Teresa Elder, Chief Executive Officer, Wide Open West: Thanks, Andrew. Welcome to Wow’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 cost with exceptional customer service.

Our legacy markets continue to have low churn and high ARPU 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 105,400,000.0 Adjusted EBITDA of $76,700,000 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 05% 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 market 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. ARPU 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 and record ARPU. I will now turn the call over to John, who will give our financial results in more detail.

John Rego, Chief Financial Officer, Wide Open West: Thank you, Theresa. In the first quarter, we reported $105,400,000 of HSD revenue, which decreased 0.8% year over year, which was largely reflecting the decrease in HSD subscribers. Total revenue for the quarter decreased 7.1% to $150,000,000 as video and telephony revenue dropped 287.3% respectively in addition to the decline in HSD revenue. Adjusted EBITDA increased 13.8 from the same period last year to $76,700,000 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.

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 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 $28,800,000 and total outstanding debt of $1,030,000,000 with our leverage ratio at 3.4 times. We reported total capital spend of $38,900,000 which is down $33,600,000 from the same quarter last year.

Our core CapEx efficiency was 16.1% in the first quarter. Expansion CapEx decreased $32,300,000 from the same period last year and increased $5,300,000 from last quarter. In the first quarter, we spent $10,800,000 on greenfields, 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 $60,000,000 to $70,000,000 in 2025 on greenfields. Additionally, we spent $1,900,000 on edge outs and $2,000,000 on business services.

Our unlevered adjusted free cash flow, which we define as adjusted EBITDA less CapEx, was 37,800,000 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 101,000,000 and $104,000,000 total revenue to be between 141,000,000 and $144,000,000 and adjusted EBITDA to be between $65,000,000 and 68,000,000 We expect our $8.50 net adds to be between a negative 6,500 and a negative $4,500 And 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 Digital Bridge and Crestview Partners at this time. And 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.

Rebecca, Conference Operator: At this time, there are no questions.

Teresa Elder, Chief Executive Officer, Wide Open West: Okay. Well, thank you for listening in on the call today. But before we close, I want to thank our people for their dedication to wowing our customers every day. And finally, thanks to all of you that listened to our call today.

Andrew Poisson, Vice President of Investor Relations, Wide Open West: Thank you. And

Rebecca, Conference Operator: at this time, my apologies, we do have a question that has come into queue.

Teresa Elder, Chief Executive Officer, Wide Open West: Okay.

Rebecca, Conference Operator: And we do have Brandon Nispel with KeyBanc Capital.

Tyler, Analyst, KeyBanc Capital: Hi, this is Tyler on for Brandon. Thank you for taking our questions. So 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 will translate into new Greenfield homes passed? And then maybe secondly, what does the competitive landscape look like?

Is competitive activity increasing? And how are you thinking about net adds, the cadence of net adds throughout the remainder of the year? And maybe lastly, if you could maybe touch on the our mobile 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, Chief Executive Officer, Wide Open West: Okay. All right. Thanks, Tyler. John, do you want to start with the CapEx question and then I’ll answer the others?

Andrew Poisson, Vice President of Investor Relations, Wide Open West: Let me start with

John Rego, Chief Financial Officer, Wide Open West: the CapEx. So we did for first quarter ’10 point ’8 million dollars in Greenfield CapEx. However, we’re still calling for 60,000,000 to $70,000,000 spend for the year. So clearly, there’s going to be more CapEx coming. So 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, but the intention is to spend the full 60,000,000 to $70,000,000 this year. So that’s a lot. So it’s just going to take another quarter or sort of start to see that coming into play.

Teresa Elder, Chief Executive Officer, Wide Open West: And then 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. And as a reminder, really for the twenty five 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. And 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.

So we don’t have the promo roll off that often are churn generators for customers who experience those. So it really gives great value when paired with our YouTube TV product. And one of the things that we’re also seeing, I guess, a competitive standpoint is that we are extremely competitive, especially in our greenfield and edge out markets. Our penetration rates continue to outperform our regular our original models that we put in place. And 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’ll continue to see a little bit of that in the second quarter. But 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. And so that will continue to drive growth throughout the business. So we’re looking forward to the second half of the year.

And then 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 term 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. So, all in all, we feel good about our competitive position.

Tyler, Analyst, KeyBanc Capital: Great. Thank you.

Rebecca, Conference Operator: I will now turn the call back over to Theresa Elder for closing remarks.

Teresa Elder, Chief Executive Officer, Wide Open West: Okay. Well, our employees, once again, deserve a shout out for their dedication to welling our customers every day. And once again, we appreciate all of you for listening in on the call.

Rebecca, Conference Operator: Ladies and gentlemen, that concludes today’s call. Thank you all for joining. You may now disconnect.

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