WideOpenWest, Inc.

Good evening. My name is Jordan, and I'll be your conference operator today. At this time, I would like to welcome everyone to the Wide Open West conference 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. If you'd like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you'd like to withdraw your question, again, press star followed by the number one on your keypad. Thank you. Andrew Posen, Vice President, Head of Investor Relations, you may begin your conference.

Good afternoon, everyone, and thank you for joining our third quarter 2023 earnings call. With me today is Teresa Elder, WOW's Chief Executive Officer, and John Grego, 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. 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 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 morning, 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 financial information presented in accordance with GAAP. Reconciliation between GAAP and non-GAAP metrics for historical reported results can be found in our earnings releases and on 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, Carissa Elder.

Thanks, Andrew. Welcome to WOW's third quarter earnings call. Our results this quarter track with the two transitions that we are making as a business. First, the growth of new market expansions. And second, the transition to the next phase of broadband first, which involves transitioning our low margin video business to a high margin streaming service. On market expansion, we are making significant progress, including adding new homes past and new customers at a pace that gives us confidence in our approach. I'm also excited about the new greenfield markets that we announced this quarter. including those in Minnesota, Central Michigan, and Hernando County, Florida, which will increase our overall footprint. On the shift in our legacy markets to the next phase of broadband first strategy, we are seeing success in our video migration to YouTube TV, and we expect to accelerate that initiative. While these transitions are going very well, I am, however, disappointed in worse than expected subscriber numbers, reporting a net HSD subscriber loss for the quarter of 4,400. This reflects challenges in our legacy footprint, exacerbated by macroeconomic environmental issues that further plague our industry, such as ongoing high interest rates, inflation, and low move activity. We are also seeing some more aggressive competitive pressure than previous quarters. As a result of the pressures in the legacy markets and slower than expected new homes coming on board, our expectation is that the fourth quarter will be significantly worse than the third quarter. Therefore, we are removing our outlook for the fourth quarter. We are, of course, taking several steps to help mitigate the expected subscriber losses in the fourth quarter. Yet, it is difficult to fully estimate the scope of these losses and the impact that it will have on our fourth quarter results. Although we acknowledge this underperformance, we continue to have confidence and believe in our plans, including our expansion initiatives and our broadband first strategy, which we are confident will result in improved financial and customer results in 2024. Now I would like to talk about our third quarter results, which included record high-speed data revenue service, which grew more than 7% year-over-year, adjusted EBITDA, which increased 3.5%, and an adjusted EBITDA margin of 41%, all while maintaining our focus on expanding into new markets and making significant progress on migrating our video business to YouTube TV. During the third quarter, we announced three new markets, including the opportunity to pass 80,000 new homes in Michigan, 85,000 in Minnesota, and 44,000 new homes in Hernando County, Florida. We have already begun initial construction in Michigan and expect to follow in Minnesota and Hernando County mid to late next year, with customers coming online in the back half of 2024 and into 2025. Including our current greenfield markets in Central Florida and South Carolina, we expect to hit our 400,000 new homes target by the end of 2027. These market expansion initiatives continue to be central to our strategy and represent the core thesis of our growth and value proposition. Our video migration strategy is also beginning to gain real traction as we continue marketing our partnership with YouTube TV, creating a competitive advantage and an excellent opportunity to offer customers what they want and at an exceptional price. We launched with YouTube TV as our primary video offering at the beginning of August. The initial returns from this partnership are very positive, with more than 13% of new subscribers signing up for YouTube TV. YouTube TV gives customers a more robust choice of programming and savings of hundreds of dollars annually over traditional cable. Customers get an additional discount off of YouTube TV when they subscribe with WOW. They also get a discount on add-ons 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 having to overbuild our own network. YouTube TV allows us to transition away from higher cost, low margin video to a higher margin service with an even greater mix of channels for our customers. What we are doing is unique among cable operators and is giving customers more of what they really want at a much better price. With regard to high-speed data subscribers, as I said at the beginning of the call, we lost 4,400 high-speed data RGU's during the quarter and we anticipate losing significantly more in the fourth quarter. There are several factors that lead to this result. The macro environment continues to be very challenging, which compounds the situation. Over the course of the year, we introduced rate increases, which led to higher than anticipated churn, predominantly for those subscribers who subscribe to lower tier speeds. During the third quarter, a large number of high speed data customers also came off of promotions. which is resulting in higher expected churn, especially once again at the lower speed tiers. Another factor contributing to the lower third quarter figure and reduced expectations for the fourth quarter has to do with the pace of construction in our greenfield markets. Although expansion is going well, and we believe we are likely to hit 50,000 new homes passed by the end of this year, the pace of construction in these new markets is below our internal forecast, which is significantly reducing the number of gross connects we expected. And lastly, we are seeing fixed wireless begin to more aggressively compete for our customers at the lower speed tiers across several of our legacy markets. However, we are absolutely confident in our good value, high quality, and reliable service, especially as significantly more of our customers are buying 500 meg and above. We also believe that many of these customers who left will return to WOW due to the reliability and value of our high-speed data service. As of the end of the third quarter, we now have more than 503,000 high-speed data subscribers. As expected, our traditional video business declined further during the quarter, which will continue as we transition them to YouTube TV. As mentioned, The new partnership with YouTube TV presents a fantastic opportunity to capitalize on the shift to video streaming, which we believe will also contribute to great results next year. As you can see from the underlying operating metrics, our core business remains strong. Over 90% of our new connects are taking broadband only, which can include streaming. As we continue to move away from offering our own video service, In concert with this transition, demand for higher speeds is growing. In fact, a record share of new customers are buying higher speeds than ever. Our high-speed data-only sell-in mix shows that 80% of our new customers are buying speeds above 500 meg, including further momentum in customers in legacy markets taking our 1.2 gig service. As we said before, this trend is even more pronounced in our new markets. 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 and to compete in our legacy markets. High-speed data ARPU increased again this quarter to a record $72.40, reflecting the full effect of the rate increase that was introduced in July and To a greater extent, customers purchasing higher data speeds. We expect high-speed data ARPU will increase further in the fourth quarter as existing customers upgrade to higher speeds and from the addition of new fiber customers in greenfield markets and new edge-outs. I would like to spend a few minutes talking about the success in our new markets. As you know, WOW has always embraced its role as a challenger brand. So while the current environment is difficult, we know how to compete, both in our legacy footprint and we have confidence in our ability to build out new markets and rapidly increase penetration. Year to date through September 30th, we have now passed a total of 25,500 new homes as part of our expansion initiatives, including a total of 14,100 greenfield homes in Central Florida. and 11,400 in new edge-outs. In the third quarter, we passed more homes than we did in the first half of the year and more than the last three years combined. However, with that said, it's less than we had internally forecast, which is negatively impacting our overall HSD growth. 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 mid-split, high-split architecture with DAA capability for HFC, which lays the framework for our DOCSIS 4.0 and symmetrical multi-gig services in those markets. The strength of these technologies is absolutely contributing to the strong penetration rates that we are seeing in these edge-outs. The chart on the right-hand side of the slide shows that we continue to have strong penetration across all of our vintages. Our 2023 vintage of edge-outs are exceeding our expectations as we grow our footprint and add new subscribers, driving our penetration rate in this vintage to nearly 30%. We are also continuing to see strong results in our new greenfield markets. Although the penetration rate came down during the quarter to 12.1%, this is due to the timing of when we've been adding those new homes past. Our 2021 and 2022 vintages also reported exceptionally strong penetration rates of 48% and 31%, respectively. It is this momentum and strong results in these markets that gives us confidence and belief in our strategy and long-term outlook, despite the current challenges in our legacy footprint. To conclude, before handing the call to John, I want to reiterate the key themes that continue to drive our business forward and remain our growth engine. Our market expansion initiatives are now moving at a stronger pace as we add new homes and announce new greenfield markets. We are seeing fantastic customer interest in YouTube TV with approximately half of YouTube subscriptions from new customers and half from our existing customers. We're pleased with the record high speed data revenue which increased more than 7% from the same period last year and more than 80% of our new customers are buying speeds above 500 meg. All of this is translating into record HSDR2 and adjusted EBITDA growth. I also want to acknowledge the challenges in our legacy footprint and emphasize that we are executing improvements in the legacy business while not being distracted from our important expansion initiatives. The pace of New Home's path in our expansion initiative, while behind what we internally had forecast, is picking up and continues to show strong results. Now I'll turn the call over to John, who will go over financials in more detail.