WideOpenWest, Inc.

during this time simply press star followed by the number one on your telephone keypad if you would like to withdraw your question again press the star one thank you i'd now like to turn the call over to andrew posen vice president head of investor relations you may begin good morning everyone and thank you for joining our fourth quarter 2024 earnings call with me today is teresa elder wow's chief executive officer and john rego wow's chief financial officer

Before we get started, I'd 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 Form 10-K filed with the SEC, as well as the forward-looking statement section on our press release. In addition, please note that on today's call and 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. 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. We have also included a presentation this morning to compliment our prepared remarks. Now I'll turn the call over to WOW's Chief Executive Officer, Theresa Elder.

Thanks, Andrew. Welcome to WOW's fourth quarter earnings call. I'm pleased with the progress we made in 2024, especially in our greenfield market, where we continue to pass additional homes and grow our penetration rates. Looking back at 2024, we took significant steps forward toward achieving our strategic initiatives, advancing our financial performance, and enhancing value for our customers through innovative partnerships and pricing strategies. all while delivering exceptional products and services to our customers. As we mentioned last quarter, we closed a $200 million new super priority term loan in October, and this puts us in a strong position to continue to invest in our greenfield fiber market expansion. Although we had a slowdown during the third quarter, we increased our construction pace in the fourth quarter, adding homes in our newest communities of Brighton, Michigan and Hernando Beach, Florida. All in all, we doubled our all-fiber footprint in 2024, adding 31,500 new homes while still increasing penetration rates in our market. We remain encouraged in our legacy markets, which saw positive trends in ARPU driven by customer upgrades to high-value services and consistent levels of low churn, all of which highlights our solid base of satisfied customers. Now I would like to discuss our fourth quarter results, which reflect continued momentum in our greenfield fiber expansion market and strong cost management. In the fourth quarter, high-speed data revenue decreased 3.5% year-over-year to $104.9 million. but includes 1.9 million of revenue credits issued to customers as a result of Hurricane Khalid and Milton. Adjusted EBITDA of 73.7 million increased 3.5% year over year with an adjusted EBITDA margin of 48.3%. 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. For the full year, our high-speed data revenue decreased 1.6% from last year to $423.6 million, but includes $2.5 million in hurricane credits issued during the third and fourth quarters. record 1.5 million in insurance we did record 1.5 million in insurance proceeds through opex to partially offset the lost revenue given this adjusted ebitda still increased 4.7 percent year over year to 288.4 million with an adjusted ebitda margin of 45.7 percent during the fourth quarter our fiber expansion made further progress as we passed an additional 9,300 homes in our greenfield markets, bringing our total number of homes passed to 31,500 in these new markets in 2024. I'm especially pleased with the results in these new markets, where over the course of the year, we strengthened our penetration rates from just under 10% at the end of 2023 to 16.6% at the end of 2024. Our success in these markets reinforces our confidence in our strategy and outlook. The 2024 edge-out vintage also increased during the quarter, passing another 2,300 new homes while delivering a penetration rate close to 40%, making this vintage another strong performing expansion effort. Our 2023 edge-out vintage increased just over 1% to a penetration rate of 30.8%, while the 2022 vintage remained strong at 31%. With regard to our HSD subscribers, we lost a total of 10,200 during the quarter. Of that, approximately 5,400 subscribers were lost due to hurricanes Milton and Helene. We added 1,100 HSD subscribers in our greenfield markets and 800 in our edge-out expansion markets, which partially offset the drop in our legacy footprint. The steps we introduced during the first half of the year, such as complementary speed upgrades and our simplified pricing plans, which includes an optional price block, modem included, no data caps, and no contracts, are continuing to benefit our business. The charts on the bottom half of the slide highlight a shift that reflects the growing success of our cyber expansion strategy, as well as the impact of our initiatives to strengthen our legacy footprint. ARPU remains high, increasing by around 1% year over year to $73.50. despite decreasing sequentially due to the hurricane impacts previously mentioned. Overall, we continue to see the success of our product, marketing, and sales strategies, which are showing particular strength in our greenfield markets. As expected, our traditional video business declined further during the quarter and now has dropped to 60,600 subscribers. a 33% 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 pleased I am with the progress we made this past year and the clear strength and success of our greenfield strategy that continues to make substantial strides forward, both in terms of the number of homes passed and the clear momentum as we have demonstrated our great penetration rates in these markets. I will now turn the call over to John, who will go over our financial results in more detail.

Thank you, Teresa. In the fourth quarter, we reported 104.9 million of HSD revenue which decreased 3.5% year over year, largely reflecting the decrease in HSD subscribers in addition to the 1.9 million in hurricane customer credits. The revenue for the fourth quarter decreased 9.6% to 152.6 million as video and telephony revenues dropped 26.9% and 16.9% respectively in addition to the decline in HSD revenue during the quarter. Adjusted EBITDA increased 3.5% from the same period last year to $73.7 million, with an adjusted EBITDA margin of 48.3%. The growth in our adjusted EBITDA reflects the impact of our continued approach to aggressively restructure our business away from our video platform. This change is reflected in integration and restructuring and is presented in the adjusted EBITDA reconciliation in our presentation and earnings release. Cost associated with this restructuring will come down and be subsequently reflected in integration as we continue to execute our broadband strategy and take the cost completely out of the business. The incremental contribution margin decreased slightly from the previous quarter, but continued to grow year over year driven by the proportionate increase in HSD revenue, which increased to more than 68.7% of our total revenue this quarter, which is up from 64.4% in the same period last year. We ended the quarter with total cash of $38.8 million and total outstanding debt of $1.02 billion, with our leverage ratio at 3.5 times. As we mentioned on our last call, during the quarter, we secured a new super priority term loan for $200 million. The agreement provides the ability to raise an additional $175 million in capital one year after the super priority close date. That additional liquidity will enable us to accelerate our fiber greenfield growth strategy in 25 and beyond as we continue to work toward our goal of passing 400,000 new homes over the next few years. We reported total capital spend of $51.7 million, which is down $28.9 million from last year, but up $11.2 million from last quarter, predominantly due to the hurricane remediation efforts. Our core CapEx efficiency was 27.7% in the fourth quarter. Expansion CapEx decreased to $31.4 million from the same period last year and $1.2 million from last quarter. In the fourth quarter, we spent $3.9 million on greenfields, $2.5 million on edge-outs, and an additional $3 million on business services. In 2025, we expect to spend between $60 to $70 million on greenfield expansion CapEx. Our unlevered adjusted free cash flow, which we define as adjusted EBITDA-less capex, was $22 million for the fourth quarter, a decrease from last quarter driven by the hurricane remediation capex. Finally, I'd like to provide our guidance for the first quarter. We expect our HSE revenue to be between $102 and $104 million, total revenue to be between $147 and $149 million, and adjusted EBITDA to be between $72 and $74 million. We expect our ACUSD net ads to be between negative 6,000 and negative 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. And while we will take questions at the end of our remarks, we will not be taking any questions on that topic. Thank you so much, and we'll now open up the line for questions.

Thank you. We will now begin the question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, simply press star 1 again. And your first question today comes from the line of Frank Luthan from Raymond James. Your line is open.

Great, thank you. I appreciate that you're not taking the questions on the deal, but can you confirm that both Crestview and DigitalBridge are still engaged with the offer for the acquisition? That's my first question.

Yeah, Frank, we don't have any updates for you beyond what we have said every quarter.

Okay, that's fine. And then with the new financing, can you give us an idea of how much liquidity that gives you and then how long do you think that takes you from a CapEx perspective on your goal to the 400,000 homes fast? Thanks.

Yeah, so the first piece was the 200 million franc. We did that back in October. I think I alluded in my comments, we can do another 175,000. in October of 2025 and that takes you pretty pretty deep into the project so there would probably be the need to raise you know incremental capital along the way but the in total 375 between the two raises I think gets us pretty far along to go back to the analyst say when we first talked about the Greenfield project you know roughly what it costs per home Etc Etc so I think we're in reasonably good shape and much better than we were before we did the deal Okay, great.

Thank you.

Your next question comes from the line of Chris Scholl from UBS. Your line is open.

Great. Thank you. You guided the broadband subscriber losses in 1Q. I recognize ACP and storms had an impact in recent quarters, but any remnant impact you are anticipating from 1Q, or is this mainly a result of competition in your footprint? And just along these lines, any color you can give on what you're seeing from fixed wireless fiber and cable in your markets would be helpful. Thank you.

Thanks, Chris. Well, first of all, we are really pleased with the results from last year, and if we took out, you know, the impact that we mentioned from the hurricanes, as well as the impact from ACP last year, we actually saw an improvement in 24 over 23, and we're pleased with the trajectory of what we're seeing for 2025 as well. First of all, certainly the green fields continue to do extremely well, and that's going to bode well, and hopefully we don't literally have any headwinds from hurricanes again this year. We have seen good momentum from our simplified pricing, which not only brings in customers, but also has helped us with overall customers going to higher tiers, higher ARPU. And one of the things that we've been seeing is that our churn is going down. So we're seeing churn very low, certainly in our greenfield markets. but also in our legacy markets with the implementation last year of our simplified pricing with the optional price block. And we think YouTube TV is also having a real benefit to us on churn. So those things all bode well. With that said, yes, there is some competition in the market. And that continues the trends, I think, that we've seen across the whole industry. We see very little from satellite. Most of our Competition, I think, is still with the traditional cable companies and some from fixed wireless. But we feel very good about the offering that we have and how we have been competing.

Great. That's helpful. And there's been a lot of talk in the industry about convergence. Can you update us on how the mobile product is performing? And do you see the need to push that product more aggressively in 2025?

Yeah, I think, you know, We have a mobile product, but it is not one that we certainly push to the forefront as some of our peers do. And I believe many of them have launched that to continue to reduce their churn and drive that lifetime value with their customers. We see our ability to do that because we have this pricing that doesn't have surprises that our customers want with a very reliable high-speed network. And we've also seen the benefits that have come from low return with YouTube TV. So we feel that we are getting the benefits of driving those items for our customers that is really allowing us to continue to compete. And like I said, have year over year improvement from 23 to 24, and I believe on into 25. And certainly we see that in spades with the success of our greenfield market. and the penetration that we're driving in those new markets too.

Great. Thank you very much.

Your next question comes from a line of Brandon Nispel from KeyBank. Your line is open.

Hey, thanks for taking the question. Question for John. John, adjusted EBITDA is increasingly being driven off what you guys are calling non-recurrent professional fees, M&A integration. Could you help us understand what those are and what maybe what's included in guidance for 20 or for the first quarter and maybe how we should be thinking about them for 25 and really when we're going to get back to maybe an EBITDA metric that's not being driven off a lot of those one time adjustments. And then, Teresa, I mean, I guess just, you know, looking at the first quarter guide from a net ad standpoint, how are you thinking about how the full year shapes up from an HST net ad standpoint? Thanks.

Okay. So this concept of integration is not new. It's embedded in our debt agreement. It's always been part of our definition of EBITDA. And if you go back on the trending schedules, you'll see it going back years and years and years. So we'll start with that. It's not something new. There is a lot more activity as of late. I think that'll start to diminish as we get through 2025. But if I wanted to give you some of the biggies that are in that line item would be things like the Sprint settlement. There would be things like you know, cost associated with the, you know, theoretical M&A activity that you keep asking us about. There are costs associated with the restructuring or, you know, or should we say the discontinuing of the video business. So as we get through 25, I think a lot of that's going to start to flush out. So I expect that number to come down. Yeah, there is a bit of that in the quarter, first quarter of 2025. 2025 would be less than what 2026 posted. And I think once we get to 27, you'll see it go down to a really small number. So we just have to flush through some pretty big things. So the, the, the sprint settlement will be done next year. I mean, the payment of the sprint settlement, you know, the, the, the, the changeover of our, how we approach video, you know, we're really moving now. We're down to 60,000 video RGUs. As Teresa said, when I joined five years ago, it was over 300,000. So it's really moving now. That's the second big piece. and you know when when examining when examining bids they're you know of course you would imagine there are legal costs and all of the kinds of costs that we incur and they really have nothing to do with the ongoing running of the business so yeah it did go up and it'll come down again there's been periods of time if you look at the trending chart over multiple years where it goes up and then it comes down and i think after this year you'll start to see it during this year you'll start to see it come down and starting next year you'll start to see it really go down hope that helps

Yeah, and then the second half of your question, Brandon, is about net ads, what we're guiding to for the first quarter, which is an improvement over the fourth quarter, certainly. And we really, we aren't seeing any other carryover from the hurricanes or from APC at this time. So that's in the rearview mirror. We hope we are regaining back some of those hurricane impacted customers who maybe had to relocate for some period of time. So we'll see how that all plays out. But in general, I think we're pretty bullish on how things are going this year. We feel good about what we've implemented in terms of all of our products and services and are seeing churn continue to trend down. With that said, we are certainly moving more towards YouTube TV, which also I think is something that very much satisfies customers. They get a discount with us. And they seem to be very happy with that service as we are transitioning them off of the traditional product. We also continue to be pleased with the ARPU improvement we're seeing. So we certainly are always looking at HSD net ads, but we're also making sure that we are doing the right thing in terms of ARPU and revenue for the business. So threading the needle on the many goals that we have to achieve our financials.

Thanks for taking the questions.

Thanks.

Your next question comes from the line of Matthew Harrigan from Benchmark. Your line is open.

Thank you. Good to get the game together for a conference call this time around and hear your thoughts. I was curious, even in emerging markets, operators are building out clearly FTTH given the collapse of the costs. And, you know, DOCSIS 4.0 is problematical, you know, for a lot of operators. I mean, 3.1 is, you know, generally as much as people need. But given the appeal of Fiverr, which you're well acquainted with, given your success on the de novo bills, how are you thinking about your existing HFC topology? I assume it's on 3.1. It's probably too expensive to go to 4.0. But what are you doing on – doing to enhance the competitiveness of your plan and even just the appeal of it to the customer side, irrespective of competition? Thanks.

Thanks, Matthew. So, yeah, I think we really are doing the best of both worlds. So certainly we have fiber to the home in our greenfield markets. We also have fiber in some of our legacy areas, too, if it makes sense. We do that in some of our edge-out areas. which are performing very, very well. So certainly we know the benefits of that kind of a symmetrical fiber that we can provide to our customers. But with that, what you said as well is the path to docks was 4.0. And yes, we have 3.1 everywhere. So we're providing 1.2 gig speeds to our customers, which is good for most residential customers for anything they need right now. However, we are on the path to 4.0. which I think is also a terrific technology. So we have a network evolution path that we are proceeding with in selected targeted markets that makes sense. And I think that keeps us very competitive with the right kind of speeds we need for our customers. We are always balancing, like the question I just answered from Brandon, balancing the financial, you know, on the ARPU side to make sure we're driving revenue. We also are always looking at every dollar we spend in CapEx to make sure we're getting the best return for our investors, whether it's on the greenfield side or continuing the path to Ford Auto within the legacy business. So we have, I think, a very robust model that we use as we look at how we spend each dollar of CapEx. And as John has said, with the new money, the $200 million that came in since last fall, we are watching everything very closely to make sure that we are always competitive in all of our markets. But yes, we're providing what our customers need. So thanks.

Thanks, Teresa.

And we have reached the end of our question and answer session. I will now turn the call back over to Teresa for closing remarks.

Okay. Well, before I close, I just wanted to give a shout out to the people of WOW for their incredible work last year, and especially in the fourth quarter with two hurricanes in two weeks. as well as building greenfields and delighting our customers every day as we've reduced churn. The people of WOW are the reason that we were once again, for the seventh year in a row, named one of the best and brightest companies to work for in the nation. And with that, I'd like to thank all of you for calling in today and listening to our results, and we hope you have a great day.

This concludes today's conference call. Thank you for your participation. You may now disconnect.