WideOpenWest, Inc. (WOW! - NYSE: WOW), a fully integrated provider of residential and commercial broadband, video and telephony services to customers in the United States, this week announced financial and operating results for the second quarter ended June 30, 2020.
For the quarter ended June 30, 2020, WOW! reported that its total revenue decreased 2.7% to $282.0 million, compared to the quarter ended June 30, 2019, a decline "which was driven primarily by lower advertising revenue and a shift in service offering mix as the company continues to experience an expected reduction in video and telephony RGUs, partially offset by growth in residential HSD RGUs and ARPU, as well as business services subscription revenue growth," WOW! said in a press release.
"We reported adjusted EBITDA of $101.3 million in the second quarter," noted John Rego, chief financial officer of WOW! "These results were negatively affected by an estimated $7.6 million due to COVID-19 related issues, including lower advertising revenue and the FCC Keep America Connected pledge, which resulted in higher bad debt reserves and fewer late fees than expected."
Nonetheless, Q2 2020 highlights as reported by WOW! were numerous, including:
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Total Subscribers of 844,500, representing 4.3% growth in subscribers compared to the prior-year period
- Total HSD RGUs of 805,600, representing 5.5% growth in HSD RGUs compared to the prior-year period
- Total Revenue of $282.0 million; Net Income of $2.2 million; Diluted Earnings Per Share of $0.03
- HSD Revenue totaled $137.3 million, an increase of $6.9 million or 5.3% compared to the prior-year period
- Adjusted EBITDA was $101.3 million
- Free Cash Flow in the second quarter totaled $17.7 million
- Adjusted Diluted Earnings Per Share was $0.12
- Business Services Subscription Revenue grew 3.5% compared to the second quarter of 2019
- John Rego joined as Chief Financial Officer and Shannon Campain joined as Chief Commercial Officer
- Gunjan Bhow, Global Chief Digital Officer of Walgreens Boots Alliance, was elected to the Board of Directors
- WOW! named “MSO of the Year” by Cablefax
"I’m proud of how the WOW! team has navigated the challenges posed by the global health pandemic and executed on our initiatives to deliver critical services to the communities that we serve. During these unprecedented times, demand for our broadband services continued to drive growth, leading to the best second quarter HSD RGU growth in five years," said Teresa Elder, chief executive officer of WOW!
Elder continued, “We added more HSD RGUs in the first half of 2020 than we did in all of 2019. We saw 77% of our new customers connecting to our HSD Only offering, up from 57% a year ago. Furthermore 40% of these new customers subscribed to higher speed tiers of 500MB or 1 Gig. Our compelling add-on service, Whole-Home WiFi, showed higher take rates in the second quarter of 2020. As more customers choose WOW!’s broadband service, they reinforce our strategic shift, which we expect to benefit margins in future quarters as legacy video subscriptions decrease.”
Other details from the company's Q2 statement were as follows:
Revenue
Total Subscription Revenue for the quarter ended June 30, 2020, was $263.9 million, down $2.5 million, or 0.9%, compared to the quarter ended June 30, 2019. Residential Subscription Revenue was $228.4 million, down $3.7 million, or 1.6%, compared to the quarter ended June 30, 2019. Business Services Subscription Revenue, totaled $35.5 million, up $1.2 million, or 3.5%, compared to the quarter ended June 30, 2019.
Other Business Services Revenue totaled $6.4 million for the quarter ended June 30, 2020, down $0.7 million compared to the quarter ended June 30, 2019.
Other Revenue totaled $11.7 million for the quarter ended June 30, 2020, down $4.5 million compared to the quarter ended June 30, 2019, primarily due to a decrease in advertising, and late fee revenue attributable to our participation in the “FCC” pledge to stop charging late fees to customers affected by the global health crisis.
Costs and Expenses
Operating Expenses (excluding Depreciation and Amortization) totaled $146.7 million for the quarter ended June 30, 2020, up $2.3 million, or 2%, compared to the quarter ended June 30, 2019 primarily due to additional bad debt reserves. Selling, General, and Administrative expenses totaled $43.0 million for the quarter ended June 30, 2020 down $4.6 million, or 10% compared to the quarter ended June 30, 2019 primarily due to lower employee costs.
Net Income and Earnings Per Share
Net Income for the quarter ended June 30, 2020, was $2.2 million, compared to Net Income of $9.7 million for the quarter ended June 30, 2019. Diluted Earnings Per Share for the quarter ended June 30, 2020, was $0.03, compared to Diluted Earnings Per Share of $0.12 for the quarter ended June 30, 2019. Adjusted Diluted Earnings Per Share for the quarter ended June 30, 2020, was $0.12.
Adjusted EBITDA
Adjusted EBITDA for the three months ended June 30, 2020, was $101.3 million, a decrease of $7.6 million, or 6.9%, compared to the three months ended June 30, 2019. Adjusted EBITDA reflects an estimated COVID-19 impact of $7.6 million. Adjusted EBITDA margin was 35.9% for the three months ended June 30, 2020, a decrease of more than 160 basis points compared to the three months ended June 30, 2019.
Customers
WOW! reported Total Subscribers of 844,500 as of June 30, 2020, an increase of 34,700, or 4.3%, compared to June 30, 2019, up 6,500 compared to March 31, 2020. HSD RGUs totaled 805,600 as of June 30, 2020, an increase of 41,900, or 5.5%, compared to June 30, 2019, up 8,000 compared to March 31, 2020.
Edge-Outs
Edge-Out Projects reached a total of 189,700 homes passed and 45,200 Subscribers since inception.
The 2018 Edge-Out projects include 5,600 Customers, which represents 18.5% penetration on such nodes. The 2019 Edge-Out projects include 6,600 Customers, which represents 13.6% penetration on such nodes. The 2020 Edge-Out projects now reach 2,400 homes passed.
Capital Expenditures
Capital Expenditures, on a reported basis, totaled $57.2 million for the quarter ended June 30, 2020, representing a $4.5 million, or 7.3%, decrease compared to the quarter ended June 30, 2019. Transaction Adjusted Capital Expenditures totaled $57.2 million for the quarter ended June 30, 2020, an increase of $1.2 million, or 2.1%, compared to the quarter ended June 30, 2019. Transaction Adjusted Expansion Capital Expenditures, defined as Edge-Out Capital Expenditures and Business Services Capital Expenditures dedicated to expansion of the Company’s network, were $5.4 million for the quarter ended June 30, 2020, a decrease of $6.3 million over the Transaction Adjusted Expansion Capital Expenditures in the quarter ended June 30, 2019. Excluding Transaction Adjusted Expansion Capital Expenditures, Transaction Adjusted Capital Expenditures for the quarter ended June 30, 2020 totaled $51.8 million, which equates to 18.4% of Total Revenue for the quarter ended June 30, 2020.
Liquidity and Leverage
As of June 30, 2020, the total outstanding amount of long-term debt and finance lease obligations was $2.322 billion, and cash and cash equivalents were $39.6 million. Total Net Leverage as of June 30, 2020, was 5.39X on a LTM Adjusted EBITDA basis, up from 5.32X at March 31, 2020, and undrawn revolver capacity totaled $215.5 million. The Company took a precautionary $50 million draw on the revolver in April which was subsequently repaid in June based on the stability of the capital markets and further understanding of the global health crisis on the business. Free Cash Flow was $17.7 million for the second quarter.
For more information, visit www.wowway.com.