Q4 2024 WideOpenWest Inc Earnings Call
Speaker Change: Thank you for standing by and welcome to the WideOpenWest 4th quarter 2024 earnings conference 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.
Speaker Change: If you would like to withdraw your question, press the star one. Thank you. I now like to turn the call over to Andrew Posen, Vice President, Head of Investor Relations. You may begin.
Andrew Posen: Good morning, everyone, and thank you for joining our fourth quarter of 2014 earnings call.
Teresa Elder: With me today, it's Teresa Elder, boss chief executive officer, and John Rego, boss chief financial officer.
Andrew Posen: 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.
Andrew Posen: Financial position for performance to be materially different from those expressed or implied in our forward looking statements.
Andrew Posen: You were cautioned not to place undue reliance on such forward-looking statements.
We just claim any obligation to update such forward-looking statements.
Andrew Posen: For additional information concerning factors, it could affect our financial results or cause actual results to differ materially from our forward-looking statements.
Andrew Posen: Please refer to our filings at the SEC, including the risk factor section of our form 10K filed with the SEC, as well as the forward-looking statement section on our press release.
Andrew Posen: 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 residential measures.
Andrew Posen: 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
Andrew Posen: for conciliations between GAP 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.
Speaker Change: We have also included a presentation this morning to complement our prepared remarks. Now we'll turn the call over to our Chief Executive Officer, Teresa Elder.
Teresa Elder: Thanks, Andrew. Welcome to Wild Fourth Quarter earnings call. I'm pleased with the progress we made in 2024, especially in our Greenfield market, where we continue to path additional home and grow our penetration rates.
Teresa Elder: Looking back at 2024, we took significant steps forward toward achieving our strategic initiative.
Teresa Elder: 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.
Teresa Elder: As we mentioned the last quarter, we closed a $200 million news super priority term loan in October and this puts us in a strong position to continue to invest in our Greenfield fiber market expansion.
Teresa Elder: Although we had a flowdown 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.
Teresa Elder: We remain encouraged in our legacy markets, which saw positive trends in our poo, driven by customer upgrades to high-value services and consistent levels of low-turn.
All which highlights are solid days of satisfied customers.
Teresa Elder: Now I would like to discuss our fourth quarter results which reflect continued momentum in our Greenfield fiber expansion markets and strong cost management.
Teresa Elder: In the fourth quarter, high-speed data revenue decreased 3.5% over year to 104.9 million, but includes 1.9 million of revenue credits issued to customers as a result of hurricane,
Teresa Elder: Adjusted EBITDA of 73.7 million increased 3.5% year-over-year with an adjusted EBITDA margin of 48.3%.
Teresa Elder: 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.
Teresa Elder: We did record $1.5 million in insurance. We did record $1.5 million in insurance proceeds through OPEC to partially offset the long-to-revenue.
Teresa Elder: During the fourth quarter, our fiber expansion made further progress as we passed an additional 9,300 homes in our Greenfield market, bringing our total number of homes passed to 31,500 in these new markets in 2024.
Teresa Elder: I'm especially pleased with the results in these new markets, where over the course of the year, we strengthen our penetration rates from just under 10% at the end of 2023 to 16.6% at the end of 2024.
Teresa Elder: 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 2300 new homes while delivering a penetration rate close to 40%.
Making this image another strong performing expansion effort.
Teresa Elder: With regard to our HST subscribers, we lost a total of 10,200 during the quarter of that approximately 5,400 subscribers were lost due to Hurricane Milton and Hulling.
Teresa Elder: We added 1100 HST subscribers in our Greenfield markets and 800 in our Edge App Expansion which partially offset the drop in our legacy footprint.
Teresa Elder: The steps we introduced during the first half of the year, such as complimentary speed upgrades and our simplified pricing plans, which includes an optional price lock, modem included, no data caps and no contracts are continuing to benefit our business.
Teresa Elder: The church on the bottom half of the slide highlights 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.
Arapu remains high, increasing by around 1% year-over-year to $73.50.
despite decreasing sequentially due to the hurricane impact previously mentioned.
Teresa Elder: Overall, we continue to see the success of our product, marketing and sales strategy, which are showing particular strengths in our Greenfield market.
Teresa Elder: As expected, our traditional video business declined further during the quarter and now is dropped to 60,600 subscribers, a 33% decrease from the same period last year.
Teresa Elder: We anticipate this trend will continue as we transition to YouTube TV, which grew significantly quickly this past year.
To conclude, before handing the call to John .
Teresa Elder: 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.
Teresa Elder: I will now turn the call over to John who will go over a financial result in more detail.
John: Thank you, Teresa. On the fourth quarter, we'll be 20 at 104.9 million of eight to see revenue.
John: with decreased 3.5% year-over-year largely reflecting the decrease in HSD subscribers in addition to the 1.9 million in hurricane customer credits.
John: The revenue to the fourth quarter decreased 9.6% to 152.6 million as video and telephony revenues dropped to 26.9% and 16.9% respectively in addition to the decline in HSD revenue during the quarter.
John: Audacity to the increase 3.5% from the same period last year to 73.7 million was an adjusted even the margin of 48.3%.
John: The growth in our adjusted evident reflects the impact of our continual approach to aggressively restructure our business away from our video platform.
John: The change is reflected in integration and restructuring and is presented in the adjusted that reconciliation in our presentation and earnings release.
John: Coffee 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.
John: The incremental contribution margin decreased slightly from the previous quarter, a continued going to grow Europe a year driven by the proportionate increase in HSD revenue.
John: We've increased to more than 68.7% of our total revenue this quarter.
John: because up from 64.4% in the same period last year.
John: 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.
John: As we mentioned in our last call, during the quarter, we secured a new super-priority term loan for 200 million.
John: That additional quantity 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.
John: 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 Court CapEx efficiency was 27.7% in the fourth quarter.
John: Expansion CapEx decreased 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 Out and the additional 3 million on business services.
John: In 2025, we expect to spend between $60 to $70 million on Greenfield expansion cap-backs.
John: Our unleavened adjusted free cash flow, which we define as adjusted EBITAL-S CapEx, was 22 million for the fourth quarter, a decrease from last quarter driven by the hurricane remediation
John: Finally, I'd like to provide our guidance for the first quarter. We expect our agency revenue to be between 102 and 104 million, total revenue to be between 147 and 149 million, and adjust anybody A to be between 72 and 74 million.
John: We expect our 8th esteem it adds to be between negative 6,000 and negative 4,500.
John: 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 Chris Repartners at this time.
John: And while we will take questions at the end of our remarks, we will not be taking any questions on that topic.
John: Thank you so much and we'll now open up the lines for questions.
John: Thank you. We will now begin the question and answer session. If you would like to ask a question please press star one in your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, simply press star one again.
Speaker Change: And your first question today comes from the line of Frank Louthan from Raymond James, your line is open.
Frank Luthan: Great. Thank you. I appreciate that you're not taking the questions on the deal, but can you confirm that both Crestview and Digital Bridge are still engaged with the offer for the acquisition? That's my first question.
Speaker Change: Thank you, John and Teresa. Hope you're having a good one. Good night. Thank you, Joe. Bye. All right, bye bye. Bye bye.
Frank Luthan: Yeah, Frank, we don't have any updates for you beyond what we have set every quarter.
Frank Luthan: Okay, that's fine. And then teach with the, with the new financing, can you let us give us an idea of how much liquidity that gives you and then how, you know, when, when, how long do you think that takes you from a catback perspective on your goal to the quarter thousand homes fast. Thanks.
Yeah, so the first-
Frank Luthan: The first piece wrote the 200 million, Frank, we did that talk in October . Like I alluded in my comments, we can do another 175.
Frank Luthan: in October of 2025, and that takes you pretty deep into the project. There would probably be the need to raise incremental capital along the way, but the total 375 between the two raises, I think, gets us pretty far along. To go back to the analyst, say, when we first
Frank Luthan: Talked about the Greenfield Project, you know, roughly what it caused for home, etc., etc. So I think we're reasonably good shaped and much better than we were before we did the deal.
Okay, great. Thank you.
Speaker Change: Your next question comes from a line of crucial from UBS. Your line is open.
Chris Scholl: Great. Thank you. You guided the broadband subscriber losses in one queue. I recognized ACP and storms had an impact in recent quarters, but any remnant impact you are anticipating from one cures, this is mainly a result of competition in your footprint, and just along these lines any color you can give on what you're seeing from six wireless fiber and cable in your markets would be helpful. Thank you.
Thanks, Chris.
Speaker Change: 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 hurricane, 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 both well. And hopefully we don't.
literally have any headwind from her canes again this year.
Speaker Change: We have seen good momentum from our simplified pricing, which not only brings in customers.
Speaker Change: but also has helped us with overall customers going to higher tiers, higher arthoos.
Speaker Change: and one of the things that we've been seeing is that our turn is going down.
Speaker Change: So we're seeing churn very low, certainly in our greenfield markets, but also in our legacy markets.
Speaker Change: with the implementation last year of our simplified pricing with the optional price block.
Speaker Change: and we think YouTube TV is also having a real benefit to us on churn. So of those things all both well with that said, yes, there is some competition in the market.
Speaker Change: and that continues the trends I think that we've seen across the whole industry.
Speaker Change: We see very little from satellite. Most of our competition, I think, is still with traditional cable companies and some some fixed wireless, but we feel very good about the offering that we have and how we have been competing.
Speaker Change: 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?
Speaker Change: 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 conversion.
Speaker Change: to continue to reduce their churn and drive that lifetime value with their customers.
Speaker Change: We see our ability to do that because we have the
Pricing that doesn't have surprises that our customers want.
with a very reliable, high-speed network.
Speaker Change: and we've also seen the benefits that have come from Moly Turn with YouTube TV. So we've
Speaker Change: I feel that we are getting the benefits of driving those.
Speaker Change: 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 space with the success of our green field market and the penetration that we're providing in those new markets too.
Great. Thank you very much.
Speaker Change: You are next question, comes from a line of Brandon Nispel from Keybank. Your line is open.
Speaker Change: Hey, thanks for taking the question. Question for John . John , adjusted even as increasingly being driven up what you guys are calling non-recurrents, professional fees, emanating integration.
Speaker Change: Could you help us understand what those are and maybe what's included in guidance 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 off.
Speaker Change: John Rego, John Rego, John Rego, John Rego
Speaker Change: 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 schedule, you'll see it going back years and years and years.
Speaker Change: and 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, you know, as we get through 2025, but if one of the give you some of the biggies that are in that line-in and would be things like the French settlement, they would be things like, you know, cost associated with the, you know. [inaudible]
Speaker Change: Theoretical M&A activity that you keep asking us about. There are costs associated with the restructuring or should we say the discontinuing of the video business.
Speaker Change: 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. The other 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
Speaker Change: some pretty big things. So the the the spring settlement will be done next year. I mean the payment of the spring settlement.
Speaker Change: You know, the change over of our how we approach video, you know, we're really moving now. We're going to have the 60,000 video RGU, which Teresa said when I joined 5,000, it was over 300,000. So, what's really moving now? That's the second big piece, and, you know, when examining bids, there's, you know, of course, you would imagine there are liquor cups and all of the kinds of cups that we incur. And they really have nothing to do with the ongoing running of the business.
Speaker Change: So yeah, it did go up and it'll come down again. There's been period 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.
Speaker Change: During the show, you'll start to see a come down and starting next show, you'll start to see it really go down. Hope that helps.
Speaker Change: Yeah, and then the second half of your question, Brandon, is about NetApps, 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 carry over from the hurricanes or from APC at this time. So that's in the review there. We hope we are beginning back some of the hurricane impacted customers who maybe have to relocate for some period of time. So we'll see again.
Speaker Change: So 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 you to TV with which also I think is something that very much satisfies customers they get to discount with us and they seem to be very happy with that service. [inaudible]
you're transitioning them off of the traditional product.
We also continue to...
Be pleased with the R-PRO improvement we're seeing.
Speaker Change: So we certainly are always looking at HSC NetAd, but we're also making sure that we are doing the right thing in terms of RAPOO and revenues for the business. So threading the need along the many goals that we have to achieve our financial.
Thanks for your questions.
Thanks.
Speaker Change: Your next question comes from the line of Matthew Harrigan from Benchmark. Your line is open.
Matthew Harrigan: 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 after T.H. given the collapse of the cost.
Matthew Harrigan: and Drs. 4-0 is problematical for a lot of operators. I mean, 3-1 is generally as much as people need. But given the appeal of 5-1, which you're well acquainted with, given your success on the DiNovo,
Bill, how are you thinking about your existing HSC?
Speaker Change: DePaul's, I assume it's on 3-1, it's probably two expenses together.
Speaker Change: 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, your irrespective of competition? Thanks.
Speaker Change: 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 market.
Speaker Change: 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.
Speaker Change: But with that, what you said as well is the path to docs with 4.0 and yes, we have 3.1 everywhere.
Speaker Change: So we're providing one dot two Gibbs 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 them.
Speaker Change: And I think that keeps us very competitive with the right kind of speeds we need for our customers.
Speaker Change: We are always balancing, like I, the question I just answered from Brandon, balancing the financial, you know, on the R Poo side to make sure we're driving revenue. We also are always looking at every dollar we spend in cat-backs.
Speaker Change: to make sure we're getting the best return for our investors, whether it's on the Greenfield side or continuing the path to Fort Otto 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.
Thanks, Teresa.
Speaker Change: 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.
Speaker Change: 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 buildings, green fields, and delighting our customers every day as we produce charm.
Speaker Change: The people of wow are the reasons 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.
Speaker Change: 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.
Speaker Change: This concludes today's conference call. Thank you for your participation. You may now disconnect.
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