ENGLEWOOD, Colo.--(BUSINESS WIRE)--
WideOpenWest, Inc. (“WOW!” or the “Company”) (NYSE: WOW), a leading,
fully integrated provider of residential and commercial high-speed data,
video and telephony services to customers in the United States, today
announced financial and operating results for the second quarter ended
June 30, 2017.
Second Quarter Highlights
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WOW! completed its initial public offering on May 25, 2017, raising
$356.5 million in gross proceeds
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2017 Edge-Out Nodes extended to 34,700 new homes passed; 2016 Edge-Out
Nodes totaled 40,300 homes passed and achieved 29% penetration
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Second quarter 2017 Total Revenue of $297.5 million; Net Income of
$5.0 million
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Second quarter 2017 Adjusted EBITDA of $112.2 million
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Transaction Adjusted business services subscription revenue grew 12.1%
year-over-year
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In July 2017, WOW! refinanced and up-sized its Term B Loan,
facilitating a full redemption of all 10.25% Senior Notes; over $60
million annualized Interest expense savings will be realized
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In August 2017, WOW! announced an agreement to sell a portion of its
fiber network in Chicago to Verizon for $225 million in cash and an
additional $50 million to complete the build
Financial Highlights (1)
For
the second quarter ended June 30, 2017, WOW! reported Total Revenue of
$297.5 million, Net Income of $5.0 million and Adjusted EBITDA of
$112.2 million, representing a decrease in Total Revenue of
$10.0 million, or 3.3%, a decrease in Net Income of $9.2 million and an
increase from Transaction Adjusted EBITDA of $1.1 million, or 1.0%, over
the second quarter ended June 30, 2016.
Total Revenue for the second quarter of 2017 was $297.5 million,
representing a $4.9 million, or 1.6%, decline from Total Revenue
including Acquisitions and Dispositions in the second quarter of 2016.
WOW!’s internet centric strategic focus has led to strong growth in
internet related revenue as HSD subscription revenues for the second
quarter ended June 30, 2017, on an actual basis, increased by $7.5
million, or 8.1%, over the year ago quarter.
“On May 25, 2017, we completed the initial public offering of WOW!. The
capital raised during that offering, and our subsequent transactions,
best position WOW! for sustainable growth going forward,” said Steven
Cochran, chief executive officer of WOW!. “Despite some anticipated
seasonality during the second quarter and a price increase effective in
June, the Company’s key objectives remain on course. WOW!’s focus on
edge outs, the growth of our commercial services business and driving
HSD connects continue to be the building blocks for a great future.”
“Raising $356.5 million through our initial public offering, coupled
with proceeds from the refinancing of our term loan and revolver on
hand, have enabled us to pay down our 10.25% Senior Notes entirely and
capture over $60 million in annualized interest savings on a go forward
basis,” said Rich Fish, chief financial officer of WOW!. “In addition,
we announced the sale of a portion of our Chicago fiber network to
Verizon, which will provide $225 million in cash at closing that we will
use to continue to de-lever the balance sheet.”
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(1)
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Refer to “Non-GAAP Financial Measures and Operating Metrics,”
“Unaudited Reconciliations of GAAP Measures to Non-GAAP Measures,”
and “Unaudited Transaction Adjusted Condensed Consolidated
Financial and Subscriber Information” in this Press Release for
definitions and information related to Adjusted EBITDA and
Transaction Adjusted financial and subscriber information.
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Revenue
On an actual basis,
second quarter Total Revenue decreased 3.3% year-over-year. Total
Revenue Including Acquisitions and Dispositions decreased 1.6%
year-over-year to $297.5 million, which was driven primarily by video
and telephony RGU losses experienced over the quarter and lower pass
through revenue, offset by increases in ARPU and business services
subscription revenue growth.
On an actual basis, Residential Subscription Revenue for the second
quarter of 2017 was down 3.2% year-over-year. Residential Subscription
Revenue Including Acquisitions and Dispositions decreased 1.8%
year-over-year to $231.3 million. The largest contributor to the decline
was video and telephony RGU losses, partially offset by increases in
ARPU.
On an actual basis, Business Services Subscription Revenue for the
second quarter of 2017 was up 6.7% year-over-year. Business Services
Subscription Revenue Including Acquisitions and Dispositions increased
12.1% year-over-year to $28.7 million.
Other Business Services Revenue totaled $10.6 million for the second
quarter, a decrease of 22.1% on a year-over-year basis. The decline was
driven by pass through revenue related to the construction of the
Company’s wireless backhaul project which is one time in nature.
Other revenue of $26.9 million in the second quarter 2017 decreased 3.9%
on a year-over-year basis.
Costs and Expenses
Operating
expenses, excluding depreciation and amortization, totaled $157.4
million in the second quarter 2017, a decrease of $10.1 million, or 6.0%
on a year-over-year basis. The change was driven by lower programming
costs due to video RGU losses over the quarter and the net effect of the
Company’s acquisitions and dispositions.
Selling, general, and administrative expenses were $32.5 million for the
second quarter of 2017, an increase of $4.9 million, or 17.8%, on a
year-over-year basis. The increase was driven by higher employee related
costs and an increase in telecom taxes, which was partially offset by
the net effect of the Company’s acquisitions and dispositions.
Net Income and Earnings per Share
Second
quarter 2017 Net Income was $5.0 million, down $9.2 million from the
second quarter of 2016. Second quarter 2017 Fully Diluted Earnings per
Share (EPS) was $0.07, down $0.14 from the second quarter of 2016. The
decline in Net Income and EPS can be attributed to decreases in Income
from Operations and increases in Income Taxes partially offset by lower
Interest Expense during the quarter. The sequential decline from the
first quarter of 2017 Net Income of $72.4 million is largely
attributable to the closing of the Lawrence, Kansas transaction.
Adjusted EPS for the second quarter of 2017 was $0.15.
Adjusted EBITDA
Second quarter
2017 Adjusted EBITDA was $112.2 million, up 1.0%, from the second
quarter of 2016 on a transaction adjusted basis. Second quarter 2017
Adjusted EBITDA margin was 37.7% up 97 basis points from the same period
a year ago on a transaction adjusted basis.
Customers
As of the second
quarter of 2017, WOW! reported total subscribers of 776,500 versus
770,200 in the second quarter of 2016 on a transaction adjusted basis, a
0.8% increase. The sequential decline from 780,100 in the first quarter
of 2017 reflects a combination of seasonality and the implementation of
the Company’s annual price increase during the second quarter.
HSD RGUs totaled 727,600, representing a 16,100 increase over the same
period, on a transaction adjusted basis, from a year ago, or 2.3%, and a
slight decline from the first quarter of 2017 from 729,000 or 0.2%.
Edge-Outs
As of June 30, 2017,
WOW! has extended its network to 75,000 new homes passed as part of the
Company’s Edge-Out growth efforts started in 2016. Edge-Out projects
begun in 2016 (“2016 Edge-Out Nodes”) passed approximately 40,300 homes
at June 30, 2017. The Company has 11,600 new customers on such nodes,
which represents 29% penetration with an average of 320 days active. The
penetration on such nodes has increased from 23% at year-end 2016.
The Edge-Out projects begun in 2017 (“2017 Edge-Out Nodes”) passed
approximately 34,700 homes at June 30, 2017. WOW! has 5,200 new
customers on such nodes, which represents 15% penetration with an
average of 77 days active.
Capital Expenditures
Capital
expenditures totaled $72.8 million in the second quarter of 2017,
compared to $71.3 million during the second quarter of 2016. Strategic
capital expenditures, defined as Edge-Out capital expenditures and
business services capital expenditures dedicated to expansion of the
Company’s network, was $29.5 million for the three months ended June 30,
2017, which represented a decrease of $0.1 million over the three months
ended June 30, 2016, in which a decline in business services capital
expenditures offset the increase in Edge-Out expenditures. Excluding
strategic capital expenditures of Edge-Outs and Business Services,
capital expenditures in the second quarter of 2017 totaled $43.3
million, which equates to 14.6% of total reported revenues for the
second quarter of 2017.
Cash Flow and Free Cash Flow
Net
cash provided by operating activities decreased $8.9 million from
$116.1 million for the six months ended June 30, 2016, to $107.2 million
for the six months ended June 30, 2017. The decrease is primarily due to
the timing of payments related to working capital accounts during the
six months ended June 30, 2017.
Free cash flow for the six months ended June 30, 2017, totaled ($44.8)
million, compared to ($18.8) million during the same period last year.
The change was related to an $8.9 million decrease in net cash flows
from operations and $17.1 million increase in capital expenditures. As
discussed more fully below, the Company effected a refinancing in July
2017 of its outstanding debt balances which will result in an annualized
reduction of interest expense of over $60 million.
Liquidity and Financing
As of
June 30, 2017, the total principal amount of debt outstanding was
approximately $2.8 billion and WOW!’s undrawn revolver provided $192.1
million of additional liquidity. Cash and cash equivalents as of June
30, 2017 was $427.5 million.
Subsequent to the quarter, on July 17, 2017, WOW! completed a
refinancing of its Term B Loans, increasing Term B Loans by $230.5
million, reduced the pricing on the facility by 25 basis points to LIBOR
plus 325 basis points, and upsized the revolver capacity to $300
million. Coupled with the proceeds from the IPO and $180 million from
the revolver, WOW! redeemed all of its outstanding 10.25% Senior Notes.
The annualized impact from these transactions equate to over $60 million
in interest savings.
Announced Sale of a Portion of Chicago Fiber
Network
On August 1, 2017, the Company announced it had
entered into a definitive agreement to sell a portion of its fiber
network in the Company’s Chicago market for $225 million in cash. In
addition, WOW! will enter into a new agreement pursuant to which WOW!
will complete the build-out of the network in exchange for approximately
$50 million payable at the remaining network elements are completed.
WOW!’s financial outlook for the twelve month period ending December 31,
2017, previously included Revenues and Adjusted EBITDA attributable to
the network totaling approximately $13.7 million and $13.2 million,
respectively. A portion of the proceeds are expected to be used to
pay-down WOW!’s existing debt balances. The transaction is expected to
close by the first quarter of 2018.
Conference Call
WOW! will host
a conference call on Monday, August 14, 2017, at 11:00 a.m. Eastern to
discuss the operating and financial results contained in this press
release. The conference call will be broadcast live on the Company’s
investor relations website at ir.wowway.com.
Those parties interested in participating via telephone can use the
conference call information as follows:
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Call Date:
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Monday, August 14, 2017
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Call Time:
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11:00 a.m. Eastern
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Dial In:
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(877) 541-5069
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Intn’l Dial In:
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(443) 842-7607
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Conf. ID:
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54326072
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A recording of the conference call will be available approximately two
hours after the completion of the call until September 14, 2017. The
dial-in number for this replay is (855) 859-2056.
The following unaudited condensed consolidated statements of operations
summarizes information in the Company’s Form 10-Q for the quarter ended
June 30, 2017, as filed on August 14, 2017, with the United States
Securities and Exchange Commission (“SEC”). For ease of use, references
in this release to “WOW!” means WideOpenWest, Inc. and its consolidated
subsidiaries.
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WideOpenWest Inc.
Condensed Consolidated Statements of Operations (Unaudited)
($ in millions, except for per share data)
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Three months ended
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Six months ended
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June 30,
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June 30,
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2017
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2016
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2017
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2016
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Revenue
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Residential subscription
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$
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231.3
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$
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239.0
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$
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463.7
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$
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479.5
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Business services subscription
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28.7
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26.9
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56.8
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52.7
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Total subscription
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260.0
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265.9
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520.5
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532.2
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Other business services
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10.6
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13.6
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21.7
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21.8
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Other
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26.9
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28.0
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55.3
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55.8
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Total Revenue
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$
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297.5
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$
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307.5
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$
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597.5
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$
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609.8
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Costs and expenses:
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Operating (excluding depreciation and amortization)
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$
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157.4
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$
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167.5
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$
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317.2
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$
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332.0
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Selling, general and administrative
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32.5
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27.6
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62.8
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53.6
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Depreciation and amortization
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50.8
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52.9
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101.1
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105.4
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Management fee to related party
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0.5
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0.5
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1.0
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0.9
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$
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241.2
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$
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248.5
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$
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482.1
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$
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491.9
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Income from operations
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$
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56.3
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$
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59.0
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$
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115.4
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$
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117.9
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Other income (expense):
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Interest expense
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(44.1
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(55.2
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(89.8
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(109.4
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)
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Loss on early extinguishment of debt
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(1.0
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(2.5
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(6.0
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(2.5
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Gain (loss) on sale of assets
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(0.3
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)
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-
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38.4
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-
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Realized and unrealized gain on derivative instruments, net
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-
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1.2
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-
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2.3
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Other income, net
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-
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0.1
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1.4
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0.1
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Income tax (expense) benefit
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(5.9
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)
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11.6
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18.0
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10.1
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Net Income
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$
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5.0
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$
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14.2
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$
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77.4
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$
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18.5
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Basic and diluted earnings per common shares
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Basic
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$
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0.07
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$
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0.21
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$
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1.10
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$
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0.28
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Diluted
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$
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0.07
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$
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0.21
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$
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1.10
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$
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0.28
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Weighted-average common shares outstanding
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Basic
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74,309,106
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66,525,044
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70,413,415
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65,138,672
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Diluted
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74,333,425
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66,531,070
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70,437,734
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65,144,698
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About WOW!
WOW! is one of the
nation’s leading providers of high-speed internet, cable TV and phone
serving communities in the U.S. Our operating philosophy is to deliver
an employee and customer experience that lives up to its name. For more
information, please visit www.wowway.com.
Forward-Looking Statements
This press release may contain forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended. All
statements, other than statements of historical facts, included in this
release are forward-looking statements. Forward-looking statements
discuss our current expectations and projections relating to our
financial condition, results of operations, plans, objectives, future
performance and business. Forward-looking statements are not guarantees
of future performance and we caution you not to place undue reliance on
such statements. Forward-looking statements are generally identifiable
by the use of the words “may,” “will,” “should,” “expect,” “anticipate,”
“estimate,” “believe,” “intend,” “project,” “continue,” or the negative
of these words, or other similar words or terms. The forward-looking
statements included in this release are made as of the date hereof.
Except as required by law, we assume no obligation to publicly update
any forward-looking statement, even if new information becomes available
in the future or if experience or future changes make it clear that any
projected results expressed or implied in such statements will not be
realized. If we do update one or more forward-looking statements, no
inference should be made that we will make additional updates with
respect to those or other forward-looking statements. Actual results may
differ materially from those expected because of various risks and
uncertainties, many of which are beyond our control, including the wide
range of competition we face in our business; competitors that are
larger and possess more resources; competition; dependence upon a
business services strategy; conditions in the economy, including
potentially uncertain economic conditions; our ability to secure new
businesses as customers; demand for our bundled broadband communications
services may be lower than we expect; our ability to respond to rapid
technological change; increases in programming and retransmission costs;
a decline in advertising revenues; the effects of regulatory changes in
our business; our substantial level of indebtedness; certain covenants
in our debt documents; programming exclusivity in favor of our
competitors; inability to obtain necessary hardware, software and
operational support; strain on business and resources from future
acquisitions, or the inability to identify suitable acquisitions; and
other factors that may be described from time to time in our filings
with the SEC. All forward-looking statements are expressly qualified in
their entirety by these cautionary statements.
Non-GAAP Financial Measures and Operating
Metrics
We have included certain non-GAAP financial
measures in this release, including: Revenues Including Acquisitions and
Dispositions, Residential Subscription Revenue Including Acquisitions
and Dispositions, Business Services Subscription Revenue Including
Acquisitions and Dispositions, Adjusted EBITDA, Transaction Adjusted
EBITDA, Transaction Adjusted Capital Expenditures, Adjusted EPS and Free
Cash Flow. The presentation of these financial measures is not intended
to be considered in isolation or as a substitute for, or superior to,
the financial information prepared and presented in accordance with
generally accepted accounting principles in the United States of America
(“GAAP”). We believe that these non-GAAP measures enhance an investor’s
understanding of our financial performance. We believe that these
non-GAAP measures are useful financial metrics to assess our operating
performance from period to period by excluding certain items that we
believe are not representative of our core business. We believe that
these non-GAAP measures provide investors with useful information for
assessing the comparability between periods of our ability to generate
cash from operations sufficient to pay taxes, to service debt and to
undertake capital expenditures. We use these non-GAAP measures for
business planning purposes and in measuring our performance relative to
that of our competitors. We believe these non-GAAP measures are measures
commonly used by investors to evaluate our performance and that of our
competitors.
Revenue Including Acquisitions and Dispositions is included herein
because it is a key metric used by management and our Board of Directors
to assess our financial performance. We define Revenue Including
Acquisitions and Dispositions as revenue after giving effect to certain
acquisitions and divestitures made by WOW! We believe that Revenue
Including Acquisitions and Dispositions is an appropriate measure of
operating performance because it is meaningful to investors by showing
how certain acquisitions and divestitures might have affected our
historical financial statements. There are no Acquisitions and
Dispositions reflected in second quarter 2017 results.
The presentation of Revenue Including Acquisitions and Dispositions is
not made in accordance with GAAP and our use of the term Revenue
Including Acquisitions and Dispositions herein varies from the use of
similar terms by other companies in our industry due to different
methods of calculation and is not necessarily comparable. Revenue
Including Acquisitions and Dispositions should not be considered as an
alternative to revenue or any other performance measures derived in
accordance with GAAP as measures of operating performance.
Residential Subscription Revenue Including Acquisitions and Dispositions
is included herein because it is a key metric used by management and our
Board of Directors to assess our financial performance. We define
Residential Subscription Revenue Including Acquisitions and Dispositions
as Residential Subscription Revenue after giving effect to certain
acquisitions and divestitures made by WOW! We believe that Residential
Subscription Revenue Including Acquisitions and Dispositions is an
appropriate measure of operating performance because it is meaningful to
investors by showing how certain acquisitions and divestitures might
have affected our historical financial statements. There are no
Acquisitions and Dispositions reflected in second quarter 2017 results.
The presentation of Residential Subscription Revenue Including
Acquisitions and Dispositions is not made in accordance with GAAP and
our use of the term Residential Subscription Revenue Including
Acquisitions and Dispositions herein varies from the use of similar
terms by other companies in our industry due to different methods of
calculation and is not necessarily comparable. Residential Subscription
Revenue Including Acquisitions and Dispositions should not be considered
as an alternative to residential subscription revenue or any other
performance measures derived in accordance with GAAP as measures of
operating performance.
Business Services Subscription Revenue Including Acquisitions and
Dispositions is included herein because it is a key metric used by
management and our Board of Directors to assess our financial
performance. We define Business Services Subscription Revenue Including
Acquisitions and Dispositions as Business Services Subscription Revenue
after giving effect to certain acquisitions and divestitures made by
WOW! We believe that Business Services Subscription Revenue Including
Acquisitions and Dispositions is an appropriate measure of operating
performance because it is meaningful to investors by showing how certain
acquisitions and divestitures might have affected our historical
financial statements. There are no Acquisitions and Dispositions
reflected in second quarter 2017 results.
The presentation of Business Services Subscription Revenue Including
Acquisitions and Dispositions is not made in accordance with GAAP and
our use of the term Business Services Subscription Revenue Including
Acquisitions and Dispositions herein varies from the use of similar
terms by other companies in our industry due to different methods of
calculation and is not necessarily comparable. Business Services
Subscription Revenue Including Acquisitions and Dispositions should not
be considered as an alternative to Business Services Subscription
Revenue or any other performance measures derived in accordance with
GAAP as measures of operating performance.
Adjusted EBITDA is included herein because it is a key metric used by
management and our Board of Directors to assess our financial
performance. We believe that Adjusted EBITDA is an appropriate measure
of operating performance because it eliminates the impact of expenses
that do not relate to business performance, and that the presentation of
this measure enhances an investor’s understanding of our financial
performance. Transaction Adjusted EBITDA makes certain additional
adjustments to the historical financial information that WOW! believes
is meaningful to investors by showing how certain acquisitions and
divestitures might have affected WOW!’s historical financial statements.
Adjusted EBITDA is defined by WOW! as net income (loss) before net
interest expense, income taxes, depreciation and amortization (including
impairments), gains (losses) realized and unrealized on derivative
instruments, management fees to related party, the write-up or write-off
of any asset, debt modification expenses, loss on early extinguishment
of debt, integration and restructuring expenses and all non-cash charges
and expenses (including equity based compensation expense) and certain
other income and expenses. Transaction Adjusted EBITDA represents
Adjusted EBITDA after giving effect to the impact of acquisitions and
dispositions that were completed during the relevant periods as if they
occurred at the beginning of the period presented. Adjusted EBITDA and
Transaction Adjusted EBITDA are not a presentation made in accordance
with GAAP and our use of the terms Adjusted EBITDA and Transaction
Adjusted EBITDA may vary from others in our industry. Adjusted EBITDA
and Transaction Adjusted EBITDA should not be considered as an
alternative to net income (loss), operating income or any other
performance measures derived in accordance with GAAP as measures of
operating performance or operating cash flows, or as measures of
liquidity. There are no Transaction Adjustments reflected in second
quarter 2017 results.
Adjusted EBITDA and Transaction Adjusted EBITDA have important
limitations as an analytical tool. For example, Adjusted EBITDA and
Transaction Adjusted EBITDA:
-
exclude certain tax payments that may represent a reduction in cash
available to us;
-
do not reflect any cash capital expenditure requirements for the
assets being depreciated and amortized that may have to be replaced in
the future;
-
do not reflect changes in, or cash requirements for, our working
capital needs; and
-
do not reflect the significant interest expense, or the cash
requirements necessary to service interest or principal payments on
our debt.
Transaction Adjusted Capital Expenditures is included herein because it
is a key metric used by management and our Board of Directors to assess
our financial performance. We define Transaction Adjusted Capital
Expenditures as capital expenditures after giving effect to certain
acquisitions and divestitures made by the Company. We believe that
Transaction Adjusted Capital Expenditures is an appropriate measure of
operating performance because it is meaningful to investors by showing
how certain acquisitions and divestitures might have affected WOW!’s
historical financial statements. There are no Transaction Adjustments
reflected in second quarter 2017 results.
The presentation of Transaction Adjusted Capital Expenditures is not
made in accordance with GAAP and our use of the term Transaction
Adjusted Capital Expenditures herein varies from the use of similar
terms by other companies in our industry due to different methods of
calculation and is not necessarily comparable. Transaction Adjusted
Capital Expenditures should not be considered as an alternative to
capital expenditures or any other performance measures derived in
accordance with GAAP as measures of operating performance.
Adjusted EPS is included herein because it is a key metric used by
management and our Board of Directors to assess our financial
performance. Adjusted EPS is a non-GAAP financial measure that
eliminates the effect of management fees to related party, loss on early
extinguishment of debt, gain (loss) on sale of assets, non-recurring
professional fees, M&A integration and restructuring expense, non-cash
stock compensation, and other (income) and expenses. We then add or
subtract an estimated incremental income tax effect applicable to those
items. We believe that this measurement is useful to investors as an
additional way to analyze the underlying trends in our business
consistently across the periods presented.
The presentation of Adjusted EPS is not made in accordance with GAAP and
our use of the term Adjusted EPS herein varies from the use of similar
terms by other companies in our industry due to different methods of
calculation and is not necessarily comparable. Adjusted EPS should not
be considered as an alternative to EPS or any other performance measures
derived in accordance with GAAP as measures of operating performance.
See “Unaudited Reconciliations of GAAP Measures to Non-GAAP Measures”
and the accompanying tables below for a reconciliation of Adjusted
EBITDA to our net income (loss), which is the most directly comparable
GAAP financial measure.
Free Cash Flow is included herein because it is a key metric used by
management and our Board of Directors to assess our financial
performance. We define Free Cash Flow as Net cash flows provided by
operating activities less Capital Expenditures. We believe that Free
Cash Flow is an appropriate measure of operating performance because it
is meaningful to investors because it presents the cash generated or
used by the business in a given period, and that the presentation of
this measure enhances an investor’s understanding of our financial
performance.
The presentation of Free Cash Flow is not made in accordance with GAAP
and our use of the term Free Cash Flow herein varies from the use of
similar terms by other companies in our industry due to different
methods of calculation and is not necessarily comparable. Free Cash Flow
should not be considered as an alternative to net income or any other
performance measures derived in accordance with GAAP as measures of
operating performance.
In addition, we use the following subscriber information in this release:
-
Homes Passed – We report homes passed as
the number of serviceable addresses, such as single residence homes,
apartments condominium units and businesses passed by our broadband
network and listed in our database.
-
Subscribers – Because we deliver multiple
services to our customers, we report the total number of customers
(“Total Customers”) as those who subscribe to at least one of our
high-speed data (“HSD”), video (“Video”) or telephony (“Telephony”)
services without regard to which or how many of those services they
subscribe. We report Video subscribers as the number of basic cable
subscribers, excluding customers who only subscribe to HSD or
Telephony services in this total. We define total Revenue Generating
Units (“RGUs”) as the sum of HSD subscribers, Video subscribers and
Telephony subscribers.
Subscriber information for acquired entities is preliminary and subject
to adjustment until we have completed our review of such information and
determined that it is presented in accordance with our policies. While
we take appropriate steps to ensure subscriber information is presented
on a consistent and accurate basis at any given balance sheet date, we
periodically review our policies in light of the variability we may
encounter across our different markets due to the nature and pricing of
products and services and billing systems. Accordingly, we may from time
to time make appropriate adjustments to our subscriber information based
on such reviews.
Unaudited Reconciliations of GAAP Measures to
Non-GAAP Measures
The following table provides an
unaudited reconciliation of our Net Income to Adjusted EBITDA for the
respective quarters ended and for the six month period ended June 30,
2017, and June 30, 2016:
WideOpenWest, Inc.
Reconciliation of GAAP Measures to Non-GAAP Measures (Unaudited)
($ in millions, except for per share data)
|
|
|
|
|
|
|
|
Three months ended
|
|
|
Six months ended
|
|
|
|
June 30,
|
|
|
June 30,
|
|
|
|
2017
|
|
|
2016
|
|
|
2017
|
|
|
2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
$
|
|
|
|
|
5.0
|
|
|
|
$
|
14.2
|
|
|
|
$
|
|
|
|
|
77.4
|
|
|
|
$
|
|
|
|
|
18.5
|
|
Depreciation and amortization
|
|
|
|
|
|
|
|
50.8
|
|
|
|
|
52.9
|
|
|
|
|
|
|
|
|
101.1
|
|
|
|
|
|
|
|
|
105.4
|
|
Management fee to related party
|
|
|
|
|
|
|
|
0.5
|
|
|
|
|
0.5
|
|
|
|
|
|
|
|
|
1.0
|
|
|
|
|
|
|
|
|
0.9
|
|
Interest expense
|
|
|
|
|
|
|
|
44.1
|
|
|
|
|
55.2
|
|
|
|
|
|
|
|
|
89.8
|
|
|
|
|
|
|
|
|
109.4
|
|
Loss on early extinguishment of debt
|
|
|
|
|
|
|
|
1.0
|
|
|
|
|
2.5
|
|
|
|
|
|
|
|
|
6.0
|
|
|
|
|
|
|
|
|
2.5
|
|
Realized and unrealized gain on derivative instruments, net
|
|
|
|
|
|
|
|
-
|
|
|
|
|
(1.2
|
)
|
|
|
|
|
|
|
|
-
|
|
|
|
|
|
|
|
|
(2.3
|
)
|
Gain (loss) on sale of assets
|
|
|
|
|
|
|
|
0.3
|
|
|
|
|
-
|
|
|
|
|
|
|
|
|
(38.4
|
)
|
|
|
|
|
|
|
|
-
|
|
Non-recurring professional fees, M&A integration and restructuring
expense
|
|
|
|
|
|
|
|
2.0
|
|
|
|
|
2.4
|
|
|
|
|
|
|
|
|
3.9
|
|
|
|
|
|
|
|
|
3.5
|
|
Non-cash stock compensation
|
|
|
|
|
|
|
|
2.6
|
|
|
|
|
0.1
|
|
|
|
|
|
|
|
|
3.1
|
|
|
|
|
|
|
|
|
0.1
|
|
Other income, net
|
|
|
|
|
|
|
|
-
|
|
|
|
|
(0.1
|
)
|
|
|
|
|
|
|
|
(1.4
|
)
|
|
|
|
|
|
|
|
(0.1
|
)
|
Income tax (benefit) expense
|
|
|
|
|
|
|
|
5.9
|
|
|
|
|
(11.6
|
)
|
|
|
|
|
|
|
|
(18.0
|
)
|
|
|
|
|
|
|
|
(10.1
|
)
|
Adjusted EBITDA (1)
|
|
|
$
|
|
|
|
|
112.2
|
|
|
|
$
|
114.9
|
|
|
|
$
|
|
|
|
|
224.5
|
|
|
|
$
|
|
|
|
|
227.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash flows provided by operating activities
|
|
|
|
|
|
|
|
76.2
|
|
|
|
|
89.9
|
|
|
|
|
|
|
|
|
107.2
|
|
|
|
|
|
|
|
|
116.1
|
|
Less: Capital Expenditures
|
|
|
|
|
|
|
|
(72.8
|
)
|
|
|
|
(71.3
|
)
|
|
|
|
|
|
|
|
(152.0
|
)
|
|
|
|
|
|
|
|
(134.9
|
)
|
Free Cash Flow
|
|
|
$
|
|
|
|
|
3.4
|
|
|
|
$
|
18.6
|
|
|
|
$
|
|
|
|
|
(44.8
|
)
|
|
|
$
|
|
|
|
|
(18.8
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30,
|
|
|
|
|
|
|
|
|
|
|
|
|
2017
|
|
|
|
|
|
|
|
|
|
|
|
|
Per Share
|
|
|
|
|
|
|
Diluted Earnings per Share
|
|
|
$
|
0.07
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Management fee to related party
|
|
|
|
0.01
|
|
|
|
|
|
|
|
Loss on early extinguishment of debt
|
|
|
|
0.01
|
|
|
|
|
|
|
|
Gain (loss) on sale of assets
|
|
|
|
0.00
|
|
|
|
|
|
|
|
Non-recurring professional fees, M&A integration and restructuring
expense
|
|
|
|
0.03
|
|
|
|
|
|
|
|
Non-cash stock compensation
|
|
|
|
0.03
|
|
|
|
|
|
|
|
Income tax applicable to adjustments, net(2)
|
|
|
|
(0.00
|
)
|
|
|
|
|
|
|
Adjusted EPS
|
|
|
$
|
0.15
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
|
See “Unaudited Transaction Adjusted Condensed Consolidated
Financial and Subscriber Information” below for a
reconciliation of Adjusted EBITDA to Transaction Adjusted EBITDA
for the respective quarters ended giving effect the acquisition of
NuLink on September 9, 2016, and our divestiture of the Lawrence,
Kansas, system on January 12, 2017, as if such transactions had
been completed at the beginning of the respective periods
presented herein.
|
|
|
|
|
(2)
|
|
|
The income tax impacts are determined using the applicable
rates in the taxing jurisdictions in which expense or income
occurred and includes both current and deferred income tax expense
(benefit) based on the nature of the non-GAAP performance measure.
|
|
|
|
|
|
|
|
|
Unaudited Transaction Adjusted Condensed
Consolidated Financial and Subscriber Information
The
SEC requires that pro forma financial information be presented in a
registrant’s periodic filings when events occur for which disclosure
would be material to investors, including significant business
combinations or the disposition of a significant portion of the
business. The significance of an acquired or disposed business is
determined based on the “significant subsidiary” tests specified in
Regulation S-X, Article 11, Rule 1-02(w). In this regard, although the
Company has made certain acquisitions and divestitures, such
transactions do not meet the “significant subsidiary” tests and,
accordingly, the Company’s historical financial information as filed
with the SEC does not contain pro forma financial information relating
to those transactions.
Nevertheless, we make certain adjustments in this release to the
historical financial and subscriber information of the Company
(“Transaction Adjusted”) as filed with the SEC because we believe such
information would be meaningful to investors by showing how such
transactions might have affected the Company’s historical financial
statements. The unaudited Transaction Adjusted financial and subscriber
information in this release has been prepared giving effect to our
acquisition of the operating assets of NuLink on September 9, 2016, and
our divestiture of the Lawrence, Kansas system on January 12, 2017, as
if such transactions had been completed at the beginning of the
respective periods presented herein. The unaudited Transaction Adjusted
financial and subscriber information is for informational purposes only
and does not purport to represent what our results of operations,
financial or subscriber information would have been if such transactions
had occurred at any date, nor does such information purport to project
the results of operations for any future period.
The unaudited Transaction Adjusted condensed consolidated financial and
subscriber information in this release was prepared based on NuLink’s
unaudited financial and subscriber information for the respective
periods presented. The historical unaudited financial and subscriber
information has been adjusted to give a Transaction Adjusted effect to
events that are directly attributable to such transactions, factually
supportable and expected to have a continuing impact on the results. The
unaudited Transaction Adjusted financial information herein does not
reflect non-recurring charges that have been incurred in connection with
the transaction including legal fees, broker fees and accounting fees.
The following table provides an unaudited reconciliation of our
residential subscription revenue to residential subscription revenue
including Acquisitions and Dispositions, business services subscription
revenue to business services subscription revenue including Acquisitions
and Dispositions, Total Revenue to Total Revenue including Acquisitions
and Dispositions, Adjusted EBITDA to Transaction Adjusted EBITDA and
Capital Expenditures to Transaction Adjusted Capital Expenditures for
the respective quarters ended and for the six month period ended June
30, 2017, and June 30, 2016:
WideOpenWest, Inc.
Transaction Adjusted Condensed Consolidated Financial Information
(Unaudited)
($ in millions)
|
|
|
|
|
Three months ended
|
|
|
Six months ended
|
|
|
|
June 30,
|
|
|
June 30,
|
|
|
|
2017
|
|
|
2016
|
|
|
2017
|
|
|
2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential Subscription Revenue
|
|
|
$
|
231.3
|
|
|
$
|
239.0
|
|
|
|
$
|
463.7
|
|
|
|
$
|
479.5
|
|
Acquisitions and Dispositions:
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential Subscription related to the Lawrence system
|
|
|
|
-
|
|
|
|
(8.3
|
)
|
|
|
|
(1.1
|
)
|
|
|
|
(16.7
|
)
|
Residential Subscription related to NuLink
|
|
|
|
-
|
|
|
|
4.9
|
|
|
|
|
-
|
|
|
|
|
9.8
|
|
Residential Subscription Revenue Including Acquisitions and
Dispositions
|
|
|
$
|
231.3
|
|
|
$
|
235.6
|
|
|
|
$
|
462.6
|
|
|
|
$
|
472.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Business Services Subscription Revenue
|
|
|
$
|
28.7
|
|
|
$
|
26.9
|
|
|
|
$
|
56.8
|
|
|
|
$
|
52.7
|
|
Acquisitions and Dispositions:
|
|
|
|
|
|
|
|
|
|
|
|
|
Business Services Subscription related to the Lawrence system
|
|
|
|
-
|
|
|
|
(1.8
|
)
|
|
|
|
(0.3
|
)
|
|
|
|
(3.5
|
)
|
Business Services Subscription related to NuLink
|
|
|
|
-
|
|
|
|
0.5
|
|
|
|
|
-
|
|
|
|
|
1.0
|
|
Business Services Subscription Including Acquisitions and
Dispositions
|
|
|
$
|
28.7
|
|
|
$
|
25.6
|
|
|
|
$
|
56.5
|
|
|
|
$
|
50.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Revenue
|
|
|
$
|
297.5
|
|
|
$
|
307.5
|
|
|
|
$
|
597.5
|
|
|
|
$
|
609.8
|
|
Acquisitions and Dispositions:
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue related to the Lawrence system
|
|
|
|
-
|
|
|
|
(11.3
|
)
|
|
|
|
(1.5
|
)
|
|
|
|
(22.8
|
)
|
Revenue related to NuLink
|
|
|
|
-
|
|
|
|
6.2
|
|
|
|
|
-
|
|
|
|
|
12.4
|
|
Total Revenue Including Acquisitions and Dispositions
|
|
|
$
|
297.5
|
|
|
$
|
302.4
|
|
|
|
$
|
596.0
|
|
|
|
$
|
599.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA
|
|
|
$
|
112.2
|
|
|
$
|
114.9
|
|
|
|
$
|
224.5
|
|
|
|
$
|
227.8
|
|
Transaction Adjustments:
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA related to the Lawrence system
|
|
|
|
-
|
|
|
|
(5.9
|
)
|
|
|
|
(1.0
|
)
|
|
|
|
(11.8
|
)
|
Adjusted EBITDA related to NuLink
|
|
|
|
-
|
|
|
|
2.1
|
|
|
|
|
-
|
|
|
|
|
4.1
|
|
Transaction Adjusted EBITDA
|
|
|
$
|
112.2
|
|
|
$
|
111.1
|
|
|
|
$
|
223.5
|
|
|
|
$
|
220.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital Expenditures
|
|
|
$
|
72.8
|
|
|
$
|
71.3
|
|
|
|
$
|
152.0
|
|
|
|
$
|
134.9
|
|
Transaction Adjustments:
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital expenditures related to the Lawrence system
|
|
|
|
-
|
|
|
|
(1.4
|
)
|
|
|
|
(0.1
|
)
|
|
|
|
(2.7
|
)
|
Capital expenditures related to NuLink
|
|
|
|
-
|
|
|
|
1.7
|
|
|
|
|
-
|
|
|
|
|
2.9
|
|
Transaction Adjusted Capital Expenditures
|
|
|
$
|
72.8
|
|
|
$
|
71.6
|
|
|
|
$
|
151.9
|
|
|
|
$
|
135.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following table provides an unaudited reconciliation of our reported
subscriber information to Transaction Adjusted subscriber information as
of the end of each of the respective quarterly periods:
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30,
|
|
|
March 31,
|
|
|
June 30,
|
|
|
|
2016
|
|
|
2017
|
|
|
2017
|
|
|
|
|
|
|
|
|
|
|
Reported Homes Passed
|
|
|
3,022,800
|
|
|
|
3,047,800
|
|
|
3,072,500
|
Transaction Adjustments:
|
|
|
|
|
|
|
|
|
|
NuLink
|
|
|
34,000
|
|
|
|
-
|
|
|
-
|
Lawrence
|
|
|
(67,700
|
)
|
|
|
-
|
|
|
-
|
Transaction Adjusted Homes Passed
|
|
|
2,989,100
|
|
|
|
3,047,800
|
|
|
3,072,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reported Total Customers
|
|
|
785,600
|
|
|
|
780,100
|
|
|
776,500
|
Transaction Adjustments:
|
|
|
|
|
|
|
|
|
|
NuLink
|
|
|
15,200
|
|
|
|
-
|
|
|
-
|
Lawrence
|
|
|
(30,600
|
)
|
|
|
-
|
|
|
-
|
Transaction Adjusted Total Customers
|
|
|
770,200
|
|
|
|
780,100
|
|
|
776,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reported HSD Subscribers
|
|
|
725,700
|
|
|
|
729,000
|
|
|
727,600
|
Transaction Adjustments:
|
|
|
|
|
|
|
|
|
|
NuLink
|
|
|
13,600
|
|
|
|
-
|
|
|
-
|
Lawrence
|
|
|
(27,800
|
)
|
|
|
-
|
|
|
-
|
Transaction Adjusted HSD Subscribers
|
|
|
711,500
|
|
|
|
729,000
|
|
|
727,600
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reported Video Subscribers
|
|
|
524,300
|
|
|
|
474,000
|
|
|
458,200
|
Transaction Adjustments:
|
|
|
|
|
|
|
|
|
|
NuLink
|
|
|
9,800
|
|
|
|
-
|
|
|
-
|
Lawrence
|
|
|
(15,600
|
)
|
|
|
-
|
|
|
-
|
Transaction Adjusted Video Subscribers
|
|
|
518,500
|
|
|
|
474,000
|
|
|
458,200
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reported Telephony Subscribers
|
|
|
277,500
|
|
|
|
243,000
|
|
|
235,400
|
Transaction Adjustments:
|
|
|
|
|
|
|
|
|
|
NuLink
|
|
|
3,600
|
|
|
|
-
|
|
|
-
|
Lawrence
|
|
|
(7,400
|
)
|
|
|
-
|
|
|
-
|
Transaction Adjusted Telephony Subscribers
|
|
|
273,700
|
|
|
|
243,000
|
|
|
235,400
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reported Total RGUs
|
|
|
1,527,500
|
|
|
|
1,446,000
|
|
|
1,421,200
|
Transaction Adjustments:
|
|
|
|
|
|
|
|
|
|
NuLink
|
|
|
27,000
|
|
|
|
-
|
|
|
-
|
Lawrence
|
|
|
(50,800
|
)
|
|
|
-
|
|
|
-
|
Transaction Adjusted Total RGUs
|
|
|
1,503,700
|
|
|
|
1,446,000
|
|
|
1,421,200
|
View source version on businesswire.com: http://www.businesswire.com/news/home/20170814005252/en/
Source: WideOpenWest, Inc.