WideOpenWest (WOW) 11 May 192019 Q1 Earnings call transcript

Good morning, my name is Christa and I'll be your conference operator today. At this time, I would like to welcome everyone to the First Quarter 2019 WideOpenWest Earnings Conference Call. All lines have been placed on mute to prevent any background noise and after the speakers’ remarks there will be question and answer session. [Operator Instructions] Thank you. I would now like to turn the call over to Mr. President Development Vice Investor WOW!'s Binder, of and Corporate Relations. Lucas Mr. proceed. please Binder,

today WOW!'s you, and Fish, XXXX first me everyone, Good WOW!'s earnings Teresa you With Thank morning, our Chief thank Financial Christa. and Executive Chief Officer; for Officer. joining call. is Rich Elder, quarter

business. that relating harbor or to performance business actual forward-looking or forward-looking provisions we of in our statements safe implied These Before everyone the operating other expected started, federal to uncertainties strategy we our in call, securities operating statements. position the need we expressed laws financial to our and our forward-looking get be our and about known are unknown matters other will our factors remind results, made subject on are results, to cause during make materially and statements that different some may and those risks, reliance from

undue obligation statements. statements. not forward-looking reliance to such are update You to place cautioned on any such disclaim We forward-looking

additional statements, our For to the our Factors including of that from Risk financial filed our XX-K our materially differ actual affect forward-looking or the could cause SEC. refer with results the results to section filings SEC concerning with Form please information factors

transaction-adjusted In expenditures in non-GAAP share. we EBITDA, refer adjusted and today's financial include per addition, to adjusted earnings measures. call note capital in our please transaction-adjusted EBITDA, certain that diluted and earnings release, Such measures

reconciled to financial trending earnings be most provide in information the non-GAAP our with measures information the these and useful appropriate. believes measures a not of Company the as release measures schedule These financial as non-GAAP accordance in substitute isolation comparable is considered for the GAAP to are GAAP. information this in While presented presentation or intended for investors,

the I'll to over Teresa. Now turn call

on thank XXXX have the XXXX to you, customer today's quarter. years. subscriber first call. quarter and focus joining highlighted with in contribute two the the are and over everyone, we helped for WOW! was in started Lower continued benefits us in least any These annualize total, the churn net and investments digital the of In success marketing have first and investments quarter throughout to and XXXX. of churn we returns of our churn X,XXX in RGUs quarter X,XXX quarter for at net X% transformation. XXXX, HSD additions care, of drive Thanks, the sales first the lowest RGU growth of HSD Through during up Lucas, generated the first additions quarter. the Customer to

HSD first the in fifth were row, HSD quarter RGUs organic and a added quarter. in organic For positive the RGU we net additions X,XXX

very get inflection that WOW! our world our business, revenues, through reps to are in growth rate our to was offerings. people higher in return While would XXXX XXXX, help total rate February the X.X% implemented are adjusted discussed also to and reflected joined saw our experience continued $XXX.X of begun. to ARPUs increase the vision: revenue XXXX return EBITDA this pleasantly benefiting drive a drive in basis. and video how contributor our reliable, speed a we growth. from Since of business I in HSD we easy XXXX and WOW!, and fit. Coupled on year-over-year XXXX, increase. being tiers adoption We over by RGUs time. did Whole-Home last a months the to growth shift towards benefit throughout the solid increase was their which consistency in subscriber WiFi pleased the to we the In surprising are quarters connecting every up efforts was year-over-year the has million made at We and mixed X HSD than the with positive of several a earlier investments we from to the in rate an

we as build Always doing or our You. in Delight and READY, keep Easy Now are reps on Reliable, and XXXX, moving towards we

quarter XXXX million X.X% revenue of was $XXX.X year-over-year. total up First

remain Subscription First commercial Services it quarter of revenue expect overall grew to to XXXX X.X% Business year-over-year. the by encouraged to our continue We contribute and business potential our growth.

Our network unique for Edge-Outs is ability our opportunity to extend a through growth WOW.

WOW. deployment Homes for of and homes to be of been As extended we’ve and March have driver growth passed than in will EBITDA XXXX. key new Edge-Out our subscribers the more initiative, a XXX,XXX adjusted a XX, as by Edge-Out our of network continue result The of

We continued XXXX and the subscriber positive and are of for to year-over-year on remainder year the toward as growth. remain We on churn to a quarter continue EBITDA with and outlook the very financial the results drive basis. we adjusted first guidance our return growth a pleased execution on our

Colorado fourth conference our to care during call in discussed difficult call, we rationalize reduced Springs quarter to due Chicago our volume. we and our As area organization made some of the decision

lower During have the redeployed facilities and while into in Augusta, West resources with first our structure, market also Georgia cost a Georgia outsourced balancing our Point, we quarter, benefits.

employee we customer efforts and to satisfaction driven yield and So our and positive XXXX. is of through the by much engagement. in XXXX steps of These to taken retention employees we’ve around the the satisfaction efforts continue improve results experienced success

the Scores quarter XXXX achieved Net First at remain throughout XXXX. high Employee we levels Promoter saw

defined Experience our unnecessary fewer automation, removing times Officer, alongside have and an leadership our and in ways customer the Customer working on focused remain organization, to a unnecessary from effort rolls reduced calls. wait bad drive truck are under IT truck self-care, focusing volume all or on Chief also to care from and perspective. The rolls the of business, We as calls teams field which we enable

solid to period this a wowway.com. results up from percentage of continue same to see substantially through ago coming relaunch. We is connects from prior the year the The channel

for Clift share transforming thriving be community Clift retail, community cross-functionally. Alabama. in into Farm, provider will Let service medical with WOW! office, Northern Madison, our urban multi-family growing space, how office Madison. teams Farm dining, has successfully catering to Alabama's the me of a as new and are chosen soon examples preferred residential, now the and been you in working

a Additionally, in row, Magazine over a recently WOW! for year. our Columbus in XXXX XX Ohio, the the Top CEO prior ranking Workplace spots was second improving by by year named

results return proud and posted the of remain relationships of are growing EBITDA. and adjusted We growth first quarter subscriber the maintaining our in on in XXXX. building We on focused to

over to I'll Now Rich. turn it

Teresa. Thanks,

the $XXX.X For XXXX, of and $X.X we net reported of of total first revenues million. million income quarter

first consecutive experienced revenue. we've quarter revenues total up the were second The basis, year-over-year million representing $XXX.X quarter's whereby in of quarterly year-over-year on a X.X% growth

$XXX.X up Business X.X% a a the as in representing basis the improvement year-over-year EBITDA a quarter as XX.X%, well revenue, lower expenses. totaled result basis First Subscription and HSD adjusted EBITDA on year-over-year basis. on an first And Services over adjusted points million, quarter of XXX beneficial XXXX to subscribers from margin as operating impact growth increased of in

quarter represents first HSD positive fifth the HSD for of organic X,XXX, the added straight RGU WOW!. included of quarter growth For X,XXX we XXXX, of which HSD growth which RGUs, positive organic RGU

had X the annual in RGUs, total which of during momentum the subscriber in quarterly by also XX,XXX Total years. X,XXX strong represents result XX, the demonstrated in quarter the first over subscriber X,XXX XX, HSD years. ago. for for XX,XXX second total RGUs video March year HSD or the of represents year-over-year last which XXXX, subscribers Subscription or total total total XXXX, X% in growth decreased quarter March X.X% the million over XXXX. first net Net quarter best XX, of As X.X%. video two had at and during RGUs best the subscribers trends HSD increased increase from And of XXXX, increased quarter, an first of RGUs least a count Services a in Business with $XX.X RGUs total net subscribers XXXX, the totaled increase million $X.X first or by revenue by March

XXXX success in expansion Edge-Out As new Teresa we a have XX.X% our about we’ve footprint continued we’re mentioned, communities. of to passed is Edge-Out penetration passed. XX,XXX total new we have nodes new at now current XXXX XXXX this passed projects. Edge-Out already nodes started homes we’ve XX.X% total XX,XXX nodes which stands And and during a XX,XXX and now added nodes at point. Edge-Out XX.X%. continues added homes in had started on XXXX achieved added date X,XXX homes the The Edge-Out these these have The the added homes passed Penetration ramp, to penetration The in at have of new investments. excited

that some pacing cost-to-build of for Chicago see only expenditures projects great are we We to million Capital projects. investments the decided of was have a totaled ROIs penetration characteristics, $X.X but amount, and final on and quarter basis. both And well, reimbursed across has reported we've the accretive. not because for Edge-Out continue the each the variability expect to as project, to highly in are vintages project completed. yearly individual of be pursue in see momentum first toward incurred projects, Of buildout XXXX percentages Edge-Out the different will as completion element all $XX.X which although attractive the million fiber the

Additionally, completion Hurricane City rebuild market Panama of towards Michael. incurred the following the $X.X the million was of and repair

strategic the XXXX total million. attributable transaction-adjusted Chicago that, incurred for first $XX.X to of million and the Of capital the respect the was expenditures million to Fiber $XX.X $X.X Excluding project totaled hurricane, quarter with investments.

first transaction-adjusted capital XXXXs expenditures of $XX.X Excluding revenue. quarter to or and With strategic those of total liquidity million leverage. investments, totaled $XX.X regard XX.X% capital million

on billion of capacity. As debt quarter, totaling of the million Outstanding had in $XX.X the million and cash undrawn end we hand. revolver $XXX.X of $X.XXX

adjusted X.XX anticipated X.XX of EBITDA March was decline sequential during transaction year. improvements we down throughout fourth With at for a which EBITDA the provided to growth to we expect at the outlook year-over-year regard guidance in XX, continue XXXX, call December times month see net We continue as our XX conference see leverage, to in XXXX, came from March. XX quarterly times XXXX. we basis, reiterate which leverage With in quarter on in transaction-adjusted trailing throughout our to

of $X.XXX given is expect half to seasonality and XXXX year. expected in associated As given second expect quarter first churn of total The move-related between weighted the we to year favorably HSD the be more billion $X.XXX uptick between quarter and second and anticipated revenues XX,XXX the implemented that subscriber growth any of reminder, we in a billion. the and customer we RGUs the growth that XX,XXX of with RGU during increase experience toward rate the typically we be

quarter transaction-adjusted to $XXX for EBITDA And throughout year. year-over-year quarterly to As between growth XXXX return demonstrated, EBITDA full be and transaction-adjusted million the year $XXX million. we expect the to in expect first we the

concludes operator I'll the for call back So prepared it our open turn remarks. to to the And that questions.

Please line question the Amy is from Instructions] Yong line from of [Operator open. your first comes Your ahead, Macquarie. go

competition. through And about of about know Teresa, XX can I was have just peers bit And a cable could gigs. been talk lot this maybe I the on cash year talking Rich, that? you you if year? wondering talk wondering you where and past then CapEx taxes then for next was little a your are and I

question. Thanks, Amy. I appreciate the

a we you but robust, competition, in of acquisition really the remains haven't behavior know, front. As on course, seen change competitive significant

think And stronger absolutely becomes take set our have certainly, subscribers stance competitive which we that. records in impact churn And on we retention. to to because ability continue broadband But of on are numbers product a competitors we I a set. gain as such more some prevalent, see part remain confident our had us. that's

capacity operator competitive at speeds future we'll who and customers need our we look footprint. first the over our at the our at XX% customers. value technology good for continue in we remain of to we and always the As gig look customers that had our what a the X need, And for are

taxes, taxpayer know, to and million. do so will taxes, very for capital to with of Yeah the has many, net we cash total expect to year cash respect be respect for between million you many and that With and very, Company CapEx years. federal any expect the not significant transaction-adjusted federal $XXX significance a we losses cash expenditures operating $XXX as be

between spend taxes. relates We to in state expect $XX state but to income varying net given it do taxes, to As $X amounts. in to any million million about have with operating respect losses we state year

expect. that's So we of the that extent the taxes cash

you. Thank

comes of Batya question UBS. from go the line next Levi Please your open. ahead is Your line from

for to that the what be be the actually the basis, the think the the more drove increase? provide fell And color percent a recent the that? ARPU residential it subscription reception bit of Can of price year? year-on-year. rest an And How that looks a to year-over-year What driver you on trend the over increases? base saw like reason on seems about video revenues for should all we down to little

a overall. talk about bit me little ARPU let Well,

a the higher of that all, rate customers ARPU. higher in see go which we not rise were reason speeds, the -- sole higher into a First at mix had overall increase we ARPU. was speeds data The of and

We with our WiFi the also which have been very ARPU. Whole-Home to pleased sales, adds

at that? to they look and customers the We also to the of continue want mix Rich, did are packages video anything buying. add to you that

and only The dollars according category of is to that, them year, the packages is for revaluation That effect that would then And of Batya, customers beginning one moving in some with required accounting to Yeah. us the out constant rules with implementation moving ARPU that of is has a at for there video respect of HSD. thing reallocation is that the was accordance a pronouncement. take effective RGU that I bundled accounting, into services. add of there of last the of the ASC XXX, the

So, that of a a of the impact, bit but also little the is amount kind mix. slight in that's

just If that Maybe a it a you Okay. of video it bit. most Or in the per about we slowed to at aggregate follow-up piece? basis, on revenue growth how should Would subscriber on that down we RGU, look an attribute forward? going think that.

for through uptick a customer basis total revenue related we ancillary Well, continued higher would basis. that customers reasons, Teresa speed Whole-Home attribute year-over-year as be pricing on customer HSD which as to to backed add-on to inbound that of expect referred at, customer similar residential as was risk any the potentially don’t taking to impact other for the a the slightly the products. to the But WiFi relationships. services acquisition significant the new on of full growth as the in down there growth primarily We taking efforts provided that tiers addition on opportunities is speed ARPU significant customers, back in are ARPU which services downside retain has from customer and to similar well on additional the well subscriber

Got it. Thank you.

line Please ahead. Your Riley FBR. next Zach the from from Silver go question comes B. of

open. line Your is

Okay. Great.

initiative it particularly years it you notable on That the Or just rate some give the I on, churn is last is the For in Is more environment? best a not be even in two shifting it a may less improved I guess, churn. though be OpEx you. did wondering Is Teresa, I the much? could if promotional increase think as detail driving that quarter. you what that subscribers was that it about, was guys very had helpful. year? broadband And you talk would Thank longer are staying around for that

last is mentioned. of provide many Whole-Home initiatives customers is And much makes Thanks, network the good tension mentioned, for focus We customers reliable, in a Zach. Yes, our did customer it our feel source our as that they such a we’ve of are broadband on better. had us. also the our us. much improving with very and retaining pride cherished I year think want all more value have a WiFi of of that’s to packages you we why continuing that making the and things that experience terms products launching customer like services that service, And

just is among are combination happier. So that significant making a that have well. we our of I competitors initiatives think really was We many it do as see there effort customers our retention

as that with So on well. to we and are us are win customers are especially proud our we continuing staying acquisition

And it. could. then more if helpful. That's one Got really I

don't upgrading with there's of your likewise, is that far what around That be of you penetration along are percentage speeds helpful. again. tier I And product? adopt of really but metrics, now? in if kind speeds, way right or frame can question think that are the to know ARPU sort what average customers getting that any how WiFi, the specific on mean, you you give speed Whole-Home you I would Just customers

Thanks, Zach.

give acquisition We been specific product. our received July. has WiFi, launch in great don't the feel Whole-Home as it can I do we teams, to well we percentages this extremely terms those. right, existing out we tell our launched upgrading you also both when and on of last like base. You're that of into the a as sales new technicians home customers this well field our that go sell the customers job into And But

calls So we And no this virtually it care get. also product. associated receive at sell every chance we we with

fronts. us So on many it helps

of see that to we And our with Whole-Home WiFi well terms want than speed customers continuing use. that they together to be we and speed, responding into it were the they before as attractive up that. new our are make In to packages to seem to have customers And the they applications more form. higher video bundle move packages

specific So speeds. sorry, or on we don't percentages numbers give

That’s great, that’s very helpful. Thank you.

comes line Evercore. from question ahead next from Your James Ratcliffe is the line open. Please of go your

seen looks line expect probably forward the that's I know going costs in on magnitude? in run Morning for could. what the there you idea are? rates seeing of cost in opportunities like see customer And are of to we an of increases give Can impacts on increase them, what have items? sort restructuring, terms that guess you And terms service, taking cost quarter, an the rate you're and channel to costs, of of it array of have? sort that overall discussed benefits I there you we cost questions, the it. I the the any programming if just Thanks. manage restructuring on two we thanks offerings was And secondly, should run in on of saw

rates think way is year. about X% of contracts. annual varies to given increases respect as that an basis annual programming tune to X-year in the programming, per generally first contracts, subscriber right to That obviously X% the to I think multiyear in those to the the on are year any per With Yes. X- regarding question

inside at escalators So X% the to expiration, each them the that of agreements is those X% annual as expect you blended average the renegotiated. of they after But are, increase have obviously, as well over year. should

first is two component one second was efficiencies XXXX, the to in driven severance those of really the expenses. were Number incurred in The second the some from nonrecurring There XXXX respect as the Colorado like over cost integration well of uptick mentioned the operational primarily is from type to things. with location. carried drive Chicago initiatives an related with impactful, onetime question respect is to that expenses optimization was more to being that as the which the our to related Springs efforts and Teresa quarter

Great. previous follow-up just on And the a question.

With video certainly increases we’ve in scenarios you? the that OTT in declines that where of there, pick one prices competitors see products. and standalone your I to who you providers say, Because are and in how video bundled to the affect they’re a drop growth, seen could does looking over-the-top from video an broadband their have up switching and product your addition customers taking

the you to net of impact those price increases? So -- is is the what

top also think broadband welcome general, are customers we the provider we to video their want linear they in our I own very own over product our known of video. packages and But as bring well. as we a provide HSD or if strong

that, for to to on switch So, do want speed if with if and adapt have to us to to always the higher been easy customers they move or up it to them friendly want what make video HSD. we we to want add stay they speeds to to they

on what with we So, our they customers really to work do. to want try

you. Thank Great.

of ahead. from from next go Please the Brian Suisse. comes question Russo Your line Crédit

Your is open. line

Hi. could. follow-ups I if Two

there. the broadband most now? right of would with is profile The there. items And highest customers of by just more take nonrecurring customers, first, speed then taken some churn customers perspective bit how one in color on on Maybe in sort help your the was the what little helpful. a for on like common speed you different packages kind be looking the Rich. then that maybe, a could for or maybe onetime who your for us of Teresa, The, questions And kind of of little is

you were impacts think expenses a up. you rate? like for that return? decent just I last, a some looks trends. back there of prior higher thought But those SG&A us capital of include we thoughts small Thanks. reported on case authorization that’s in bit Your And some quarter than in a run little of what the shares showed March. guess, your or where met should was of it as Rich, the the number then was Can assuming you I and is I that first update bought kind previously.

had go with I’ll Well, on here questions the Okay. off broadband customers and the churn. you ahead start and

think around that can for talk email speed the we that on checking the that So broadband speed meg, be customers, would many there, probably point doing out you prevalent because have and the to just XXX if it work of the are on quite well. and price I want about who Facebook most customers

those reason WiFi with are move the up, to using applications to well, and way we change. enhances of customers and gives applications, no you Whole-Home retention one whole I products want that would experience them churn customer just about as is say have also again, ever talk once the As to many I think that. reduction as sticky more And is and the very associated which see

care launched popular also bit gamut many offerings has they well. the But takes we customers. been of well. as XXX very We and as who one's speed fully attractive recently that of megabit as their run well of to more that little and customers X a been options the tier utilize a that very them gig certainly, need Gives

quarter. respective of those the pulled actually financial see the as as the separately With onetime the nature, categories two are and that you respect kind actually, that the re-buy, the in they them as nonrecurring seeing correct. question, Company we a repurchase I to employee to maintains to to traditional probably as vesting related restricted and stock The them the not you any the during referred believe, expenses. be what to, you're believe of second face They the sense, refer it a expenses statements. did expenses units, what I process respect of to satisfaction employee in those of cost as two to to relates operating it that vest, are of you're delivered during the relates period shares on I delivered component so. or questions consequence are to we vested And as question, amount shares integration then that delivery net with of such the that had the tax integration out were doing the might identified the SG&A a stock that Company's net expenses of of referring

stock, shares, those treasury show seeing. shows and if will, to as that's most what those you're up you likely, So addition

you, thank much. Got very you

question line Capital your go Brandon ahead Nispel line of Markets. from from open. Your is KeyBanc the comes next Please

the Hi from the quarter good dip good a question. came for for amount Thanks costs. a the taking morning. I of video question. looks had EBITDA like It

and a business $X what think cable on more I bundle? such you've be that's assume going it the into offering that's forward? that million trends do expense guess, to broadband of focusing much to Or Question for that had more seen, and vision between of i.e., the see I'm services is, sequentially it a is versus more as question connectivity what wondering is Teresa, you one. should you as one see this increase services difference to mentioned this I Company XXXX two, video historically there you $X safe company, an expected million But company the be not quarter, first you

let the video Rich about first, talk I'll answer Yes. vision. the Brandon. question then And I'll

Yes.

quarter that annual out video video coming content given agreements, of effect an the go expenses providers to increases the into cost rate QX programming X. sequentially. There's the programming year, the fourth think pursuant I January any occurred increase of from are the into

So on sequential the primary from really that cost a basis the in driver Company's XQ. XQ into is structure

So that’s...

like And the to They cost as as were, video well. the some as were marketing as well year-over-year. contributors resets increase resets flat they to consequentially were, going well of said, spend other But scroll Rich Brandon. as

are those this contributors some to what to we’re of why -- the expecting decline. this drove So some of sequential

And We the view vision. ourselves a really Brandon, question relationships. about customer your increasing is our about focused company customer to all that as

look broadband that and offer at base in subscriber how can and we they or want subscriber customers overall base, to is a continuing our what whether our profitable in it we packages So the way. keep grow in and

So we on although put of focused that the broadband, we are not just our at definitely forefront business.

to offered also because want while offer bundles video a our sure also for those value them make we good us. that We customers And the we that from services us. profitable

the areas that’s especially, attractive properties we incumbent the focus commercial very residential into as customers want mentioned, Edge-Out think you why the As the return I providers. Edge-Out along to to investments. see also continue for where we of key much that to phenomenal well alternative we And in they’re an those with of very and one can on our where continue see on our business areas future, services and as drivers us, to launch rates new business in

this Mr. to time. you for Binder, over have in at queue remarks. we closing further it turn I’ll questions our And no

it, you and all appreciate WOW. so us go joining I’ll Thank ahead our continued your close and much. business of you We Christa. you support this Thank interest for so morning. at much

So have great a day.

participation now for a your call. you today’s day. disconnect. may and This you concludes Thank great Have conference