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 third quarter ended September 30, 2017.
Third Quarter 2017
Highlights
- WOW! added 2,400 high-speed data (HSD)
RGUs in the third quarter; up 16,400 compared with the third
quarter of 2016
- 2017 Edge-Out Nodes now extend to
55,800 new homes passed; 2016 Edge-Out Nodes totaled 40,400 homes
passed and have achieved over 30% penetration
- Total Revenue of $297.8 million; Net
Loss of $(2.1) million; Net Loss per share of $(0.02)
- Adjusted EBITDA of $114.8 million;
Adjusted Earnings Per Share of $0.37
- Successful debt refinancing facilitated
a full redemption of all 10.25% Senior Notes; over $60 million in
annualized Interest expense savings; quarterly Interest expense
declined 39% year over year
- Signed agreement to sell a portion of
the Chicago Fiber Network to Verizon for $225 million, expected to
close in fourth quarter and achieve pro forma leverage of
approximately 5.0 times
- Business Services Subscription Revenue
Including Acquisitions and Dispositions grew 13.4%
year-over-year
- WOW! announced its plans to complete
the rollout of 1 gig services throughout its digital footprint by
early 2018
Financial Highlights
(1)
For the third quarter ended September 30, 2017, WOW! reported
Total Revenue of $297.8 million, down $13.4 million, or 4.3%, over
the same period last year. The Company reported a Net Loss of
$(2.1) million, a year over year improvement of $18.2 million.
Transaction Adjusted EBITDA was $114.8 million, an increase of $3.3
million, or 3.0%, compared with the third quarter ended September
30, 2016.
Total Revenue for the third quarter of 2017 declined 2.2%, from
Total Revenue including Acquisitions and Dispositions in the third
quarter of 2016. WOW!’s internet centric strategic focus has led to
strong growth in internet-related revenue, as HSD subscription
revenue for the third quarter ended September 30, 2017 increased by
$13.4 million, or 14.8%, compared to third quarter of 2016, on a
transaction adjusted basis.
“In the third quarter we returned to positive HSD RGU growth
with 2,400 net additions,” said Steven Cochran, chief executive
officer of WOW! “The continued success and execution by our teams
in growing business services subscription revenues and expanding
our Edge-Out homes passed was well represented during the quarter.
Our 2016 Edge-Out nodes have achieved over 30% penetration with
just over one year of activity in these markets.”
“Year-over-year growth in Transaction Adjusted EBITDA of $3.3
million, or 3.0%, is reflective of our efforts to drive growth in
our most profitable segments,” said Rich Fish, chief financial
officer of WOW! “This can be seen in the shift toward higher speed
tier HSD RGUs, the associated growth in HSD ARPU, and the 13.4%
growth in Business Services Subscription Revenue Including
Acquisitions and Dispositions.”
(1)
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,
reconciliation of such non-GAAP measures to GAAP measures and why
our management thinks it is beneficial to present such non-GAAP
measures.
Revenue
On an actual basis, third quarter Total Revenue decreased 4.3%
compared with the third quarter of 2016. Total Revenue Including
Acquisitions and Dispositions decreased 2.2% to $297.8 million
compared with the third quarter of 2016, which was driven primarily
by video and telephony RGU losses and lower pass-through revenue
related to the construction of the Company’s wireless backhaul
project, partially offset by increases in ARPU and business
services subscription revenue growth.
On an actual basis, Residential Subscription Revenue for the
third quarter of 2017 was down 4.7% compared with the third quarter
of 2016. Residential Subscription Revenue Including Acquisitions
and Dispositions decreased 2.8% compared with the third quarter of
2016 to $231.9 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 third quarter of 2017 was up 7.6% compared with the third
quarter of 2016. Business Services Subscription Revenue Including
Acquisitions and Dispositions increased 13.4% to $29.6 million
compared with the third quarter of 2016.
Other Business Services Revenue totaled $9.6 million for the
third quarter of 2017, a decrease of 4.0% compared with the third
quarter of 2016. The decline was driven by lower pass-through
revenue related to the construction of the Company’s wireless
backhaul project which is non-recurring in nature.
Other revenue totaled $26.7 million for the third quarter of
2017, a decrease of 11.9% compared with the third quarter of 2016,
primarily driven by decreases in advertising revenues associated
with a non-political year and franchise fees, both of which are
impacted by the reduction in subscribers over the same period in
2016.
Costs and Expenses
Operating expenses, excluding depreciation and amortization,
totaled $153.2 million in the third quarter of 2017, a decrease of
$13.9 million, or 8.3% compared with the third quarter of 2016. The
decrease is primarily due to reductions in Video programming costs,
decreased costs related to the Company’s network construction
activities and overall reductions in costs as a result of the
disposition of the Company’s Lawrence, Kansas system.
Selling, general, and administrative expenses were $38.1 million
for the third quarter of 2017, an increase of $5.5 million, or
16.9%, compared with the third quarter of 2016. The increase is
mainly due to a $5.2 million increase in employee related non-cash
compensation cost and third party professional fees, which was
partially offset by the net effect of the Company’s acquisitions
and dispositions.
Net Income (Loss) and Net Loss per
Share
Third quarter 2017 Net Loss was $(2.1) million, compared with
Net Loss of $(20.3) million in the third quarter of 2016. Third
quarter 2017 Net Loss per share was $(0.02), compared to Net Loss
per share of $(0.31) in the third quarter of 2016. The improvement
in Net Loss is largely attributed to a reduction in interest
expense. The sequential decline from the second quarter of 2017 Net
Income of $5.0 million is attributable to the Loss on early
extinguishment of debt associated with a full redemption of the
10.25% Senior Notes during the third quarter of 2017. Adjusted EPS
for the third quarter of 2017 was $0.37.
Adjusted EBITDA
Third quarter 2017 Adjusted EBITDA was $114.8 million, up 3.0%
from the third quarter of 2016 on a Transaction Adjusted basis.
Third quarter 2017 Adjusted EBITDA margin was 38.5%, representing
an increase of over 190 basis points from the same period a year
ago on a Transaction Adjusted basis.
Customers
WOW! reported total subscribers of 776,400 as of September 30,
2017, compared with 769,700 as of September 30, 2016, on a
Transaction Adjusted basis, a 0.9% increase. Total subscribers were
sequentially flat from 776,500 as of June 30, 2017, which reflects
continued aggressive competitive behavior in the Company’s markets
associated with brand building and the impact of Hurricane Irma in
the southeast markets.
HSD RGUs totaled 730,000 as of September 30, 2017, representing
a 16,400 increase over September 30, 2016, on a Transaction
Adjusted basis, or 2.3%, and a sequential increase of 2,400 from
727,600 or 0.3%, as of June 30, 2017.
Edge-Outs
As of September 30, 2017, WOW! has extended its network to
96,200 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 40,400 homes at September 30,
2017. The Company has 12,300 new customers on such nodes, which
represents over 30% penetration with an average of 414 days in
active service. 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 55,800 homes at September 30, 2017. WOW! has
10,400 new customers on such nodes, which represents over 18%
penetration with an average of 136 days in active service.
Announced Sale of a Portion of Chicago
Fiber Network
On August 1, 2017, the Company entered into a definitive
agreement to sell a portion of its fiber network in the Company’s
Chicago market to a subsidiary of Verizon for $225.0 million in
cash. The Company anticipates the sale to be completed in the
fourth quarter of 2017. In addition, at the closing of the
definitive agreement, the Company and Verizon will enter into a new
agreement pursuant to which the Company will complete the build-out
of the network in exchange for approximately $50.0 million, which
represented the estimated remaining build-out costs to complete the
network at the time the definitive agreement was entered into. The
$50.0 million will be payable as such network elements are
completed. The Company anticipates such network would be completed
in the second half of 2018.
Capital Expenditures
Capital expenditures totaling $72.3 million in the third quarter
of 2017 were flat compared with the third quarter of 2016, on a
reported basis, and up from $71.5 million on a Transaction Adjusted
basis. Strategic capital expenditures, defined as Edge-Out capital
expenditures and business services capital expenditures dedicated
to expansion of the Company’s network, were $24.4 million for the
three months ended September 30, 2017, which represented a decrease
of $4.7 million over the three months ended September 30, 2016, as
a result of a decline in business services capital expenditures
partially offset by an increase in Edge-Out expenditures. Excluding
strategic capital expenditures of Edge-Outs and Business Services,
capital expenditures in the third quarter of 2017 totaled $47.9
million, which equates to 16.1% of total reported revenues for the
third quarter of 2017.
Free Cash Flow
Free cash flow for the three months ended September 30, 2017 was
$(63.1) million, representing an improvement of $14.8 million
compared to the three months ended September 30, 2016. The
improvement in free cash flow for the quarter on a year over year
basis was driven primarily as a result of a reduction in cash paid
for interest of $19.1 million, which was offset by an increase in
the amount of cash paid to reduce net working capital assets and
liabilities totaling $10.6 million.
During the three months ended September 30, 2017, and included
as components of free cash flow, the Company paid $20.2 million in
connection with the debt refinancing completed during the quarter
and paid down accrued interest balances by $38.8 million.
Debt Refinancing
During the quarter, WOW! completed a refinancing of its Term B
Loans, in which Term B Loans were upsized by $230.5 million,
pricing on the Term B Loans was reduced by 25 basis points to LIBOR
plus 325 basis points, and revolver capacity was increased to $300
million. Combined 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 will
result in over $60 million in interest savings.
Liquidity and Leverage
As of September 30, 2017, the total principal amount of debt
outstanding was approximately $2.46 billion. Cash and cash
equivalents as of September 30, 2017 was $36.4 million. WOW!’s
undrawn revolver capacity provides $112.1 million of additional
liquidity. Senior Secured Net Leverage and Total Net Leverage as of
September 30, 2017 was 5.4x.
Conference Call
WOW! will host a conference call on Monday, November 13, 2017,
at 5:00 p.m. Eastern to discuss the operating and financial results
contained in this press release. The conference call will be
broadcast live on the Company’s investor relations website at
ir.wowway.com. Those parties interested in participating via
telephone can use the conference call information as follows:
Call Date: Monday, November 13, 2017 Call
Time: 5:00 p.m. Eastern Dial In: (877) 541-5069 Intn’l Dial In:
(443) 842-7607 Conf. ID: 5498407
A recording of the conference call will be available
approximately two hours after the completion of the call until
December 13, 2017. The dial-in number for this replay is (855)
859-2056.
The following unaudited condensed consolidated statements of
operations summarizes information in the Company’s Form 10-Q for
the quarter ended September 30, 2017, as filed on November 13,
2017, with the United States Securities and Exchange Commission
(“SEC”). For ease of use, references in this release to “WOW!”
means WideOpenWest, Inc. and its subsidiaries.
WideOpenWest Inc.
Condensed Consolidated Statements of
Operations (Unaudited)
($ in millions, except for per share
data)
Three months ended Nine months ended September 30, September
30, 2017 2016 2017
2016
Revenue
Residential subscription $ 231.9 $
243.4 $ 695.6 $ 722.9 Business services subscription 29.6
27.5 86.4
80.2 Total subscription 261.5 270.9 782.0
803.1 Other business services 9.6 10.0 31.3 31.8 Other 26.7
30.3 82.0
86.1 Total Revenue $ 297.8
$ 311.2 $ 895.3 $ 921.0
Costs and
expenses
Operating (excluding depreciation and amortization) $ 153.2 $ 167.1
$ 470.4 $ 499.1 Selling, general and administrative 38.1 32.6 100.9
86.2 Depreciation and amortization 49.0 49.6 150.1 155.0 Management
fee to related party - 0.4
1.0 1.3 $ 240.3
$
249.7
$ 722.4 $ 741.6
Income from
operations
$ 57.5 $ 61.5 $ 172.9 $ 179.4 Other income (expense) Interest
expense (32.2 ) (52.9 ) (122.0 ) (162.3 ) Loss on early
extinguishment of debt (26.1 ) (28.1 ) (32.1 ) (30.6 ) Gain on sale
of assets - - 38.4 -
Unrealized gain on derivative instruments,
net
- - - 2.3 Other income, net 0.3 1.9 1.7 2.0 Income tax (expense)
benefit (1.6 ) (2.7 ) 16.4
7.4 Net Income (loss) $ (2.1 )
$ (20.3 ) $ 75.3 $ (1.8 )
Basic and diluted earnings (loss) per common shares Basic $ (0.02 )
$ (0.31 ) $ 0.99 $ (0.03 )
Diluted $ (0.02 ) $ (0.31 ) $ 0.99
$ (0.03 ) Weighted-average common shares outstanding Basic
86,973,345 66,525,044
76,014,568 65,605,874
Diluted 86,973,345 66,525,044
76,096,401 65,605,874
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; 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 Revenue 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, Residential
Subscription Revenue Including Acquisitions and Dispositions,
Business Services Subscription Revenue Including Acquisitions and
Dispositions, and Transaction Adjusted Capital Expenditures are
included herein because they are key metrics 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 define Residential Subscription Revenue Including
Acquisitions and Dispositions as Residential Subscription Revenue
after giving effect to certain acquisitions and divestitures made
by WOW! 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 define Transaction Adjusted Capital
Expenditures as capital expenditures after giving effect to certain
acquisitions and divestitures made by WOW! We believe that these
non-GAAP measures are appropriate measures of operating performance
because they are 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 third quarter 2017 results.
The presentation of these measures is not made in accordance
with GAAP and our use of these terms herein varies from the use of
similar terms by other companies in our industry due to different
methods of calculation and therefore are not necessarily
comparable. These non-GAAP measures should not be considered as an
alternative to revenue, capital expenditures 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. The presentation of Adjusted
EBITDA and Transaction Adjusted EBITDA is not 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, operating cash flows or liquidity. There are
no Transaction Adjustments reflected in the third 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.
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 and a reconciliation of
Adjusted EPS to Diluted Earnings Per Share, 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.
The unaudited Homes Passed and Subscriber information in this
release is presented on a Transaction Adjusted basis 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 Homes Passed and Subscriber information is for
informational purposes only and does not purport to represent what
our subscriber information would have been if such transactions had
occurred at any date, nor does such information purport to project
subscribers or homes passed for any future period.
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 (Loss) to Adjusted EBITDA for the periods indicated:
WideOpenWest, Inc.
Reconciliation of GAAP Measures to
Non-GAAP Measures (Unaudited)
($ in millions, except for per share
data)
Three months ended Nine months ended September 30, September
30, 2017 2016 2017
2016
Net income (loss) $ (2.1 ) $ (20.3 ) $ 75.3 $ (1.8 ) Depreciation
and amortization 49.0 49.6 150.1 155.0 Management fee to related
party - 0.4 1.0 1.3 Interest expense 32.2 52.9 122.0 162.3 Loss on
early extinguishment of debt 26.1 28.1 32.1 30.6 Realized and
unrealized gain on derivative instruments, net - - - (2.3 ) Gain
(loss) on sale of assets - - (38.4 ) - Non-recurring professional
fees, M&A integration and restructuring expense 3.1 3.8 7.0 7.3
Non-cash stock compensation 5.2 0.4 8.3 0.5 Other income, net (0.3
) (1.9 ) (1.7 ) (2.0 ) Income tax (benefit) expense 1.6
2.7 (16.4 )
(7.4 ) Adjusted EBITDA (1) $ 114.8 $
115.7 $ 339.3 $ 343.5 Net
cash flows provided by operating activities 9.2 (5.6 ) 116.4 110.5
Less: Capital Expenditures (72.3 )
(72.3 ) (224.3 ) (207.2 ) Free Cash
Flow $ (63.1 ) $ (77.9 ) $ (107.9 ) $
(96.7 ) Three months ended September 30, 2017 Per Share
Diluted loss per share $ (0.02 ) Loss on early
extinguishment of debt 0.30 Non-recurring professional fees,
M&A integration and restructuring expense 0.04 Non-cash stock
compensation 0.06 Income tax applicable to adjustments, net(2)
(0.01 ) Adjusted Earnings Per Share (EPS) $ 0.37
(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). 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 for the Lawrence, KS system
was prepared based on our books and records for the Lawrence, KS
system for the perspective periods presented. Such 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 periods indicated:
WideOpenWest, Inc.
Transaction Adjusted Condensed
Consolidated Financial Information (Unaudited)
($ in millions)
Three months ended Nine months ended September 30, September
30, 2017 2016 2017
2016 Residential Subscription
Revenue $ 231.9 $ 243.4 $ 695.6 $ 722.9
Acquisitions and
Dispositions:
Residential Subscription related to the Lawrence system - (8.5 )
(1.1 ) (25.2 ) Residential Subscription related to NuLInk -
3.7 -
13.5 Residential Subscription Revenue Including
Acquisitions and Dispositions $ 231.9 $ 238.6
$ 694.5 $ 711.2 Business
Services Subscription Revenue $ 29.6 $ 27.5 $ 86.4 $ 80.2
Acquisitions and
Dispositions:
Business Services Subscription related to the Lawrence system -
(1.7 ) (0.3 ) (5.2 ) Business Services Subscription related to
NuLInk - 0.3 -
1.3 Business Services Subscription
Including Acquisitions and Dispositions $ 29.6 $ 26.1
$ 86.1 $ 76.3 Total
Revenue $ 297.8 $ 311.2 $ 895.3 $ 921.0
Acquisitions and
Dispositions:
Revenue related to the Lawrence system - (11.5 ) (1.5 ) (34.3 )
Revenue related to NuLink - 4.7
- 17.1 Total Revenue
Including Acquisitions and Dispositions $ 297.8 $
304.4 $ 893.8 $ 903.8
Adjusted EBITDA $ 114.8 $ 115.7 $ 339.3 $ 343.5
Transaction
Adjustments:
Adjusted EBITDA related to the Lawrence system - (5.9 ) (1.0 )
(17.7 ) Adjusted EBITDA related to NuLink -
1.7 - 5.8
Transaction Adjusted EBITDA $ 114.8 $ 111.5 $
338.3 $ 331.6 Capital
Expenditures $ 72.3 $ 72.3 $ 224.3 $ 207.2
Transaction
Adjustments:
Capital expenditures related to the Lawrence system - (1.7 ) (0.1 )
(4.4 ) Capital expenditures related to NuLink -
0.9 - 3.8
Transaction Adjusted Capital Expenditures $ 72.3
$ 71.5 $ 224.2 $ 206.6
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:
September 30, June 30, September 30,
2017 2017 2016 Reported Homes Passed 3,097,500
3,072,500
3,075,000
Transaction
Adjustments:
Lawrence - - (67,900 ) Transaction Adjusted Homes Passed 3,097,500
3,072,500 3,007,100 Reported Total Customers
776,400
776,500
800,800
Transaction
Adjustments:
Lawrence -
-
(31,100 ) Transaction Adjusted Total Customers 776,400
776,500
769,700 Reported HSD Subscribers 730,000
727,600
742,000
Transaction
Adjustments:
Lawrence
-
-
(28,400 ) Transaction Adjusted HSD Subscribers 730,000
727,600
713,600 Reported Video Subscribers 442,500
458,200
514,900
Transaction
Adjustments:
Lawrence -
-
(15,300 ) Transaction Adjusted Video Subscribers 442,500
458,200
499,600 Reported Telephony Subscribers 226,200
235,400
267,400
Transaction
Adjustments:
Lawrence -
-
(7,200 ) Transaction Adjusted Telephony Subscribers 226,200
235,400
260,200 Reported Total RGUs 1,398,700
1,421,200
1,524,300
Transaction
Adjustments:
Lawrence -
-
(50,900 ) Transaction Adjusted Total RGUs 1,398,700
1,421,200
1,473,400
View source
version on businesswire.com: http://www.businesswire.com/news/home/20171113006221/en/
WideOpenWest, Inc.Lucas Binder, 303-927-4951VP Corporate
Development & Investor Relationslucas.binder@wowinc.com
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