WOW - Earnings call transcript Q3 2019

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Operator

Good morning, ladies and gentlemen, and welcome to the Third Quarter 2019 WideOpenWest, Inc. Earnings Conference Call. [Operator Instructions] As a note, today's call is being recorded.

I would now like to turn the call over to Mr. Lucas Binder, WOW!'s Vice President of Corporate Development and Investor Relations. Mr. ahead. go please Binder,

Lucas Binder

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

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

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

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

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

a website our for to reported believes information of of EBITDA and isolation to in transaction-adjusted company in the these measures schedule be useful available ir.wowway.com. release presentation intended substitute trending These adjusted EBITDA with this at our as GAAP. presented the While not on the financial financial a in include accordance or for is earnings reconciliation provide information non-GAAP information investors, considered

impact to from dispositions included, and otherwise noted, the means this associated and insurance and impact exclude Hurricane the from transaction-adjusted impact adjusted references results to acquisitions in the exclude settlement. include results discussed call Unless Michael from

Now Teresa. the to call I'll turn over

Teresa Elder

Thanks, Lucas, and thank you, call. everyone joining today's for

execution XXXX with our additions, pleased Edge-Out organic in continued our saw very growth, quarter HSD in month reflected positive the transaction-adjusted third subscriber expansion EBITDA. are and passed Edge-Out in We best We our solid operational growth history homes HSD RGU RGU additions, results.

year Total third subscribers in the X,XXX of X,XXX. grew HSD Organic the been by the third quarters. RGU the our subscriber RGUs growth This quarterly XXXX. has grew grew RGUs in XXXX. ago period, subscriber adding quarter, on represented quarter quarter, HSD churn since churn the third of quarter with HSD the in best quarter growth consistent first Total in which XX,XXX the also best remains best X record.

have efforts, the operating able As we strong noted to were execution expected seen results on levels. continued we that returned with second the Coupled our quarter, we retention the drive to in exited connects quarter. third

Nodes within passed homes the which XXXX. best XX,XXX, added homes in rapid double-digit Edge-Out included month launch. continue the subscribers, the our by best third months a growth grew growth Edge-Outs history. to Several recently passed reaching Edge-Out in X,XXX of was demonstrate couple adoption, since of company's quarter launched penetration which of Edge-Out

partially $XXX.X video million revenues, subscription decline was or growth subscription in Third This revenue decline in offset lower of total The down by HSD XX.X% driven year-over-year. or XXXX was revenue million total $XX.X by million subscription quarter a X.X% of revenue revenue. $XX.X X.X%. was specifically

is are time, to this our At continue revenues, shift the provide discussed, towards has not on why mix subscription we want the a efforts, have compelling hallmark accretive the happy to we video. HSD customers in and the been customers we while has to who video offering transformation the business. focus been As same have our for declines of linear

month this acceleration out the going increase XXXX. be will the is The into customers for the out-of-contract XXXX. year are end customers that implementing effect better take at that we reason of December on start to the effective rate a ongoing increases to programming will of video notifications Additionally, match

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

Third quarter year-over-year on million of transaction-adjusted $XXX.X X.X% EBITDA was basis. a up

investments in XXXX in we we drive XXXX. As inflection in made have the an helped to discussed, business have the

being pleasantly of by vision, interaction. resonates their surprising through time, WOW!'s WOW! to connecting and our every the through people world reliable, all experience easy

to year, and last the can talent develop ensure best continued in the Over have attract, we our investments people retain we our industry. in make to

benefits our in investments Our results. are employee and strong training, yielding compensation

quarter the percentage voluntary points XXXX, of versus by turnover we third X our quarter third employee decline During the of XXXX. saw

also saw levels employee at remain our Net achieved Scores XXXX. We the Promoter throughout high we

increased driving We drive penetration to begun unnecessary also as decline of or in reduced has highlighted define remain WiFi the bad and service decreases from down improvement business, volume the calls throughout but Whole-Home outage focused initiatives outage times a this have in past, calls. rolls. on the we which in the removing events Network year. discernible truck We've through calls

to equipment of legacy rest of boxes and This focus year on XXXX. retirement, removal from effect. similar premise our an we is had area a customer this throughout will network, Additionally, have continue the

continues speed meg has The the and been successful, adoption launch accelerate. of to tier our highly XXX

are the the speeds XXX ARPU. that higher pleased driving and take within of from adoption coming XXX meg speeds opting buyers, higher preponderance We to particularly meg are

and the excellent developed added our continues of deployed. to and which functionality making be channel, and strides throughout drivers store, expanded are WiFi business. and as Whole-Home the growth We've wowway.com, online have WiFi footprint to Whole-Home online features our

in behavior subscriber November solid expectations. shift see and more quarter connects. the will strong tempered continued growth October to and The toward see saw consistent third seasonal have our We likely with December connect

Churn third investments to in stable X.X%. business in and our continued was of growth transaction-adjusted the the the contributed in quarter, EBITDA

Now I'll turn it over to Rich.

Rich Fish

Teresa. Thanks,

of $XXX.X year-over-year million, were which $XX.X X.X% revenues quarter on million. a total income of For and the of reported third net XXXX, down we basis,

year-over-year transaction-adjusted third XX.X%. to quarter mentioned, million, $XXX.X X.X% This XXXX margin improvement And represents was third EBITDA an a of over increased RGUs beneficial totaled on basis. revenue operating HSD up on basis year-over-year margin lower ARPU of in basis quarter Services which XXX growth impact as the and increases, a in subscription Teresa expenses. points transaction-adjusted from EBITDA and As Business result growth the a

over net As from or XXXX, by XX, count. total, XX,XXX total XX, RGUs September June of subscriber by subscribers X.X% X,XXX or X.X% increased XXXX. XXXX, In June increased total XX, HSD the

of the the the RGU for solid a RGU net activity return WOW! growth represented quarter quarter X,XXX. during third Subscriber for XXXX organic HSD as additions HSD change of to included

in subscription million a year-over-year totaled increase revenue the X.X%. third $XX.X or quarter, $X.X of Services million Business

As this we XX,XXX passed, be passed a date the Teresa these to to XX.X% achieved expansion growth continue momentum Edge-Out new Edge-Out mentioned, a in driver, Edge-Outs The future. in new and XX.X%. at homes Nodes into see and added started initiative footprint now to in total communities. XXXX stands we current have continue we've to XXXX a total Nodes penetration and have added penetration homes XX,XXX of The expect of

XXXX added this now ramp, Edge-Out XXXX we Penetration XX,XXX started the XX,XXX have at homes during already XX.X%, point. is passed at Nodes passed. new homes The Nodes added new and continues which just to Edge-Out have

expected and some projects We across projects to pace vintages, characteristics, our be both although of has attractive variability see opportunities and we've decided individual ROI are investment penetration project opportunity to because pursue great and both the the to all in continue Edge-Out And accretive. in projects. each different we to Edge-Out percentages see cost-to-build yearly do have expect that highly

basis. Capital end as that XXXX Of quarter. of was expenditures the third the reported completion incurred amount, project, of totaled complete substantially is of third a the which million $X for the million on toward Chicago the of fiber quarter $XX.X

incurred investments which Excluding XXXX in $XX.X transaction-adjusted project, the fiber quarter attributable to capital for million third the $XX.X transaction-adjusted strategic investments. CapEx of Chicago totaled million, the of was

of capital $XX.X million transaction-adjusted investments, or revenue. strategic $XX.X XXXX quarter those Excluding total CapEx XX.X% transaction-adjusted of third totaled million,

And of $X.X hand, capacity. undrawn cash September XX, $X.XXX had as million revolver totaling billion we debt and and leverage, XXXX, of to finally, with million $XXX.X in regard on outstanding liquidity

to EBITDA of down from in XX, XXXX. times X.XX June which quarter which times in We September X.XX on XX, net XXXX, came see sequential basis, as of the previous at a was transaction-adjusted XX-month continue improvements leverage, at trailing

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

Operator

question today's with Frank from Raymond Louthan Instructions] first take We'll James. [Operator

Frank Louthan

speed at data, any tiers, many to the WiFi? lower with how like something can adding additional idea Looking the success you us penetration? of that, Whole-Home some give get homes some thoughts maybe on the some And have

rationalization to consider Is would forth? delevering then with you any And and follow-up. help there so footprint maybe

Teresa Elder

what down amount break I HSD of that first product. Thanks, on question rate see Frank. really truck specifically in Whole-Home care calls WiFi. tell WiFi on To But really the growth we us Whole-Home is organization take your the And Whole-Home out you and that get the sales the we don't WiFi, can take drive to those product the rolls. to continue with helped we

the just as it well So customer in, helping bottom a whole I think, our role line. plays experience as key

of we and to always we like the is have products tiers, our products need. speed meg our have XXX continue quite And terms customers the that we evaluate for feel good. of mix In also the product customers do what we and our

feel have. our to where are question things work your we're driving about always we like But customer And I the how the can at we very that growth. good about footprint have markets we regard opportunistically. that footprint, With the looking we and

Operator

take Riley. Silver Zack next question from We'll our B. with

Zack Silver

is ahead hike programming off And rate you that the ARPU have you escalators I with, video next a sort growth of HSD? year. I where the nonpromotional from on first see get of at of for wanted in this start some bit HSD this coming and to holding a to just side, prices you just time? I'm price wondering, pricing. some who something guys Charter, increase the Or of with could at overlap quite understand raised that's beginning that are on

Teresa Elder

December first we the value place video to programming always high-speed ahead decided We regard priced go compared to are ahead make we of sure that of our year. the the take yes. in I increases that take and With get So the competition. think data, to increase to at

well in the market. So rack our and as discounts promotions rate look we as both at

increase continue time, At we we HSD don't our to that. pricing. evaluate have So to plans this

Zack Silver

net growth accelerated which HSD sort the on from period. subscriber then of in And ago meaningfully quarter, the the big year Okay.

of churn it and that's on substantially maybe helping what's you competitive I'm more working, said would what's pretty that said just volume. a give maybe it of the going Teresa, higher You year-over-year. landscape are up connects that us mix if on but that imply detail connects, can was you drive was, wondering connect sort the also a little bit And in

Teresa Elder

you're correct. yes, And

maintain to continuing seeing record we are as the We both as on the connects churn. on lows improvement that well had

I think of are that there number taking things are a So place.

say I'd help general, challenges hasn't the of quarters. really focused In last and do put our But offset on materially of activity. place have we've to board the in the changed terms over increases of competitive our retention the in that rate save course had discounting. the competitors some that environment are across We few

So between to our that's collaboration the has rolling benefit that from of our total website, basis, a percentage become as I an our improvements well from sales. that and good thing. and improved make larger we an ongoing our continue force We continued to, growth marketing think, our and the of field, even But sales on sales wowway.com. processes

Zack Silver

Rich. for And then one maybe quick just a

increased Just on capital. substantially year-over-year. working it like looks It pretty

Just through expecting flow you positive that guys us if free walk the still wondering for you are if cash also what's year. driving and can

Rich Fish

Yes. that inside to, were on the that The from, quarter, previously basis, needed attributable is accruals from, year-to-date had are capital bringing really to free no be some been free longer excess it up accruals. standpoint, From was of put put the related flow balance the still down that a working believe we we'll still, positive. as to guidance cash right flow out there. a We that the for year cash we relates that

Operator

Levi Batya our take from with next question We'll UBS.

Batya Levi

think fourth should adds? quarter. slowdown you data, the to do growth high-speed connects you seasonal mentioned high-speed good that show that a But pace we're some in still on we in On expect year-over-year in data

and And will can just would What programming see then of base provide price cost. that you increase video took? more price that color It balance that And second, on came last with and down how one sequentially percent that kind you expect you what would to this a the compare maybe increase to drove quarter. there? of the what

Teresa Elder

Okay. you questions, Thank the for Batya.

industry. just first the whole fourth question for So regarding the the seasonal HSD and slowdown quarter, the really across that's

push back-to-school many into of we have strongest and quarter, homes. is course, as Third new the people our are moving

last between and believe still on we that and So guidance net gave HSD the XX,XXX XX,XXX. will adds, quarter we reiterate

that that as the well. the for strong end that be results third least we'll at And year growth be the the quarter. the year results great obviously of with at of probably I will comparable high think we last our believe we from saw full

In or out that we terms put that. needless terms to the don't the for of on this video, number that do we've will But many coming year. say, I video the of programming the of to to try think how by be the increase what impacted customers first percentage is increases be cover will in

Batya Levi

cost. in just sequential was the to going follow the programming decline I up on

Teresa Elder

first the It's the year. an increase, mean Or of I'm sorry, revenue? cost revenue? of as the you the in video The programming

Batya Levi

a of it down. looked any to Is true-ups? think subscribers quarter the of that video Was the the there more function about terms were that next or that in escalator we'll cost good year? see programming like in base The down coming trended

Rich Fish

Yes, primarily by volume. Batya. That driven is

are As associated subscribers we primarily. experienced video cost the the attriting, programming volume with reduction

Operator

We'll from Ratcliffe with question take next Evercore James ISI. our

James Ratcliffe

if could. Two, I

last talked sort a about at of into versus we XQ quickly we really of First call those essentially on push sort that and had. XQ of HSD Did looking any plus be in impact the changes connects as, should as the block? XQ of all, those So last year XQ? some side, system

that even your the clearly centralized secondly, fragmented your take the becoming who about competitors to platform services, around a way at you customers being your don't hub talk service? of thoughts same for And for looking sort some a of OTT can are a increasingly video

Teresa Elder

James. Thanks,

that a own. strong of system its in on quarter. the yes, we connects the very So feel HSD was the stand-alone, second softness quarter have some changes do we think certainly I impacted quarter third

now. benefiting in And us some of made systems changes we really the that the are

own. So good I the say I quite its would feel third quarter about even on

saw certainly out momentum soft quite June. we starting and was quarter Second even in coming

positioned very XX% For the your being early had, much in a really first services, of be digitization better ISP exactly believe centralized customers established different well many have that about services I We were for over itself gig operator We has our position. X the WOW! comment to for services, very are hub it OTT crystal-clear years the top to is in that rankings the with Netflix Netflix. a of Netflix that days, with content the so to routinely closer viewership put our in so that just looks relationship to we on footprint.

So customers provide we feel about ability to we that. very good us streaming services to and come for our believe specifically

something WiFi it's encourage. with And an believe excellent experience. I the customer that it's we product, So definitely just Whole-Home that

definitely So we embrace changes. those

Operator

from We'll Brandon Nispel with Capital question take KeyBanc next Markets. our

Brandon Nispel

else's in percentage total a increase? as I out give to video questions, us guess what guess, just of everybody of follow-up I customers a contract try can related I'll to different sense way, are you the of, a

the compare on penetration the to help vintages much Maybe different for so 'XX them help understand sort by rates and and XXXX vintages. and active Edge-Outs. just us of Can't XXXX. at days are And the why then XXXX but look different

business then is sense would higher speed last Can understand terms percentage sort at you just where a customers maybe us overall And And of megabit tier of of customers speed the of product? XXX are help just driving give taking the one. average XXX to your us and in tiers. what

Teresa Elder

are side. for and don't customers percentage Thanks, out the talk percentages of think of I have of the about contract all to on in the terms Brandon, video really those we questions. total that

to So want add you Lucas, that? anything to

Lucas Binder

shrink increase the say rate increase is as of a contract the expire. on people contracts are their just eligible more with typical for of coincide it's, cohort I their and to would kind rate that continues would when timing

out it those will who of increase. the is who that who of But are rate the eligible that smaller done one decent are So people continues still but in we've contract number shrink, to of past. it's probably cohorts get a

with, your in there up are who is those rate be However, year, joined throughout would rate they're August, for in X. your and get contract August. eligible, August their receive who their in others happen then the to if increase on But will increase will increase rate December you going timing

Rich Fish

is say, this unlimited the actually in Rich. sense. is, about And question by great penetrations. On to different concerned I are your having Brandon, penetration the We being rates And annual would virtually, cohorts. Edge-Out reason not we continue across opportunity an the see

And is regard the them are that the basically of one evaluate and projects, individual actual new over with network we're projects the the at to every looking that community. extend move cost the we expansion different. quite of we Edge-Outs, As the, cost to next that construct to network specifically to

be can aerial, communities that of vary inside must Some we're community building of the underground. to The the homes density could some be greatly.

variables analysis. cost So project there are multiple that the multiple, go into

it Certainly, a penetration could one but penetration not opportunity, same looking important clearly that the you characteristics. if have have the to sense But to is revenue the garnered. on cohort a relative the we've still one opportunity at all return cost-to-build rates greater, very low next, upon dependent speaks as

any that not we of it sort believe opportunities. relates limit So are of reaching to stretch the any Edge-Out imagination do as by we

continue see in to, as remarks, relates Teresa significant really that quarter, to the most was the it mentioned we Third we into future. passed. quarter I to And to of the range adding a full expand had as homes almost as said, continue opportunities

Teresa Elder

we customers what speeds, third continues go take some a be that. are really well those our of is that WiFi, and growth that that customer Brandon, customers We rate certainly customers are meg of popular. and is higher most question the below encouraging this to at XXX to see and another to of higher in rate your so the speeds the positioned continue do experience. how both to new continues services. having move But increase we take way also have the legacy ahead OTT ARPU underlines I'll the answer I of saying, once And again which And just are taking think advantage Whole-Home we to take enhance by and

Operator

Evans next with We'll from Kyle question our take Stephens.

Kyle Evans

basis? are that I hit then as increase And increases? on going and And based We've few more few video price I'm prior times. churn then increase is circling a what have to video a a big that this How for that horse percentage dead call on been your well. expectations on follow-ups

Lucas Binder

it's Kyle, So Lucas here.

it's, as far amount, it's our as increases we're the emphasized, in own we conclusions, not can the specific As the to amount. once but meant again, to specify going draw Teresa costs match so

With and in regard it's would we the rate. to we stick taken out I actually expected February, churn, increase a how rate that is put good note of in, when what just pretty had

under costs passed and in the are that's in spike factors thus don't been hike. change number I we incurred, expect of rates along. different, this. pressure not as material and a our that very a around any from Don't messaged any Obviously, from it's experiencing think churn churn other expect just video much rate we But result we've what's far. is a than of

Teresa Elder

first in The last quarter taking is or Right. year that difference in big we December like it this year, did XXXX. we're rather, the versus

Kyle Evans

How the basis term could that gross is to And HSD I margins. to it on fully about kind margins to doing video but of on much And on should a a more us RGU churn customer? of lower think you a to on TV. What kind what few are the guys help that see or you then when high-level have bundle side? know think X- bundle X-year we can as loaded just that you do then on more we durable? fully ones of kind longer margin it, how TV loaded make

Teresa Elder

XX% Yes. to addition our I we I have think are is acquisitions of video we don't give that looking customer What something far. you in new service. out projections service still tell the a for over that HSD can

them for continue provide listen we and they a service customers follow our enjoy. and that to So to

those of ways. as I both that HSD managing So we and board. churn as that the customers churn we the hard say across the improvement at a tightly the retain would look has in very on on to shown well processes. Anything are area, all continued of And video Kyle? else only variety work

Operator

further Elder Teresa closing questions. I'd the It comments. does like appear we floor return to to have for no

Teresa Elder

everyone, Have you, to we morning for continue day. your our joining and a Thank interest in us appreciate great and business WOW! this your of support

Operator

does program. this And today's conclude

now disconnect. You may

WideOpenWest (WOW) 3 Nov 192019 Q3 Earnings call transcript