WOW! Announces Results for the Fiscal Year Ended December 31, 2016

ENGLEWOOD, Colo.--()--WideOpenWest Finance, LLC (“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 year ended December 31, 2016.

Financial & Operating Highlights (1)
For the year ended December 31, 2016, WOW! reported Total Revenue of $1.237 billion, Net Loss of ($146.7) million and Adjusted EBITDA of $463.6 million, representing a year-over-year increase in Total Revenue of $19.9 million, or 1.6%, a year-over-year expansion in Net Loss of $104.0 million and a year-over-year increase in Adjusted EBITDA of $19.7 million, or 4.4%, over the year ended December 31, 2015.

For the year ended December 31, 2016, WOW! reported Transaction Adjusted Total Revenue of $1.208 billion and Transaction Adjusted EBITDA of $445.7 million, representing a year-over-year increase in Transaction Adjusted Total Revenue of $13.0 million, or 1.1%, and a year-over-year increase in Transaction Adjusted EBITDA of $16.6 million, or 3.9%.

On a Transaction Adjusted basis, for the year ended December 31, 2016, WOW! reported a 10,100 increase in Total Customers over the year ended December 31, 2015 (an improvement of 40,800 from the year ended results of December 31, 2015), which includes an increase of 20,600 HSD RGUs (an improvement of 35,700 over the year ended results of December 31, 2015).

Conference Call
WOW! will host a conference call on Friday, March 24, 2017, at 11:00 a.m. Eastern to discuss the operating and financial results contained in this press release. Conference call information is as follows:

      Call Date:     Friday, March 24, 2017             Call Time:     11:00 a.m. Eastern
Dial In: (877) 541-5069 Intn’l Dial In: (443) 842-7607
Conf. ID: 75105902
 

A recording of the conference call will be available approximately two hours after the completion of the call until April 24, 2017. The dial-in number for this replay is (855) 859-2056.

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Refer to “Definitions of 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 Earnings Release for definitions and information related to Adjusted EBITDA and Transaction Adjusted financial and subscriber information.

 

The following unaudited condensed consolidated statements of operations summarizes information in our Form 10-K for the quarter and year ended December 31, 2016, as furnished on March 23, 2017, with the United States Securities and Exchange Commission (“SEC”). For ease of use, references in this release to “WOW!” means WideOpenWest Finance, LLC and its consolidated subsidiaries.

     

WideOpenWest Finance, LLC

Condensed Consolidated Statements of Operations (Unaudited)(1)

($ in millions)

 
    Three months ended     Year ended
December 31, December 31,
2016     2015 2016     2015
       

Revenue

Residential subscription $ 243.4 $ 242.9 $ 966.3 $ 987.3
Commercial subscription   28.9         25.6     109.1         99.7  
Total subscription revenue 272.3 268.5 1,075.4 1,087.0
Other commercial services 13.8 5.9 45.6 24.0
Other   29.9         26.9     116.0         106.1  
Total Revenue   316.0         301.3     1,237.0         1,217.1  
 

Costs and expenses:

Operating (excluding depreciation & amortization) 169.2 165.5 668.3 678.6
Selling, general and administrative 30.2 27.4 116.4 110.6
Depreciation and amortization 52.0 54.9 207.0 221.1
Management fee to related party   0.4         0.5     1.7         1.9  
  251.8         248.3     993.4         1,012.2  
 
Income from operations 64.2 53.0 243.6 204.9
 
Other income (expense):
Interest expense (48.8 ) (54.7 ) (211.1 ) (226.0 )

Realized and unrealized gain on derivative instruments, net

- 1.3 2.3 5.6

Loss on early extinguishment of debt

(7.4 ) - (38.0 ) (22.9 )
Other income (expense), net 0.2 0.1 2.2 (0.4 )
Income Tax (expense) benefit   (2.3 )       (1.2 )   (145.7 )       (3.9 )
Net Income (loss) $ 5.9         ($1.5 )   ($146.7 )       ($42.7 )
         

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The unaudited condensed consolidated statements of operations above and the information in this release should be read in conjunction with our Form 10-K for the year ended December 31, 2016, filed with the SEC on March 23, 2017.

 

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. WOW! is privately owned by Avista Capital Partners and Crestview Partners. For more information, please visit www.wowway.com.

Forward-Looking Statements
This press release may contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements, other than statements of historical facts, included in this release are forward-looking statements. Forward-looking statements discuss our current expectations and projections relating to our financial condition, results of operations, plans, objectives, future performance and business. Forward-looking statements are not guarantees of future performance and we caution you not to place undue reliance on such statements. Forward-looking statements are generally identifiable by the use of the words “may,” “will,” “should,” “expect,” “anticipate,” “estimate,” “believe,” “intend,” “project,” “continue,” or the negative of these words, or other similar words or terms. The forward-looking statements included in this release are made as of the date hereof. Except as required by law, we assume no obligation to publicly update any forward-looking statement, even if new information becomes available in the future or if experience or future changes make it clear that any projected results expressed or implied in such statements will not be realized. If we do update one or more forward-looking statements, no inference should be made that we will make additional updates with respect to those or other forward-looking statements. Actual results may differ materially from those expected because of various risks and uncertainties, many of which are beyond our control, including the wide range of competition we face in our business; competitors that are larger and possess more resources; competition; dependence upon a business services strategy; conditions in the economy, including potentially uncertain economic conditions; our ability to secure new businesses as customers; demand for our bundled broadband communications services may be lower than we expect; our ability to respond to rapid technological change; increases in programming and retransmission costs; a decline in advertising revenues; the effects of regulatory changes in our business; our substantial level of indebtedness; certain covenants in our debt documents; programming exclusivity in favor of our competitors; inability to obtain necessary hardware, software and operational support; and strain on business and resources from future acquisitions, or the inability to identify suitable acquisitions. You should review our filings with the SEC, including the section titled “Risk Factors” contained in our Annual Report on Form 10-K filed with the SEC on March 23, 2017.

Definitions of Non-GAAP Financial Measures and Operating Metrics
We have included certain non-GAAP financial measures in this release including Adjusted EBITDA and Transaction Adjusted EBITDA. 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.

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/disposal of any asset, debt modification expenses, loss on 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, as further defined in our credit facilities. Adjusted EBITDA is not a presentation made in accordance with generally accepted accounting principles in the United States of America (“GAAP”) and our use of the term Adjusted EBITDA varies from others in our industry. Adjusted EBITDA should not be considered as an alternative to net income (loss), operating income or any other performance measures derived in accordance with GAAP as measures of operating performance or operating cash flows, or as measures of liquidity.

Adjusted EBITDA has important limitations as an analytical tool and you should not consider it in isolation or as a substitute for analysis of our results as reported under GAAP. For example, Adjusted EBITDA:

  • excludes certain tax payments that may represent a reduction in cash available to us;
  • does not reflect any cash capital expenditure requirements for the assets being depreciated and amortized that may have to be replaced in the future;
  • does not reflect changes in, or cash requirements for, our working capital needs; and
  • does not reflect the significant interest expense, or the cash requirements necessary to service interest or principal payments on our debt.

See “Unaudited Reconciliations of GAAP Measures to Non-GAAP Measures” and the accompanying tables below for reconciliations of Adjusted EBITDA to our net income (loss), which is the most directly comparable GAAP financial measure.

Furthermore, Adjusted EBITDA in this release is sometimes presented on a Transaction Adjusted basis, giving effect to the acquisition of HC Cable Opco LLC d/b/a NuLink (“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 each period presented (see “Unaudited Transaction Adjusted Condensed Consolidated Financial and Subscriber Information” below for a complete discussion).

In addition, we use the following subscriber information in this release:

  • Homes Passed – We report homes passed as the number of residential units, such as single residence homes, apartments and condominium units, passed by our broadband network and listed in our database, excluding those we believe are covered by exclusive arrangements with other providers of competing services.
  • 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 and do not include customers who only subscribe to HSD or Telephony services in this total. We define total Revenue Generating Units (“RGUs”) as the sum of HSD subscribers, Video subscribers and Telephony subscribers.

Subscriber information for acquired entities is preliminary and subject to adjustment until we have completed our review of such information and determined that it is presented in accordance with our policies.

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 respective quarters ended and for the twelve month period ended (“LTM”) December 31, 2016, and December 31, 2015:

 

WideOpenWest Finance, LLC

Reconciliation of GAAP Measures to Non-GAAP Measures (Unaudited)

($ in millions)

 

               
Three Months Ended LTM
Mar. 31,     Jun. 30,     Sept. 30,     Dec. 31,     Mar. 31,     Jun. 30,     Sep. 30,     Dec. 31, Dec. 31,     Dec. 31,
2015     2015     2015     2015     2016     2016     2016     2016 2015     2016
 
Net income (loss) ($6.6 ) $ (27.5 ) $ (7.1 ) $ (1.5 ) $ 4.8 $ (145.0 ) $ (12.4 ) $ 5.9 $ (42.7 ) $ (146.7 )
Depreciation and amortization 54.8 55.5 55.9 54.9 52.5 52.9 49.6 52.0 221.1 207.0
Management fee to related party 0.4 0.6 0.5 0.4 0.4 0.5 0.4 0.4 1.9 1.7
Interest expense 58.9 57.1 55.3 54.7 54.2 55.2 52.9 48.8 226.0 211.1
Loss on extinguishment of debt - 22.9 - - - 2.5 28.1 7.4 22.9 38.0
Unrealized gain on derivative instruments, net (2.0 ) (1.1 ) (1.2 ) (1.3 ) (1.1 ) (1.2 ) - - (5.6 ) (2.3 )
Non-recurring prof. fees, M&A integration and restr. exp. 3.5 4.2 4.8 3.5 1.1 2.4 3.8 2.9 16.0 10.2
Non-cash stock compensation - - - - - 0.1 0.4 0.6 - 1.1
Other expense (income), net (0.2 ) - 0.6 - - (0.1 ) (1.9 ) (0.2 ) 0.4 (2.2 )
Income tax (benefit) expense   0.9         1.0         0.8         1.2         1.0         147.6         (5.2 )       2.3     3.9         145.7  
Adjusted EBITDA (1) $ 109.7       $ 112.7       $ 109.6       $ 111.9       $ 112.9       $ 114.9       $ 115.7       $ 120.1   $ 443.9       $ 463.6  
 
     

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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

 

Unaudited Transaction Adjusted Condensed Consolidated Financial and Subscriber Information
The SEC requires that pro forma financial information be presented in a registrant’s periodic filings when events occur for which disclosure would be material to investors, including significant business combinations or the disposition of a significant portion of the business. The significance of an acquired or disposed business is determined based on the “significant subsidiary” tests specified in Regulation S-X, Article 11, Rule 1-02(w). In this regard, although the Company has made certain acquisitions and divestitures, such transactions do not meet the “significant subsidiary” tests and, accordingly, the Company’s historical financial information as filed with the SEC does not contain pro forma, financial information relating to those transactions.

Nevertheless, we make certain adjustments in this release to the historical financial and subscriber information of the Company (“Transaction Adjusted”) as filed with the SEC because we believe such information would be meaningful to investors by showing how such transactions might have affected the Company’s historical financial statements. The unaudited Transaction Adjusted financial and subscriber information in this release has been prepared giving effect to our acquisition of the operating assets of NuLink on September 9, 2016, and our divestiture of the Lawrence, Kansas, system on January 12, 2017, as if such transactions had been completed at the beginning of the respective periods presented herein. The unaudited Transaction Adjusted financial and subscriber information is for informational purposes only and does not purport to represent what our results of operations, financial or subscriber information would have been if such transactions had occurred at any date, nor does such information purport to project the results of operations for any future period.

The unaudited Transaction Adjusted condensed consolidated financial and subscriber information in this release was prepared based on NuLink’s unaudited financial and subscriber information for the respective periods presented. The historical unaudited financial and subscriber information has been adjusted to give a Transaction Adjusted effect to events that are directly attributable to such transactions, factually supportable and expected to have a continuing impact on the results. The unaudited Transaction Adjusted financial information herein does not reflect non-recurring charges that have been incurred in connection with the transaction including legal fees, broker fees and accounting fees.

The following table provides an unaudited reconciliation of our Total Revenue to Transaction Adjusted Total Revenue, Adjusted EBITDA to Transaction Adjusted EBITDA and Capital Expenditures to Transaction Adjusted Capital Expenditures for the respective periods ended:

 

WideOpenWest Finance, LLC

Transaction Adjusted Condensed Consolidated Financial Information (Unaudited)

($ in millions)

 
               
Three Months Ended LTM
Mar. 31,     Jun. 30,     Sept. 30,     Dec. 31,     Mar. 31,     Jun. 30,     Sep. 30,     Dec. 31, Dec. 31,     Dec. 31,
2015     2015     2015     2015     2016     2016     2016     2016 2015     2016
 
Total Revenue $ 312.3 $ 305.8 $ 297.7 $ 301.3 $ 302.3 $ 307.5 $ 311.2 $ 316.0 $ 1,217.1 $ 1,237.0

Transaction Adjustments:

Revenue related to the Lawrence system (11.8 ) (11.6 ) (11.5 ) (11.5 ) (11.5 ) (11.3 ) (11.5 ) (11.4 ) (46.4 ) (45.7 )
Revenue related to NuLink   6.1         6.2         6.2         6.2         6.2         6.2         4.7         -     24.7         17.1  
Transaction Adjusted Total Revenue $ 306.6       $ 300.4       $ 292.4       $ 296.0       $ 297.0       $ 302.4       $ 304.4       $ 304.6   $ 1,195.4       $ 1,208.4  
 
Adjusted EBITDA $ 109.7 $ 112.7 $ 109.6 $ 111.9 $ 112.9 $ 114.9 $ 115.7 $ 120.1 $ 443.9 $ 463.6

Transaction Adjustments:

Adjusted EBITDA related to the Lawrence system (5.8 ) (5.9 ) (5.7 ) (5.8 ) (5.9 ) (5.9 ) (5.9 ) (6.0 ) (23.2 ) (23.7 )
Adjusted EBITDA related to NuLink   2.0         2.1         2.1         2.2         2.0         2.1         1.7         -     8.4         5.8  
Transaction Adjusted EBITDA $ 105.9       $ 108.9       $ 106.0       $ 108.3       $ 109.0       $ 111.1       $ 111.5       $ 114.1   $ 429.1       $ 445.7  
 
Total Capex $ 55.6 $ 54.7 $ 64.5 $ 57.1 $ 63.6 $ 71.3 $ 72.3 $ 80.3 $ 231.9 $ 287.5

Transaction Adjustments:

Capex related to the Lawrence system (0.7 ) (0.7 ) (1.8 ) (3.2 ) (1.3 ) (1.4 ) (1.7 ) (1.3 ) (6.4 ) (5.7 )
Capex related to NuLink   0.8         1.1         1.1         0.7         1.2         1.7         0.9         -     3.7         3.8  
Transaction Adjusted Total Capex $ 55.7       $ 55.1       $ 63.8       $ 54.6       $ 63.5       $ 71.6       $ 71.5       $ 79.0   $ 229.2       $ 285.6  
 

The unaudited Transaction Adjusted condensed consolidated financial information presented above should be read in conjunction with the information contained in “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” the consolidated financial statements and the accompanying notes appearing in our Annual Report on Form 10-K for the year ended December 31, 2016, as filed with the SEC on March 23, 2017.

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:

     
      4Q-14     1Q-15     2Q-15     3Q-15     4Q-15     1Q-16     2Q-16     3Q-16     4Q-16
                               
Reported Homes Passed 2,985,000 2,988,600 2,993,100 2,997,200 3,003,100 3,010,700 3,022,800 3,075,000 3,094,300

Transaction Adjustments:

NuLink 34,000 34,000 34,000 34,000 34,000 34,000 34,000 - -
Lawrence (66,900 )     (66,900 )     (67,100 )     (67,300 )     (67,500 )     (67,600 )     (67,700 )     (67,900 )     (68,000 )
Transaction Adjusted Homes Passed 2,952,100       2,955,700       2,960,000       2,963,900       2,969,600       2,977,100       2,989,100       3,007,100       3,026,300  
                                                       
 
Reported Total Customers 809,100 799,200 787,100 781,700 777,800 784,600 785,600 800,800 803,400

Transaction Adjustments:

NuLink 15,500 15,600 15,400 15,500 15,500 15,400 15,200 - -
Lawrence (31,700 )     (31,600 )     (30,900 )     (31,400 )     (31,100 )     (31,200 )     (30,600 )     (31,100 )     (31,100 )
Transaction Adjusted Total Customers 792,900       783,200       771,600       765,800       762,200       768,800       770,200       769,700       772,300  
                                                       
 
Reported HSD Subscribers 727,800 722,000 713,100 712,300 712,500 722,200 725,700 742,000 747,400

Transaction Adjustments:

NuLink 13,400 13,600 13,500 13,700 13,800 13,800 13,600 - -
Lawrence (27,800 )     (28,000 )     (27,500 )     (28,000 )     (28,000 )     (28,200 )     (27,800 )     (28,400 )     (28,500 )
Transaction Adjusted HSD Subscribers 713,400       707,600       699,100       698,000       698,300       707,800       711,500       713,600       718,900  
                                                       
 
Reported Video Subscribers 634,700 606,500 582,700 564,500 547,500 537,200 524,300 514,900 501,400

Transaction Adjustments:

NuLink 10,900 10,800 10,400 10,300 10,200 10,100 9,800 - -
Lawrence (19,300 )     (18,600 )     (17,500 )     (17,200 )     (16,800 )     (16,300 )     (15,600 )     (15,300 )     (15,000 )
Transaction Adjusted Video Subscribers 626,300       598,700       575,600       557,600       540,900       531,000       518,500       499,600       486,400  
                                                       
 
Reported Telephony Subscribers 359,400 339,600 324,500 310,600 296,800 286,600 277,500 267,400 258,100

Transaction Adjustments:

NuLink 4,100 4,000 4,000 3,900 3,900 3,700 3,600 - -
Lawrence (9,000 )     (8,700 )     (8,400 )     (8,100 )     (7,900 )     (7,600 )     (7,400 )     (7,200 )     (7,000 )
Transaction Adjusted Telephony Subscribers 354,500       334,900       320,100       306,400       292,800       282,700       273,700       260,200       251,100  
                                                       
 
Reported Total RGUs 1,721,900 1,668,100 1,620,300 1,587,400 1,556,800 1,546,000 1,527,500 1,524,300 1,506,900

Transaction Adjustments:

NuLink 28,400 28,400 27,900 27,900 27,900 27,600 27,100 - -
Lawrence (56,100 )     (55,200 )     (53,400 )     (53,300 )     (52,600 )     (52,200 )     (50,800 )     (50,900 )     (50,500 )
Transaction Adjusted Total RGUs 1,694,200       1,641,300       1,594,800       1,562,000       1,532,000       1,521,400       1,503,800       1,473,400       1,456,400  
                                                                         

Contacts

WideOpenWest Finance, LLC
Lucas Binder, 303-927-4951
VP Corporate Development & Investor Relations
lucas.binder@wowinc.com

$Cashtags

Contacts

WideOpenWest Finance, LLC
Lucas Binder, 303-927-4951
VP Corporate Development & Investor Relations
lucas.binder@wowinc.com