WOW(US:WOW)2025-05-06 20:05Part I. Financial Information This section presents the company's unaudited financial statements, management's discussion and analysis, market risk disclosures, and internal controls Item 1: Financial Statements (Unaudited) The company reported a net loss of $13.9 million on $150.0 million revenue for Q1 2025, with operating cash flow significantly down Condensed Consolidated Balance Sheets The balance sheet shows a slight decrease in total assets to $1,502.3 million and an increase in total liabilities to $1,306.3 million as of March 31, 2025 Balance Sheet Summary (as of March 31, 2025) | Balance Sheet Item | March 31, 2025 (in millions) | December 31, 2024 (in millions) | | :--- | :--- | :--- | | Assets | | | | Cash | $28.8 | $38.8 | | Total current assets | $111.3 | $111.8 | | Property, plant and equipment, net | $822.0 | $831.2 | | Total assets | $1,502.3 | $1,512.5 | | Liabilities & Equity | | | | Total current liabilities | $167.7 | $183.2 | | Long-term debt and finance lease obligations, net | $1,013.8 | $997.4 | | Total liabilities | $1,306.3 | $1,303.7 | | Total stockholders' equity | $196.0 | $208.8 | Condensed Consolidated Statements of Operations The statement of operations indicates a 7.1% revenue decrease and a 7.3% reduction in net loss for the three months ended March 31, 2025 Statement of Operations Summary (Three months ended March 31) | Metric | 2025 (in millions) | 2024 (in millions) | Change | | :--- | :--- | :--- | :--- | | Revenue | $150.0 | $161.5 | -7.1% | | Income from operations | $8.7 | $5.2 | +67.3% | | Interest expense | $(27.5) | $(21.0) | +31.0% | | Net loss | $(13.9) | $(15.0) | -7.3% | | Basic and diluted loss per share | $(0.17) | $(0.18) | N/A | Condensed Consolidated Statements of Cash Flows Operating cash flow significantly decreased to $16.7 million, while investing activities saw reduced cash usage for the three months ended March 31, 2025 Cash Flow Summary (Three months ended March 31) | Cash Flow Activity | 2025 (in millions) | 2024 (in millions) | | :--- | :--- | :--- | | Net cash provided by operating activities | $16.7 | $33.2 | | Net cash used in investing activities | $(37.7) | $(72.5) | | Net cash provided by financing activities | $11.0 | $35.1 | | Decrease in cash and cash equivalents | $(10.0) | $(4.2) | - Capital expenditures decreased significantly to $38.9 million from $72.5 million in the prior-year period20 Notes to the Condensed Consolidated Financial Statements Notes detail a 7% revenue decline, $1.03 billion total debt, and a settled patent infringement claim Revenue by Service Offering (Three months ended March 31) | Service | 2025 (in millions) | 2024 (in millions) | | :--- | :--- | :--- | | Residential HSD | $85.5 | $86.9 | | Residential Video | $20.6 | $29.3 | | Residential Telephony | $4.3 | $4.8 | | Total Residential Subscription | $110.4 | $121.0 | | Business Subscription | $28.1 | $28.0 | | Total Revenue | $150.0 | $161.5 | - As of March 31, 2025, total long-term debt and finance lease obligations amounted to $1,049.7 million before debt issuance costs, with $130.7 million of available borrowing capacity under its Revolving Credit Facility40 - The company settled a patent infringement claim with Sprint and owes a final payment of $5.0 million as of March 31, 2025, to be paid by January 2026, also receiving $0.5 million in indemnification refunds related to this matter during the quarter7374 - The company's operations are managed and reported as one reportable segment78 Management's Discussion and Analysis (MD&A) Management attributes the 7% revenue decline to subscriber reductions, especially in Video, with operating expenses decreasing Overview and Strategy The company, a leading broadband provider, focuses on a 'broadband first' strategy and continues its all-IP fiber network expansion - The company is a leading broadband provider in 18 markets across six states, passing nearly 2.0 million homes and serving 473,800 customers as of March 31, 202581 - The core strategy is 'broadband first,' focusing on High-Speed Data (HSD) as the primary driver of profitability, with 94% of new connections being HSD-only in Q1 20258384 - WOW is continuing its market expansion strategy, building out its all-IP fiber network in new and adjacent markets85 Key Operating Metrics Key operating metrics show a 5.4% decrease in total subscribers and a significant 38.3% decline in Video RGUs year-over-year Subscriber and RGU Trends | Metric | Mar 31, 2024 | Dec 31, 2024 | Mar 31, 2025 | YoY Change | | :--- | :--- | :--- | :--- | :--- | | Homes Passed | 1,948,500 | 1,962,100 | 1,977,600 | +1.5% | | Total Subscribers | 500,700 | 478,700 | 473,800 | -5.4% | | HSD RGUs | 489,700 | 470,400 | 465,900 | -4.9% | | Video RGUs | 79,300 | 60,600 | 48,900 | -38.3% | | Telephony RGUs | 77,700 | 71,600 | 69,200 | -11.0% | Results of Operations Results of operations indicate a 7% revenue decrease driven by subscriber loss, offset by a 13% reduction in operating expenses - Total revenue decreased by $11.5 million (7%) year-over-year, primarily driven by a $10.5 million decrease in residential subscription revenue due to a reduction in RGUs, especially Video9899 - Operating expenses decreased by $8.5 million (13%) year-over-year, mainly due to an $8.1 million reduction in programming costs aligned with the decline in Video subscribers102 - SG&A expenses decreased by $4.9 million (13%) year-over-year due to lower compensation, marketing expenses, and receipt of business continuity insurance recoveries104 - Interest expense increased by $6.5 million (31%) year-over-year, driven by a higher debt balance and a higher effective interest rate from the new Priority Credit Agreement entered into in Q4 2024106 Liquidity and Capital Resources The company maintains sufficient liquidity with $28.8 million in cash and $130.7 million available borrowing capacity, despite decreased operating cash flow - As of March 31, 2025, the company had $28.8 million in cash and $130.7 million of available borrowing capacity, which management believes is sufficient to fund obligations for the next 12 months112113 - Net cash from operating activities decreased to $16.7 million from $33.2 million year-over-year, primarily due to timing differences in receivables and payables118 - Capital expenditures decreased to $38.9 million from $72.5 million year-over-year, mainly due to the timing of spending on market expansion initiatives, with Greenfield expansion spending down to $10.8 million from $43.1 million120122 Quantitative and Qualitative Disclosures about Market Risk Interest rate fluctuations on variable-rate debt are the primary market risk, with a 1% SOFR increase impacting annual interest expense by $5.3 million - The primary market risk is fluctuating interest rates on variable-rate debt under the Priority Credit Agreement124 - The company uses interest rate swaps to manage risk, but about 50% of its Senior Secured Credit Facility remains variable-rate debt124 - A hypothetical 1% (100 basis point) change in SOFR would result in an annual interest expense change of approximately $5.3 million124 Controls and Procedures Disclosure controls were ineffective due to a material weakness in impairment testing documentation; remediation is planned for Q4 2025 - Management concluded that disclosure controls and procedures were not effective as of March 31, 2025126 - The ineffectiveness is due to a material weakness identified at year-end 2024, where there was insufficient documentation and evidence of review for inputs used in the annual impairment testing131132 - A remediation plan is being designed, but the material weakness is not expected to be considered remediated until after testing is completed in Q4 2025134135 Part II. Other Information This section covers legal proceedings, updated risk factors, and details on issuer purchases of equity securities Legal Proceedings The company is involved in various legal proceedings; details on the Sprint patent infringement settlement are in Note 13 - For details on legal proceedings, the report refers to Note 13 – Commitments and Contingencies in the financial statements139 Risk Factors No material changes to risk factors, except for expanded discussion on U.S.-China trade relations and potential tariff impacts - A key risk highlighted is the potential for increased tariffs on goods from China, which could raise the prices of network infrastructure and customer premise equipment141 - The company notes that historically it has not been able to pass such increased costs to customers without losing them, and price lock promotions may prevent price increases141 Issuer Purchases of Equity Securities In Q1 2025, the company acquired 252,322 shares, primarily withheld from employees for tax obligations on restricted stock awards Issuer Purchases of Equity Securities (Q1 2025) | Period | Total Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | Jan 2025 | 2,100 | $4.36 | | Feb 2025 | 1,906 | $4.93 | | Mar 2025 | 248,316 | $4.88 | | Total | 252,322 | N/A | - The shares purchased represent shares withheld from employees for the payment of taxes upon the vesting of restricted stock awards142