WOW(US:WOW)2025-08-11 21:11PART I. Financial Information Item 1: Financial Statements (Unaudited) The unaudited financial statements show decreased assets, increased liabilities, declining revenue, and a wider net loss for the period ended June 30, 2025 Condensed Consolidated Balance Sheets | Balance Sheet Items | June 30, 2025 (in millions) | December 31, 2024 (in millions) | | :--- | :--- | :--- | | Total Assets | $1,501.5 | $1,512.5 | | Total Current Assets | $109.4 | $111.8 | | Property, plant and equipment, net | $823.9 | $831.2 | | Total Liabilities | $1,320.6 | $1,303.7 | | Long-term debt and finance lease obligations | $1,032.7 | $997.4 | | Total Stockholders' Equity | $180.9 | $208.8 | - Total assets slightly decreased to $1,501.5 million from $1,512.5 million at year-end 2024, while long-term debt increased to $1,032.7 million from $997.4 million12 - Stockholders' equity declined from $208.8 million to $180.9 million, driven by the net loss12 Condensed Consolidated Statements of Operations | Metric | Q2 2025 (in millions) | Q2 2024 (in millions) | Six Months 2025 (in millions) | Six Months 2024 (in millions) | | :--- | :--- | :--- | :--- | :--- | | Revenue | $144.2 | $158.8 | $294.2 | $320.3 | | Income from operations | $2.4 | $3.7 | $11.1 | $8.9 | | Interest expense | ($25.6) | ($17.8) | ($53.1) | ($38.8) | | Net loss | ($17.8) | ($10.8) | ($31.7) | ($25.8) | | Diluted loss per share | ($0.22) | ($0.13) | ($0.38) | ($0.32) | - Revenue for Q2 2025 decreased by 9.2% year-over-year to $144.2 million13 - Net loss widened to $17.8 million in Q2 2025 from $10.8 million in Q2 2024, primarily due to lower revenue and a significant increase in interest expense13 Condensed Consolidated Statements of Cash Flows | Cash Flow Activity (Six Months Ended June 30) | 2025 (in millions) | 2024 (in millions) | | :--- | :--- | :--- | | Net cash provided by operating activities | $52.8 | $86.6 | | Net cash used in investing activities | ($85.5) | ($123.5) | | Net cash provided by financing activities | $25.7 | $34.2 | | Decrease in cash and cash equivalents | ($7.0) | ($2.7) | - Net cash from operating activities decreased by 39% to $52.8 million for the first six months of 2025 compared to the same period in 202420 - Capital expenditures were reduced to $86.8 million from $123.6 million year-over-year20 Notes to the Condensed Consolidated Financial Statements Revenue by Service Offering (Six Months Ended June 30) | Service | 2025 (in millions) | 2024 (in millions) | % Change | | :--- | :--- | :--- | :--- | | Residential HSD | $170.5 | $172.6 | -1.2% | | Residential Video | $37.0 | $57.6 | -35.8% | | Residential Telephony | $8.2 | $9.3 | -11.8% | | Total residential subscription | $215.7 | $239.5 | -9.9% | | Total business subscription | $55.7 | $56.0 | -0.5% | - On August 11, 2025, the company entered into a Merger Agreement with Bandit Parent LP to be acquired for $5.20 per share in cash85 - The company's long-term debt outstanding balance increased to $1,042.2 million as of June 30, 2025, from $1,008.7 million at the end of 202441 Item 2: Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses an 8% revenue decline from subscriber loss, its 'broadband first' strategy, and the pending acquisition by DigitalBridge and Crestview Partners Overview and Recent Developments - The company's core strategy is to provide outstanding service at affordable prices, with a primary focus on its high-speed data (HSD) service under a 'broadband first' approach9495 - WOW is pursuing a greenfield expansion strategy, building out its all-IP fiber network in new markets in Florida, Alabama, and South Carolina97 - On August 11, 2025, WOW entered into a definitive agreement to be acquired by affiliates of DigitalBridge and Crestview Partners for $5.20 per share98100 Homes Passed and Subscribers Subscriber Trends | Metric | Jun. 30, 2024 | Dec. 31, 2024 | Jun. 30, 2025 | | :--- | :--- | :--- | :--- | | Homes passed | 1,956,700 | 1,962,100 | 1,997,100 | | Total subscribers | 495,200 | 478,700 | 469,600 | | HSD RGUs | 485,000 | 470,400 | 462,000 | | Video RGUs | 71,600 | 60,600 | 42,500 | | Telephony RGUs | 75,700 | 71,600 | 67,000 | - While total subscribers have declined from 495,200 to 469,600 over the past year, market expansion activities have contributed a growing base, reaching 46,300 total subscribers as of June 30, 2025104106 Results of Operations Analysis - Total revenue for the six months ended June 30, 2025, decreased by $26.1 million (8%) compared to the prior year, driven by a $24.1 million drop in subscription revenue117118 - Operating expenses for the first six months of 2025 decreased by $17.9 million (14%) year-over-year, mainly due to a $17.2 million reduction in programming expenses121 - Interest expense for the first six months of 2025 increased by $14.3 million (37%) year-over-year, attributed to higher overall debt balances and derivative instruments125 Liquidity, Capital Resources, and Cash Flow - As of June 30, 2025, the company had $31.8 million in cash and $110.4 million available under its Revolving Credit Facility132133 - Net cash from operating activities for the first six months of 2025 was $52.8 million, a significant decrease from $86.6 million in the same period of 2024137 Capital Expenditures (Six Months Ended June 30) | Category | 2025 (in millions) | 2024 (in millions) | | :--- | :--- | :--- | | Customer premise equipment | $35.8 | $34.4 | | Scalable infrastructure | $23.8 | $50.4 | | Support capital and other | $14.2 | $19.5 | | Line extensions | $13.0 | $19.3 | | Total | $86.8 | $123.6 | Item 3: Quantitative and Qualitative Disclosures about Market Risk The company's primary market risk is interest rate fluctuation on its variable-rate debt, with a 1% rate increase projected to raise annual interest expense by $5.5 million - The company's main market risk is from interest rate fluctuations on its variable rate debt; after accounting for swaps, 51% of this debt remains at a variable rate143 - A hypothetical 100 basis point (1%) increase in the SOFR rate would change annual interest expense by approximately $5.5 million143 Item 4: Controls and Procedures Management concluded that disclosure controls were not effective as of June 30, 2025, due to a material weakness in internal control over financial reporting - Management concluded that disclosure controls and procedures were not effective as of June 30, 2025145 - The ineffectiveness is due to a material weakness in internal control over financial reporting related to insufficient documentation for annual impairment testing148149 - A remediation plan is being designed, but the material weakness continued to exist at June 30, 2025150151153 PART II. Other Information Item 1: Legal Proceedings The company is party to various legal proceedings arising from normal business operations, with no expected material adverse effect from their resolution - For a discussion of legal proceedings, the report refers to Note 13 – Commitments and Contingencies in the financial statements156 Item 1A: Risk Factors The company identifies new material risks related to its proposed merger, including potential closing failures, business disruptions, and significant costs - Completion of the proposed merger is subject to several closing conditions, including stockholder and regulatory approvals, which may not be satisfied or could be delayed158 - The pending merger creates uncertainty that may disrupt business relationships with customers, partners, and employees, and diverts management attention162 - If the merger is completed, stockholders will receive a fixed cash price and will not benefit from any potential future appreciation in the company's value164 Item 2: Unregistered Sales of Equity Securities and Use of Proceeds The company purchased 11,672 shares of its equity securities in Q2 2025 to cover employee tax obligations upon the vesting of restricted stock awards Issuer Purchases of Equity Securities (Q2 2025) | Period | Total Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | April 2025 | 3,001 | $4.38 | | May 2025 | 3,336 | $4.21 | | June 2025 | 5,335 | $4.14 | | Total | 11,672 | N/A | - The shares purchased represent shares withheld from employees for the payment of taxes upon the vesting of restricted stock awards167