WideOpenWest, Inc. 10-K Analysis & Summary – 3/14/2025

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WideOpenWest, Inc.

10-K

Annual report

Filing date:

03/14/2025

TLDR:

ELI5:

WOW, a company that provides internet and cable, is having a tough time because they are losing customers and not making as much money. They’re trying to fix this by focusing on faster internet, but they also have a lot of debt and some problems with how they keep track of their money.

Accession #:

0001558370-25-003008

Published on

March 16, 2025

Analyst Summary

Total revenue decreased by 8% year-over-year, primarily due to a decline in residential subscription revenue, particularly in video services.
Operating expenses decreased by 15%, mainly due to lower programming costs associated with the decline in video subscribers and a reduction in patent litigation expenses.
The company’s management concluded that its internal control over financial reporting was not effective as of December 31, 2024, due to a material weakness related to documentation and evidence of review regarding certain inputs utilized in the Company’s annual impairment testing.
The company is pursuing a broadband-first strategy, with approximately 93% of new customers choosing HSD-only offerings.
The Debt-to-Equity Ratio is high at 4.78, indicating significant leverage compared to the industry average.
The Interest Coverage Ratio is very low at 0.07, indicating difficulty in covering interest expenses.
Total Subscribers decreased by 5.04%, and Video RGUs decreased significantly by 33.26%, reflecting the ongoing trend of cord-cutting.
Capital Expenditures decreased by 19.74%, which may indicate a shift in investment strategy or cost-cutting measures.

Opportunities and Risks

Opportunity: Focusing on high-speed data services aligns with changing consumer preferences.
Opportunity: Expanding the fiber network could provide a competitive advantage.
Opportunity: Offering a full range of products and services to business customers could generate additional revenue.
Risk: WOW faces intense competition from larger cable and telecommunications companies, as well as from streaming services.
Risk: The company has a substantial amount of debt, which could limit its financial flexibility.
Risk: Rapid technological advancements could render WOW’s services obsolete.
Risk: Changes in regulations could negatively impact WOW’s business.
Risk: The identified material weakness in internal control over financial reporting raises concerns about the reliability of financial reporting.
Risk: The company’s operations are vulnerable to severe weather events.

Potential Implications

Company Performance

Subscriber Growth: WOW needs to attract and retain high-speed data subscribers to offset the decline in video subscribers.
Debt Management: The company must effectively manage its debt and comply with its debt covenants.
Internal Control Remediation: Addressing the material weakness in internal control over financial reporting is crucial for restoring investor confidence.
Greenfield Expansion: The success of the greenfield expansion strategy is critical for future growth.

WOW (WideOpenWest, Inc.) 2024 10-K Filing Report

Executive Summary

This report analyzes WideOpenWest, Inc.’s (WOW) 2024 10-K filing. WOW faces significant challenges, including declining revenue, customer losses, and substantial debt. While the company is focusing on a broadband-first strategy and expanding its fiber network, competition and economic uncertainty pose considerable risks. The company’s internal control over financial reporting was deemed ineffective due to a material weakness. Overall, a cautious approach is warranted, and a “Hold” rating is suggested. Investors should closely monitor the company’s ability to execute its strategy, manage its debt, and improve its internal controls.

Company Overview

WideOpenWest, Inc. (WOW) is a broadband provider offering high-speed data, cable television, and digital telephony services to residential and business customers. The company operates in several markets across Alabama, Florida, Georgia, Michigan, South Carolina, and Tennessee. WOW is pursuing a broadband-first strategy, focusing on high-speed data services and fiber network expansion.

Detailed Analysis

Management’s Discussion and Analysis (MD&A)

Management highlights the company’s broadband-first strategy and network enhancements. They emphasize the increasing demand for high-speed data services. However, the MD&A also reveals challenges, including a decrease in total revenue and a decline in video subscribers. The narrative acknowledges the impact of Hurricane Helene and Milton on the company’s operations. The tone is cautiously optimistic, focusing on future growth opportunities while acknowledging current difficulties.

Financial Statement Analysis

Revenue

Total revenue decreased by 8% year-over-year, primarily due to a decline in residential subscription revenue. While ARPU (Average Revenue Per User) increased, it was not enough to offset the loss of subscribers. Business service revenue remained relatively flat.

Expenses

Operating expenses (excluding depreciation and amortization) decreased by 15%, mainly due to lower programming costs associated with the decline in video subscribers. Selling, general, and administrative expenses also decreased, primarily due to a reduction in patent litigation expenses. Depreciation and amortization expenses increased due to network expansion and infrastructure replacement.

Key Ratios

Revenue Growth: -8%
Operating Margin: Positive, but minimal.
Debt-to-Equity Ratio: High, indicating significant leverage.

Cash Flow

Cash flow from operating activities increased, but capital expenditures remain significant, particularly related to network expansion. Financing activities were impacted by debt-related transactions.

Uncommon Metrics

HSD-Only New Connections: Approximately 93% of new customers are choosing HSD-only offerings, highlighting the shift away from traditional bundled services.
Greenfield Expansion: The company is actively expanding its fiber network in new markets, but this strategy involves significant capital expenditures and faces competition.

Risk and Opportunity Assessment

Risks

Competition: WOW faces intense competition from larger cable and telecommunications companies, as well as from streaming services.
Debt: The company has a substantial amount of debt, which could limit its financial flexibility.
Technological Change: Rapid technological advancements could render WOW’s services obsolete.
Regulatory Changes: Changes in regulations could negatively impact WOW’s business.
Internal Control Weakness: The identified material weakness in internal control over financial reporting raises concerns about the reliability of financial reporting.
Natural Disasters: The company’s operations are vulnerable to severe weather events.

Opportunities

Broadband-First Strategy: Focusing on high-speed data services aligns with changing consumer preferences.
Fiber Network Expansion: Expanding the fiber network could provide a competitive advantage.
Business Services: Offering a full range of products and services to business customers could generate additional revenue.

Internal Controls

The company’s management concluded that its internal control over financial reporting was not effective as of December 31, 2024, due to a material weakness related to documentation and evidence of review regarding certain inputs utilized in the Company’s annual impairment testing. This is a significant concern and requires immediate remediation.

Conclusion and Actionable Insights

WOW is navigating a challenging environment with declining revenue and intense competition. While the company’s broadband-first strategy and fiber network expansion offer potential growth opportunities, significant risks remain, including its high debt load and the identified material weakness in internal control over financial reporting. The “Hold” rating reflects the uncertainty surrounding the company’s ability to execute its strategy and improve its financial performance. Investors should closely monitor the following:

Subscriber Growth: WOW needs to attract and retain high-speed data subscribers to offset the decline in video subscribers.
Debt Management: The company must effectively manage its debt and comply with its debt covenants.
Internal Control Remediation: Addressing the material weakness in internal control over financial reporting is crucial for restoring investor confidence.
Greenfield Expansion: The success of the greenfield expansion strategy is critical for future growth.

Financial Analysis of WideOpenWest, Inc. (WOW) – Year Ended December 31, 2024

1. Commentary

WideOpenWest (WOW) experienced a challenging year in 2024. Revenue declined, and while the net loss improved compared to the previous year, the company remains unprofitable. The decrease in revenue was primarily driven by a decline in residential subscription revenue, particularly in video services. Despite these challenges, WOW managed to increase cash flow from operating activities and reduce its capital expenditures.

2. Financial Ratio and Metric Analysis

Profitability

Ratio/Metric	2024	2023	Trend (%)	Industry Comparison
Gross Profit Margin	N/A (Insufficient Data)	N/A (Insufficient Data)	N/A	Varies widely by specific services offered.
Operating Profit Margin	1.03%	-45.87%	N/A	The industry average is around 10-15%. WOW is below average.
Net Profit Margin	-9.32%	-41.90%	N/A	The industry average is around 5-10%. WOW is below average.
Return on Assets (ROA)	-3.89%	-18.99%	N/A	Industry average ROA is typically 3-5%. WOW is below average.
Return on Equity (ROE)	-28.16%	-111.43%	N/A	Industry average ROE is typically 10-15%. WOW is below average.
Earnings Per Share (EPS) – Basic and Diluted	$(0.72)	$(3.53)	N/A	Varies significantly.

Liquidity

Ratio/Metric	2024	2023	Trend (%)	Industry Comparison
Current Ratio	0.61	0.65	-6.15%	A typical industry average is 1.0 to 1.5. WOW is below average.
Quick Ratio (Acid-Test Ratio)	0.61	0.65	-6.15%	A typical industry average is 0.8 to 1.0. WOW is below average.
Cash Ratio	0.21	0.14	50.00%	A typical industry average is 0.1 to 0.3. WOW is within average.

Solvency/Leverage

Ratio/Metric	2024	2023	Trend (%)	Industry Comparison
Debt-to-Equity Ratio	4.78	3.55	34.65%	The industry average is around 1.0 to 2.0. WOW is above average, indicating higher leverage.
Debt-to-Assets Ratio	0.66	0.60	10.00%	The industry average is around 0.4 to 0.6. WOW is within average.
Interest Coverage Ratio (Times Interest Earned)	0.07	-4.43	N/A	The industry average is around 2.0 to 3.0. WOW is below average.

Activity/Efficiency

Ratio/Metric	2024	2023	Trend (%)	Industry Comparison
Inventory Turnover	N/A (Insufficient Data)	N/A (Insufficient Data)	N/A	N/A
Days Sales Outstanding (DSO)	18.47	20.49	-9.86%	The industry average is around 30-45 days. WOW is below average.
Days Payable Outstanding (DPO)	24.39	28.79	-15.28%	The industry average is around 30-45 days. WOW is below average.
Asset Turnover	0.42	0.45	-6.67%	The industry average is around 0.5 to 0.7. WOW is below average.

Valuation

Ratio/Metric	2024	Trend (%)	Industry Comparison
Price-to-Earnings Ratio (P/E)	N/A (Negative Earnings)	N/A	N/A
Price-to-Book Ratio (P/B)	2.89	N/A	The industry average is around 2.0 to 4.0. WOW is within average.
Price-to-Sales Ratio (P/S)	0.29	N/A	The industry average is around 1.0 to 2.0. WOW is below average.
Enterprise Value to EBITDA (EV/EBITDA)	13.85	N/A	The industry average is around 7.0 to 10.0. WOW is above average.

Growth Rates

Ratio/Metric	2024	2023	Trend (%)	Industry Comparison
Revenue Growth	-8.13%	-2.58%	N/A	Varies significantly.
Net Income Growth	79.56%	N/A	N/A	Varies significantly.
EPS Growth	79.60%	N/A	N/A	Varies significantly.

Other Relevant Metrics

Homes Passed: Increased from 1,932,200 to 1,962,100, a growth of 1.55%. This indicates continued expansion of the company’s network reach.
Total Subscribers: Decreased from 504,100 to 478,700, a decline of 5.04%. This suggests challenges in retaining customers.
HSD RGUs: Decreased from 490,100 to 470,400, a decline of 4.02%. This indicates a decrease in high-speed data subscribers.
Video RGUs: Decreased from 90,800 to 60,600, a significant decline of 33.26%. This reflects the ongoing trend of cord-cutting.
Telephony RGUs: Decreased from 79,500 to 71,600, a decline of 9.94%. This indicates a decrease in telephony subscribers.
Total RGUs: Decreased from 660,400 to 602,600, a decline of 8.75%. This is the overall decline in revenue generating units.
Capital Expenditures: Decreased from $268.9 million to $215.8 million, a decline of 19.74%. This may indicate a shift in investment strategy or cost-cutting measures.