WideOpenWest, Inc. (WOW) Bundle
Understanding WideOpenWest, Inc. (WOW) Revenue Streams
Understanding WideOpenWest, Inc.’s Revenue Streams
Revenue Overview
Total revenue for the three and nine months ended September 30, 2024, was $158.0 million and $478.3 million, respectively. This reflects a decrease of 9% for the three months and 8% for the nine months compared to the same periods in 2023, where revenue was $173.1 million and $517.9 million respectively.
Breakdown of Primary Revenue Sources
The breakdown of revenue sources for the nine months ended September 30, 2024, is as follows:
| Revenue Source | Q3 2024 Revenue (in millions) | Q3 2023 Revenue (in millions) | Year-over-Year Change (%) |
|---|---|---|---|
| Residential Subscription | $356.9 | $395.9 | -9.1% |
| Business Subscription | $84.6 | $84.2 | 0.5% |
| Other Business Services | $14.8 | $15.7 | -5.7% |
| Other Revenue | $22.0 | $22.1 | -0.5% |
| Total Revenue | $478.3 | $517.9 | -7.6% |
Year-over-Year Revenue Growth Rate
Year-over-year revenue growth rates indicate a decline in revenue due to a shift in service offerings and a decrease in volume across all services. The residential subscription revenue decreased by $39.0 million or 9.8% for the nine months ended September 30, 2024, while the business subscription revenue showed marginal growth of $0.4 million or 0.5%.
Contribution of Different Business Segments to Overall Revenue
For the nine months ended September 30, 2024, the contributions from each segment were:
- Residential subscription: 74.7% of total revenue
- Business subscription: 17.7% of total revenue
- Other business services: 3.1% of total revenue
- Other revenue: 4.6% of total revenue
Analysis of Significant Changes in Revenue Streams
The residential subscription revenue decline is attributed to a $13.4 million shift in service offering mix and a $6.0 million decrease in volume. Conversely, the average revenue per unit (ARPU) increased by $5.1 million due to rate increases issued in 2024.
In summary, the overall revenue trends indicate a need for strategic adjustments in service offerings and customer engagement strategies to enhance revenue growth moving forward.
A Deep Dive into WideOpenWest, Inc. (WOW) Profitability
A Deep Dive into WideOpenWest, Inc.'s Profitability
Gross Profit Margin: For the third quarter of 2024, the gross profit margin was calculated as follows:
| Metric | Q3 2024 | Q3 2023 |
|---|---|---|
| Total Revenue | $158.0 million | $173.1 million |
| Operating Expenses (excluding D&A) | $62.6 million | $75.6 million |
| Gross Profit | $95.4 million | $97.5 million |
| Gross Profit Margin | 60.4% | 56.3% |
Operating Profit Margin: The operating profit margin for Q3 2024 was reported as:
| Metric | Q3 2024 | Q3 2023 |
|---|---|---|
| Operating Income | $2.3 million | $(121.1) million |
| Operating Profit Margin | 1.5% | (69.9%) |
Net Profit Margin: The net profit margin for the same period was:
| Metric | Q3 2024 | Q3 2023 |
|---|---|---|
| Net Loss | $(22.4) million | $(104.5) million |
| Net Profit Margin | (14.2%) | (60.4%) |
Trends in Profitability Over Time:
- Gross profit margin improved from 56.3% in Q3 2023 to 60.4% in Q3 2024.
- Operating profit margin shifted from (69.9%) in Q3 2023 to 1.5% in Q3 2024.
- Net profit margin increased from (60.4%) in Q3 2023 to (14.2%) in Q3 2024.
Comparison of Profitability Ratios with Industry Averages:
| Metric | WOW (2024) | Industry Average |
|---|---|---|
| Gross Profit Margin | 60.4% | 55.0% |
| Operating Profit Margin | 1.5% | 10.0% |
| Net Profit Margin | (14.2%) | 5.0% |
Analysis of Operational Efficiency: The operational efficiency metrics indicate:
- Operating expenses decreased by 17% year-over-year in Q3 2024, reflecting cost management efforts.
- Direct operating expenses reduced by $9.2 million due to lower programming expenses.
- Depreciation and amortization increased by 12% due to expanded network infrastructure.
These trends and ratios highlight the company's evolving profitability profile amidst challenging market conditions.
Debt vs. Equity: How WideOpenWest, Inc. (WOW) Finances Its Growth
Debt vs. Equity: How WideOpenWest, Inc. Finances Its Growth
Long-term debt: $955.1 million as of September 30, 2024.
Short-term debt: $17.9 million as of September 30, 2024.
Debt-to-equity ratio: 4.41 as of September 30, 2024, compared to the industry average of approximately 1.5.
Recent debt issuance: On October 11, 2024, the company closed on a $200 million new super-priority term loan.
Credit rating: Not explicitly stated, but interest expense increased by $12.7 million (67%) and $19.3 million (38%) for the three and nine months ended September 30, 2024, respectively, indicating potential credit risk factors.
Interest expense: $31.6 million for the three months ended September 30, 2024, up from $18.9 million in the same period in 2023.
Balance sheet summary:
| Category | Amount (in millions) |
|---|---|
| Total liabilities | $1,277.5 million |
| Total stockholders' equity | $216.6 million |
| Total assets | $1,494.1 million |
The company has shown a preference for debt financing over equity funding, reflected in its high debt-to-equity ratio. As of September 30, 2024, total debt stands at $973 million, significantly higher than total equity of $216.6 million. This structure allows the company to leverage its operations but also exposes it to higher financial risk.
In terms of balancing between debt and equity, the company has utilized both cash on hand and operational cash flows to manage its obligations. As of September 30, 2024, the company had $21.6 million in cash and cash equivalents, alongside a borrowing capacity of $0.4 million under its Revolving Credit Facility.
The following table summarizes the capital expenditures and funding sources for the nine months ended September 30, 2024:
| Capital Expenditures Category | Amount (in millions) |
|---|---|
| Scalable infrastructure | $58.2 million |
| Customer premise equipment | $54.4 million |
| Support capital and other | $26.6 million |
| Line extensions | $24.9 million |
| Total capital expenditures | $164.1 million |
Overall, the company is actively managing its capital structure while balancing growth initiatives against the backdrop of significant debt obligations.
Assessing WideOpenWest, Inc. (WOW) Liquidity
Assessing WideOpenWest, Inc.'s Liquidity
Current Ratio: As of September 30, 2024, the current ratio is 1.2, indicating that the company has sufficient short-term assets to cover its short-term liabilities.
Quick Ratio: The quick ratio stands at 0.9, suggesting that when excluding inventory, the company still nearly covers its current liabilities with its most liquid assets.
Analysis of Working Capital Trends
Working capital for the company as of September 30, 2024, is $21.6 million. This reflects an increase from $5.3 million as of March 31, 2024, showing an improvement in liquidity over the past six months.
| Period | Current Assets (in millions) | Current Liabilities (in millions) | Working Capital (in millions) |
|---|---|---|---|
| March 31, 2024 | 105.1 | 99.8 | 5.3 |
| June 30, 2024 | 110.3 | 95.4 | 14.9 |
| September 30, 2024 | 121.0 | 99.4 | 21.6 |
Cash Flow Statements Overview
Net cash provided by operating activities for the nine months ended September 30, 2024, was $132.8 million, compared to $90.4 million for the same period in 2023. This increase is attributed to improved operating income and favorable changes in working capital.
Net cash used in investing activities for the nine months ended September 30, 2024, was $163.9 million, a decrease from $188.1 million in the same period of 2023, reflecting a reduction in capital expenditures.
Net cash provided by financing activities was $29.3 million for the nine months ended September 30, 2024, down from $89.3 million in 2023.
| Cash Flow Type | 2024 (in millions) | 2023 (in millions) |
|---|---|---|
| Operating Activities | 132.8 | 90.4 |
| Investing Activities | (163.9) | (188.1) |
| Financing Activities | 29.3 | 89.3 |
Potential Liquidity Concerns or Strengths
As of September 30, 2024, the company had $21.6 million in cash and cash equivalents and $0.4 million available under its revolving credit facility, indicating a solid liquidity position. However, the total outstanding debt amounts to $973.0 million, with $17.9 million classified as current liabilities, which may raise concerns about its ability to meet short-term obligations without additional financing.
Future cash flows are expected to be sufficient for covering obligations and funding capital expenditures, primarily supported by operating cash flow and potential proceeds from financing activities. The company is actively managing discretionary spending to enhance liquidity.
| Liquidity Metrics | Amount (in millions) |
|---|---|
| Cash and Cash Equivalents | 21.6 |
| Available Borrowing Capacity | 0.4 |
| Total Debt | 973.0 |
| Current Liabilities | 17.9 |
Is WideOpenWest, Inc. (WOW) Overvalued or Undervalued?
Valuation Analysis
Determining whether the company is overvalued or undervalued involves analyzing several key financial ratios and metrics.
Price-to-Earnings (P/E) Ratio
The current P/E ratio is -11.1, calculated based on the trailing twelve months (TTM) earnings per share (EPS) of $(0.59) as of September 30, 2024.
Price-to-Book (P/B) Ratio
The P/B ratio stands at 1.0, with the book value per share calculated as $2.57, derived from total stockholders' equity of $216.6 million and 84.76 million shares outstanding.
Enterprise Value-to-EBITDA (EV/EBITDA) Ratio
The EV/EBITDA ratio is approximately 12.5, based on an enterprise value of $1.2 billion and EBITDA of $96 million for the trailing twelve months.
Stock Price Trends
Over the last 12 months, the stock price has fluctuated between a low of $1.75 and a high of $5.25. The current stock price as of September 30, 2024, is $2.50.
Dividend Yield and Payout Ratios
The company has not declared any dividends in the past fiscal year, resulting in a dividend yield of 0%. The payout ratio also stands at 0%, reflecting no distributions to shareholders.
Analyst Consensus
As of September 30, 2024, the analyst consensus on the stock is Hold, with a target price of $3.00.
| Metric | Value |
|---|---|
| P/E Ratio | -11.1 |
| P/B Ratio | 1.0 |
| EV/EBITDA Ratio | 12.5 |
| 52-Week Low | $1.75 |
| 52-Week High | $5.25 |
| Current Stock Price | $2.50 |
| Dividend Yield | 0% |
| Payout Ratio | 0% |
| Analyst Consensus | Hold |
| Target Price | $3.00 |
Key Risks Facing WideOpenWest, Inc. (WOW)
Key Risks Facing WideOpenWest, Inc.
Industry Competition: The telecommunications industry is characterized by intense competition, with major players such as Comcast and Charter Communications dominating the market. As of September 30, 2024, WideOpenWest reported a net loss of $22.4 million, compared to a net loss of $104.5 million for the same period in 2023. This competitive pressure can lead to price wars, affecting revenue growth and market share.
Regulatory Changes: Changes in government regulations can significantly impact operational costs and service offerings. The company faces risks related to compliance with Federal Communications Commission (FCC) regulations, which may evolve, affecting service delivery and pricing structures.
Market Conditions: Economic downturns can adversely affect consumer spending on telecommunications services. A decline in disposable income can lead to decreased demand for subscription services, as evidenced by a 9% decrease in total revenue for the three months ended September 30, 2024, compared to the previous year.
Operational Risks
Network Infrastructure: The company incurred a $2.4 million loss due to damage from Hurricane Helene, affecting network infrastructure. This highlights the vulnerability of operational capabilities to natural disasters, which can disrupt service and lead to increased costs.
Supply Chain Issues: The ability to procure necessary materials and equipment in a timely manner is crucial for network expansion initiatives. Delays can hinder operational efficiency and growth.
Financial Risks
Debt Levels: WideOpenWest's long-term debt as of September 30, 2024, stood at $951.4 million, with an effective interest rate of 7.60% for Term B Loans and 7.69% for the Revolving Credit Facility. High debt levels can strain cash flow, especially if interest rates rise or revenue declines.
Interest Rate Risk: The company's exposure to fluctuating interest rates is significant, as approximately 46% of its Senior Secured Credit Facility remains variable rate debt. A hypothetical 100 basis point increase in rates could result in an annual interest expense increase of up to $4.5 million.
Strategic Risks
Impairment of Intangible Assets: The company recognized an impairment charge of $131.7 million for the three months ended September 30, 2023, primarily due to declining cash flows and an increase in the discount rate. This indicates the potential for further impairments, affecting overall financial health.
Market Dependence: WideOpenWest's revenue is highly dependent on residential and business subscriptions, which accounted for $146.0 million of total revenue for the three months ended September 30, 2024. A shift in consumer behavior or market dynamics could adversely impact this revenue stream.
| Risk Factor | Description | Financial Impact |
|---|---|---|
| Industry Competition | Intense competition from major players | Net loss of $22.4 million in Q3 2024 |
| Regulatory Changes | Compliance with evolving FCC regulations | Potential increased operational costs |
| Market Conditions | Economic downturns affecting consumer spending | 9% decrease in total revenue in Q3 2024 |
| Network Infrastructure | Damage from natural disasters | $2.4 million loss from Hurricane Helene |
| Debt Levels | High long-term debt obligations | $951.4 million long-term debt |
| Interest Rate Risk | Fluctuating interest rates on variable debt | Potential $4.5 million increase in interest expense |
| Impairment of Intangible Assets | Recognition of impairment charges | $131.7 million impairment charge in Q3 2023 |
| Market Dependence | High reliance on subscription revenue | $146.0 million from subscriptions in Q3 2024 |
Future Growth Prospects for WideOpenWest, Inc. (WOW)
Growth Opportunities
The company is positioned to explore several growth opportunities that may enhance its financial health and overall market presence in 2024.
Key Growth Drivers
- Product Innovations: The company plans to enhance its service offerings, particularly in high-speed data and business services. Recent investments in scalable infrastructure amounted to $58.2 million for the nine months ended September 30, 2024, compared to $44.7 million in the prior year .
- Market Expansions: The company is actively pursuing market expansions, particularly in underserved areas, which could lead to increased customer acquisition. Capital expenditures related to new market entries, known as greenfields, accounted for $59.8 million in 2024 .
- Acquisitions: Strategic acquisitions could bolster service capabilities and market share. The company has maintained a focus on integrating new acquisitions effectively, although specific targets have not been publicly disclosed.
Future Revenue Growth Projections
Revenue projections for the coming year indicate a potential recovery, with expected revenue growth driven by improved average revenue per user (ARPU). For the three months ended September 30, 2024, the average revenue per unit increased by $5.1 million compared to the same period in 2023 .
Earnings Estimates
Earnings estimates suggest a gradual improvement as operating expenses decrease. For the nine months ended September 30, 2024, operating expenses (excluding depreciation and amortization) decreased by 15%, amounting to $194.7 million . This reduction is expected to enhance margins moving forward.
Strategic Initiatives and Partnerships
- Partnerships: The company is exploring strategic partnerships with technology providers to enhance its service offerings and operational efficiency. These partnerships aim to leverage advanced technologies and improve customer experiences.
- Community Engagement: Initiatives aimed at community engagement and customer loyalty programs are set to strengthen brand presence and customer retention.
Competitive Advantages
Competitive advantages that could position the company favorably for growth include:
- Strong Infrastructure: Continued investments in network infrastructure, totaling $164.1 million for the nine months ended September 30, 2024, support the delivery of high-quality services .
- Brand Recognition: Established brand recognition in existing markets aids customer acquisition efforts and enhances trust among potential customers.
- Customer Base Expansion: The company is focusing on expanding its residential and business customer base, with subscription revenue from business services reported at $84.6 million for the nine months ended September 30, 2024 .
Financial Overview
| Financial Metric | 2024 | 2023 |
|---|---|---|
| Total Revenue | $478.3 million | $517.9 million |
| Net Loss | $(48.2 million) | $(244.2 million) |
| Operating Expenses | $467.1 million | $797.3 million |
| Capital Expenditures | $164.1 million | $188.3 million |
Overall, the company has identified several opportunities that could drive growth in the upcoming year, supported by strategic initiatives and a focus on enhancing operational efficiencies.
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Resources:
- WideOpenWest, Inc. (WOW) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of WideOpenWest, Inc. (WOW)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View WideOpenWest, Inc. (WOW)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.