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Broadband and telecommunications services provider WideOpenWest (NYSE:WOW) reported results in line with analysts' expectations in Q1 CY2024, with revenue down 6.2% year on year to $161.5 million. On the other hand, next quarter's revenue guidance of $159.5 million was less impressive, coming in 1.9% below analysts' estimates. It made a GAAP loss of $0.18 per share, improving from its loss of $0.46 per share in the same quarter last year.
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WideOpenWest (WOW) Q1 CY2024 Highlights:
- Reminder that WOW received an acquisition offer from DigitalBridge Investments and Crestview $4.80 per share in cash on May 3, 2024; WOW's Board of Directors established a special committee to evaluate the proposal
- Revenue: $161.5 million vs analyst estimates of $161.4 million (small beat)
- EPS: -$0.18 vs analyst estimates of -$0.10 (-$0.08 miss)
- Revenue Guidance for Q2 CY2024 is $159.5 million at the midpoint, below analyst estimates of $162.6 million
- Gross Margin (GAAP): 58.2%, up from 54.6% in the same quarter last year
- Free Cash Flow was -$39.3 million compared to -$35.9 million in the previous quarter
- Subscribers: 500,700
- Market Capitalization: $403.2 million
Initially started in Denver as a cable television provider, WideOpenWest (NYSE:WOW) provides high-speed internet, cable, and telephone services to the Midwest and Southeast regions of the U.S.
Cable and SatelliteThe massive physical footprints of fiber in the ground or satellites in space make it challenging for companies in this industry to adjust to shifting consumer habits. Over the last decade-plus, consumers have ‘cut the cord’ to their traditional cable subscriptions in favor of streaming options. While that is a headwind, this affinity to streaming means more households need high-speed internet, and companies that successfully serve customers can enjoy high retention rates and pricing power since the options for internet connectivity in any geography is usually limited.
Sales GrowthExamining a company's long-term performance can provide clues about its business quality. Any business can put up a good quarter or two, but the best consistently grow over the long haul. WideOpenWest's revenue declined over the last five years, dropping 10.2% annually. Within consumer discretionary, a long-term historical view may miss a company riding a successful new product or emerging trend. That's why we also follow short-term performance. WideOpenWest's 2-year annualized revenue declines of 9.4% align with its five-year revenue declines, suggesting its demand is consistently shrinking.
We can dig even further into the company's revenue dynamics by analyzing its number of subscribers, which reached 500,700 in the latest quarter. Over the last two years, WideOpenWest's subscribers averaged 2% year-on-year declines. Because this number is higher than its revenue growth during the same period, we can see the company's monetization of its consumers has fallen.
This quarter, WideOpenWest reported a rather uninspiring 6.2% year-on-year revenue decline to $161.5 million of revenue, in line with Wall Street's estimates. The company is guiding for a 7.6% year-on-year revenue decline next quarter to $159.5 million, a deceleration from the 2% year-on-year decrease it recorded in the same quarter last year. Looking ahead, Wall Street expects revenue to decline 4.8% over the next 12 months.
Cash Is KingAlthough earnings are undoubtedly valuable for assessing company performance, we believe cash is king because you can't use accounting profits to pay the bills.
Over the last two years, WideOpenWest's demanding reinvestments to stay relevant with consumers have drained company resources. Its free cash flow margin has been among the worst in the consumer discretionary sector, averaging negative 22.8%.
WideOpenWest burned through $39.3 million of cash in Q1, equivalent to a negative 24.3% margin, reducing its cash burn by 42.4% year on year.
Key Takeaways from WideOpenWest's Q1 Results We struggled to find many strong positives in these results. Its operating margin missed and its EPS fell short of Wall Street's estimates. Overall, this was a mediocre quarter for WideOpenWest. The company is down 3.1% on the results and currently trades at $4.7 per share.
