WideOpenWest, Inc. - Quarter Report: 2022 March (Form 10-Q)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2022

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 001-38101

WideOpenWest, Inc.

(Exact name of registrant as specified in its charter)

Delaware (State or Other Jurisdiction of Incorporation or Organization)	46-0552948 (IRS Employer Identification No.)

7887 East Belleview Avenue, Suite 1000 Englewood, Colorado (Address of Principal Executive Offices)	80111 (Zip Code)

(720) 479-3500

(Registrant’s Telephone Number, Including Area Code)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock	WOW	New York Stock Exchange

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer ☒	Accelerated filer ☐

Non-accelerated filer ☐	Smaller reporting company ☐
Emerging Growth Company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

The number of outstanding shares of the registrant’s common stock as of April 29, 2022 was 87,800,330.

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WIDEOPENWEST, INC AND SUBSIDIARIES

FORM 10-Q

FOR THE THREE MONTHS ENDED MARCH 31, 2022

TABLE OF CONTENTS

		Page
PART I. Financial Information
Item 1:	Financial Statements (Unaudited)
	Condensed Consolidated Balance Sheets	1
	Condensed Consolidated Statements of Operations	2
	Condensed Consolidated Statements of Comprehensive Income	3
	Condensed Consolidated Statements of Changes in Stockholders’ Equity (Deficit)	4
	Condensed Consolidated Statements of Cash Flows	5
	Notes to the Condensed Consolidated Financial Statements	6
Item 2:	Management’s Discussion and Analysis of Financial Condition and Results of Operations	18
Item 3:	Quantitative and Qualitative Disclosures about Market Risk	26
Item 4:	Controls and Procedures	27
PART II. Other Information		28
Item 1:	Legal Proceedings	28
Item 1A:	Risk Factors	28
Item 2:	Unregistered Sales of Equity Securities and Use of Proceeds	28
Item 3:	Defaults Upon Senior Securities	28
Item 4:	Mine Safety Disclosures	28
Item 5:	Other Information	28
Item 6:	Exhibits	29

This Quarterly Report on Form 10-Q is for the three months ended March 31, 2022. Any statement contained in a prior periodic report shall be deemed to be modified or superseded for purposes of this Quarterly Report to the extent that a statement contained herein modifies or supersedes such statement. The Securities and Exchange Commission allows us to “incorporate by reference” information that we file with them, which means that we can disclose important information by referring you directly to those documents. Information incorporated by reference is considered to be part of this Quarterly Report. References in this Quarterly Report to “WOW,” “we,” “us,” “our”, or “the Company” are to WideOpenWest, Inc. and its direct and indirect subsidiaries, unless the context specifies or requires otherwise.

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Cautionary Statement Regarding Forward-Looking Statements

Certain statements contained in this Quarterly Report that are not historical facts contain “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements represent our goals, beliefs, plans and expectations about our prospects for the future and other future events. Such statements involve certain risks, uncertainties and assumptions. Forward-looking statements include all statements that are not historical fact and can be identified by terms such as “may,” “intend,” “might,” “will,” “should,” “could,” “would,” “anticipate,” “expect,” “believe,” “estimate,” “plan,” “project,” “predict,” “potential,” or the negative of these terms. Although these forward-looking statements reflect our good-faith belief and reasonable judgment based on current information, these statements are qualified by important factors, many of which are beyond our control, that could cause our actual results to differ materially from those in the forward-looking statements, including, but not limited to:

●

the ability to retain and further attract customers due to increased competition, resource abilities of competitiors, and shifts in the entertainment desires of customers;

●

our ability to respond to rapid technological change, including our ability to develop and deploy new products and technologies;

●

increases in programming and retransmission costs and/or programming exclusivity in favor of our competitors;

●

the disruption or failure of our network information systems or technologies as a result of hacking, viruses, outages or natural disasters in one or more of our geographic markets;

●

the effects of new regulations or regulatory changes on our business;

●

our substantial level of indebtedness and our ability to comply with all covenants in our debt agreements;

●

changes in laws and government regulations that may impact the availability and cost of capital;

●

effects of uncertain economic conditions, particularly in light of the current novel coronavirus (“COVID-19”) pandemic and related factors (e.g., unemployment, decreased disposable income, etc.) which may negatively affect our customers’ demand or ability to pay for our current and future products and services;

●

our ability to manage the risks involved in the foregoing; and

other factors described from time to time in our reports filed or furnished with the SEC, and in particular those factors set forth in the section entitled “Risk Factors” in our annual report filed on Form 10-K with the SEC on February 24, 2022 and other reports subsequently filed with the SEC. Given these uncertainties, you should not place undue reliance on any such forward-looking statements. The forward-looking statements included in this report are made as of the date hereof or the date specified herein, based on information available to us as of such date. Except as required by law, we assume no obligation to update these forward-looking statements, even if new information becomes available in the future.

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PART I-FINANCIAL INFORMATION

WIDEOPENWEST, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(unaudited)


	March 31,		December 31,
	2022		2021

	(in millions, except share data)
Assets
Current assets
Cash and cash equivalents	$	190.7	$	193.2
Accounts receivable—trade, net of allowance for doubtful accounts of $2.8 and $4.3, respectively		37.7		40.9
Accounts receivable—other, net		15.5		17.2
Prepaid expenses and other		38.7		30.7
Total current assets		282.6		282.0
Right-of-use lease assets—operating		15.9		17.2
Property, plant and equipment, net		716.6		722.3
Franchise operating rights		620.1		620.1
Goodwill		225.1		225.1
Intangible assets subject to amortization, net		1.6		1.7
Other non-current assets		39.7		38.3
Total assets	$	1,901.6	$	1,906.7
Liabilities and stockholders’ equity
Current liabilities
Accounts payable—trade	$	40.8	$	50.3
Accrued interest		4.9		0.8
Current portion of long-term lease liability—operating		4.9		5.1
Accrued liabilities and other		216.4		218.7
Current portion of long-term debt and finance lease obligations		18.1		17.9
Current portion of unearned service revenue		28.7		28.1
Total current liabilities		313.8		320.9
Long-term debt and finance lease obligations, net of debt issuance costs —less current portion		722.2		723.5
Long-term lease liability—operating		12.7		13.8
Deferred income taxes, net		255.6		257.6
Other non-current liabilities		20.5		20.1
Total liabilities		1,324.8		1,335.9
Commitments and contingencies
Stockholders' equity:
Preferred stock, $0.01 par value, 100,000,000 shares authorized; 0 shares issued and outstanding		—		—
Common stock, $0.01 par value, 700,000,000 shares authorized; 96,930,774 and 96,225,910 issued as of March 31, 2022 and December 31, 2021, respectively; 87,798,566 and 87,392,088 outstanding as of March 31, 2022 and December 31, 2021, respectively		1.0		1.0
Additional paid-in capital		354.1		348.5
Accumulated income		316.2		310.5
Treasury stock at cost, 9,132,208 and 8,833,822 shares as of March 31, 2022 and December 31, 2021, respectively		(94.5)		(89.2)
Total stockholders’ equity		576.8		570.8
Total liabilities and stockholders’ equity	$	1,901.6	$	1,906.7

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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WIDEOPENWEST, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited)


	Three months ended
	March 31,
	2022		2021

	(in millions, except share data)
Revenue	$	174.6	$	181.5
Costs and expenses:
Operating (excluding depreciation and amortization)		87.3		98.4
Selling, general and administrative		38.3		42.5
Depreciation and amortization		44.4		41.3
		170.0		182.2
Income (loss) from operations		4.6		(0.7)
Other income (expense):
Interest expense		(7.4)		(31.4)
Loss on sale of assets, net		(0.4)		—
Other income, net		8.7		0.6
Income (loss) from continuing operations before provision for income tax		5.5		(31.5)
Income tax benefit		0.2		8.8
Income (loss) from continuing operations		5.7		(22.7)
Discontinued Operations (Note 3)
Income from discontinued operations, net of tax		—		32.3
Net income	$	5.7	$	9.6

Basic and diluted earnings (loss) per common share - continuing operations
Basic	$	0.07	$	(0.28)
Diluted	$	0.07	$	(0.28)
Basic and diluted earnings per common share - discontinued operations
Basic	$	—	$	0.40
Diluted	$	—	$	0.40
Basic and diluted earnings per common share
Basic	$	0.07	$	0.12
Diluted	$	0.07	$	0.12
Weighted-average common shares outstanding
Basic		83,286,934		82,031,043
Diluted		86,422,983		82,031,043

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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WIDEOPENWEST, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(unaudited)


	Three months ended
	March 31,
	2022		2021

	(in millions)
Net income	$	5.7	$	9.6
Unrealized gain on derivative instrument, net of tax		—		4.3
Comprehensive income	$	5.7	$	13.9

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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WIDEOPENWEST, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)

FOR THE THREE MONTHS ENDED MARCH 31, 2022 AND 2021

(unaudited)



		Common		Treasury		Additional				Total
	Common	Stock		Stock at		Paid-in		Accumulated		Stockholders'
	Stock	Par Value		Cost		Capital		Income		Equity

	(in millions, except share data)
Balances at January 1, 2022	87,392,088	$	1.0	$	(89.2)	$	348.5	$	310.5	$	570.8
Stock-based compensation	—		—		—		5.6		—		5.6
Issuance of restricted stock, net	704,864		—		—		—		—		—
Purchase of shares	(298,386)		—		(5.3)		—		—		(5.3)
Net income	—		—		—		—		5.7		5.7
Balances at March 31, 2022(1)	87,798,566	$	1.0	$	(94.5)	$	354.1	$	316.2	$	576.8

(1)	Included in outstanding shares as of March 31, 2022 are 3,721,638 non-vested shares of restricted stock awards granted to employees and directors.


								Accumulated
		Common		Treasury		Additional		Other				Total
	Common	Stock		Stock at		Paid-in		Comprehensive		Accumulated		Stockholders'
	Stock	Par Value		Cost		Capital		Loss		Deficit		Deficit

	(in millions, except share data)
Balances at January 1, 2021	86,847,797	$	1.0	$	(80.7)	$	333.8	$	(6.5)	$	(460.0)	$	(212.4)
Changes in accumulated other comprehensive gain	—		—		—		—		4.3		—		4.3
Stock-based compensation	—		—		—		3.1		—		—		3.1
Issuance of restricted stock, net	666,127		—		—		—		—		—		—
Purchase of shares	(397,186)		—		(6.6)		—		—		—		(6.6)
Net income	—		—		—		—		—		9.6		9.6
Balances at March 31, 2021(1)	87,116,738	$	1.0	$	(87.3)	$	336.9	$	(2.2)	$	(450.4)	$	(202.0)

(1)	Included in outstanding shares as of March 31, 2021 are 4,423,885 non-vested shares of restricted stock awards granted to employees and directors.

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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WIDEOPENWEST, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)


	Three months ended
	March 31,
	2022		2021

	(in millions)
Cash flows from operating activities:
Net income	$	5.7	$	9.6
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		44.4		61.8
Deferred income taxes		(2.0)		0.2
Provision for doubtful accounts		0.4		2.9
Loss on sale of assets, net		0.4		—
Amortization of debt issuance costs and discount		0.4		1.2
Non-cash compensation		5.7		3.1
Other non-cash items		(0.1)		(0.1)
Changes in operating assets and liabilities:
Receivables and other operating assets		(5.7)		(0.7)
Payables and accruals		0.2		(0.4)
Net cash provided by operating activities	$	49.4	$	77.6
Cash flows from investing activities:
Capital expenditures	$	(42.1)	$	(59.3)
Other investing activities		0.5		0.4
Net cash used in investing activities	$	(41.6)	$	(58.9)
Cash flows from financing activities:
Proceeds from issuance of long-term debt, net	$	—	$	31.0
Payments on long-term debt and finance lease obligations		(5.0)		(19.4)
Purchase of shares		(5.3)		(6.6)
Net cash (used in) provided by financing activities	$	(10.3)	$	5.0
(Decrease) increase in cash and cash equivalents		(2.5)		23.7
Cash and cash equivalents, beginning of period		193.2		12.4
Cash and cash equivalents, end of period	$	190.7	$	36.1
Supplemental disclosures of cash flow information:
Cash paid during the periods for interest	$	2.8	$	30.7
Cash paid during the periods for income taxes	$	—	$	—
Non-cash operating activities:
Operating lease additions	$	—	$	0.1
Non-cash financing activities:
Finance lease additions	$	3.5	$	2.8
Capital expenditure accounts payable and accruals	$	20.3	$	17.0

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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WIDEOPENWEST, INC. AND SUBSIDIARIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2022

(unaudited)

Note 1. General Information

WideOpenWest, Inc. (“WOW” or the “Company”) is a leading broadband services provider offering high-speed data (“HSD”), cable television (“Video”), and digital telephony (“Telephony”) services to residential and business customers. The Company serves customers in 14 markets in the United States which consist of Detroit and Lansing, Michigan; Augusta, Columbus, Newnan and West Point, Georgia; Charleston, South Carolina; Dothan, Auburn, Huntsville and Montgomery, Alabama; Knoxville, Tennessee; and Panama City and Pinellas County, Florida.

The Company’s operations are managed and reported to its Chief Executive Officer (“CEO”), the Company’s chief operating decision maker, on a consolidated basis. The CEO assesses performance and allocates resources based on the consolidated results of operations. Under this organizational and reporting structure, the Company operates as one reportable segment.

Note 2. Summary of Significant Accounting Policies

Principles of Consolidation and Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and with the instructions to Form 10-Q and Article 10 of Regulation S-X for interim financial information. Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to rules and regulations of the Securities and Exchange Commission (“SEC”); however, in the opinion of management, the disclosures made are adequate to ensure the information presented is not misleading. The year-end consolidated balance sheet was derived from audited financial statements.

In the opinion of management, all normally recurring adjustments considered necessary for the fair presentation of the financial statements have been included, and the financial statements present fairly the financial position and results of operations for the interim periods presented. The results of operations for any interim period are not necessarily indicative of results expected for the full year or any future period. These unaudited condensed consolidated financial statements should be read in conjunction with the 2021 Annual Report filed with the SEC on February 24, 2022.

All significant intercompany accounts and transactions have been eliminated in consolidation.

Use of Estimates

The preparation of financial statements in accordance with GAAP requires management to make assumptions and estimates that affect the reported amounts and disclosures of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts and disclosures of revenues and expenses during the reporting period. The Company bases its estimates on historical experience and on various other assumptions that it believes are reasonable under the circumstances. To the extent there are differences between those estimates and actual results, the unaudited condensed consolidated financial statements may be materially affected.

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Note 3. Discontinued Operations

Sale of Service Areas

On June 30, 2021, WOW entered into two seperate asset sales with two different buyers. On September 1, 2021, WOW completed the sale of its Cleveland and Columbus, Ohio markets and on November 1, 2021, WOW completed the sale of its Chicago, Illinois, Evansville, Indiana and Baltimore, Maryland markets. The Company will present these markets as discontinued operations in the consolidated statements of operations and exclude from continuing operations for all periods in which such discontinued operations are presented. Results of discontinued operations include all revenues and direct expenses of these markets. General corporate overhead is not allocated to discontinued operations.

The following table presents information regarding certain components of income from discontinued operations:


	Three months ended
	March 31,
	2021
	(in millions)
Revenue	$	104.8
Costs and expenses:
Operating (excluding depreciation and amortization)		39.6
Selling, general and administrative		2.7
Depreciation and amortization		20.5
		62.8
Income from discontinued operations before provision for income tax		42.0
Income tax expense		(9.7)
Income from discontinued operations	$	32.3

The following table presents revenue by service offering from discontinued operations:


	Three months ended
	March 31,
	2021
	(in millions)
Residential subscription
HSD	$	50.3
Video		36.0
Telephony		4.0
Total Residential subscription	$	90.3
Business subscription
HSD	$	5.8
Video		0.9
Telephony		2.8
Total business subscription	$	9.5
Total subscription services revenue		99.8
Other business services revenue		0.6
Other revenue		4.4
Total revenue	$	104.8

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The following table presents specified items of cash flow and significant non-cash items of discontinued operations:


	Three months ended
	March 31,
	2021
	(in millions)
Specified items of cash flow:
Capital expenditures	$	15.3

Non-cash investing activities:
Capital expenditure accounts payable and accruals	$	1.8

In connection with the asset sales, the Company entered into two separate transition services agreements under which WOW will continue to provide certain services to each of the buyers. Under the transition services agreements, the buyers may elect a variety of services, including but not limited to: information technology, network, business support services, etc. The term of the transition services agreements are for 12 months following the closing date, with two optional three month extensions. None of the costs related to the employees, processes or systems that will be utilized to provide the services under the transition services agreements were allocated to discontinued operations.

Income earned under these agreements is presented in other income, net in the condensed consolidated statement of operations and associated receivables are presented in accounts receivable – other, net in the condensed consolidated balance sheet. The Company recognized $8.1 million of income related to the transition service agreements for the three months ended March 31, 2022.

Note 4. Revenue from Contracts with Customers

Revenue by Service Offering

The following table presents revenue by service offering:


	Three months ended
	March 31,
	2022		2021

	(in millions)
Residential subscription
HSD	$	82.3	$	79.5
Video		45.7		53.6
Telephony		6.3		7.6
Total residential subscription	$	134.3	$	140.7
Business subscription
HSD	$	17.8	$	17.1
Video		2.9		2.8
Telephony		7.0		7.4
Total business subscription	$	27.7	$	27.3
Total subscription services revenue		162.0		168.0
Other business services revenue(1)		5.3		5.6
Other revenue		7.3		7.9
Total revenue	$	174.6	$	181.5

(1)	Includes wholesale and colocation lease revenue of $4.7 and $4.8 million for the three months ended March 31, 2022 and 2021.

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Costs of Obtaining Contracts with Customers

The following table summarizes the activity of costs of obtaining contracts with customers:


	Three months ended
	March 31,
	2022		2021

	(in millions)
Balance at beginning of period	$	37.3	$	31.8
Deferral		3.8		4.0
Amortization		(3.4)		(2.0)
Balance at end of period	$	37.7	$	33.8

The following table presents the current and non-current portion of costs of obtaining contracts with customers as of the end of the corresponding periods:


	March 31, 2022		December 31, 2021

	(in millions)
Current costs of obtaining contracts with customers	$	14.6	$	14.1
Non-current costs of obtaining contracts with customers		23.1		23.2
Total costs of obtaining contracts with customers	$	37.7	$	37.3

The current portion and the non-current portion of costs of obtaining contracts with customers are included in prepaid expenses and other and other non-current assets, respectively, in the Company’s unaudited condensed consolidated balance sheets. Amortization of costs of obtaining contracts with customers is included in selling, general and administrative expense in the Company’s unaudited condensed consolidated statements of operations.

Contract Liabilities

The following table summarizes the activity of current and non-current contract liabilities:


	Three months ended
	March 31,
	2022		2021

	(in millions)
Balance at beginning of period	$	3.3	$	2.9
Deferral		3.2		2.9
Revenue recognized		(3.4)		(2.6)
Balance at end of period	$	3.1	$	3.2

The following table presents the current and non-current portion of contract liabilities as of the end of the corresponding periods:


	March 31, 2022		December 31, 2021

	(in millions)
Current contract liabilities	$	2.8	$	2.9
Non-current contract liabilities		0.3		0.4
Total contract liabilities	$	3.1	$	3.3

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The current portion and the non-current portion of contract liabilities are included in the current portion of unearned service revenue and other non-current liabilities, respectively, in the Company’s unaudited condensed consolidated balance sheets.

Unsatisfied Performance Obligations

Revenue from month-to-month residential subscription service contracts have historically represented a significant portion of the Company’s revenue and the Company expects that this will continue to be the case in future periods. All residential subscription service performance obligations will be satisfied within one year.

A summary of expected business subscription and other business services revenue to be recognized in future periods related to performance obligations which have not been satisfied or are partially unsatisfied as of March 31, 2022 is set forth in the table below:


	2022		2023		2024		Thereafter		Total

	(in millions)
Subscription services	$	32.4	$	25.6	$	11.9	$	3.5	$	73.4
Other business services		2.6		1.7		0.7		0.1		5.1
Total expected revenue	$	35.0	$	27.3	$	12.6	$	3.6	$	78.5

Provision for Doubtful Accounts

The provision for doubtful accounts and the allowance for doubtful accounts are based on the aging of the individual receivables, historical trends and current and anticipated future economic conditions. The Company manages credit risk by disconnecting services to customers who are delinquent, generally after 100 days of delinquency. The individual receivables are written-off after all reasonable efforts to collect the funds have been made. Actual write-offs may differ from the amounts reserved.

The following table presents the change in the allowance for doubtful accounts for trade accounts receivable:


	Three months ended
	March 31,
	2022		2021

	(in millions)
Balance at beginning of period	$	4.3	$	6.7
Provision charged to expense (1)		0.4		2.0
Accounts written off, net of recoveries		(1.9)		(1.6)
Balance at end of period	$	2.8	$	7.1

(1)	The Company released $0.8 million of a reserve established in 2020 related to COVID-19.

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Note 5. Plant, Property and Equipment, Net

Plant, property and equipment consists of the following:


	March 31,		December 31,
	2022		2021

	(in millions)
Distribution facilities	$	1,265.0	$	1,238.3
Customer premise equipment		267.6		267.7
Head-end equipment		236.3		228.5
Computer equipment and software		139.0		132.5
Telephony infrastructure		52.4		52.4
Buildings and leasehold improvements		32.2		32.1
Vehicles		23.8		23.7
Office and technical equipment		18.9		18.9
Land		4.4		4.4
Construction in progress (including material inventory and other)		28.0		34.9
Total property, plant and equipment		2,067.6		2,033.4
Less accumulated depreciation		(1,351.0)		(1,311.1)
	$	716.6	$	722.3

Depreciation expense for the three months ended March 31, 2022 and 2021 was $44.3 million and $41.2 million, respectively.

Note 6. Accrued Liabilities and Other

Accrued liabilities and other consists of the following:


	March 31,		December 31,
	2022		2021

	(in millions)
Property, income, sales and use taxes(1)	$	134.4	$	132.7
Programming costs		20.0		19.3
Payroll and employee benefits		16.1		29.6
Customer cash collections (Transition Services Agreements)		30.5		17.5
Other accrued liabilities		7.8		9.5
Franchise and revenue sharing fees		6.0		7.9
Utility pole costs		1.6		2.2
	$	216.4	$	218.7

(1)	Includes the current income tax payable associated with the sale of the Chicago, Illinois, Evansville, Indiana, and Baltimore, Maryland markets.

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Note 7. Long-Term Debt and Finance Leases

The following table summarizes the Company’s long-term debt and finance leases:


							December 31,
	March 31, 2022						2021
	Available
	borrowing		Effective		Outstanding		Outstanding
	capacity		interest rate(1)		balance		balance

	(in millions)
Long-term debt:
Term B Loans, net(2)	$	—	3.50	%	$	722.6	$	724.2
Revolving Credit Facility(3)		245.6	3.00	%		—		—
Total long-term debt	$	245.6				722.6		724.2
Other Financing						0.3		0.4
Finance lease obligations						22.7		22.3
Total long-term debt, finance lease obligations and other						745.6		746.9
Debt issuance costs, net(4)						(5.3)		(5.5)
Sub-total						740.3		741.4
Less current portion						(18.1)		(17.9)
Long-term portion					$	722.2	$	723.5

(1)	Represents the effective interest rate in effect for all borrowings outstanding as of March 31, 2022 pursuant to each debt instrument including the applicable margin.

(2)	At March 31, 2022 and December 31, 2021 includes $5.6 million and $5.8 million of net unamortized discounts, respectively.

(3)

Available borrowing capacity at March 31, 2022 represents $250.0 million of total availability less outstanding letters of credit of $4.4 million. The aggregate amount of undrawn letters of credit cannot exceed $20.0 million and are used in the ordinary course of business and released when the respective contractual obligations have been fulfilled by the Company.

(4)	At March 31, 2022 and December 31, 2021, debt issuance costs include $4.0 million and $4.1 million related to Term B Loans and $1.3 million and $1.4 million related to the Revolving Credit Facility, respectively.

Refinancing of the Term B Loans and Revolving Credit Facility

On December 20, 2021, the Company entered into a new secured credit agreement with Morgan Stanley Senior Funding, Inc., as administrative agent, collateral agent and issuing bank (the “Credit Agreement”). The Credit Agreement consists of (i) a new Term Loan B in an aggregate principal amount of $730.0 million and (ii) a $250.0 million revolving credit commitment. The Term Loan B matures in December 2028 and bears interest at a rate equal to the Secured Overnight Financing Rate (“SOFR”) plus 3.00%, subject to a 50 basis point floor, and the revolving credit commitment bears interest at a rate equal to SOFR plus 2.75%, subject to a 50 basis point commitment fee rate for unused commitments, and matures in December 2026. The Senior Secured Term B loans and Revolving Credit Facility are secured on a first-priority basis by a lien on substantially all of the Company’s assets, subject to certain exceptions and permitted liens.

As of March 31, 2022, the Company was in compliance with all debt covenants.

Note 8. Stock-Based Compensation

WOW’s 2017 Omnibus Incentive Plan provides for grants of stock options, restricted stock and performance awards. The Company’s directors, officers and other employees and persons who engage in services for the Company are eligible for grants under the 2017 Omnibus Incentive Plan. The 2017 Omnibus Incentive Plan has authorized 12,074,128 shares of common stock to be available for issuance, subject to adjustment in the event of a reorganization, stock split, merger or similar change in the Company’s corporate structure of the outstanding shares of common stock.

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The following table presents restricted stock activity during the three months ended March 31, 2022:


		Number of
		Unvested
		Restricted Stock
		Shares
Outstanding, beginning of period		4,325,124
Granted		735,761
Vested		(1,308,350)
Forfeited		(30,897)
Outstanding, end of period(1)		3,721,638

(1)

The total outstanding non-vested shares of restricted stock awards granted to employees and directors are included in total outstanding shares as of March 31, 2022.

Restricted stock awards generally vest ratably over a four year period based on the date of grant. For restricted stock awards that contain only service conditions for vesting, the Company calculates the award fair value based on the closing stock price on the accounting grant date. Certain awards were modified during the year ended December 31, 2021 and are classified as liabilities.

Nonvested Performance Shares

On March 3, 2022, the Company granted 199,592 performance shares which will vest based on the Company’s achievement level relative to the following performance measures at December 31, 2024: 50% based upon the Company’s Total Shareholder Return (“TSR”) relative to the TSRs of the Company’s peer group and 50% based on the Company’s three-year cumulative EBITDA metric. EBITDA is defined as net income (loss) before net interest expense, income taxes, depreciation and amortization (including impairments), impairment losses on intangibles and goodwill, the write-off of any asset, loss on early extinguishment of debt, integration and restructuring expenses and all non-cash charges and expenses (including stock compensation expense) and certain other income and expenses. Upon achievement of the minimum threshold performance metric, the grantee may earn 50% to 200% of their respective target shares based on the performance goal.

The performance shares based on relative TSR performance have a market condition and are valued using a Monte Carlo simulation model on the grant date, which resulted in a grant date fair value of $24.71 per share. The estimated fair value is amortized to expense over the requisite service period, which ends on December 31, 2024. The following assumptions were used in the Monte Carlo simulation for computing the grant date fair value of the performance shares with a market condition: risk-free interest rate of 1.66%, volatility factors in the expected market price of the Company's common shares of 58.47% and an expected life of three years.

The performance shares based on three-year cumulative EBITDA have a performance condition. The probability of achieving the performance condition is assessed at each reporting period. If it is deemed probable that the performance condition will be met, compensation cost will be recognized based on the closing price per share of the Company's common stock on the date of the grant multiplied by the number of awards expected to be earned. If it is deemed that it is not probable that the performance condition will be met, the Company will discontinue the recognition of compensation cost and any compensation cost previously recorded will be reversed.

During the fourth quarter of 2021, the Company determined that it was not probable that the performance condition based on three-year cumulative EBITDA would be met for the performance shares issued in 2021 and 2020. The Company came to this conclusion based on the sale of five service areas in 2021. See Note 3 – Discontinued Operations for additional information regarding the sales. As a result of this conclusion, the Company reversed approximately $1.0 million of previously recognized stock compensation expense in the fourth quarter of 2021.

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During February of 2022, the Compensation Committee approved proportional adjustments to the three-year cumulative EBITDA metrics associated with the 2021 and 2020 performance shares to adjust for the sale of the five service areas. Stock compensation expense will be recognized from the date of adjustment through the remaining service period of the awards if achievement is deemed probable. As of March 31, 2022, achievement of the performance conditions associated with the 2022, 2021 and 2020 performance shares was deemed probable.

The Company recorded $5.7 million and $3.1 million for the three months ended March 31, 2022 and 2021, respectively, of non-cash stock-based compensation expense which is reflected in operating expense or selling, general and administrative expense, depending on the recipients’ duties, in the Company’s unaudited condensed consolidated statements of operations.

Note 9. Earnings per Common Share

Basic earnings or loss per share attributable to the Company’s common stockholders is computed by dividing net income or loss attributable to common stockholders by the weighted average number of common shares outstanding for the period. Diluted earnings or loss per share attributable to common stockholders presents the dilutive effect, if any, on a per share basis of potential common shares (such as restricted stock units) as if they had been vested or converted during the periods presented. No such items were included in the computation of diluted loss or earnings per share for the three months ending March 31, 2021 because the Company incurred a net loss from continuing operations and the effect of inclusion would have been anti-dilutive.


	Three months ended
	March 31,
	2022		2021

	(in millions, except share data)
Income (loss) from continuing operations	$	5.7	$	(22.7)

Income from discontinued operations	$	—	$	32.3

Net income	$	5.7	$	9.6

Basic weighted-average shares		83,286,934		82,031,043
Effect of dilutive securities:
Restricted stock awards		3,136,049		—
Diluted weighted-average shares		86,422,983		82,031,043

Basic and diluted earnings (loss) per common share - continuing operations
Basic	$	0.07	$	(0.28)
Diluted	$	0.07	$	(0.28)

Basic and diluted earnings per common share - discontinued operations
Basic	$	—	$	0.40
Diluted	$	—	$	0.40

Basic and diluted earnings per common share
Basic	$	0.07	$	0.12
Diluted	$	0.07	$	0.12

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The dilutive effect of the potential common shares from the performance shares is included in diluted earnings per share upon the satisfaction of certain performance and market conditions. These conditions are evaluated at each reporting period and if the conditions have been satisfied during the reporting period, the number of contingently issuable shares are included in the computation of diluted earnings per share. As of March 31, 2022, the Company determined the performance conditions were not yet achieved; however, the market conditions indicated a certain level of achievement within the payout range. Therefore, the contingently issuable performance shares associated with the market condition were included in the computation of diluted earnings per share.

Note 10. Fair Value Measurements

The fair values of cash and cash equivalents, receivables and trade payables approximate their carrying values due to the short-term nature of these instruments. For assets and liabilities of a long-term nature, the Company determines fair value based on the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants. Market or observable inputs are the preferred source of values, followed by unobservable inputs or assumptions based on hypothetical transactions in the absence of market inputs. The Company applies the following hierarchy in determining fair value:

●

Level 1, defined as observable inputs being quoted prices in active markets for identical assets;

●

Level 2, defined as observable inputs other than quoted prices included in Level 1, including quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations in which significant inputs and significant value drivers are observable in active markets; and

●

Level 3, defined as values determined using models that utilize significant unobservable inputs for which little or no market data exists, discounted cash flow methodologies or similar techniques, or other determinations requiring significant management judgment or estimation.

The Company’s derivative instrument expired in May 2021; however, prior to expiration the derivative instrument was accounted for at fair value on a recurring basis and classified within Level 2 of the valuation hierarchy. The fair value of the derivative instrument was measured as the present value of all expected future cash flows based on the LIBOR-based swap yield curves as of the measurement date. The present value calculation utilized discount rates that were adjusted to reflect the credit quality of the Company and its counterparties.

The estimated fair value of the Company’s long-term debt is based on dealer quotes considering current market rates for the Company’s credit facility and is classified as Level 2. The ratio of the Company’s aggregate debt balance has trended from quoted market prices in active markets to quoted prices in non-active markets. The fair value of the Company’s long-term debt was valued at $725.4 million and $729.1 million as of March 31, 2022 and December 31, 2021, respectively. Long-term debt fair value does not include debt issuance costs and discounts. There were no transfers into or out of Level 1, 2 or 3 during the periods ended March 31, 2022 and December 31, 2021.

The Company’s nonfinancial assets such as franchise operating rights, property, plant, and equipment, and other intangible assets are not measured at fair value on a recurring basis; however, they are subject to fair value adjustments in certain circumstances, such as when there is evidence that an impairment may exist. When such impairments are recorded, fair values are generally classified within Level 3 of the valuation hierarchy.

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Note 11. Derivative Instruments and Hedging Activities

The Company is exposed to certain risks during the normal course of its business arising from adverse changes in interest rates. The Company selectively uses derivative financial instruments (“derivatives”), including interest rate swaps, to manage interest rate risk. The Company does not hold or issue derivative instruments for speculative purposes. Fluctuations in interest rates can be volatile, and the Company’s risk management activities do not totally eliminate these risks. Consequently, these fluctuations could have a significant effect on the Company’s financial results.

The Company’s exposure to interest rate risk results primarily from its variable rate borrowings. On May 9, 2018, the Company entered into variable to fixed interest rate swap agreements for a notional amount of $1,361.2 million to hedge the outstanding principal balance of its then-existing variable rate term loan debt. The interest rate swap contracts expired in May of 2021.

Gains on derivatives designated as cash flow hedges included in the unaudited condensed consolidated statements of comprehensive income for the three months ended March 31, 2021 are shown in the table below:


	Three months ended
	March 31,
	2021
	(in millions)
Interest rate swap contracts(1)
Gain recorded in AOCL on derivatives, before tax	$	5.6
Tax impact		(1.3)
Gain recorded in AOCL on derivatives, net		4.3

(1)

Gains on derivatives reclassified from AOCL into income will be included in “Interest expense” in the unaudited condensed consolidated statement of operations, the same income statement line item as the earnings effect of the hedged item. Losses recognized in the unaudited condensed consolidated statements of operations for the three months ended March 31, 2021 were $5.7 million.

For the periods presented, all cash flows associated with derivatives are classified as operating cash flows in the unaudited condensed consolidated statements of cash flows.

Note 12. Income Taxes

The Company accounts for income taxes under the asset and liability method. Under this method, deferred tax assets and liabilities are determined based on the difference between the financial statement and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the difference is expected to reverse. Additionally, the impact on deferred tax assets and liabilities of changes in tax rates is reflected in the financial statements in the period that includes the date of enactment.

The Company reported income tax benefit of $0.2 million and income tax expense of $0.9 million for the three months ended March 31, 2022 and 2021, respectively.

Note 13. Commitments and Contingencies

IPO Shareholder Class Action. Beginning in June 2018, four different plaintiffs’ firms filed five separate class-action lawsuits against WOW, certain individual defendants, and the private equity sponsors and underwriters of the May 2017 initial public offering. The actions alleged violations of Sections 11, 12, and 15 of the 1933 Securities Act. Prior to an anticipated trial, the parties undertook mediation on November 6, 2020 which, in turn, resulted in a Stipulation of Settlement, which was approved by the Court on January 20, 2022. As a consequence of the approval, the Company, along with all other defendants, was dismissed entirely without any admission of wrong-doing in exchange for a payment of substantially less than that sought by plaintiffs, with the funding of such payment provided substantially from the Company’s primary D&O carrier.

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Sprint Patent Infringement Claim. On March 7, 2018, Sprint Communications Company L.P (“Sprint”) filed complaints in the U.S. District Court for the District of Delaware alleging that the Company (and other industry participants) infringe patents purportedly relating to Sprint’s Voice over Internet Protocol (“VoIP”) services. The lawsuit is part of a pattern of litigation that was initiated as far back as 2007 by Sprint against numerous broadband and telecommunications providers. The Company has multiple legal and contractual defenses and is vigorously defending against the claims. Additionally, the Company is pursuing indemnification claims against equipment providers whose equipment is implicated by the claims. Formal discovery was completed in mid-February 2020, with the trial originally scheduled for October 2020, being moved to a yet to be determined date likely in 2023, with the parties undertaking settlement discussions. The Court has requested periodic status reports as to the settlement discussions as a condition to the continued stay of the litigation proceedings. The Company is unable at this time to determine whether the outcome of the litigation would have a material impact on the Company’s financial position, results of operations or cash flows.

The Company is party to various legal proceedings (including individual, class and putative class actions) arising in the normal course of its business covering a wide range of matters and types of claims including, but not limited to, general contracts, billing disputes, rights of access, programming, taxes, fees and surcharges, consumer protection, trademark and patent infringement, employment, regulatory, tort, claims of competitors and disputes with other carriers.

In accordance with GAAP, the Company accrues an expense for pending litigation when it determines that an unfavorable outcome is probable and the amount of the loss can be reasonably estimated. Legal defense costs are expensed as incurred. None of the Company’s existing accruals for pending matters are material. The Company consistently monitors its pending litigation for the purpose of adjusting its accruals and revising its disclosures accordingly, in accordance with GAAP, when required. However, litigation is subject to uncertainty, and the outcome of any particular matter is not predictable. The Company will vigorously defend its interests in pending litigation, and the Company believes that the ultimate resolution of all such matters, after considering insurance coverage or other indemnities to which it is entitled, will not have a material adverse effect on its consolidated financial position, results of operations, or cash flows.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Overview

We are a leading broadband services provider offering high-speed data (“HSD”), cable television (“Video”), and digital telephony (“Telephony”) services to residential customers and offer a full range of products and services to business customers. Our services are delivered across 14 markets via our advanced hybrid fiber-coax (“HFC”) network. Our footprint covers certain suburban areas within the states of Alabama, Florida, Georgia, Michigan, Ohio, South Carolina and Tennessee. At March 31, 2022, our broadband networks passed 1.9 million homes and businesses and served 534,700 customers.

Our core strategy is to provide outstanding service at affordable prices. We execute this strategy by managing our operations to focus on the customer. We believe that the customer experience should be reliable, easy and pleasantly surprising, every time. To achieve this customer experience, we operate one of the most technically advanced and uniform networks in the industry with approximately 96% of our network at 750 MHz or greater capacity.

Our advanced network offers HSD speeds up to 1 GIG (1000 Mbps) in approximately 99% of our footprint. Led by our robust HSD offering, our products are available either as an individual service or a bundle to residential and business service customers. We operate under a broadband first strategy. Based on our per subscriber economics, we believe that HSD represents the greatest opportunity to enhance profitability across our residential and business markets.

We continue to experience strong demand for our HSD service. For the three months ended March 31, 2022, the average percentage of HSD only new connections was approximately 87% compared to an average percentage of approximately 86% for the three months ended March 31, 2021. Customers also connected at higher speeds with approximately 68% of HSD only new connections purchasing 500MB or higher speeds during the three months ended March 31, 2022, representing an 18% increase compared to the three months ended March 31, 2021.

During the first quarter of 2022, WOW launched specific greenfield initiatives to build out its network in locations non-adjacent to its existing network and bring its state-of-the-art all IP fiber technology and award-winning customer service to new markets. WOW announced Seminole County and Orange County, Florida as the Company’s first two new service areas at a time when the demand for strong-reliable broadband continues to rise.

Key Transactions Impacting Operating Results and Financial Condition

Sale of Service Areas

On September 1, 2021, we completed the sale of our Cleveland and Columbus, Ohio markets and on November 1, 2021, we completed the sale of our Chicago, Illinois, Evansville, Indiana and Baltimore, Maryland markets. We utilized the majority of the total net proceeds of $1.8 billion to pay down outstanding debt in the third and fourth quarter of 2021 and to refinance our credit agreement in December of 2021. The divestitures strengthened our financial position and will help accelerate our broadband first strategy, which includes additional investments in edge-outs, greenfield initiatives and commercial services.

Refinancing of the Term B Loans and Revolving Credit Facility

On December 20, 2021, the Company entered into a new secured credit agreement with Morgan Stanley Senior Funding, Inc., as administrative agent, collateral agent and issuing bank (the “Credit Agreement”). The Credit Agreement consists of (i) a new Term Loan B in an aggregate principal amount of $730.0 million and (ii) a $250.0 million revolving credit commitment. The Term Loan B matures in December 2028 and bears interest at a rate equal to SOFR plus 3.00%, subject to a 50 basis point floor, and the revolving credit commitment bears interest at a rate equal to SOFR plus 2.75% and matures in December 2026. The Senior Secured Term B loans and Revolving Credit Facility are secured on a first-priority basis by a lien on substantially all of the Company’s assets, subject to certain exceptions and permitted liens.

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Critical Accounting Policies and Estimates

For a discussion of our critical accounting policies and the means by which we develop estimates refer to “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our 2021 Annual Report on Form 10-K. There have been no material changes from the critical policies described in our Form 10-K.

Homes Passed and Subscribers

We report homes passed as the number of serviceable addresses, such as single residence homes, apartments and condominium units, and businesses passed by our broadband network and listed in our database. We report total subscribers as the number of subscribers who receive at least one of our HSD, Video or Telephony services, without regard to which or how many services they subscribe. We define each of the individual HSD subscribers, Video subscribers and Telephony subscribers as a revenue generating unit (“RGU”). The following table summarizes homes passed, total subscribers and total RGUs for our services as of each respective date and for comparability purposes, presents subscribers associated with the Company’s continuing operations as of each specified date:


	Mar. 31,	Jun. 30,	Sep. 30,	Dec. 31,	Mar. 31,
	2021	2021	2021	2021	2022
Homes passed	1,873,900	1,877,300	1,880,900	1,882,100	1,886,000
Total subscribers	528,000	530,500	531,600	532,900	534,700
HSD RGUs	504,900	507,900	509,500	511,700	515,000
Video RGUs	178,800	169,300	158,600	150,600	142,000
Telephony RGUs	108,000	105,600	102,400	100,000	97,300
Total RGUs	791,700	782,800	770,500	762,300	754,300

The following table displays the homes passed and subscribers related to the Company’s edge-out activities:


	Mar. 31,	Jun. 30,	Sep. 30,	Dec. 31,	Mar. 31,
	2021	2021	2021	2021	2022
Homes passed	76,500	77,400	78,000	78,200	78,600
Total subscribers	18,400	18,600	19,000	19,300	19,500
HSD RGUs	18,300	18,500	18,900	19,200	19,400
Video RGUs	7,100	6,900	6,900	6,900	6,900
Telephony RGUs	2,900	2,800	2,800	2,800	2,800
Total RGUs	28,300	28,200	28,600	28,900	29,100

While we take appropriate steps to ensure subscriber information is presented on a consistent and accurate basis at any given balance sheet date, we periodically review our policies in light of the variability we may encounter across our different markets due to the nature and pricing of products, services and billing systems. Accordingly, we may from time to time make appropriate adjustments to our subscriber information based on such reviews.

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Financial Statement Presentation

Revenue

Our operating revenue is primarily derived from monthly recurring charges for HSD, Video, Telephony and other business services to residential and business customers, in addition to other revenues.

●

HSD revenue consists primarily of fixed monthly fees for data service and rental of modems.

●

Video revenue consists primarily of fixed monthly fees for basic, premium and digital cable television services and rental of video converter equipment, as well as charges from optional services, such as pay-per-view, video-on-demand and other events available to the customer. The Company is required to pay certain cable franchising authorities an amount based on the percentage of gross revenue derived from video services. The Company generally passes these fees on to the customer, which is included in video revenue.

●

Telephony revenue consists primarily of fixed monthly fees for local service and enhanced services, such as call waiting, voice mail and measured and flat rate long-distance service.

●

Other business service revenue consists primarily of monthly recurring charges for session initiated protocol, web hosting, metro Ethernet, wireless backhaul, broadband carrier services and cloud infrastructure services provided to business customers.

●

Other revenue consists primarily of revenue from line assurance warranty services provided to residential and business customers and revenue from late fees and advertising placement.

Revenues attributable to monthly subscription fees charged to customers for our HSD, Video and Telephony services provided by our broadband networks were 93% of total revenue for both the three months ended March 31, 2022 and 2021. The remaining percentage of total revenue represents non-subscription revenue primarily from other business services, line assurance warranty services and advertising placement.

Costs and Expenses

Our expenses primarily consist of operating, selling, general and administrative expenses, depreciation and amortization expense, and interest expense.

Operating expenses primarily include programming costs, data costs, transport costs and network access fees related to our HSD, Video and Telephony services, hardware/software expenses, network operations and maintenance services, customer service and call center expenses, bad debt, billing and collection expenses and franchise and other regulatory fees.

Selling, general and administrative expenses primarily include salaries and benefits of corporate and field management, sales and marketing personnel, human resources and related administrative costs.

Depreciation and amortization includes depreciation of our network infrastructure, including associated equipment, hardware and software, buildings and leasehold improvements, and finance lease obligations. Amortization is recognized on other intangible assets with definite lives primarily related to acquisitions. Depreciation and amortization expense is presented separately from operating and selling, general and administrative expenses in the accompanying unaudited condensed consolidated statements of operations.

We control our costs of operations by maintaining strict controls on expenditures. More specifically, we are focused on managing our cost structure by improving workforce productivity, increasing the effectiveness of our purchasing activities and maintaining discipline in customer acquisition. We expect programming expenses to continue to increase per Video subscriber due to a variety of factors, including increased demands by owners of some broadcast stations for carriage of other services or payments to those broadcasters for retransmission consent and annual increases imposed by programmers with additional selling power as a result of media consolidation. We have not been able to fully pass these increases on to our customers without the loss of customers, nor do we expect to be able to do so in the future.

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Continuing Operations

Results of Operations

The following table summarizes our results from continuing operations for the periods presented:


	Three months ended
	March 31,
	2022		2021

	(in millions)
Revenue	$	174.6	$	181.5
Costs and expenses:
Operating (excluding depreciation and amortization)		87.3		98.4
Selling, general and administrative		38.3		42.5
Depreciation and amortization		44.4		41.3
		170.0		182.2
Income (loss) from operations		4.6		(0.7)
Other income (expense):
Interest expense		(7.4)		(31.4)
Loss on sale of assets, net		(0.4)		—
Other income, net		8.7		0.6
Income (loss) before provision for income tax		5.5		(31.5)
Income tax benefit		0.2		8.8
Net income (loss)	$	5.7	$	(22.7)

Revenue

Total revenue from continuing operations for the three months ended March 31, 2022 decreased $6.9 million, or 4%, as compared to revenue for the three months ended March 31, 2021 as follows:


	Three months ended
	March 31,
	2022		2021

	(in millions)
Residential subscription	$	134.3	$	140.7
Business services subscription		27.7		27.3
Total subscription		162.0		168.0
Other business services		5.3		5.6
Other		7.3		7.9
Total revenue	$	174.6	$	181.5

Subscription Revenue

Total subscription revenue from continuing operations decreased $6.0 million, or 4%, during the three months ended March 31, 2022 compared to the three months ended March, 31 2021. The decrease is primarily driven by a $14.2 million shift in service offering mix as we continue to experience a reduction in Video and Telephony RGUs, partially offset by a $6.0 million increase in average revenue per unit (“ARPU”) as HSD customers upgrade to higher speed offerings coupled with a $2.2 million increase in volume attributable exclusively to the addition of HSD subscribers. ARPU is calculated as subscription revenue for each of the HSD, Video and Telephony services divided by the average total RGUs for each service category for the respective period.

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Other Business Services

Other business services revenue from continuing operations decreased $0.3 million, or 5%, during the three months ended March 31, 2022 compared to the three months ended March 31, 2021. The decrease is primarily due to a decrease in data center revenue.

Other

Other revenue from continuing operations decreased $0.6 million, or 8%, during the three months ended March 31, 2022 compared to the three months ended March 31, 2021. The decrease is primarily related to decreases in advertising and line assurance revenue.

Operating expenses (excluding depreciation and amortization)

Operating expenses (excluding depreciation and amortization) from continuing operations decreased $11.1 million, or 11%, during the three months ended March 31, 2022 compared to the three months ended March 31, 2021. The decrease is primarily driven by decreases in direct operating expense, specifically programming expense of $9.8 million, which aligns with the reduction in Video RGUs between periods and lower bad debt expense, partially offset by decreases in capital eligible expenses.

Incremental contribution

Incremental contribution is defined as subscription services revenue less costs directly incurred from third parties in connection with the provision of such services to our customers (service direct expense). Incremental contribution from continuing operations increased $6.3 million, or 6% during the three months ended March 31, 2022 compared to the three months ended March 31, 2021. The increase is primarily due to the decrease in programming expenses from $49.3 million for the three months ended March 31, 2021 to $39.5 million for the three months ended March 31, 2022.

Selling, general and administrative expenses

Selling, general and administrative expenses from continuing operations decreased $4.2 million, or 10%, during the three months ended March 31, 2022 compared to the three months ended March 31, 2021. The decrease is primarily attributable to decreases in costs associated with digital transformation initiatives, lower marketing and professional services expenses, partially offset by an increase in stock compensation expense.

Depreciation and amortization expenses

Depreciation and amortization expenses from continuing operations increased $3.1 million, or 8%, in the three months ended March 31, 2022 compared to the three months ended March 31, 2021. The increase is primarily due to an increase of equipment placed into service.

Interest expense

Interest expense from continuing operations decreased $24.0 million, or 76%, in the three months ended March 31, 2022 compared to the three months ended March 31, 2021. The decrease is primarily due to lower interest rates on a lower outstanding principal balance as a result of the debt refinancing that occurred in December 2021, and the expiration of the interest rate swap agreement in May 2021.

Other Income

Other income from continuing operations increased $8.1 million during the three months ended March 31, 2022 compared to the three months ended March 31, 2021. The increase is primarily related to the Transition Services Agreements under which WOW is providing post-transaction continuity of service to the two different buyers of our sold service areas during the transition periods.

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Discontinued Operations

On September 1, 2021, WOW completed the sale of its Cleveland and Columbus, Ohio markets and on November 1, 2021, WOW completed the sale of its Chicago, Illinois, Evansville, Indiana and Baltimore, Maryland markets. The Company will present these markets as discontinued operations in the consolidated statements of operations and exclude from continuing operations for all periods in which such discontinued operations are presented. Results of discontinued operations include all revenues and direct expenses of these markets. General corporate overhead is not allocated to discontinued operations.

Discontinued operating expenses do not include general corporate overhead or continuing costs related to providing service per the transition service agreements. Certain costs of providing the transition service agreements will continue during the term of the agreements as services are provided; however, upon termination of the agreements, these costs are expected to be reduced. In addition, general corporate overhead costs are expected to be reduced over a three year period.

Results of Operations

The following table summarizes our results from discontinued operations for the period presented:


	Three months ended
	March 31,
	2021
	(in millions)
Revenue	$	104.8
Costs and expenses:
Operating (excluding depreciation and amortization)		39.6
Selling, general and administrative		2.7
Depreciation and amortization		20.5
		62.8
Income from discontinued operations before provision for income tax		42.0
Income tax expense		(9.7)
Income from discontinued operations	$	32.3

Revenue

The following table summarizes our revenue from discontinued operations for the period presented:


	Three months ended
	March 31,
	2021
	(in millions)
Residential subscription	$	90.3
Business services subscription		9.5
Total subscription		99.8
Other business services		0.6
Other		4.4
	$	104.8

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Total Company

Income tax (benefit) expense

We reported income tax benefit of $0.2 million and income tax expense of $0.9 million for the three months ended March 31, 2022 and 2021, respectively. The change to income tax benefit for the three months ended March 31, 2022 compared to income tax expense for the three months ended March 31, 2021 was primarily related to a decrease in income from operations before provision for income tax period over period, coupled with a decrease in the effective income tax rate, which is the result of windfall tax deductions related to equity compensation and additional research and development credits.

Use of Incremental Contribution

Incremental contribution is included herein because we believe that it is a key metric used by our management to assess the financial performance of the business by showing how the relative relationship of the various components of subscription services contributes to our overall consolidated historical results. Our management further believes that it provides useful information to investors in evaluating our financial condition and results of operations because the additional detail illustrates how an incremental dollar of revenue generates cash, before any unallocated costs are considered, which we believe is a key component of our overall strategy and important for understanding what drives our cash flow position relative to our historical results. Incremental contribution is defined by us as the components of subscription revenue, less costs directly incurred from third parties in connection with the provision of such services to our customers.

Incremental contribution is not made in accordance with GAAP and our use of the term incremental contribution varies from others in our industry. Incremental contribution should be considered in addition to, not as a substitute for, consolidated net income (loss) and operating income (loss) or any other performance measures derived in accordance with GAAP as measures of operating performance or operating cash flows, or as measures of liquidity. Incremental contribution has important limitations as an analytical tool and you should not consider it in isolation or as a substitute for analysis of our results as reported under GAAP as it does not identify or allocate any other operating costs and expenses that are components of our income from operations to specific subscription revenues as we do not measure or record such costs and expenses in a manner that would allow attribution to a specific component of subscription revenue. Accordingly, incremental contribution should not be considered as an alternative to operating income or any other performance measures derived in accordance with GAAP as measures of operating performance or operating cash flows, or as a measure of liquidity.

The following table provides a reconciliation of incremental contribution to income from operations, which is the most directly comparable GAAP measure, for the three months ended March 31, 2022 and 2021:


	Three months ended						Three months ended
	March 31, 2022						March 31, 2021
	Continuing		Discontinued		Total		Continuing		Discontinued			Total

	(in millions)
Income from operations	$	4.6	$	—	$	4.6	$	(0.7)	$	42.0	$	41.3
Revenue (excluding subscription revenue)		(12.6)		—		(12.6)		(13.5)		(5.0)		(18.5)
Other non-allocated operating expense (excluding depreciation and amortization)		43.8		—		43.8		42.6		7.5		50.1
Selling, general and administrative		38.3		—		38.3		42.5		2.7		45.2
Depreciation and amortization		44.4		—		44.4		41.3		20.5		61.8
Incremental contribution	$	118.5	$	—	$	118.5	$	112.2	$	67.7	$	179.9

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Liquidity and Capital Resources

Our primary funding requirements are for our ongoing operations, capital expenditures, outstanding debt obligations, including lease agreements, and strategic investments. At March 31, 2022 the principal amount of our outstanding consolidated debt aggregated to $740.3 million, of which $18.1 million is classified as current in our unaudited condensed consolidated balance sheet as of such date. As of March 31, 2022, we had borrowing capacity of $245.6 million under our new Revolving Credit Facility. We are required to prepay principal amounts if we generate excess cash flow, as defined in the Credit Agreement.

Our primary funding requirements are for our ongoing operations, capital expenditures, outstanding debt obligations, including lease agreements, and strategic investments. As of March 31, 2022, we had $190.7 million of cash and cash equivalents. We believe that our existing cash balances, available borrowing capacity under our Revolving Credit Facility, and operating cash flows will provide sufficient resources to fund our obligations and anticipated liquidity requirements over the next 12 months.

We expect to utilize free cash flow and cash on hand as funding sources, as well as potentially engage in future refinancing transactions to further extend the maturities of our debt obligations. The timing and terms of any refinancing transactions will be subject to market conditions among other considerations.

As potential acquisitions or dispositions arise, we actively review such transactions against our objectives including, among other considerations, improving our operational efficiency, geographic clustering of assets, product development or technology capabilities of our business and achieving appropriate strategic objectives, and we may participate in such transactions to the extent we believe these possibilities present attractive opportunities. However, there can be no assurance that we will actually complete any acquisitions or dispositions, or that any such transactions will be material to our operations or results.

Our ability to fund operations, make capital expenditures, repay debt obligations and make future acquisitions and strategic investments depends on future operating performance and cash flows, which are subject to prevailing economic conditions and to financial, business and other factors, some of which are beyond our control.

Historical Operating, Investing, and Financing Activities

Operating Activities

Net cash provided by operating activities decreased from $77.6 million for the three months ended March 31, 2021 to $49.4 million for the three months ended March 31, 2022. The decrease is primarily due to the reduction in operating income, including the impact from the aforementioned sale, and timing differences of our receivables and payables, partially offset by the decrease in interest paid.

Investing Activities

Net cash used in investing activities was $58.9 million for the three months ended March 31, 2021 and $41.6 million for the three months ended March 31, 2022. The decrease is primarily attributable to a decrease in capital expenditures relating to our smaller footprint following the sales of our service areas.

We have ongoing capital expenditure requirements related to the maintenance, expansion and technological upgrades of our network. Capital expenditures are funded primarily through a combination of cash on hand and cash flow from operations. Our capital expenditures from continuing operations were $42.1 million and $44.0 million for the three months ended March 31, 2022 and 2021, respectively. The $1.9 million decrease from the three months ended March 31, 2021 to the three months ended March 31, 2022 is related to a reduction in customer premise equipment (“CPE”) and network enhancement expenditures partially offset by increases in line extensions as we focus on expanding our network.

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The following table sets forth additional information regarding our capital expenditures for the periods presented:


	Three months ended						Three months ended
	March 31, 2022						March 31, 2021
	Continuing		Discontinued		Total		Continuing		Discontinued		Total

	(in millions)
Capital Expenditures
Customer premise equipment(1)	$	19.0	$	—	$	19.0	$	20.0	$	10.6	$	30.6
Scalable infrastructure(2)		10.7		—		10.7		11.4		1.0		12.4
Line extensions(3)		4.5		—		4.5		3.7		1.2		4.9
Support capital and other(4)		7.9		—		7.9		8.9		2.5		11.4
Total	$	42.1	$	—	$	42.1	$	44.0	$	15.3	$	59.3
Capital expenditures included in total related to:
Edge-outs(5)	$	1.1	$	—	$	1.1	$	0.8	$	0.6	$	1.4
Business services(6)	$	3.2	$	—	$	3.2	$	3.9	$	1.1	$	5.0

(1)	Customer premise equipment, or CPE, includes equipment and installation costs incurred to deliver services to residential and business services customers. CPE includes the costs of acquiring and installing our set-top boxes and modems, as well as the cost of customer connections to our network.

(2)	Scalable infrastructure includes costs, not directly related to customer acquisition activity, to support new customer growth and provide service enhancements (e.g., headend equipment).

(3)	Line extensions include costs associated with new home development within our footprint and edge-outs (e.g., fiber / coaxial cable, amplifiers, electronic equipment, make-ready and design engineering).

(4)	Support capital and other includes costs to modify or replace existing HFC network, including enhancements, and all other costs to support day-to-day operations, including land, buildings, vehicles, office equipment, tools and test equipment.

(5)	Edge-outs represent costs to extend our network into new adjacent service areas, including the associated CPE.

(6)	Business services represent costs associated with the build-out of our network to support business services customers, including the associated CPE.

Financing Activities

Net cash provided by financing activities was $5.0 million for the three months ended March 31, 2021 and net cash used in financing activities was $10.3 million for the three months ended March 31, 2022. The change is primarily due to a decrease in net borrowings of $16.6 million during the three months ended March 31, 2022 compared to the three months ended March 31, 2021.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Our exposure to market risk is limited and primarily related to fluctuating interest rates associated with our variable rate indebtedness under our Senior Secured Credit Facility. As of March 31, 2022, borrowings under our Term B Loans and Revolving Credit Facility bear interest at SOFR plus 3.00% and SOFR plus 2.75%, respectively. As of March 31, 2022, our Senior Secured Credit Facility is still variable rate debt. A hypothetical 100 basis point (1%) change in SOFR interest rates (based on the interest rates in effect under our Senior Secured Credit Facility as of March 31, 2022) would result in an annual interest expense change of up to approximately $7.3 million on our Senior Secured Credit Facility.

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Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the U.S. Securities and Exchange Commission rules and forms and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer (together, the “Certifying Officers”), as appropriate, to allow for timely decisions regarding required disclosure.

In designing and evaluating disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance, not absolute assurance of achieving the desired objectives. Also, the design of a control system must reflect the fact that there are resource constraints and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake. The design of any system of controls is based, in part, upon certain assumptions about the likelihood of future events and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.

Our management, with the participation of the Certifying Officers, evaluated the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act) as of March 31, 2022. Based on these evaluations, the Chief Executive Officer and the Chief Financial Officer concluded that our disclosure controls and procedures required by paragraph (b) of Rule 13a-15 or 15d-15 were effective as of March 31, 2022 represent in all material respects our financial position, results of operations, cash flows and changes in shareholders’ deficit as of and for the periods presented in accordance with U.S. GAAP.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting (as defined in Rule 13a-15(f) of the Exchange Act) that occurred during the first quarter of 2022.

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PART II

Item 1. Legal Proceedings

Refer to Note 13 – Commitments and Contingencies for a discussion of the Company’s legal proceedings.

Item 1A. Risk Factors

Our Annual Report on Form 10-K for the year ended December 31, 2021 includes “Risk Factors” under Item 1A of Part 1. There have been no material changes to the risk factors set forth therein.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Purchases of Equity Securities by the Issuer

The following table presents WOW’s purchases of equity securities completed during the first quarter of 2022 (in millions, except share and per share amounts):


					Approximate Dollar Value of
				Total Number of Shares	Shares that May Yet be
	Number of Shares	Average Price		Purchased as Part of Publicly	Purchased Under the Plans
Period	Purchased (1)	Paid per Share		Announced Plans or Programs	or Programs
January 1 - 31, 2022	3,810	$	18.61	—	$	—
February 1 - 28, 2022	3,014	$	16.99	—	$	—
March 1 - 31, 2022	291,562	$	17.66	—	$	—

(1)	Shares represent shares withheld from employees for the payment of taxes upon the vesting of restricted stock awards.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

None.

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Item 6. Exhibits


Exhibit Number		Exhibit Description

31.1*		Certification of Chief Executive Officer pursuant to 15 U.S.C. Section 10A, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2*		Certification of Chief Financial Officer pursuant to 15 U.S.C. Section 10A, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1*		Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101		The following financial information from WideOpenWest, Inc.’s Quarterly Report on Form 10-Q for the three months ended March 31, 2022, filed with the Securities and Exchange Commission on May 9, 2022, formatted in iXBRL (inline eXtensible Business Reporting Language) includes: (i) the Condensed Consolidated Balance Sheets; (ii) the Condensed Consolidated Statements of Operations; (iii) the Condensed Consolidated Statements of Comprehensive Income; (iv) the Condensed Consolidated Statements of Changes in Stockholders’ Equity (Deficit); (v) the Condensed Consolidated Statements of Cash Flows; and (vi) the Notes to the Condensed Consolidated Financial Statements.
104		Cover Page, formatted in iXBRL and contained in Exhibit 101.

*	Filed herewith.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


	WIDEOPENWEST, INC.

May 9, 2022	By:	/s/ TERESA ELDER
		Teresa Elder
		Chief Executive Officer

	By:	/s/ JOHN REGO
		John Rego
		Chief Financial Officer