Trending Schedule First Quarter Board of Directors Meeting 2Q-17

Transcription

1 Trending Schedule First Quarter Board of Directors Meeting 2Q-17

2 Non-GAAP Financial Measures and Operating Metrics We have included certain non-gaap financial measures in this presentation including Total Revenue Including Acquisitions and Dispositions, Adjusted EBITDA, Transaction Adjusted EBITDA, and Transaction Adjusted Capital Expenditures. The presentation of these financial measures is not intended to be considered in isolation or as a substitute for, or superior to, the financial information prepared and presented in accordance with generally accepted accounting principles in the United States of America ( GAAP ). We believe that these non-gaap measures enhance an investor s understanding of our financial performance. We believe that these non-gaap measures are useful financial metrics to assess our operating performance from period to period by excluding certain items that we believe are not representative of our core business. We believe that these non-gaap measures provide investors with useful information for assessing the comparability between periods of our ability to generate cash from operations sufficient to pay taxes, to service debt and to undertake capital expenditures. We use these non-gaap measures for business planning purposes and in measuring our performance relative to that of our competitors. We believe these non-gaap measures are measures commonly used by investors to evaluate our performance and that of our competitors. Revenue Including Acquisitions and Dispositions is included herein because it is a key metric used by management and our Board of Directors to assess our financial performance. We define Revenue Including Acquisitions and Dispositions as revenue after giving effect to certain acquisitions and divestitures made by WOW! We believe that Revenue Including Acquisitions and Dispositions is an appropriate measure of operating performance because it is meaningful to investors by showing how certain acquisitions and divestitures might have affected our historical financial statements. The presentation of Revenue Including Acquisitions and Dispositions is not made in accordance with GAAP and our use of the term Revenue Including Acquisitions and Dispositions herein varies from the use of similar terms by other companies in our industry due to different methods of calculation and is not necessarily comparable. Revenue Including Acquisitions and Dispositions should not be considered as an alternative to revenue or any other performance measures derived in accordance with GAAP as measures of operating performance. Adjusted EBITDA is included herein because it is a key metric used by management and our Board of Directors to assess our financial performance. We believe that Adjusted EBITDA is an appropriate measure of operating performance because it eliminates the impact of expenses that do not relate to business performance, and that the presentation of this measure enhances an investor's understanding of our financial performance. Transaction Adjusted EBITDA makes certain additional adjustments to the historical financial information that we believe is meaningful to investors by showing how certain acquisitions and divestitures might have affected our historical financial statements. Adjusted EBITDA is defined by us as net income (loss) before net interest expense, income taxes, depreciation and amortization (including impairments), impairment losses on intangibles and goodwill, gains (losses) realized and unrealized on derivative instruments, management fees to related party, the write-up or write-off of any asset, debt modification expenses, loss on extinguishment of debt, integration and restructuring expenses and all non cash charges and expenses (including equity based compensation expense) and certain other income and expenses. Transaction Adjusted EBITDA represents Adjusted EBITDA after giving effect to the impact of acquisitions and dispositions that were completed during the relevant periods as if they occurred at the beginning of the period presented. The presentation of Adjusted EBITDA and Transaction Adjusted EBITDA is not made in accordance with GAAP and our use of the terms Adjusted EBITDA and Transaction Adjusted EBITDA may vary from others in our industry. Adjusted EBITDA and Transaction Adjusted EBITDA should not be considered as an alternative to net income (loss), operating income or any other performance measures derived in accordance with GAAP as measures of operating performance or operating cash flows, or as measures of liquidity. Adjusted EBITDA and Transaction Adjusted EBITDA have important limitations as an analytical tool. For example, Adjusted EBITDA and Transaction Adjusted EBITDA: exclude certain tax payments that may represent a reduction in cash available to us; do not reflect any cash capital expenditure requirements for the assets being depreciated and amortized that may have to be replaced in the future; do not reflect changes in, or cash requirements for, our working capital needs; and do not reflect the significant interest expense, or the cash requirements necessary to service interest or principal payments on our debt. Page 1

3 Non-GAAP Financial Measures and Operating Metrics (continued) Transaction Adjusted Capital Expenditures is included herein because it is a key metric used by management and our Board of Directors to assess our financial performance. We define Transaction Adjusted Capital Expenditures as capital expenditures after giving effect to certain acquisitions and divestitures made by the Company. We believe that Transaction Adjusted Capital Expenditures is an appropriate measure of operating performance because it is meaningful to investors by showing how certain acquisitions and divestitures might have affected WOW! s historical financial statements. The presentation of Transaction Adjusted Capital Expenditures is not made in accordance with GAAP and our use of the term Transaction Adjusted Capital Expenditures herein varies from the use of similar terms by other companies in our industry due to different methods of calculation and is not necessarily comparable. Transaction Adjusted Capital Expenditures should not be considered as an alternative to capital expenditures or any other performance measures derived in accordance with GAAP as measures of operating performance. In addition, we use the following subscriber information in this presentation: Homes Passed 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. Subscribers - Because we deliver multiple services to our customers, 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 unaudited Homes Passed and Subscriber information is presented on a Transaction Adjusted basis giving effect to our acquisition of the operating assets of NuLink on September 9, 2016, and our divestiture of the Lawrence, Kansas system on January 12, 2017, as if such transactions had been completed at the beginning of the respective periods presented herein. The unaudited Transaction Adjusted Homes Passed and Subscriber information is for informational purposes only and does not purport to represent what our subscriber information would have been if such transactions had occurred at any date, nor does such information purport to project subscribers or homes passed for any future period. Subscriber information for acquired entities is preliminary and subject to adjustment until we have completed our review of such information and determined that it is presented in accordance with our policies. 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 and services and billing systems. Accordingly, we may from time to time make appropriate adjustments to our subscriber information based on such reviews. Page 2

4 Customer Metrics Including Acquisitions and Dispositions (operating statistics in thousands) a 1Q 2Q 3Q 4Q FY 1Q 2Q 3Q 4Q b FY b 1Q Homes Passed (EoP) 1 2, , , , , , , , , , ,129.3 Total Subscribers (EoP) Net Subscriber Additions / (Losses) (0.5) (3.6) (0.1) Subscriber Penetration (%) % 25.8% 25.6% 25.5% 25.5% 25.6% 25.3% 25.1% 25.0% 25.0% 25.5% RGUs (EoP) 4 HSD Video Telephony Total RGUs 1, , , , , , , , , , ,391.2 Net Additions / (Losses) HSD (1.4) Video (9.9) (12.5) (18.9) (13.2) (54.5) (12.4) (15.8) (15.7) (9.9) (53.8) (3.6) Telephony (10.1) (9.0) (13.5) (9.1) (41.7) (8.1) (7.6) (9.2) (6.3) (31.2) (1.6) Total Net Additions / (Losses) (10.5) (17.8) (30.3) (17.0) (75.6) (10.4) (24.8) (22.5) (13.5) (71.2) 6.0 Penetration (%) 3 HSD 23.8% 23.8% 23.7% 23.8% 23.8% 23.9% 23.7% 23.6% 23.6% 23.6% 23.8% Video 17.8% 17.3% 16.6% 16.1% 16.1% 15.6% 14.9% 14.3% 13.9% 13.9% 13.7% Telephony 9.5% 9.2% 8.7% 8.3% 8.3% 8.0% 7.7% 7.3% 7.1% 7.1% 7.0% Note (a) : All figures give effect to the acquisition of NuLink and the divestiture of our Lawrence, Kansas system, except as otherwise noted. Minor differences may exist due to rounding. (b) Statistical reporting was standardized to a single reporting methodology beginning in the first quarter of Previously, the data was maintained and accumulated separately through independent processes and procedures. The standardized reporting had the following increase/(decrease) on December 31, 2017 homes passed and subscriber numbers: homes passed (700); Total Subscribers 14,200; HSD RGUs 2,500; Video RGUs 4,100; Telephony RGUs 2,700; and Total RGUs 9,300. Page 3

5 Edge Outs (operating statistics in thousands) 1Q 2Q 3Q 4Q FY 1Q 2Q 3Q 4Q FY 1Q Home Passed (EoP) Total Subscribers (EoP) RGUs (EoP) 4 HSD Video Telephony Total RGUs Vintage Home Passed (EoP) Total Subscribers (EoP) Total Penetration 29.0% 30.4% 31.1% 31.1% 31.8% Days Active Vintage Home Passed (EoP) Total Subscribers (EoP) Total Penetration 15.0% 18.6% 21.4% 21.4% 23.9% Days Active Vintage Home Passed (EoP) Total Subscribers (EoP) Total Penetration 9.5% Days Active 27 Note: Customer metrics attributable to Edge Out expansion projects are a subset of overall customer metrics presented on page 3. Page 4

6 Reconcilation of Revenue to Revenue Including Acquisitions and Dispositions 1Q 2Q 3Q 4Q FY 1Q 2Q 3Q 4Q FY 1Q Revenue $ $ $ $ $ 1,237.0 $ $ $ $ $ 1,188.1 $ Revenue related to NuLink Revenue related to the Lawrence system (11.5) (11.3) (11.5) (11.4) (45.7) (1.5) (1.5) - Revenue related to the Chicago fiber network (1.2) (7.4) (4.0) (5.2) (17.8) (3.9) (3.2) (3.3) (2.5) (12.9) - Revenue Including Acquisitions and Dispositions $ $ $ $ $ 1,190.6 $ $ $ $ $ 1,173.7 $ Revenue Including Acquisitions and Dispositions: Components Residential Subscription Business Services Subscription Total Subscription $261.4 $261.0 $264.4 $261.9 $1,048.7 $258.7 $259.5 $261.0 $257.3 $1,036.5 $263.5 Other Business Services Other Revenue Total , , Subscription Revenue Subtotal HSD Subscription $88.6 $90.1 $90.2 $91.7 $360.6 $96.0 $99.4 $103.4 $107.7 $406.5 $111.7 Video Subscription Telephony Subscription Total Subscription Revenue $261.4 $261.0 $264.4 $261.9 $1,048.7 $258.7 $259.5 $261.0 $257.3 $1,036.5 $263.5 Net Income Net Income (loss) $4.3 $14.2 ($20.3) $28.1 $26.3 $72.4 $5.0 ($2.1) $84.2 $159.5 ($202.7) Transaction Adjusted EBITDA 6 Revenue, Net Income and Transaction Adjusted EBITDA ($ in millions) Transaction Adjusted EBITDA $108.4 $110.4 $110.5 $112.8 $442.1 $108.8 $110.5 $113.0 $104.8 $437.1 $96.3 Margin (%) 36.6% 37.4% 36.8% 37.7% 37.1% 36.9% 37.5% 38.4% 36.1% 37.2% 33.7% See Reconciliations of GAAP Measures to Non-GAAP Measures and the accompanying tables for a reconciliation of Adjusted EBITDA to our net income (loss), which is the most directly comparable GAAP financial measure. Note: (1) The unaudited Transaction Adjusted and Revenue Including Acquisitions and Dispositions information herein has been prepared giving effect to the divestiture of a portion of our Chicago fiber network on December 14, 2017, the acquisition of the operating assets of NuLink on September 9, 2016, our divestiture of the Lawrence, Kansas system on January 12, 2017, as if such transactions had been completed at the beginning of the respective periods presented herein. This unaudited information is for informational purposes only and does not purport to represent what our results of operations, financial or subscriber information would have been if such transactions had occurred at any date, nor does such information purport to project the results of operations for any future period. (2) On January 1, 2018, we prospectively adopted the FASB s new revenue recognition standard. There are a number of small adjustments in the quarter related to adoption of the standard, both in revenue and expenses. Year-over-year and sequential comparisons of the Company s revenue components and Adjusted EBITDA have been impacted by the adoption of these standards. Page 5

7 Capital Expenditures ($ in millions) 1Q 2Q 3Q 4Q FY 1Q 2Q 3Q 4Q FY 1Q Reconcilation of Capital Expenditures to Transaction Adusted Capital Expenditures Total Capital Expenditures $63.6 $71.3 $72.3 $ $79.2 $72.8 $72.3 $ $56.5 Transaction Adjustments Capital Expenditures related to NuLink Capital Expenditures related to the Lawrence system (1.3) (1.4) (1.7) (1.3) (5.7) (0.1) (0.1) - Capital Expenditures related to the Chicago fiber network (12.8) (17.3) (14.4) (8.4) (52.9) (25.9) (5.7) (6.6) (8.1) (46.3) (5.9) Transaction Adjusted Capital Expenditures $50.7 $54.3 $57.1 $70.6 $232.7 $53.2 $67.1 $65.7 $68.9 $254.9 $50.6 Transaction Adjusted Capital Expenditures: Components Customer Premise Equipment (CPE) 7 $24.8 $25.4 $26.8 $19.9 $96.9 $25.9 $25.0 $26.9 $29.5 $107.3 $21.6 Scalable Infrastructure Line Extensions Upgrade / Rebuild Support Capital Transaction Adjusted Capital Expenditures $50.7 $54.3 $57.1 $70.6 $232.7 $53.2 $67.1 $65.7 $68.9 $254.9 $50.6 Strategic Capital Expenditures Included in Total related to: Edge-Outs 12 $7.2 $7.4 $8.0 $8.0 $30.6 $9.5 $16.9 $12.3 $7.1 $45.8 $4.6 Business Services 13 $3.5 $4.9 $6.7 $8.9 $24.0 $5.3 $6.9 $5.5 $6.7 $24.4 $7.4 Note: (1) The unaudited Transaction Adjusted information herein has been prepared giving effect to the divestiture of a portion of our Chicago fiber network on December 14, 2017, the acquisition of the operating assets of NuLink on September 9, 2016, our divestiture of the Lawrence, Kansas system on January 12, 2017, as if such transactions had been completed at the beginning of the respective periods presented herein. This unaudited information is for informational purposes only and does not purport to represent what our results of operations, financial or subscriber information would have been if such transactions had occurred at any date, nor does such information purport to project the results of operations for any future period. Page 6

8 Reconciliation of Non-GAAP Measures to GAAP Measures ($ in millions) Reconcilation of Net Income (Loss) to Adjusted EBITDA 6 1Q 2Q 3Q 4Q FY 1Q 2Q 3Q 4Q FY 1Q Net Income (loss) $ 4.3 $ 14.2 $ (20.3) $ 28.1 $ 26.3 $ 72.4 $ 5.0 $ (2.1) $ 84.2 $ $ (202.7) Depreciation and amortization Impairment loss on intangibles and goodwill Gain on sale of assets (94.1) (94.1) - Management fee to related party Interest expense Loss on early extinguishment of debt Realized and unrealized gain on derivative instruments (1.1) (1.2) - - (2.3) Gain on sale of system dispositions (38.7) (38.4) - Non-recurring proffessional fees, M&A integration and restructuring expense Non-cash stock compensation Other expense (income), net - (0.1) (1.9) (0.2) (2.2) (1.4) - (0.3) 0.1 (1.6) - Income tax (benefit) expense 1.5 (11.6) 2.7 (19.9) (27.3) (23.9) (116.1) (132.5) (41.2) Adjusted EBITDA 6 $ $ $ $ $ $ $ $ $ $ $ 96.3 Reconcilation of Adjusted EBITDA to Transaction Adjusted EBITDA 6 Adjusted EBITDA 6 $ $ $ $ $ $ $ $ $ $ $ 96.3 Adjusted EBITDA related to NuLink Adjusted EBITDA related to the Lawrence system (5.9) (5.9) (5.9) (6.0) (23.7) (1.0) (1.0) - Adjusted EBITDA related to the Chicago fiber network (0.6) (0.7) (1.0) (1.3) (3.6) (2.5) (1.7) (1.8) (1.6) (7.6) - Transaction Adjusted EBITDA 6 $ $ $ $ $ $ $ $ $ $ $ 96.3 Note: (1) The unaudited Transaction Adjusted and Revenue Including Acquisitions and Dispositions information herein has been prepared giving effect to the divestiture of a portion of our Chicago fiber network on December 14, 2017, the acquisition of the operating assets of NuLink on September 9, 2016, our divestiture of the Lawrence, Kansas system on January 12, 2017, as if such transactions had been completed at the beginning of the respective periods presented herein. This unaudited information is for informational purposes only and does not purport to represent what our results of operations, financial or subscriber information would have been if such transactions had occurred at any date, nor does such information purport to project the results of operations for any future period. Page 7

9 Notes 1 Homes passed is defined 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 2 Total Subscribers is 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. 3 Penetration represents customers or RGUs as a percent of estimated homes passed. 4 We define each of the individual HSD subscribers, Video subscribers and Telephony subscribers as a revenue generating unit ( RGU ) 5 Other revenue consists primarily of advertising, late fees, line assurance warranty program, program guides and commissions related to the sale of merchandise by home shopping services. 6 We define Adjusted EBITDA as net income (loss) before net interest expense, income taxes, depreciation and amortization (including impairments), impairment losses on intangibles and goodwill, gains (losses) realized and unrealized gain on derivative instruments, management fees to related party, the write up or write off of any asset, debt modification expenses, loss on early extinguishment of debt, integration and restructuring expenses and all non-cash charges and expenses (including equity based compensation expense) and certain other income and expenses. Transaction Adjusted EBITDA represents Adjusted EBITDA after giving effect to the impact of acquisitions and dispositions that were completed during the relevant periods as if they occurred at the beginning of the period presented. 7 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 video set-top boxes and modems, as well as the cost of customer connections to our network. 8 Scalable infrastructure includes costs, not directly related to customer acquisition activity, to support new customer growth and provide service enhancements (e.g., headend equipment). 9 Line extensions include costs associated with new home development within our footprint and edge-outs (e.g., fiber / coaxial cable, amplifiers, electronic equipment, makeready and design engineering). 10 Upgrade / rebuild includes costs to modify or replace existing HFC network, including enhancements. 11 Support capital includes all other non-network-related costs to support day-to-day operations, including land, buildings, vehicles, office equipment, tools and test equipment. 12 Edge-outs represent costs to extend our network into new adjacent service areas, including the associated CPE. 13 Business services represent costs associated with the build-out of our network to support business services customers, including the associated CPE. Page 8