WideOpenWest Stock: Improving Financials With Room To Grow (NYSE:WOW)

WideOpenWest (NYSE:WOW) is a broadband provider headquartered in Colorado that serves approximately 2 million customers across 14 markets in the United States. WideOpenWest is one of the largest cable providers in the United States. It is a competitive provider of high-speed Internet, cable television, and telephone services. Its network passes over 3 million homes and businesses while primarily serving South Dakota as its most extensive coverage. About 25% of WideOpenWest’s coverage area is domiciled in South Dakota. WideOpenWest’s market reach also extends to Michigan, Ohio, Alabama, Florida, Georgia, and South Carolina, among others.

WideOpenWest has a buoyant ambition to aggressively increase the number of its subscribers by 200,000 to 400,000 over the next five years. This will significantly add to the company’s existing market. WideOpenWest has a consequential result in the last financial year. The company grew its operation by 11% and increased its adjusted EBITDA by nearly 9%. The Colorado-based company has successfully transformed its financial position while now setting on renewed growth. WideOpenWest has shown enough bullish metrics that could interest both short and long-term investors. The company is set to consolidate on this transformation and deliver impressive earnings per share in the current financial year. Therefore, it is expected that investors will take a long position in the company.

Financial Overview

WideOpenWest Incorporated transformed its financial position in FY 2021 and repositioned the company for progress and bigger goals. The company generated a full-year revenue of $725 million. This represents an 11% increase in its continuing operations revenue compared to FY 2020. Meanwhile, while WideOpenWest had the most parts of FY 2021 to reform its financial status and operation management ahead of future growth, the company managed to add 10,000 new subscribers within the last financial year. The 10,000 new subscribers is a 2% increase year-over-year. Furthermore, the company recorded an 11% increase in its adjusted EBITDA, which reflects the repositioning of the company’s financial health status.

WideOpenWest’s primary aim for FY 2021 was to reduce its debts obligations and reposition the company ahead of future growth and opportunities. It is interesting to note that as of December 31st, 2020, WideOpenWest’s long-term debt was $2.3 billion, while the company’s cash and cash equivalents were $12.4 million. However, WideOpenWest ended FY 2021 with a long-term debt obligation of $752 million and cash and cash equivalents of $193.2 million due to the repositioning. This means that WideOpenWest was able to clear off $1.5 billion from its debt burden and, at the same time, added $180 million as cash and cash equivalents within the year.

In Q2 2021, WideOpenWest Inc. sold its Columbus and Cleveland markets to Atlantic Broadband at a value of $1.125 billion. The company also raised an additional $661 million from markets sold in Chicago, Indiana, Maryland and Evansville. While the impressive profits made from these transactions reflect the attractiveness of WideOpenWest’s assets, it most importantly creates an opportunity for the company to reduce its debt burden and further reposition it as a leading force in the broadband market. Similarly, WideOpenWest new long-term credit facility of an aggregate principal amount of $730 million and a revolving credit commitment of $250 million will further help the company compete fairly in the market. A combination of the new credit facility and the proceeds of $1.8 billion from the company divestment will be critical for the company’s Fiber-to-the-Premises (FTTP) project, especially, its high-speed broadband.

Therefore, WideOpenWest transactions in the last financial year strategically placed the company in a position to finance its business operations and expansion with little debt burden. The company ended FY 2021 with 532,900 customers across its three high-speed broadband, cable TV, and telephone service segments.

Company Growth and Valuation

Founded in 1996, WideOpenWest initially served few people in Denver, United States. The company later purchased Americast in 2001, which opened WideOpenWest to more than 310,009 new customers in the metropolitan areas. Ever since the acquisition of Americast, WideOpenWest has been an active player in the American broadcasting and broadband industries. The company transformed over the years by a combination of acquisitions and organic growth. WideOpenWest is always quick to buy complementing business or assets to expand her services. Significant among the company’s acquisitions is a cable operator company, NuLink, at a transaction value of $53 million. The purchase of NuLink enables WideOpenWest to have access to additional 34,000 customers. The acquisition further strengthens WideOpenWest’s footprints in Georgia. Besides, the company’s acquisition of Knology Incorporated, a leading provider of interactive and entertainment services, opened WideOpenWest to more markets in both the southeastern and Midwest of the United States.

Going forward, the market size of the United States telecommunication industry provides huge revenue streams opportunities for WideOpenWest. The United States telecommunications industry had estimated revenue of $583.4 billion in 2021. Undoubtedly, the market opportunities coupled with unprecedented technological innovations such as artificial intelligence (AI) and the massive deployment of the 5G network will accelerate the renewed growth of the industry and, specifically, WideOpenWest.

In addition, the $65 billion earmarked for continued broadband adoption and deployment from the $1 trillion United States infrastructure program offers another market opportunity. Therefore, it is expected that WideOpenWest as a leading provider of broadband networks, will feed on the overwhelming market opportunities and grow with the industry over the years.

Risks and Mitigants

As expected, WideOpenWest is not invulnerable to risks and uncertainties. As a player in a fast pace developing industry of information and communication technology, WideOpenWest is associated with several risks and uncertainties. The most significant of the risks is the competitive nature of the ICT industry. The overwhelming competitive nature of the industry requires WideOpenWest to release new products or packages often and catch up with the latest trend and customers’ demands. More importantly, WideOpenWest direct competitors possess greater resources than the company. Some of its competitors include AT&T and Verizon. Nevertheless, the successful implementation of WideOpenWest’s transformation plan and its “Broadband -First” strategy will give the company a competitive tactical advantage in the years ahead.

Future Outlook

After the successful transformation of the company’s operation to enhance customers’ experience and decrease cost, it is undeniable that the years ahead for WideOpenWest look positive. Going forward, WideOpenWest is on the verge of consolidating and building on its successes by strengthening its network, increasing penetration and growth, extending to new communities, and offering customers more product choices. Furthermore, institutional shareholders buying activities in the last quarter of 2021 are another representation of bullish sentiment among institutional investors. While Wellington Management LLP bought an additional 1.9 million shares of WideOpenWest, Cardinal Capital Management LLC and SIMCOE Capital Management LLC bought an additional 787.9 thousand and 495.7 thousand shares of WideOpenWest, respectively. Institutional investors hold the majority of the company’s shares. Most of these institutional investors, including Crestview Advisors LCC, Nine Ten Capital Management LLC, BlackRock Fund Advisors, and The Vanguard Group, are popular names in the asset management industry.

Moreover, with a market capitalization of $1. 6 billion, WideOpenWest is a decent size company in its sector with enough room to move further upward. For these reasons, WideOpenWest presents a solid bullish opportunity. While I believe that the company has enough potential to record strong growth in the current financial year, it also has the prospect for long-term growth.