WIDEOPENWEST, INC. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (form 10-Q)

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.

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.

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

Customer premise equipment, or CPE, includes equipment and installation costs
(1) 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.

Scalable infrastructure includes costs, not directly related to customer
(2) acquisition activity, to support new customer growth and provide service

enhancements (e.g., headend equipment).

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

equipment, make-ready and design engineering).

Support capital and other includes costs to modify or replace existing HFC
(4) 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.

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