Broadband and telecommunications services provider WideOpenWest (NYSE:WOW) reported results in line with analysts' expectations in Q2 CY2024, with revenue down 8% year on year to $158.8 million. The company expects next quarter's revenue to be around $158.5 million, in line with analysts' estimates. It made a GAAP loss of $0.13 per share, improving from its loss of $1.25 per share in the same quarter last year.
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WideOpenWest (WOW) Q2 CY2024 Highlights:
- Revenue: $158.8 million vs analyst estimates of $159.2 million (small miss)
- EPS: -$0.13 vs analyst expectations of -$0.14 (in line)
- Revenue Guidance for Q3 CY2024 is $158.5 million at the midpoint, roughly in line with what analysts were expecting
- Gross Margin (GAAP): 59.3%, up from 56.2% in the same quarter last year
- EBITDA Margin: 35.7%, up from -43.3% in the same quarter last year
- Free Cash Flow of $2.3 million is up from -$39.3 million in the previous quarter
- Subscribers: 495,200, down 27,200 year on year
- Market Capitalization: $432 million
"We made substantial progress throughout the quarter, growing our presence in Greenfield markets while continuing to stabilize our subscriber numbers in our legacy footprint," said Teresa Elder, WOW!'s CEO.
Initially started in Denver as a cable television provider, WideOpenWest (NYSE:WOW) provides high-speed internet, cable, and telephone services to the Midwest and Southeast regions of the U.S.
Cable and Satellite
The massive physical footprints of fiber in the ground or satellites in space make it challenging for companies in this industry to adjust to shifting consumer habits. Over the last decade-plus, consumers have ‘cut the cord’ to their traditional cable subscriptions in favor of streaming options. While that is a headwind, this affinity to streaming means more households need high-speed internet, and companies that successfully serve customers can enjoy high retention rates and pricing power since the options for internet connectivity in any geography is usually limited.
Sales Growth
Reviewing a company's long-term performance can reveal insights into its business quality. Any business can have short-term success, but a top-tier one tends to sustain growth for years. WideOpenWest's demand was weak over the last five years as its sales fell by 10.5% annually, a rough starting point for our analysis. 
We at StockStory place the most emphasis on long-term growth, but within consumer discretionary, a stretched historical view may miss a company riding a successful new product or emerging trend. WideOpenWest's annualized revenue declines of 3.6% over the last two years suggest its demand continued shrinking.
We can dig further into the company's revenue dynamics by analyzing its number of subscribers, which reached 495,200 in the latest quarter. Over the last two years, WideOpenWest's subscribers averaged 2.8% year-on-year declines. Because this number aligns with its revenue growth during the same period, we can see the company's monetization was fairly consistent. 
This quarter, WideOpenWest reported a rather uninspiring 8% year-on-year revenue decline to $158.8 million of revenue, in line with Wall Street's estimates. The company is guiding for a 8.4% year-on-year revenue decline next quarter to $158.5 million, a deceleration from the 0.3% year-on-year decrease it recorded in the same quarter last year. Looking ahead, Wall Street expects revenue to decline 5% over the next 12 months.
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Cash Is King
If you've followed StockStory for a while, you know we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can't use accounting profits to pay the bills.
While WideOpenWest posted positive free cash flow this quarter, the broader story hasn't been so clean. Over the last two years, WideOpenWest's demanding reinvestments to stay relevant have drained its resources. Its free cash flow margin was among the worst in the consumer discretionary sector, averaging negative 12.9%.
WideOpenWest's free cash flow clocked in at $2.3 million in Q2, equivalent to a 1.4% margin. This quarter's result was nice as its cash flow turned positive after being negative in the same quarter last year
Key Takeaways from WideOpenWest's Q2 Results
It was good to see WideOpenWest beat analysts' EPS expectations this quarter. On the other hand, its number of subscribers unfortunately missed. Zooming out, we think this was a mixed quarter. The stock remained flat at $5.18 immediately following the results.
So should you invest in WideOpenWest right now? When making that decision, it's important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it's free.