Cable One (CABO) Q1 2025 Earnings Call May 01, 2025 05:00 PM ET Company Participants Jordan Morkert - VP - Investor RelationsJulie Laulis - Chair, President & Chief Executive OfficerTodd Koetje - Chief Financial OfficerFrank Louthan - Managing Director Conference Call Participants Sebastiano Petti - Senior Research AnalystBrandon Nispel - Director & Equity Research Analyst Operator Thank you for standing by. My name is Rebecca, and I will be your conference operator today. At this time, I would like to welc ...

Customer Metrics - As of March 31, 2025, the company served approximately 1.1 million residential and business customers out of 2.8 million passings, with 1,045,000 subscribing to data services, 108,000 to video services, and 103,000 to voice services[100]. - The company experienced a decline in residential data PSUs by 2.3% to 945,000 and a significant drop in residential video PSUs by 19.4% to 101,300[109]. - Business data PSUs increased by 0.8% to 99,800, indicating continued growth in this segment[109]. Financial Performance - Total revenues for the three months ended March 31, 2025, were $380.6 million, a decrease of 5.9% from $404.3 million in the same period of 2024[108]. - Net income for the same period was $2.6 million, down 93.0% from $37.4 million in 2024[108]. - Adjusted EBITDA for the three months ended March 31, 2025, was $202.7 million, a decrease of 6.6% from $217.1 million in 2024[108]. - Residential data service revenues decreased by $10.7 million, or 4.5%, primarily due to a decrease in subscribers and a 3.1% decrease in ARPU[115]. - Residential video service revenues decreased by $9.6 million, or 15.8%, mainly due to a decrease in subscribers, partially offset by a rate adjustment[115]. - Business data revenues increased by $0.7 million, or 1.2%, due to an increase in business data subscribers[116]. - Operating expenses (excluding depreciation and amortization) were $99.9 million, a decrease of $6.7 million or 6.3% compared to the prior year[117]. - Selling, general and administrative expenses increased by $5.0 million, or 5.6%, totaling $95.4 million for the three months ended March 31, 2025[118]. - Net income for the three months ended March 31, 2025, was $2.6 million, a significant decrease of $34.7 million or 93.0% compared to $37.4 million in 2024[124]. - Adjusted EBITDA for the three months ended March 31, 2025, was $202.7 million, a decrease of $14.3 million or 6.6% from $217.1 million in 2024[130]. Capital Expenditures and Investments - Capital expenditures increased by 8.0% to $71.1 million compared to $65.9 million in the previous year[108]. - The company plans to continue investing in infrastructure improvements and expanding high-speed data services in existing and newly acquired markets[104]. - The company has ongoing capital expenditure requirements, with total capital expenditures for the three months ended March 31, 2025, amounting to $71.1 million, an increase from $65.9 million in the same period of 2024[152]. Cash Flow and Debt Management - Net cash provided by operating activities decreased by $48.4 million year-over-year to $116.3 million, a decline of 29.4%[136]. - Net cash used in investing activities decreased by $13.4 million year-over-year to $56.6 million, primarily due to $10.7 million from the sale of an equity investment[137]. - Net cash used in financing activities decreased by $10.0 million year-over-year to $64.3 million, mainly due to lower debt repayments[138]. - The company had $149.1 million in cash and cash equivalents at the end of the period, down 29.3% from $210.7 million a year earlier[136]. - As of March 31, 2025, the company had $273.0 million in borrowings under the Revolving Credit Facility at an average interest rate of 6.2%[143]. - The company is party to two interest rate swap agreements to convert $1.2 billion of variable rate SOFR indebtedness to fixed rates, with fixed base rates of 2.595% and 2.691%[150]. - The unamortized debt discount associated with the Convertible Notes was $6.7 million as of March 31, 2025[148]. - As of March 31, 2025, the company had outstanding Senior Notes of $650.0 million, 2026 Notes of $575.0 million, and 2028 Notes of $345.0 million[160]. - The fair market values of the Senior Notes, 2026 Notes, and 2028 Notes were $514.3 million, $545.5 million, and $274.3 million, respectively[160]. Dividend and Share Repurchase - A quarterly dividend of $2.95 per share was approved, resulting in a total distribution of $17.2 million, but the company plans to suspend future dividends, saving approximately $67 million annually[140]. - The company has repurchased 646,244 shares of common stock at an aggregate cost of $556.9 million since becoming publicly traded, with $143.1 million remaining under the share repurchase authorization[139]. Strategic Focus - The strategy focuses on growing higher-margin residential and business data services while de-emphasizing the video business due to escalating programming costs[101]. - The company aims to achieve long-term growth in Adjusted EBITDA and profit margins through disciplined cost management and targeted pricing strategies[105]. Overall Revenue Summary - MBI's total revenues for the twelve months ended March 31, 2025, were approximately $320 million, with around 220,000 residential and business data customers[134]. - Total revenues for the three months ended March 31, 2025, were $380.6 million, a decrease of $23.7 million or 5.9% compared to $404.3 million in the same period of 2024[114].

Financial Data and Key Metrics Changes - For Q1 2025, total revenues were $380.6 million, down from $404.3 million in Q1 2024, representing a decrease of 5.6% year over year [18] - Residential data revenues decreased by $10.7 million or 4.5% year over year, with residential data subscribers and ARPU both declining by 1.1% [18] - Net income for Q1 2025 was $2.6 million, compared to $37.4 million in Q1 2024, driven by lower income from operations and increased non-cash equity method accounting loss [20] - Adjusted EBITDA was $203 million in Q1 2025, representing a 53.3% margin, compared to $217 million and a 53.7% margin in Q1 2024 [20] - Capital expenditures were $71.1 million, an increase of $5.2 million or 8% from Q1 2024 [20] Business Line Data and Key Metrics Changes - Business data revenues grew by 1.2% compared to Q1 2024, with strong performance in carrier and enterprise fiber businesses [19] - Residential video revenues decreased by $9.6 million or 15.8% year over year, driven by losses in video subscribers [19] Market Data and Key Metrics Changes - The company reported a churn rate that remained historically low, despite unusual churn events in Q1 2025 [7][8] - The company is experiencing competitive pressure from mobile operators in nearly all markets, which has not changed significantly [57] Company Strategy and Development Direction - The company is executing a multiyear plan aimed at achieving sustained profitable growth in a competitive environment [5] - A revised capital allocation strategy has been implemented, including the suspension of the quarterly cash dividend to accelerate debt repayment and invest in organic growth initiatives [17][22] - New product offerings such as FlexConnect and Internet Lift are being piloted to attract value-conscious customers and drive growth [10][11] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in returning to broadband revenue growth in 2025, despite a slow start in Q1 [36] - The company is focused on improving customer acquisition and retention through enhanced strategies and new product offerings [9][12] - Management highlighted the importance of a disciplined and strategic approach to customer engagement and retention [46] Other Important Information - The company has a debt balance of approximately $3.6 billion, with a weighted average cost of debt at 3.9% [24] - The company plans to maintain a balanced approach to capital allocation while focusing on long-term growth initiatives [22] Q&A Session Summary Question: What led to the decision to eliminate the dividend? - Management clarified that the decision was based on capital allocation strategies and not due to any going concern or debt covenant issues [31] Question: When can the company expect to see broadband subscriber growth? - Management indicated that while they cannot specify an exact timeline, they believe they will deliver broadband revenue growth in 2025 [36] Question: What were the unusual churn events in the quarter? - Management explained that the unusual churn was due to several factors, including billing migration activities and weather-related events [43] Question: What is the ARPU for the new products FlexConnect and Lyft? - Management stated that while they cannot provide specific ARPU figures yet, they are seeing positive trends in customer satisfaction and data usage for these products [55]

Financial Performance - Total revenues for the first quarter of 2025 were $380.6 million, a decrease of $23.7 million or 5.9% compared to $404.3 million in the first quarter of 2024[3]. - Net income for the first quarter of 2025 was $2.6 million, down 93.0% from $37.4 million in the prior year quarter, resulting in a net profit margin of 0.7%[3][8]. - Adjusted EBITDA for the first quarter of 2025 was $202.7 million, a decrease of $14.3 million or 6.6% from $217.1 million in the first quarter of 2024, with an Adjusted EBITDA margin of 53.3%[3][9]. - The company reported a comprehensive loss of $12.4 million for Q1 2025, compared to a comprehensive income of $55.6 million in Q1 2024, marking a decline of 122.3%[31]. - Basic net income per share decreased to $0.46, a decline of 93.1% from $6.65 in the same period last year[31]. - The net profit margin for Q1 2025 was 0.7%, down from 9.2% in Q1 2024[38]. Revenue Breakdown - Residential data revenues decreased by $10.7 million or 4.5% year-over-year to $225.1 million, primarily due to a reduction in subscribers and a 3.1% decrease in average revenue per unit (ARPU)[6][7]. - Residential video revenue fell by 15.8% to $50.8 million[31]. - Business data revenues grew by 1.2% year-over-year, indicating durable growth in the carrier and enterprise fiber segments[6]. - Average Revenue Per User (ARPU) for residential data decreased by 3.1% to $78.84 from $81.33[41]. - The percentage of total non-video services increased to 89.7% from 87.6% year-over-year[41]. Cash Flow and Debt Management - Cash flows from operating activities were $116.3 million in the first quarter of 2025, down 29.4% from $164.8 million in the first quarter of 2024[3][10]. - The company repaid $40.0 million under its revolving credit facility during the first quarter of 2025, with total net debt paydowns since March 31, 2023, amounting to $271.3 million[6][12]. - The company plans to suspend the quarterly cash dividend, which represents approximately $67 million annually, to allocate funds for debt repayment and organic growth initiatives[14]. - As of March 31, 2025, the company had $149.1 million in cash and cash equivalents and a debt balance of $3.57 billion[11]. - Long-term debt decreased to $2.95 billion from $3.57 billion at the end of 2024[34]. Customer Metrics - Total residential customers decreased by 3.0% to 970.1 thousand from 999.8 thousand year-over-year[41]. - Total customers declined by 2.5% to 1,075.1 thousand from 1,102.4 thousand in the previous year[41]. Operating Expenses - Operating expenses (excluding depreciation and amortization) decreased by 6.3% to $99.9 million[31]. - Capital expenditures for the first quarter of 2025 totaled $71.1 million, an increase of 8.0% from $65.9 million in the first quarter of 2024[3][10]. - Capital expenditures increased by 8.0% to $71,130 compared to $65,887 in Q1 2024[39]. Investment Income - Equity method investment income (loss) showed a significant decline, with a loss of $57.0 million compared to a loss of $22.0 million in Q1 2024, representing a 158.6% increase in losses[31]. - Equity method investment income increased significantly by 158.6% to $56,990 from $22,036 year-over-year[38]. Asset Overview - Total assets as of March 31, 2025, were $6.42 billion, down from $6.53 billion at the end of 2024[34]. - Cash and cash equivalents were $149.1 million, slightly down from $153.6 million at the end of 2024[34].

Financial Data and Key Metrics Changes - For Q4 2024, total revenues were $387.2 million, a decrease of 6% year-over-year from $411.8 million in Q4 2023 [36] - Residential data revenues decreased by 5.4%, while business data revenues increased by 2.3% year-over-year [37] - Net loss for Q4 2024 was $105.2 million compared to a net income of $103.5 million in Q4 2023, primarily due to non-cash charges related to MBI investments [39] - Adjusted EBITDA was $211 million, a decrease of 7% compared to the prior year quarter, with an adjusted EBITDA margin of 54.5% [41] - For the full year 2024, total revenues were $1.58 billion, a decrease of 5.9% from 2023 [43] - Net income for 2024 was $14.5 million compared to $224.6 million in 2023, impacted by a combined $186.5 million non-cash loss associated with MBI [47] Business Line Data and Key Metrics Changes - Residential data PSUs decreased by 5,500 during 2024, including approximately 10,000 ACP customers who disconnected due to the program ending [43] - Business data revenue increased by 2.6%, driven by a gain of over 1,400 PSUs and strong demand from high-value carrier, wholesale, and enterprise customers [45] - ARPU for residential data customers was $80.39 for 2024, a decrease of 4.9% from 2023, but stabilized in the second half of the year due to various initiatives [44] Market Data and Key Metrics Changes - The company experienced above-average churn activity among remaining ACP customers in early Q4 2024 [37] - The competitive landscape is evolving, with new competition from third-party overbuilders moderating in the company's markets [16] - The company believes incumbent fiber builds reduce the chance of new third-party entrants, maintaining a two-party market favorable to its long-term economics [18] Company Strategy and Development Direction - The company is executing a phased plan for long-term growth, focusing on broadband revenue growth as a top priority [10] - Strategic initiatives include migrating acquired operations to a unified billing system and enhancing customer experience through intelligent Wi-Fi and cybersecurity solutions [26][30] - The company aims to leverage its network capabilities and customer experience to differentiate itself in a competitive landscape [20][24] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the long-term growth of business data services and the ability to navigate competitive dynamics effectively [16][18] - The company anticipates that the foundational actions taken in 2024 will lead to smart, balanced, and sustainable growth in 2025 [34][58] - Management highlighted the importance of customer experience and operational efficiencies as key drivers for future growth [22][31] Other Important Information - The company completed the rebranding of acquired companies and achieved 100% aided awareness for its Sparklight brand [27] - Capital expenditures for 2024 totaled $286.4 million, with a focus on new market expansion and integration activities [48] - The company distributed $67.9 million in dividends to shareholders and repaid $238.1 million of debt in 2024 [52] Q&A Session Summary Question: Thoughts on addressing the MBI call option and 2026 converts - Management discussed the flexibility gained from the strategic amendment to the MBI partnership, which enhances liquidity for near-term refinancing strategies [65][66] Question: Future ARPU trends and growth strategies - Management indicated that various strategies will be employed to grow units and expand ARPU, depending on market conditions [70][72] Question: Churn dynamics and subscriber growth - Management clarified that churn was actually the second lowest in the last three years for Q4 2024, despite some unique headwinds affecting performance [94] Question: Insights on competitive dynamics and market share - Management noted that the competitive landscape is changing, with less independent overbuilding and a focus on defending their market position [106][110] Question: Expectations for fiber overlap and market share - Management expects fiber overlap to increase, particularly from incumbent telcos, but remains confident in their competitive positioning [117][120]

Cable One (CABO) came out with quarterly earnings of $1.53 per share, missing the Zacks Consensus Estimate of $9.91 per share. This compares to earnings of $10.66 per share a year ago. These figures are adjusted for non-recurring items.This quarterly report represents an earnings surprise of -84.56%. A quarter ago, it was expected that this telecommunications company would post earnings of $9.93 per share when it actually produced earnings of $7.92, delivering a surprise of -20.24%.Over the last four quarte ...

Cable One, Inc. (NYSE:CABO) Q4 2024 Earnings Conference Call February 27, 2025 5:00 PM ET Company Participants Jordan Morkert - Vice President-Investor Relations Julia Laulis - Chair of the Board, President & Chief Executive Officer Todd Koetje - Chief Financial Officer Conference Call Participants Gregory Williams - TD Cowen Sebastiano Petti - JPMorgan Brandon Nispel - KeyBanc Capital Markets Craig Moffett - MoffettNathanson Sam McHugh - BNP Paribas Steven Cahall - Wells Fargo Operator Thank you for standi ...

Financial Performance - In 2024, Adjusted EBITDA margins for residential data and business data were approximately three and four times greater than for residential video, with programming costs and retransmission fees representing 59% to 64% of total residential video revenues over the past three years [21][22]. - Residential data services accounted for 14% of total revenues in 2024, with significant growth in customer base and average monthly revenue per unit (ARPU) expected to continue due to upgrades in broadband capacity and demand for higher speeds [23]. - Residential data and business data services represented 73.1% of total revenues in 2024, up from 71.6% in 2023 and 67.0% in 2022 [58]. - Business data revenues increased by $5.8 million, or 2.6%, in 2024 compared to 2023 [59]. - Residential data services accounted for 58.6% of total revenues in 2024, up from 54.8% in 2022 [63]. - Business services represented 19.0% of total revenues in 2024, an increase from 17.9% in 2022 [64]. - Residential video services contributed 14.1% of total revenues in 2024, down from 19.1% in 2022 [68]. - The company’s residential video customers declined by 20.0% from 2024 compared to 2023 [57]. - The company anticipates that future increases in programming costs and retransmission fees may further decrease residential video margins and impact revenue growth [170]. Infrastructure and Investment - The company has invested approximately 61% of total capital expenditures since 2017 in infrastructure improvements to drive revenue and Adjusted EBITDA expansion, including the rollout of multi-Gigabit download data service to over 40% of markets [25][26]. - The company plans to continue investing in infrastructure improvements and expanding high-speed data services in existing and newly acquired markets to meet customer needs and remain competitive [26]. - The company has invested over $1 billion over the last three years to enhance broadband capacity and reliability [47]. - The company began deploying DOCSIS 4.0 in the fourth quarter of 2024, which will further increase network capacity and support growing data usage by customers [30]. - The company plans to expand multi-Gigabit download service offerings in over 40% of its markets [63]. Competition and Market Position - The company faces increasing competition from wireless providers and municipalities constructing their own data networks [71][72]. - Approximately 60% of the company's footprint has been overbuilt by wired competitors offering high-speed data services with speeds of 100 Mbps or higher as of December 31, 2024, leading to increased competition [159]. - The company faces significant competition from various service providers, including well-capitalized entrants in the video and data services industry, which could reduce market share and profits [158]. - The company is experiencing increased costs related to compliance with FCC regulations, including those for customer proprietary network information and disability access requirements [147][148]. Regulatory Environment - The Affordable Connectivity Program (ACP) funding has been depleted, ending effective June 1, 2024, with uncertain future funding from Congress [109]. - The FCC's 2024 Open Internet Order was overturned by the U.S. Court of Appeals for the Sixth Circuit, reinstating broadband internet access service as an information service [102]. - Compliance with new broadband internet access service regulations could incur additional costs for Cable One, impacting operations [104]. - The FCC's new broadband label requirements took effect on April 10, 2024, requiring additional consumer disclosure [108]. - The FCC has proposed new rules regarding outage reporting and customer support quality for broadband services, which may affect operations [106]. - The FCC's regulations prohibit local authorities from regulating rates for cable systems under effective competition, impacting pricing strategies [120]. - The FCC's recent review of media ownership rules retained existing rules, potentially increasing costs for retransmission consent negotiations [129]. - The FCC's new reporting requirement for cable operators regarding television station blackouts is expected to take effect in early to mid-2025, which may affect operations [128]. Strategic Focus and Acquisitions - The company intends to de-emphasize its residential video business due to escalating programming costs and competition from streaming services, while focusing on higher-margin residential and business data services [29]. - The company has made several acquisitions since its spin-off, including the acquisition of Hargray for approximately $2.0 billion, which enhances its market presence and service offerings [32]. - The company has invested a combined $634.9 million in broadband-centric providers serving non-urban markets to capitalize on growth opportunities and potential future acquisitions [35]. - The company completed the Hargray Acquisition on May 3, 2021, but may not realize anticipated business opportunities and growth prospects from this integration [172]. - The company has made several acquisitions since 2017, including NewWave, Clearwave, Fidelity, and CableAmerica, which expose it to risks and uncertainties associated with such transactions [173]. Operational Challenges - A material weakness in internal control over financial reporting was identified as of December 31, 2023, which could lead to significant expenses and affect the accuracy of financial reporting [184]. - The implementation of a unified billing system began in 2024, requiring significant investments and potentially diverting management's attention from ongoing operations [177]. - Cybersecurity incidents pose increasing risks to the company's network and information systems, which are critical for providing services [178]. - The company relies on a limited number of third-party suppliers for necessary hardware and software, which could adversely affect its operations if these suppliers fail to perform [171]. - The company faces risks related to integrating new strategic acquisitions, including potential loss of key associates and challenges in achieving anticipated benefits [174]. Financial Risks - The company has substantial indebtedness of approximately $1.73 billion in term loans and $313 million in revolving credit borrowings, which may limit financial flexibility [206]. - The company is exposed to interest rate risk due to variable rate indebtedness, which could increase debt service obligations if interest rates rise [206]. - The company’s ability to refinance its indebtedness will depend on future cash generation from operations, which is subject to various external factors [203]. - The company may face risks from rising interest rates due to reliance on short-term or variable-rate borrowings, potentially impacting financial condition and cash flows [207]. - The inability to raise necessary funds for repurchasing or settling convertible notes could lead to defaults under existing agreements [208]. - The conditional conversion feature of convertible notes may adversely affect liquidity and financial condition if triggered [210]. - Conversion of convertible notes could dilute existing stockholders' ownership and depress common stock prices [211]. - The company cannot assure continued payment of dividends due to existing indebtedness and financial condition [212]. Market Demand and Economic Conditions - Adverse economic conditions in the U.S. could negatively impact demand for products and services, affecting overall business performance [216]. - Future demand for residential and business data services may be lower than expected, impacting growth projections [218]. - Stock price volatility may be influenced by various factors, including trading volume and market fluctuations unrelated to company performance [219]. - The company’s ability to gain new customers is influenced by economic conditions affecting housing and consumer behavior [216].

Exhibit 99.1 Cable One Reports Fourth Quarter and Full Year 2024 Results | | | | Year Ended December 31, | | | | | | --- | --- | --- | --- | --- | --- | --- | --- | | (dollars in thousands) | | 2024 | | 2023 | | $ Change | % Change | | Revenues | $ | 1,579,542 | $ | 1,678,081 | $ | (98,539) | (5.9)% | | Net income | $ | 14,480 | $ | 224,622 | $ | (210,142) | (93.6)% | | Net profit margin | | 0.9% | | 13.4% | | | | | Cash flows from operating activities | $ | 664,128 | $ | 663,170 | $ | 958 | 0.1 % | | (1) A ...

Wall Street analysts forecast that Cable One (CABO) will report quarterly earnings of $9.91 per share in its upcoming release, pointing to a year-over-year decline of 7%. It is anticipated that revenues will amount to $390.46 million, exhibiting a decline of 5.2% compared to the year-ago quarter.The current level reflects no revision in the consensus EPS estimate for the quarter over the past 30 days. This demonstrates how the analysts covering the stock have collectively reappraised their initial projectio ...