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Cable One, Inc. (CABO)

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Cable One, Inc. (CABO)

Q1 2017 Earnings Conference Call

May 04, 2017 11:00 AM ET

Executives

Kevin Coyle – Chief Financial Officer

Julia Laulis – President & Chief Executive Officer

Analysts

Philip Cusick – JPMorgan

Craig Moffett – MoffettNathanson

Stephan Bisson – Wells Fargo

Greg Miller – SunTrust

Presentation

Operator

Good day, and welcome to the Cable ONE First Quarter Earnings Report 2017 Conference Call and Webcast. All participants will be in a listen-only mode. [Operator Instructions] After today's presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note this event is being recorded.

I would now like to turn the conference over to Kevin Coyle. Please go ahead.

Kevin Coyle

Thank you, operator. Good morning everyone and welcome to Cable ONE's first quarter 2017 earnings call. We're excited to have you with us this morning as we review our results. Before we proceed, I would like to remind you that today's discussion may contain forward-looking statements relating to future events and expectations. You can find factors that could cause Cable ONE's actual results to differ materially from these projections listed in today's press release and in our recent SEC filings.

Cable ONE is under no obligation, and in fact expressly disclaims any obligation to update its forward-looking statements whether as a result of new information, future events, or otherwise. Additionally, today's remarks will include a discussion of certain financial measures that are not presented in conformity with U.S. Generally Accepted Accounting Principles. Reconciliations of non-GAAP financial measures discussed on this call to the most directly comparable GAAP measures can be found in our earnings release or on our website at ir.cableone.net. Joining me on today's call is our President and CEO, Julie Laulis.

And with that, let me turn the call over to Julie.

Julia Laulis

Thank you, Kevin. Good morning and thanks everyone for joining our first quarter 2017 earnings call. I will highlight few notable items, and then Kevin will provide a full recap of our financial performance. We saw in the first quarter that our continued focus on executing our strategy produced solid growth in both residential HSD and business services. Residential HSD units grew more than 2% for the quarter and residential HSD revenues were up more than 8%. Business customers grew 8.5% and business revenues increased more than 13% for the quarter. Total revenues were up over 2.3% to $207.4 million.

As we've said in the past, our focus is on long-term profitability and not short-term results. So we don't put too much weight on the results of any single quarter. This is largely because a number of variables can cause unevenness in a quarter-over-quarter compassion. For example, we are following a non-recurring schedule rate adjustments which we saw in the first quarter of 2017 as a result of our video rate adjustment taken during the quarter.

First quarter results were also impacted by the accounting changes related to the capitalization of certain labor costs that we discussed in our last earnings call. For the first quarter, adjusted EBITDA was $97.9 million, an increase of 14.6% year-over-year which included the positive impact of those capitalized labor costs. If we exclude those costs, adjusted EBITDA growth would have been 7.7% year-over-year.

To reinforce our strategic focus on residential HSD, we continue to enhance our residential HSD product with new value added services that make the lives of our customer easier and distinguish us from other providers in our market. For example, we are launching WiFi ONE, Cable ONE's first advanced WiFi solution that will provide our customers with enhanced WiFi signal strength and extend and improve the WiFi signal throughout their homes. WiFi certified Cable ONE technicians will utilize signal mapping software to find the optimum location of the WiFi gateway in the customers' home and determine the proper hardware configuration based on the customer's number of wireless devices and the design and structure of their home. DVR technology solutions will be customized based on individual customers needs.

WiFi ONE will give our customers the freedom to access our super fast internet speeds from multiple devices anywhere in their home, helping to eliminate dead zones and buffering. This advanced WiFi service combined with the fastest speeds in the majority of the markets we serve will give our customers a superior internet experience. The rollout of GigaONE, our 1 gigabit service to all of our markets is also progressing nicely. At the end of the first quarter, more than 75% of our homes cost and our legacy footprint had access to GigaONE.

Our other major area of strategic focus is business services. Our newest product in this area is called Piranha Fiber, which we market as ferociously fast internet. Piranha Fiber offers businesses up to 2 gigabit symmetrical service using an extremely reliable fiber-based architecture and shared bandwidth service. We are currently the only company providing this type of product in the markets we serve. We have launched Piranha Fiber in two markets already and we will continue to introduce this differentiating mid-market business services product to other Cable ONE area.

We announced on Monday that we have completed our acquisition of NewWave Communications and we are very excited to welcome all of the NewWave associates to the Cable ONE family. Cable ONE now has more than 2,400 associates, serving over 800,000 customers, representing 102 million PSUs in 21 states. We believe this new division of Cable ONE will be a great fit because of our similar strategies, customer demographics and products.

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