Cable One, Inc. (CABO)

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Cable One, Inc. (CABO)

Q4 2017 Earnings Conference Call

March 01, 2018, 11:00 AM ET


Julia Laulis - Chairwoman of the Board, President & CEO

Kevin Coyle - Senior VP & CFO


Philip Cusick - JPMorgan

Craig Moffett - MoffettNathanson

Stephan Bisson - Wells Fargo

Frank Louthan - Raymond James



Hello, everyone, and welcome to the Cable One, Inc. Fourth Quarter 2017 Earnings Conference Call. [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 Full Year and Fourth 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 current 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 welcome to our fourth quarter and full year 2017 earnings call. I'll start by touching on a few highlights and then turn the call over to Kevin to provide a full recap of our financial performance.

We announced in our press release this morning that we revised our historical financial statements mainly related to our capitalized labor change that we've discussed on prior calls. Kevin will address this later in the call.

I'd like to first take a moment to reflect on 2017, which was a year of growth, opportunity and teamwork for Cable ONE. We acquired NewWave Communications, which enabled us to expand into new markets and bring faster and more reliable service to customers in these cities and towns.

I consider the NewWave acquisition a resounding success at this stage. From a financial perspective, adjusted EBITDA as well as both HSD ARPU and margins have improved faster than our original internal forecast. We are also ahead of our operations plan. And we continue to work to culturally assimilate the 2 companies, sharing best practices from both.

Capital improvements and streamlining processes and platforms as well as embracing our strategies for success have been areas of emphasis. In keeping with our long-term focus, our work on NewWave, or what we call our Northeast Division, has us targeting actions that will pay off over time.

Despite some short-term impacts that decelerated unit growth there, we're confident that a shortened, more disciplined collection cycle, a cessation of deep and lengthy discounts as well as other lifetime value measures focused on profitability, not pure market share at any cost, will benefit us when we roll out our eventual pricing and packaging migration.

For Cable ONE as a whole, there are many moving parts to keep track of: our accounting change associated with capitalized labor; a partial year of Northeast Division financials; the impact of Hurricane Harvey across both legacy Cable ONE and Northeast Division systems; and most recently, the revision of our financial statements. We have attempted to provide and will continue to lend transparency to these items. Meanwhile, Kevin and I will help to offer clarity in the big picture as well.

And speaking of the big picture, we believe that our strategy continues to bear fruit as we emphasize growth products of residential HSD and business services, drive operational efficiencies and capitalize on favorable competitive dynamics in our largely non-metropolitan markets.

As we focus on the long term, the company has been taking steps to ensure a strong, diverse and talented bench. Our team has been evaluating our strategy and refining our tactics. As part of that effort, we are employing expanded business intelligence tools to help us make informed decisions. We believe that these initiatives are providing a sound path to sustainable adjusted EBITDA growth and situate us well for the future.

One example from 2017 was moving away from year-round discounting of our flagship 100 meg HSD product in order to establish and dimensionalize the value of this service. Early indications show that our already low churn is going even lower.

And as a side result, ARPU rose in the fourth quarter due to the lack of these promotions. This approach allows us to strategically test marked sales techniques and offers to drive profitable connects and growth.

Additionally, we are shifting away from a one-size-fits-all marketing philosophy. Armed with data, we're confident that the adjustments we're making to be more responsive to market demand will prove profitable in the long run.

We have multiple levers, which include units, ARPU and total revenue, at our disposal to wisely calibrate growth that make sense for both our customers and the future success of our company.

A combination of testing, data mining and implementation of alternative approaches will help set Cable ONE on the path for reliable growth over time. Given all that we have done and what is currently in process, I am comfortable where our HSD product and pricing is headed.

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