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Cable One, Inc. (CABO)

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Cable One, Inc. (CABO)

Q4 2018 Results Earnings Conference Call

February 27, 2019, 05:00 PM ET

Company Participants

Julia Laulis - President & CEO

Steven Cochran - SVP & CFO

Conference Call Participants

Philip Cusick - JPMorgan

Zack Silver - B. Riley FBR

Frank Louthan - Raymond James

Craig Moffett - Moffettnathanson

Stephan Bisson - Wolfe Research

Brandon Nispel - KeyBanc Capital

Presentation

Operator

Good afternoon, and welcome to the Cable One Q4 2018 Earnings Conference Call.

All participants will be in a listen-only mode. [Operator Instructions] After today's presentation, there'll 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 Steve Cochran, CFO. Please go ahead.

Steven Cochran

Thank you, Danielle. Good afternoon and welcome to Cable One's Fourth Quarter and Full Year 2018 Earnings Call. We're glad to have you join us 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 expressly disclaims any obligation except as required by law to update or alter 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 US 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, Julia Laulis.

With that, let me turn the call over to Julie.

Julia Laulis

Thank you, Steven. Good afternoon and we appreciate you joining us for today's call. I will review quite a few highlights, as it has been a very busy three and a half months since we last talked. Then, I will hand the call back to Steven for full recap of our financial performance.

Before getting into results, I want to welcome our 92 new associates from Clearwave. I will talk more about the acquisition a little later, but we are so excited to have them as part of the Cable One team. I would also like to acknowledge two groups of associates and they are our people in and around Taylorville, Illinois, who experienced two severe tornadoes on December 1st, and our associates in Columbus, Mississippi, who were hit by a devastating tornado last Saturday.

Despite personal impact and loss, these dedicated associates worked tirelessly to get our customers back up and running, in both cases, restoring service to more than 90% of our customers in just 24 hours. Our associates took care of each other and our customers, exemplifying the true Cable One spirit.

Now turning to our results. Once again, I'm gratified to say that we were able to deliver strong operational and financial performance in 2018. Some Q4 highlights include year-over-year increases in total revenues, up 4.7%, and adjusted EBITDA of 8.8%. In line with our long-term strategy, this impressive growth was led by our higher-margin residential HSD and business services products, where we saw revenue increases of 12.3% and 10.3%, respectively. These products now comprise approximately 62% of our total revenues.

As we discussed on the last call, we accelerated our marketing spend in the third quarter in order to, one, take advantage of a more active buying season, and two, reduce call volumes during the go-live phase of our NewWave billing system conversion in early November.

I'm pleased to say that the conversion went incredibly well, aided in part by the thoughtful preplanning to reduce the customer contacts around the time of the cut over. Meanwhile, the reduced Q4 marketing cost positively impacted adjusted EBITDA for the quarter and we still drove an increase of more than 2,700 residential HSD PSUs sequentially from Q3. For the full year, we saw residential HSD PSUs grow 2.7%, in line with our expectations.

Our residential HSD ARPU is up 9.4% year-over-year. That growth continued to be fueled by a mix of marketing, our modem rental rate adjustment in the first quarter of 2018, increased subscriptions to premium tiers, usage-based billing and contributions from further alignment of the Northeast Division. While we expect to see residential HSD ARPU continue to increase from several of these mix-related drivers and our recent pricing and packaging changes, keep in mind that we have not implemented any 2019 residential HSD service or equipment increases as we did with the modem rental adjustment in the first quarter of 2018.

I'd like to provide a bit more detail on the residential HSD pricing and packaging changes we've implemented. As of January 2nd, we launched our new pricing and packaging across our entire legacy Cable One footprint and the majority of our NewWave footprint, in line with and informed by the testing we conducted throughout much of 2018.

We simplified our core HSD plans, offering lower pricing and higher speeds across our premium tiers, as well as shifting usage-based billing from upgrades to overage charges. Our $55 dollar flagship product continues to offer 100 megs download speeds -- 100 meg download speeds with a 300 gig data plan.

Our $65 plan now provides 200 meg download speeds and 600 gigs of data and we've introduced an $80 service, which gives customers 300 meg downstream with 900 gigs of data.

Read the rest of this transcript on seekingalpha.com