Cable One suffers revenue decrease, adds residential data subscribers

During Cable One’s Q1 earnings call, president and CEO Julie Laulis reported that first quarter results reflected momentum in residential broadband customer growth and efforts to attract new customers.

“Our past strategy focusing on high lifetime value customers enabled us to streamline operations and marketing efforts, leading to tremendous growth of HSD revenues, EBITDA, and free cash flow by attracting a higher ARPU customer, albeit at a lower overall penetration level,” she said. “We are now navigating a marketplace characterized by low move activity, the emergence of new fixed wireless competitors targeting value-conscious customers—a segment we had not previously targeted—and a rise in additional fiber competitors in select markets.”

She reported that Cable One has, since the fall of 2023, focused on expanding market penetration, which she said has yielded tangible results.

Laulis also noted that Cable One has invested more than $1 billion into its network infrastructure over the last three years.

“This strategic focus includes enhancing reliability within homes and across individual devices with a large majority of customer issues occur regardless of whether the service is delivered via fiber or HFC,” she said. “As a result, we have seen a notable improvement in customer satisfaction.”

She also reported that Cable One continues to invest in its network so that it can implement DOCSIS 4.0 and 10 Gbps speeds.

Investment partnerships

According to Laulis, the companies that Cable One has invested in have collectively grown broadband subscribers by 11%, adding 330,000 new fiber passings in 2023.

“This performance,” she said, “underscores the effective execution by the seasoned management teams we chose to partner with and why we believe in the substantial value and potential future growth of these companies.”

She also touched on the investment in Mega Broadband Investments (MBI), noting that Cable One may acquire the remaining 55% stake in the company.

“Let me explain why we believe MBI is a great partner for us,” she said. “First, they are performing well financially, with annualized Q4 2023 revenues of approximately $320 million and a double-digit EBITDA growth rate when comparing LQA Q4 2022 to LQA Q4 2023, thanks in part to continued growth in both broadband customers and ARPU. They also have a loyal customer base of approximately 230,000 residential and business broadband customers in a network that covers about 665,000 passings as of December 31, 2023. Finally, and very importantly, we have a strong management team that shares our vision and value.”

Financial results

Todd Koetje, CFO, presented details of the company’s first quarter results.

Cable One’s total revenues for the quarter were $404.3 million, down from $421.9 in Q1 2023. This decline was attributed to losses in video subscribers, with residential video revenues decreasing $9.9 million or 14.1% year-over-year.

Residential data revenue was also down, decreasing $6.9 million or 2.8% year-over-year; this Koetje attributed to a 2.7% decrease in average revenue per unit. He noted that residential data subscribers grew by 6,900 quarter over quarter.

Business data revenues grew in the first quarter, increasing more than $2 million or 3.7% compared to Q1 2023.

Net income for the quarter was $47.3 million, down from $57.4 million in the first quarter of 2023.

“The prior-year quarter benefited from a $12.3 million noncash mark-to-market gain on one of our equity investments,” said Koetje.

Q1’s adjusted EBITDA was $217.1 million, and capital expenditures were $65.9 million, $30.2 million less than Q1 2023.

“During the quarter,” said Koetje, “we invested $15.9 million of CapEx for new expansion projects and $4.4 million for integration activities. The reduced level of capital expenditures during Q1 was largely due to the execution of our working capital optimization initiatives and a continued benefit associated with prior proactive investments in our network architecture. We continue to expect total CapEx for the year to trend towards below $300 million for the full year. Adjusted EBITDA less capital expenditures increased $18.5 million or 13.9% to $151.2 million in the first quarter of 2024.”

He also touched on the affordable connectivity program (ACP), reporting that Cable One had achieved growth in overall residential broadband subscribers each month of Q1.

“It’s important to note,” he said, “that among our roughly 48,000 ACP subscribers, approximately 20% are fully dependent on ACP funding for their service plans. Although we anticipate some customer losses, this transition also offers an opportunity to attract new customers.”