Cable One, Inc. Q3 FY2024 earnings call

• Broadband Growth: Residential ARPU stabilized; HSD subscribers flat post-ACP discontinuation; ongoing transition to new billing system limited marketing adjustments for ~20% of HSD customers; pilot pay-as-you-go internet offering for value-conscious customers.
• Product and Network Enhancements: DOCSIS 4.0 for future speed advancements; gigabit speeds across entire footprint with multi-gig capabilities in over 40% of markets; network peak utilization low at 19% downstream and 18% upstream; intelligent Wi-Fi for seamless connectivity; top-tier security package introduced.
• Strategic Initiatives: New billing system going live next week to consolidate customers onto a single platform; rebranding to Sparklight ongoing; AI integration into customer experience framework; addition of Tony Mokry as SVP of Residential Services; quick restoration of services for impacted customers post-Hurricane Helene.

Residential Broadband: HSD subscribers were essentially flat for the quarter excluding the impact of customer losses from the expiration of the affordable connectivity program. Q3 residential data revenues decreased by $17.1 million or 6.9% year-over-year, driven by a 7.1% decrease in ARPU. New customer selection of speed tiers of 600 megs or higher increased significantly to an all-time high of 62%. Business Broadband: Third quarter business data revenues grew by $1.6 million or 2.9% compared to the same period last year, driven by strong demand across carrier, wholesale, and enterprise customer segments.

• Adjusted EBITDA was $213.6 million or 54.3% of revenues in Q3 2024, with adjusted EBITDA margin improving 50 basis points sequentially.
• Capital allocation focused on enhancing network/platform infrastructure, organic growth, strategic inorganic growth, and debt repayment.
• Investments in Metronet and Ziply slated to close in 2025, yielding pretax proceeds over $100 million.
• Revolving credit facility upsized by $250 million, with $50 million voluntary debt repayment post-Q3.

• Factors affecting forward-looking statements include ACP discontinuation impact, competitive dynamics, new billing system implementation challenges, and risks related to the MBI put option exercise.

Q: Can you clarify the billing system comment about being unable to change pricing packaging for 20% of the base and its financial/subscriber impacts in the quarter, and on the pay-as-you-go pilot's ARPU impact, and whether Cable One sees itself as a consolidator?

A: Billing system changes didn't affect customers immediately as rates were frozen during conversion. Pay-as-you-go pilot ARPU from signed-up customers is higher than entry-level price, not dilutive. Cable One sees itself as a natural aggregator for its markets but remains speculative on future consolidation plans.

Q: How do you think about wireless competition and bundling, and attractive wholesale rates for wireless?

A: Cable One evaluates mobile on a biannual basis, considering customer needs and financial impacts. Bundling of products is explored. Wholesale rates for wireless are accessible but need to be evaluated holistically with other assumptions.

Q: On ARPU stability and subscriber growth, and fiber overlap?

A: ARPU stabilized and expected to continue; Cable One aims for subscriber growth while delivering stable/ growing ARPU. Fiber overlap remains below 40% of the overall network as reported last quarter.

Q: On competition stabilization and OpEx investments timetable?

A: Competition is stabilizing with some markets showing positive growth post-adjustments; network stability supports wireline reliability. OpEx investments remain on track for late 2024 into mid-2025.

Q: On pricing power, ARPU differential, and build front?

A: There's room for rate adjustments in segmented customer bases; ARPU differential due to past high LTV strategy; build front impacted by access to capital and cost of capital, with large-scale consolidators focusing on larger markets rather than small communities.