CABO - Earnings call transcript Q3 2017

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Operator

Good day, and welcome to the Cable ONE Q3 2017 Earnings Report Conference Call. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Kevin Coyle, Chief Financial Officer. Please go ahead, sir.

Kevin Coyle

Thank you, Chad. to Third welcome Call. XXXX and morning, Cable Quarter ONE’s Earnings Good

excited us our with have morning We’re you review this to as we results.

today’s expectations. I remind statements proceed, like to discussion that relating and we forward-looking may events Before future contain would you to

factors in cause Cable any find under filings. ONE our differ current results future ONE’s today’s in no could its projections forward-looking a as events new update in to is disclaims these or SEC obligation from listed that fact, obligation press can otherwise. actual to whether You materially release expressly of and, and Cable statements result information,

Additionally, in website non-GAAP discussed found on today’s or financial presented conformity certain with most of this call U.S. on release financial our measures to accounting include comparable be remarks ir.cableone.net. of can a the GAAP generally measures discussion Reconciliations in not measures that directly earnings are accepted at our will principles.

President that, me and Julie. Joining is Laulis. over me the let And to on call Julie CEO, turn today’s call our with

Julie Laulis

you, we joining third for our call. appreciate XXXX Good and earnings Thank us quarter you morning, Kevin.

You estimate as complicated to in mention change by labor have accounting heard comparisons NewWave been the before that our costs results. incorporating well us as capitalized related quarter-over-quarter

results In financial by to factors, were call. help Hurricane that addition quarter walk in into our somewhat the detailed to us those also Harvey. get impacted results this for our Kevin later will through

communities. a our acknowledge felt and Texas a customers August, financial moment effects markets had Harvey also take hit in our a associates our want one. Hurricane it coastal to to I these and the While had human as it impact, We in

those recovery of personal worked by still those been associates, our affected possible. experienced who as repairs thank all customers get care service from for their want XXX some to diligently running. as disasters. nearly back and work our restore whom Cable associates ONE hard and impact all I who I made quickly Our these the their for while of these our thank and to thoughts in want area, to customers up we and necessary with true for their of In efforts. throughout are of also to living patience dedication are spirit, recovering have their especially services loss, our and

integration very to to our We these like fund, truly to work. feel where to our or donated the don’t impact our our benefiting impact profitability. where donations are our and ONE weight put These quarter who also results much homes. needed company-wide of other making associates. single of grateful business suppliers the as quarterly their rollouts natural we times support and in Hurricane in basis, associates is communities disaster on we to events long-term financial that Cable Harvey, activities, local repairs the too our provided connection It’s of of a damaged vendors, on assistance live associates any we may Regardless on product and focus

serve, with the others our we customer every no gig of and in homes our effort and focus. XXX the passed lay Today, ago has via of to our service they that providing continues years launch our competition are the the access to claim live. this to Gig eliminate of industry. to envision legacy ONE digital where an our our gigabit nearly communities the matter we and Internet X-gigabit our unique that two in compared announced part view, of strategic now title As be can towns XX% At long-term Cable proud to service footprint service third footprint the to cities high-speed in an In that had of rollout divide We been GigaONE. to week, city. say area legacy quarter, of end across the we access

approach, We close to made goal those XX-channel substantial including launch will we allow speeds, in bonding, that year, markets. which what progress of new markets, Division, have our to call and the us legacy to we achieving now to Northeast end the are GigaONE, our approximately faster Northeast now transition customers three throughout Cable product By well fourth NewWave, for of associates of ONE Division future bonding. services while and and will terms unified positioning We XX-channel the the closely the offers Division establish have footprint a that in resemble Northeast making of process benefiting completed operational our us growth. believe will more

recent elite adjusted continues EBITDA across the Piranha of medium-sized our Northeast expand businesses deployment we of some our other realize area expect and and the of Northeast include Division the business million Meanwhile, year-end. in to most operations our ONE the deployment margin than $XX Division’s Northeast to small- platform. payroll resources in as our with we to benefits bonding, and human offer accomplishments conversion, In now XXX-megabit business launch revenues Division upcoming services, Cable completion and of contributed Internet our quarter, the to IVR XX-channel and to mid-market Texas; product, integration Idaho cost our services Odessa, markets. addition synergies the proceeds. recent of by Boise, more the of the In migration and Fiber, majority continue legacy business in

beneficial expansion continued provide improving that will products confident bottom in while are ONE’s of services line. our to businesses alternatives markets business Cable and We our

Tom’s it Tom take be moment provide than due spent Cable our sent more vision over results. making the Kevin, I decades as now, turn Chairman. Before But earlier want passion and want instrumental the recognize been that his Tom later we announcement third call. for Kevin an on today And two out in I touch proper retirement a Tom more have within the call quarter will details the I on today. Cable ONE company now, to ONE. is regarding Might’s in to I’ll to giving to Executive

Kevin Coyle

Julie. Thanks,

our also reflect accounting to and operations in of the change labor costs. related Before three capitalized to I the details, third that months into results estimate getting NewWave remind include everyone want quarter

asset Harvey by from and Hurricane an operating were additional million cleanup should suppressed In our addition, waived that event million mentioned, $X.X quarter of labor cost. keep affect charges loss $X.X is approximately impacted XX,XXX with our with as already results to offering not initially mind a third and associated onetime forward. expenses service revenue Julie estimated was negatively disposal, of results this Please and in going customers. Billing

results currently to The will As approximately line growth has in prior or customers. able end, majority of Again, quarter. our with the this our to time. been of to very much these this this results. the affect of back reduced in large quantify quarter Harvey, and full-time X,XXX amounts at that Adjusted but is are insurance service. We we have through expectations customers we news hope specific for not to costs the a reimbursement, are sub-growth number good recover some

growth been due ONE. have a legacy adjusted have accounting contribution from from EBITDA EBITDA capitalized change million of some of the the costs. been XX.X%. third full EBITDA are to operations, was XXX.X expense include results would in to quarter and of XX.X% EBITDA highlights X.X NewWave of the Cable adjusted EBITDA with increase margin Here margin in of the The Adjusted was an would estimate impact Without a favorable related million, NewWave year-over-year, million and a XX.X% of a reduction XX adjusted labor quarter. adjusted XX.X% and operations on

adjusted Cable impact the XX.X have Excluding adjusted ONE. for negative EBITDA margin XX.X% of would EBITDA and a growth would Hurricane with legacy million Harvey, been been XX% have of

the contribution X.X%, related of was X.X million XX.X an would million. XX% been XX.X% $XX data been X%. Business have in increased to Business to change growth from million growth, service Excluding adjusted estimate X.X XX.X the operations revenues been $X.X data of or or have NewWave impact revenues growth Adjusted would service or or million growth capital would million, XX.X% X.X expenditures capitalized less excluding further, from and growth NewWave been Residential EBITDA operations. both without increase revenues the But million have XXX.X NewWave operations. Harvey, adjusted contribution EBITDA the have to million. would X.X% excluding EBITDA XX.X increased Residential million revenues million year-over-year. Hurricane labor, X.X%.

Now getting into the detailed results.

XXXX, the million a from XX.X%, of XXXX, or with to third operations. increased For contribution NewWave quarter compared quarter XX.X the of million $XX.X third revenues

I negatively mentioned an estimated before, million Harvey. impacted Hurricane were by revenues with As $X.X loss associated

residential of XX.X% total revenues. revenues data total of business service comprised the XXXX, and quarter XX.X% comprised third our revenues For of revenues

$X.X decrease quarter So XXXX, $X.X of Operating $X.X million, of without XX.X third together, $XX.X all increase from have of costs a XXXX. labor was the decrease this increase or in by of third Without of estimate and million revenues, the increased to increase, a would operations XXXX fact, in in labor, would increase, $X.X decrease million general with the of to of for expenses $X.X $XX.X been our offset million decrease to to and X.X% our contract expenses XX% a the comprise Operating to in operating associated and contributing in operations, the backbone million the video XXXX. NewWave in change growth in quarter businesses million XX.X%. million XX.X% operating improved or and million, This to NewWave points additional this a in the million compared Selling, third in were million with million capitalized attributable the $XX XX.X% costs, programming a subscribers operations, a expenses due quarter as increase. also XXX increased of accounting expenses percentage third labor. $X.X partially Most our Internet connectivity expenses NewWave revenues. now costs have were million. of NewWave basis operations fewer XX.X% quarter administrative $XX.X total $X.X or

been expenses capitalized as offset a compensation an change acquisition-related and or the by associated estimate of incurred and labor. the a third reduction debt percentage improvement with quarter positive accounting of of EBITDA lower XX.X% expense Adjusted $XX.X the capitalized NewWave Again, additional third Interest the XX.X% and quarter Additionally, NewWave to prior impact NewWave were and year million expenses insurance operations, from capitalized due and have X.X%. adjusted labor, points have EBITDA EBITDA $XXX.X of operations our of XXX million SG&A a and adjusted would basis have finance without $X.X third The without been expenses XX% been XX.X% the to labor million or of have $XX.X and both Without SG&A to was $XX would quarter $X.X higher of estimate million XXXX, of $X.X million have acquisition. NewWave million Without for would the million, would in costs of of $X increase growth in been the EBITDA decreased was million. $X.X for of EBITDA NewWave, the the NewWave adjusted million. XXXX. deferred marketing with costs million $X from million, change expenses of in labor XXXX. included would have growth revenues, change for a adjusted $X.X X.X% would increased of operations, reduction quarter been costs costs.

in before, estimate As to $XX.X Cable growth been during storm EBITDA EBITDA $X.X operations, we and with Without damage. have adjusted I related NewWave Hurricane ONE. change have for X.X% $X.X been and adjusted impact, million would the Hurricane of labor which third for disposal of million EBITDA Harvey operating adjusted $XX.X mentioned legacy growth capitalized million been have the expenses the would due would incurred Harvey to million asset quarter, and additional associated loss

in margin Our quarter. basis quarter quarter in NewWave legacy to the increased the ONE third XX.X%. compared XX.X% improved XXX year in to margin prior the basis Further, XXX from points over XX.X% XX.X% sequentially points second to Cable for

XX.X% XXXX, of capitalized that Harvey. ONE’s expenditures million resulting expect achieved the produce $X.X and margins in of associated increase Hurricane accounting million million quarter that legacy or a and look change third $XX.X labor in for synergies will replacement the estimate included the revenues several to years. expenditures $X.X totaled with integration for We from capital Cable through next NewWave will similar Capital of

$XX.X been Without Harvey. revenues. million the as was had as excellent expenditures capital the with operations, Hurricane approximately a of This on $XXX percentage a Harvey, would hand. increase have of our XX.X% capital X%. expenditures capital we cash of for remain also standpoint, we associated From million, capital actually less Hurricane or in Excluding an have NewWave been capital revenues XX%. would Adjusted included million approximately position EBITDA of liquidity $XX.X

As connection was which of loan debt a NewWave million of term balance included XX, our $XXX with borrowings September billion, $X.X acquisition. the in

only September providing adjusted of on facility We EBITDA our for liquidity. to is us with EBITDA available also significant X.X borrowing -- about our had only net was $XXX debt-to-adjusted as million times X.X and under times, XX. debt adjusted revolving hand cash for Overall, credit net

we into As NewWave focusing Julie operations. of integration continue on mentioned, our the

is expectations, year. performing the of NewWave forward or in Division next growth look our ahead continued our Northeast and to we

Harvey, Hurricane take understanding hard their I in Regarding of all of process. recovery to and for restore to for during moment thank a service for customers the region also want the and support work associates our all their to our

ready questions. are for Chad? We now

Operator

Instructions] question [Operator Philip Cusick The from first come Morgan. with will JP

Philip Cusick

is changed, I wonder, First, an last How the X% price in was think that in the terms do price of rate deceleration a looking issue saturation before price growth And issue much at on or year legacy is subs of competition forward you X.X% the broadband the increase the driven elasticity ONE from taking the base? going has I’m a by there growth or increase? Cable to in today.

Kevin Coyle

the of X% to mind, that see business, data as narrative, PSUs PSUs was the been have data would And it in higher keep also. The I would been you increase, for Harvey. X%. on in have the Some mentioned again, residential due actually

after of the those would data X.X% impact actually Harvey, been of recognizing took two the you or a we Harvey If growth. together, have,

data on it’s think and from So the the effect affected of I which prior don’t Really, PSUs business. year. have XXX-or-so significant X,XXX been a PSUs Harvey, data video the on deceleration we

So to look without and at take Harvey. numbers not I really a have Harvey the

Julie Laulis

I’m add referring increase what not to price you’re so And Kevin, to. to that, sure

on in almost product our years rate HSD seven We the haven’t now. raised

Our last XXXX. of in was October increase

Philip Cusick

think sorry. Yes, I’m that’s to price the ability to need increase you That the about with But I at it price one speaking lined numbers. Kevin’s of. I’m how forward? up. take look And going do

Kevin Coyle

Phil, I guess we’ll -- yes.

in price We elasticity. We have we’ll said think $XX. to think we’ve There for continue probably we that’s very XXX at at past, it extremely look well-priced some service As the megs an quarter-to-quarter. competitive. is

don’t sensitive very customers them. want to and We’re our abuse to

to continue our basis a we’ll take on to look quarter-by-quarter at increase. to rate it So when as next

Philip Cusick

follow-up broadband one do can ARPU I there. if been And The stabilizing. has

price with this see as increase, a about broadband stable ARPU remember, But you about higher Or increase? growing been unless had to customers year-over-year. that is up the Before to potential in the lift I point products. this at there’s price that trading should flat going as forward? for think Do we

Julie Laulis

higher think Actually, at elasticity, exact have I numbers Kevin So I the opposite looking in ARPU University is our at on our the flipping has of at the ARPU versus through, level end. levels Indiana that read markets, HSD. pushing flattened elasticity don’t and that in XXX, because lower there’s rapid the for I that the price gig I’m service, are the our more a XXX finding is rate, expensive say end growing services to That up. higher our

Kevin Coyle

at on ago Phil, as was ARPU HSD, year reported look I at a that actually XX.XX. we

it’s Now XX.XX.

would it’s saw rate for a over like for they ONE, make is have at are number So they the But including And composite mean, obviously, a next ARPU, a increase ARPU XX and the year-over-year. that’s us ranging maybe to reason is NewWave our to it you’re couple of megs, look up Cable growth But our confusion tiers, megs Their XXX definitely the lower. referring them. NewWave. XX.XX. them composite ARPU. I a be acquisition. to we years. that Maybe for legacy Again, X.X% goal of is more from in ARPU

Operator

be Moffett Please of ahead. go next from The question will MoffettNathanson. Craig

Cathy Yao

do broadband ignore I to and little up thinking a I debundling question in In part also to data off would break to have. and in down a there. uplift discounts Craig. of and was able This plans the ARPU have you about then perspective. deploy is think be speeds is as gigabit to Julie, you promotions? within NewWave business, well? speeds ARPU. But increase of, also Cathy And Yao from Kevin that not color I it that bit how question higher legacy actually And what guess, rate terms ton X.X% the ARPU involuntary My we’ll on is that in of for take of you trying of voluntary legacy came remaining. it think a And the gave rolling maybe NewWave, customers take rate caps, footprint once and you I’m get ARPU you broadband bundling take since there’s and much from

Julie Laulis

Thanks, Cathy. This is Julie.

down that the ARPU increase, for it I things think all driving don’t we parties. of outside are break mentioned you part and that

For believe NewWave, time. not is and bringing mentioned to think pricing over growing, ARPU as closer ARPU I we I closely more earlier. mirrors Cable absolutely done drive which higher packaging, broadband ours will speeds that ONE, their different do and

Cathy Yao

follow-up. it. what items in about this I If bit Got expected. a Can for the capital we you could quarter? of intensity ask It even was talk some onetime a little than adjusted had higher

your in maybe get to aggressive that peers more will wanted and about capital some Just your think the of intensity couple of you on years what next thoughts go where target.

Kevin Coyle

as reported give we legacy our you that you’re quarter, as we a capital as Cathy, teens. don’t for know, said, I seeing I What guidance guidance. extra the would the in upper give And be we did without The XX.X%. XX.X%. percentage as CABO, of been we expected of future last associated revenue that the as Hurricane together, company, reported We million that. would XX%. been have quarter. Legacy with already Harvey, would that mentioned there NewWave. Julie capital a associated Harvey, mentioned, additional Without capital for X.X -- whatever, have XX% are NewWave, with

that would is most the with capital and look be We Cable to like the them expenditures that, additional the much of NewWave So case. bringing again, market associated told ONE.

XX% through We’re probably months the in still to even range. the nine XX% running

ago. upper guidance the quarter in that’s we gave are and teens, we a the So

Operator

Frank James. ahead. will Louthan go with question Please next be from Raymond The

Frank Louthan

what quantify see you competitive from where and you you of some the sort front, with go, are Division even and change your And markets? the on migration? then -- cost if system you customers the for competition broadband, HR of savings Can seeing in are migration the should you once their leaving where seeing the they’re lift Northeastern you materially offer

Julie Laulis

integration future right Frank, it’s our systems There from provisioning coming HR products large will duplicate running of system, in looking savings types I savings be, are be that. the many the we for wouldn’t Julie. for now. because however, The for of

from those. to synergies come So are

are aggressive In terms fiber-to-the-home our with We’ve of a a That these for in being builds, providers are passed thoughtful very But competing overlap over play I with overlaps hardwire in or broadband war. some giveaways. our of is and price over to engaging where provider footprint triple seeing have be competition, speeds time we to without with wherever trying which small. seeing are it or been being about AT&T builder XX% And what competition certainly that in any dramatic various now. a think there of is significant it those homes are systems incredibly against been said, bundling of changes HSD. in of primarily exists their they our doing incredibly responsive offers, terms competition don’t

Frank Louthan

more should to Great. trends think have the sub How characterize post can we that? storm or the normalized trends? back October, Okay. of in November sort sort you the about how of And been

Julie Laulis

I’m sorry. can something that That comment isn’t I on.

Kevin Coyle

of Phil are billing quarter. the still the back good September. is end mind, the our earlier, now. were suppressed customers almost there at a subs said of numbers as keep I X,XXX sub impact do But to in were status did that the The But hurricane for Frank, all in news

seen if much back that very the we what prior. growth. add with affect But So in believe line is you Harvey, growth does we’ve our

Operator

Fargo. Stephan [Operator next from Instructions] question The Wells Bisson with comes

Stephan Bisson

you rollout any MVPDs little lot are the a the impact side with the of broadband seeing the side increased to start of bit? more out First, virtual either demand on maybe on people migrate sub as video a there, or

Julie Laulis

Julie. Stephan, this is

actually strategy, can bring data because they highlight service terms folks. folks there welcome that are we losses, our robust to what In video a of given these high-speed

the strategy. question? think than I couple What it’s of was been quarters past second us doing So with for suffering given your video’s our don’t any what more

Stephan Bisson

side [Indiscernible]? the potentially on uplift Any broadband at look as people

Julie Laulis

electing is Absolutely. want go Again, high more whether by People I gaming, it’s tiers, the taking of incredibly XXX-meg rates. services, in their don’t it multiple higher-level tier surprised over-the-top, higher to robust. very into level whether say I’m home, it’s whether to it’s our devices at people but growth our are

Stephan Bisson

these a Right. And type I more you days? those satellite from competition question. guess similar then Are over-the-top seeing packages than

Julie Laulis

I We research. that, quantify don’t do know do, I research, third-party can that Stephan. independent

at gather video customers. towards video put a And share going, our are and don’t what’s with so look we happening we lot customers we market where but of the and resources ascertaining

and Our focus really broadband business services. on is

Operator

would [Operator any over Instructions] to closing session. concludes our conference remarks. Laulis turn question-and-answer I This like for the to Julie back

Julie Laulis

Chad. you, Thank

ONE. all Now turning us today, retirement we Cable very as of to Tom announced something Chairman. the Might close to at of Earlier Executive

express behind XXXX years, for thanks XX positioned with that decades. Cable and customers for new want Cable legacy He’s success. has focus company growth dedicated to associates. past leadership ONE for innovation. service the board nearly our leaving guided Cable excellence strategic Tom his a and We well Under and integrity organic his of and since For through acquisitions, continued has appreciation sincere his to on our unquestionable to ONE and our over grown commitment has our a of ONE to unwavering Tom leadership, his X-plus product strategic stewardship, future

retirement, providing are wisdom, insight his as thrilled continue Director, serve We forward with that his for a and us our you to and today’s distinguished we call, you speaking for We following Tom appreciate look again will XXXX. to board. joining in experience to

Operator

The you today’s now conference Thank has for attending presentation. concluded.

You now disconnect. may

Cable One (CABO) 11 Nov 172017 Q3 Earnings call transcript