CABO - Earnings call transcript Q2 2018

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Operator

Good morning, and welcome to the Cable One's Second Quarter 2018 Earnings Conference Call. [Operator Instructions] Please note, this event is being recorded. At this time, I would like to turn the conference over to Kevin Coyle, Chief Financial Officer. Please go ahead, sir.

Kevin Coyle

Thank you, Denise. to second 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 recent results future One's today's in no could it's 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, or 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 Julia. Joining is Laulis. over me the let And to on call Julia CEO, turn today's call our with

Julia Laulis

you, to recap performance. you and joining hand second over on our few a for call. all XXXX financial review then Good thank earnings Thank us quarter highlights I it for of will morning, our full Kevin Kevin. a

of distinguished the our Before Award. to lead thank I summer, of a getting Cablefax be associates. prouder team. This into this want our award results I and hard associates. Year result our and the direct MSO though, the dedication XXXX Earlier to this commitment congratulate couldn't Cable received is work, One of

associates. our from outstanding also of positive Our results second quarter flow team

related strategy increases results strategy we our and adjusted of believe and serving per $X successful of reflect the that XX% year-over-year Cable an Kevin $X to allocation, will EBITDA or on which earlier we've a in the of later have both is share second share capital in which long-term from Cable this dividend legacy Some during were call. Also to revenues X%, pleased announce share week, to increase These our customers may One an $X discussed calls, basis. repurchases quarter the quarterly well. more One you a shareholders to on execution previous up significant X.X%. per dividend We we've than highlights address total made include annualized noticed

the Now results well June that basis we've turning Cable for HSD unit higher testing quarter. stacked second a growth growth seen up year-over-year faster as especially review We to and markets. XXXX. growth and customers HSD X.X% churn, residential of our to decreased tiers, it's Meanwhile, One. and combined operations, let's began One as for on residential Cable quarterly unit the saw business market rates legacy HSD competitive from strongest showing with experienced packaging new how unit options early since In pricing selling quarter, based we legacy

to continue company ensure will these measure for the [ph]. tests We results and the long-term to customers benefits of

pricing, One up X% year-over-year. residential ARPU slightly than HSD more Cable in Regarding was legacy

and climb in call as such or of Division, HSD One of Total residential ARPU mix legacy figures. we and a lack been our by has improvement discounts company NewWave marketing to growth beginning more look For Northeast now peeled what likely selling proportional is Cable ARPU upgrades.

President Division our Our Ken we to Services. Northeast subscriptions this NewWave leaders [ph], of quarter one came who tiers. Technology the the to the senior acquisition promoted in usage earlier the premium of mode as Vice rate based second world rental of increased over and Johnson the year of following adjustment of Division, to SVP Related

operational processes, end as on finance activities as integration as our well of the to our Additionally, such. network our teams related accounting all completed and operations

operational The year. well experience system underway Northeast Cable customer-centric provide later the migration of consistent to efficiencies. year the of One's more in more us prepare Division residential to customers to speed conversion also all will digital billing us is Division customers allowing Work robust the gigabit a while expected Division eliminate continues allowing digital system billing gain Northeast to [indiscernible] to and conversion next Our Northeast this with markets communities. the legacy launch for completion

the On upto business management expanded service WiFi by our launched technology feet Cable XX,XXX front, the customer which One latest upgraded square SMB Group stuff of our a installed deployed covers This offers and when service capabilities. managed second-generation with business. WiFi coverage

who business We're this one app. gateway, are service subscribing to through seeing own settings a customers place. to business subscribed at Additionally, delighted customers already WiFi mobile our able manage first their

quarter business customers The of technology. offering cloud-based deployment of flexibility hosted service market, voice virtual the saw XX% the of PDX our second latest nearly also and the freedom across

While timeline end, of the by end slated a the year for quarter. completion to original now expect project on rollout XXX% we have third the

well, as available Our Fiber fixed EPON of now greenfield strategy in has customers business with been area building to very markets. Piranha successful to

of is reminder, a Fiber typically service modem-based shared that As within an double reliable fiber-based cable is businesses extremely our that ARPU product. architecture HSD bandwidth Piranha

Our a of variety for [indiscernible] that new launch easier quarter triple with with be the allowing schedule number them planned originally product next We've most launching our experience In services, both our business recently of of of rollout business encompassed give residential exceeding XXXX. the expectations. an online customers with will portal to accelerated lives with goal services. launches and interact us by seamless our and making early engaging the results we'll this a service for of staff quarter downtime customer offering value-added segments keeping

before to him. Kevin, recognize want take back Now, I to to call moment over hand a I the

Kevin you XXXX. intention many announced in his retire may early be to this As of aware, spring

and XX. final August will still take us this reigns will an be who closely he call. in While Steven, serving January with us joined on will be August Steven CFO with likely Cochran, Kevin's until earnings advisory working the X on role

focus communications acumen, been strong has contributor strategic of the a plan and business execution and a evolve discipline, financial expertise provider. has Kevin's leading He One Cable key development years, three and to has a past the strategic laid helped Cable for Over for on the company's broadband public Kevin financial into to it's us is sustainable. And our more that profitable and continue foundation you, company will growth early provide serving our One on years. details financial in second so now, Kevin well Thank results. driving quarter

Kevin Coyle

Thank Julia, I much, so you appreciate that.

XXXX to months two into getting completed want include three details, was Before months, quarter while I results only as second the include NewWave XXXX second NewWave our X, everyone quarter remind our XXXX. of operations, acquisition May on that

million of demonstrate increase from results; quarter residential Legacy the in quarter. revenues the revenue income XX.X% $XX.X XX.X% with and prior business during year-over-year. compared for Cable had was XX.X% including XXXX quarter data residential the of robust our an service data of were X.X% quarter operating business compared $XX.X quarter second a in One results performance or achieved of contribution second revenues first the prior growth Consolidated revenues financial for XXXX $XXX of year-over-year increased year into to $XX.X continuation XXXX million quarter, to in Net revenues in respectively. million the service operations of to and the million increased and a getting year the increases the strong second compared second XX.X%. XX.X% Consolidated the Now million, NewWave million of quarter XXXX quarter. $XXX.X $XX second

strong a have increase increase. second of net income quarter would XX.X% with revenue million the federal share $XX.X Consolidated operating the Excluding result quarter per NewWave, quarter. end primarily was increased second XX.X% revenues $X.XX, by in our of XX.X% XX.X% income rate of an increase. as or million in compared our effective course the increase been taxes to expenses of $XX.X Net to XX.X% driven XXXX income enacted of $X.XX million, of at year prior quarter $XX XXXX, second in from of the tax to reform The legislation net lower tax a from revenues were or and decreasing in income XX%.

$XX by the million higher quarter. expenses NewWave second $XXX.X million to for administrative and and quarter second million, XXXX. compared $X.X the and they prior of $X.X One $X XXXX the Excluding costs X.X% million insurance in of of selling, XX.X% and EBITDA a million, the an quarter. attributable have million of Cable million $XX costs Legacy general administrative of selling, year-over-year, expenses year general Without been offset acquisition-related in would cost second $X.X increased expenses for the $XXX.X XXXX current XXXX, marketing lower were quarter growth the increased operating NewWave, prior at flat respectively. million million EBITDA $XX.X operations, quarter adjusted million were was and same primarily Adjusted were to from of in $XX.X Consolidated $XXX.X million. from quarter year and

XX.X%. increased also points year One in Cable Our XX.X% to margin for prior quarter legacy basis from XX the

performance XXXX. Adjusted of for fourth was less capital quarter expenditures Capital of totaled million XX.X% grown We EBITDA million of an the or from NewWave XXXX $XX.X $X.X million, are of their of of quarter. to and $XX.X increase $XX.X X.X% EBITDA approximately an quarter from the the also million million XXXX for The prior $XX.X of this quarter the very quarter, increase expenditures and second revenue. XXXX XX.X%. represents million capital second the adjusted as pleased expenditures in $XX.X year $XX for with million has of

standpoint, as approximately higher capital been revenues have cash-on-hand that at second capital $XXX during capital as teens be expenditures June XX From high during was due liquidity of $XX.X quarter we in a XXXX. million remain a our expect timing light to first expenditures XX, as percentage would we million of continue $XXX had for We still relatively position versus for NewWave, quarter. excellent Excluding Spending spending in of capital million. had December the the to will as the expenditures XXXX. we

average approximately quarter per our the XX,XXX as mentioned of shares Julia for share. repurchased of we an at common price $XX.X earlier, During million stock $XXX

the during is million end, EBITDA netting $XX times, to Term within our with free $XXX term us interest us In B significant only our to loan will debt cash costs NewWave federal to at annually. in approximately adjusted cash-on-hand approximately legislation Loan million Overall, significant generate billion, $XX enhanced acquisition. continue flow, after XXXX interest in was included borrowings our debt expected approximately turn balance the by and liquidity. which tax we XXXX. $X.X providing X.X million save further quarter times of was which to At repriced reform of finance savings XXXX, April X.X was million $X.X cash tax against debt lower rate, approximately which We X.X%

borrowing also We our $XXX credit million as of available quarter revolving approximately end. under for had facility

results; lines of products our focused and with to topline drive second services. primary very are in we residential overall, continue financial We pleased quarter data our growth business

operations realized. NewWave expectations Acquired and steady We also experience further is One ARPU's EBITDA to successful. operations continue our NewWave growth growth and in we and expansion. to integrate and to This adjusted outperform into efficiencies our anticipate adjusted are continue core that our and continue strategy improve demonstrates EBITDA We working August strong margins Cable as model. as

reflect third fully both the questions. In Operator, operations and will our addition, ready time. our now results beginning the acquired first NewWave for quarter for in financial XXXX for we're XXXX

Operator

first Our JPMorgan. of will this Instructions] question [Operator morning be Cusick Philip from

Philip Cusick

about consumer to Julia? new where at this talk you basis broadband the And Can the the upselling point? are pricing response [ph] we and

Julia Laulis

when line but goes is we I but want next ahead we ARPU think quarter already top interesting I selling to and results far versus reduced don't goes our and caught too that up, Phil. prices we'll have the part because on second time tiers I get pricing actually talk going on note your first the churn low your by lower. holistic packaging; up not to faster very

have the fulsome pretty look that So topline quarter. us excited forward a next those are to previews more but discussion

Philip Cusick

the you To but be premium -- XX when you're to a faster on as than selling your tiers today? XXX reduced clear, sell standard in prices faster

Julia Laulis

correct. That's

So call value. making are customers a on

per you a that about think meg service, $X.XX. on If XXX that's $XX our meg price

meg your If exciting meg; price $X.XX, you that's to look it's at per voting XXX $X.XX high and to are customers next tasks, at the in those see.

Philip Cusick

sort like? to us able next be looked will responses you of quarter what And the about customer tell

Julia Laulis

yes. my guess, is That

Philip Cusick

business And then a are quarter; bit grow that double-digits? this can continue growth you decelerated this to confident at

Julia Laulis

about seasonal, I an and confident; am, Business strength this just to actually, morning of with our VP Services -- our had competitors. our yes. know, relative you very felt It's I exchange likely

Philip Cusick

little expand products are strength? or bit what Can a programs that you driving on

Julia Laulis

is is that which Sure. something host of of well, competitive We WiFi the are everything very also services went serves our some Fiber services, that grow. that improving helping through about well. think Piranha and rolling us services business today. voice Fiber are them we space, to the out Piranha is are serves very and business disruptor products customers that marketplace and service Those that need. value-added something We in

make to well. into the continue as We enterprise phase in-roads

Operator

Zack B.Riley will from The FBR. next question be Silver of [ph]

Unidentified Analyst

in I side. and in just on some were the more than able as bring upto to deeper the that uptake made the the for I price? how promotion, a gross residential churn prices are And new legacy straight for to into legacy kind by also mean, Are the drilldown maybe grow modem up then wanted those customers net-adds seeing the NewWave's receiving is on being then of little pricing increased of NewWave ads? back you going kind side, you guys you fee. data

Julia Laulis

One, and churn those people what don't discount, down. at we've pricing. It I Cable it's we we've giveaways, call so call effect changes are a not amazing. have new net are NewWave, that and they same we The time put there us in are stopped in seems that are up speeds shortened just -- the making legacy One, into systems, many and choosing customers can again, value like actually we've In cycles, the Cable going getting. churn; pricing make which be collection is about the It appreciate, they introduce think in we've is going asked because adds, new stopped they increased a on judgment you

as to normalize. areas, so doing and changes see -- those have we're we we're many think While they wait making many so in I

Unidentified Analyst

the so to chills thesis you for natural wanted guys of to your the of M&A expanding world a this half? environment be in shared I kind provide seeing landscape [ph] what you cable, a kind in of aggregator You more that since relative if of on can M&A see kind maybe could first you're

Kevin Coyle

we've cable systems view really continues. said we and past in think the the rural on America, don't in can as comment we're I specifics; that we aggregator of natural that

out aggressive, be potential to properties we the will market all backed venture properties. in family-owned at as we everyone capital past, know there, we've are to that said We look the continue in from opportunities

aggressive, out be this better think there, make. you acquisition continue will anyone do we that will We be in we to research as can year earlier than and pointed it synergies any your we out there on

comment any I look but very of bullish them in acquisitions at on specific. on we one any we're So all them and and of can't really

Operator

from The Louthan Frank next will be Raymond of James. question

Frank Louthan

bit, quarter? Any trend any go that portal, promotions that there might development you Thanks. customer it? the And from other curious are helped residential on on new that out or things thought. would a that have roll that the video subs little developing better Just costs little any as for in we that away a then, the

Julia Laulis

have XXX-meg value been the months would On our actually we to point, -- establish that's promotion trying now. $XX product, I several for our product what call standard at of

discounting. but did on tip so a the tipped doing have pricing; been ongoing that that short-term that these promotions not quarter In versus what to promotions and an we in plan [indiscernible] promotion was normal that. we there do into everyday some basis is so of And are means we

terms development that Cable is done in-house for cost In portal, One of our associates. being with

Operator

question will next of KeyBanc Capital from [ph] The Brandon Markets. be

Unidentified Analyst

you some broadband And think pricing; you rate Thanks. can margins as the on to type on a might maybe do you margins back get higher? subscriber result EBITDA we growth the One? X% these think new around then changes? happen Julia And then maybe and when of of get packaging timing to of I you get give needs -- guess, What sense a upto legacy to Cable can us when

Kevin Coyle

we fall we our to is NewWave; inning in is already, will at for number when be XX%, see, synergies game. a acquired synergy are the you're some will -- this there if at margins come. programming north combining that we're at you have but four, still probably looking I a XX%, they only will be baseball obviously NewWave, disparity are systems, still done there a already were billing margins a our lot of mean, margins obviously The still we're so XX%,

of takes We inning game. it very of earlier of that going the still did probably already So number million, is things, bit years, an still we're but annualized million there from X.X I has was upto and a $XX synergies a we as again, gone to it happy is lot told ongoing little flow we're time. come market basis from said the cash there in to when the four to deal, take X so $XX

Julia Laulis

said quarter as and your timing at growth horizon CABO? going the the addressed of specifically We are it we NewWave last that very rate, years ahead originally our stated on performing this things well issue. with expectations. also question quarter already or that we is although And aimed is On and well as X integration NewWave new

Unidentified Analyst

CABO up get I legacy CABO; X% around as the sort And of you centered guess to you can type back getting I that you back guess, that the when of forma, of to think like do guys of pro but some type roll -- promotions rate? growth are range?

Julia Laulis

continue to a don't accomplish. in issue range. strategy not One but an -- to our legacy going us we drive is X% to in because growth, we there, For with strategy, to the having think well do promos so We're X% it's simply do are I X% we to hanging Cable going steady us with essentially we're stay in have growth serving past see a the we've maintain what we rate stated to the we that can and range intend

Operator

next The of question Craig Moffett from be Moffett Capital. will

Craig Moffett

demographics. what of number still because and a you're probably if wireless footprint in of given view have he back would for whether the a but looking of and CEO, there technology wondering broadband you'll the deployments the theme upgrading of be you've that you've same got the with for was broadband staying against. comment XG was Tom bit it's seen your the I'm lower -- upside when penetration previous competing guess particularly DSL that you were fixed I questions some from competitively deployment advantages that at Julia,

could kind across footprint, longer talk you of how old term upside see just new? both for you If broadband penetration about the and your

Julia Laulis

and new Older NewWave? legacy

Craig Moffett

That's right.

Julia Laulis

in how penetration competition the Upside measure the is Okay. determined marketplace. in a by is believe delivered, that's type product we i.e. there of the

are I our I'd markets relatively on Given there with in right markets the on market, marketplace. penetration we match the penetration of and two to mix marketplaces think this don't very that point, but [indiscernible] in created to now. we that all going free get at by depending well volume, the highlighting aim and rate we regions terms going or have those a pieces, point are we relatively markets those and to expect and City Mississippi equally, I York there this are of are say room competition testing not side at penetration and balanced exactly, in that are New and pieces varies are so competitor by penetration but do

Operator

And hand Kevin gentlemen, will Coyle this would to remarks. closing his ladies to and session. back conclude like over our question-and-answer conference the for I

Kevin Coyle

their working that, some with look forward a incoming words. me to past the thank to our company Julia years. we CFO public let took over and for Cable my And the really I the Thank One since want to Cochran, X.X with call One and the just just you, turn back enjoyed all for seamless transition. time operator. entire have Julia I final to I mid-XXXX support Cable at Steven over in team ensure

Julia Laulis

Thank you, Kevin.

One grateful Cable that sincerely are family. since all done We you've joining the for

up CFO I next also Investor welcome will we be and week, Steven Relations heading our as function. As he new mentioned, our

appreciate call Leverage out Annual hope today's speaking to you for be next schedule meet [ph]. to many see the Steven again Finance look October us in Deutsche to you attending greet Conference call, invite and we in also quarter. you So joining We and you of forward I will Arizona. and we there. reach Scottsville, We to Bank

Operator

your attending presentation. Thank concluded. has time, lines. Thank the today's you. for At Ladies this you and you may gentlemen, disconnect conference

Cable One (CABO) 13 Aug 182018 Q2 Earnings call transcript