CABO - Earnings call transcript Q2 2019

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Operator

Good afternoon and welcome to the Cable One CABO Earnings Report Q2 2019 Conference Call. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Steven Cochran, CFO. Please go ahead.

Steven Cochran

Thank you, Ashley. to Second welcome Call. XXXX and afternoon, Cable Quarter One’s Earnings Good

glad us join have we We’re you results. as to review our

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

could that listed to filings. projections Cable One’s today’s recent SEC earnings release factors differ find actual from materially can cause You our these in results and in

its any otherwise. to future is One under alter statements, Cable update except law, required by events and a disclaims no as as obligation, expressly information, or result forward-looking whether new obligation of or

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

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

Julie Laulis

Good Steven. you as a financial call for recap second performance. earnings afternoon, thank you, I portion branded and our review highlights our Thank it hand Sparklight. Steven then to for us company call a earnings will our first of now quarter and a few for our over of large XXXX joining with and full

First, I customers would service. like to outstanding thank our our associates for with providing

customer amongst and their provider commitment Cablefax were top recently the we of dedication, result a As midsize service operators. by as all recognized

midsize Additionally, we XXXX the Forbes list of were to employers. America’s best on honored be named

list. MSO the was this only One Cable on recognized

those results outstanding Our work the quarter of positive second flow from associates.

EBITDA total revenues of year-over-year increases X.X%. X.X% of highlights in and include adjusted Some

points increased XX year-over-year the XX.X% Our quarter. to adjusted EBITDA for basis margins

new driven X.X% which We margins improvement the HSD increase. are with residential continuous mindset impact HSD growth by pricing we our reflective of residential solid shift business. saw run of The packaging a business the and strategy, our and the mix unit and sustained improved our

or year-over-year, X.X% Clearwave. increase resulting revenues. impact revenues up residential HSD was service ARPU HSD excluding Business in year-over-year X.X% of in residential Some XX.X%, an the XX.X% up were

primary so We X our are very pleased drivers that well. are growth performing

and changes nice mix and an than are by a HSD being customer of across-the-board have packaging resulted rather choice fueled residential which increases, rate implementing Our pricing ARPU adjustment. unit in

three of also is significant began integration customers devoting have a of we work been Sparklight business base. We segment the early our our share customer sales those taking are On generating a services acquisitions. markets, upmarket One execution In allocated We priority. June. more efforts in ample as seeing increasing steadily with towards legacy top activities, top resources we parallel, rebrand our driving associated business, accretive vital existing which this have core see to by which our planning and from Cable in to

While of NewWave value still we are improving the we the and end integration creating projects real experience. have efforts, the nearing that are customer

migration complete, are of significant are teams of Our as the result well is The phone usage-based implementing these with in we gigabit making which as launching markets across onto upgrades speeds realization. and provisioning the and in process standardization will further majority billing. customers our synergy network essentially of progress

all expansion Poplar Bluff. and process be integrated. are nearby in fully this in care customer office Missouri the Finally, will center decommissioning of operations data finalizing while the centers and center in Sikeston, we care our With of expansion, the

are capture that are continue the is in even are accelerate growth. and business and upward that develop we excited We connection first believe by in plans investing support synergies well-positioned there to simulation expansion closely entire of Clearwave’s organization. operational trajectory, implement maximizing we our to teams while its so we to Clearwave we to more Clearwave activity with Meanwhile, across them learnings sales While acquisition, further helping are gains. are aligning strategies the pursuing

been nicely Not fortunate team prepare surprisingly, appreciate and the prior close. which more gaining get Fidelity markets, another of as the joining company at transaction. as enthusiasm will having We also Fidelity One. and their we the will of ownership associates both strong is a at well, believe we to leadership be who great in of us associates of Fidelity very is know have wonderful teamwork who in are for expected the group we year and focus. fit to talented is group but from closing reflective to a the very We the Cable spirit this importantly,

excellent rebrand making to are Sparklight. our progress We on

are our website customer new reps our uniforms wearing signage truck Sparklight and Our badges well now systems billing underway. and in reflect brand, and are and associates

new the We launch customers mediums, the summer in brand and an or We’ll we customers We were remainder serve to another $X of our XX.X% have and dividend week through response annualized engage $X associates a of earlier per throughout $X.XX basis. from engaged for share communities our hosting announce Sparklight quarterly brand. into share to parties to per dividend the fall with new are a thrilled increase we we’ve of and the by the this both pleased be variety to the positive received. on

a Steven, Board. Mary call the of take welcome the the over like Before member to Meduski, I to moment I’d newest One Cable hand to

to her accomplished and telecommunications further fortunate will Board, industries. technology engaged extensive very in and and Mary are insight have media, and that We to background add an with

financial results. will provide quarter our more on And now Steven second details

Steven Cochran

Thanks, Julie.

XXXX million $XXX.X increase. again representing a financial strong quarter, the X.X% were in The produced second quarter year prior Revenues quarter to for second of results. million $XXX.X the XXXX once compared of

the by increase revenue HSD As business services XX.X%. mentioned, of residential revenue fueled increase of was increase X.X% this Julie and

X.X% total operations, increased revenue Excluding Clearwave year-over-year.

per basis on was Net and income the million $X.XX diluted $XX.X was in second quarter net a per fully income share. share

a year basis $XX.X quarter or compared the in or XX XX.X% second improvement. $XX.X in were XX.X% quarter to expenses of Operating or revenues revenues million the million point of prior

higher and expenses revenues of the attributed or Clearwave XX.X% quarter expenses of second rebranding, Selling, SG&A for costs well and or other to during were million quarter in $XX.X and respectively. acquisition-related operations. The as to the XXXX, XXXX administrative and related as general the was $XX.X of additional revenues XX% million incurred primarily increase

Adjusted X.X% and in $XXX.X from $XXX.X the million was quarter. XXXX EBITDA of prior increased million quarter for year the second

Our XX.X% adjusted EBITDA margin increased basis XX year-over-year, to going XX.X%. points from

our expenditures $XX.X current percentage Capital expenditures of Clearwave expenditures were of respectively. quarter respectively, and Included to of $X.X million Year-to-date, and capital for and with related million in quarter as totaled in XX.X% revenue and XX.X%, the XXXX, second million a $XX.X capital EBITDA operations. the adjusted XXXX expectations. were line

quarter paid $XX.X dividends in XXXX, we million to shareholders. second In of the

quarter, in borrowed Term XXXX. During we Loan our million the new under $XXX B maturing

unsecured A, purposes. with in remainder Loan We also credit facility to June from established the mature be $XXX existing $XXX early together acquisition, general refinanced expected loans with and quarter, Term cash transactions to were Draw other close and used a our these with new Delayed Loan million for used million to $XXX These the expanded of the fourth to is hand our A notes Term on million. in a Loan million XXXX. Term new capacity revolving finance A on to of $XXX XX Proceeds corporate the senior redeem Fidelity which

in we June of standpoint, position XX. liquidity as had remain we a hand million $XXX approximately as of on excellent From cash

quarter of was $X.X cash We free generate flow. end, consisting at billion, continue borrowings. loan our debt balance approximately And to term significant

Overall, cash our hand on was providing us debt-to-adjusted ample against X.Xx, with EBITDA after at debt netting liquidity.

quarter We credit our under also end. facility as of -- $XXX.X revolving available million the XXX of had point for borrowings

fees our note, separate $XX.XX have decreased residential $XX.XX certain a if pass-through a on On increased comparable net a voice as from on point $X.XX from reported prior were slightly a XX Residential basis ARPU historically. that year reported result to voice basis. of ARPU -- would

with forward half have as quarter the another and excited pleased the of are opportunities second about to We year. look a healthy we ahead we busy

ready now Ashley, we’re questions. for

Operator

first comes The Zack from Silver, question B. Instructions] Riley FBR. [Operator

Zack Silver

Okay. to a taking seen either or or the and we if question. early whether from Thank churn? re-branding even adds wondering you any talk negative Great. subscriber you’ve about perspective for gross maybe the benefit with regard first can I’m

Julie Laulis

Zack. Hi, It’s Julie.

do perception I of the another associates, their end one talking brand at the own reactions our well the from the social market signage, as would are similar having their end I before and system and the doesn’t It understanding and of the really with brand. capture associates it will mean cut, our we out We too trucks and is a flash actual I we June speak customers basis. on changing brand consumers we as summer the locations just our as just the did are to do interactions we the baseline as to in going right? to rolling to think year did. say study of of just uniforms, started began early. and a

of of we the them it, I like, are place? the like right think some they to idea are sending the but payment

and are day clarifying Is of age this So people Sparklight? like Did Is Cable Cable we’re my that. going things somebody place? the to In buy right check One very security, One? concerned.

early. it’s So

Zack Silver

going getting taking kind could change rate year-ago taking tiers, plan customers you’ve And up and a perhaps customers the the the update still actual of from but is but the period. just maybe higher in you from one, wondering great. unlimited change you I us another any the That’s benefit are if Okay. then X-parter, a of guys customers guess speed of not on if of penetration? them, number tier just then amount And

Julie Laulis

Maybe recent from and in that pricing January. packaging of a change our give Sure. I’ll place stats couple took

meg at over We higher are of see in folks to continuing our XXX the flagship. sell than tiers standard XX%

in unlimited point an this over selling our at acceleration sell-in We It seeing in time. are XX% is the of in plan.

I’m plan on that where might of be any the get you’ll think trying plan data for interesting. to additional, you $XX that unlimited others buy. That’s

new actually that XXX in plan. people in think flagship packaging pricing group meg at the our is time, this who I have our and point the

those general of have meg, XXX packaging, level our in that who those is base, and the service seen XXX pricing meg the it’s but has new still customers. So

Operator

with comes question Your Moffett from MoffettNathanson. next Craig

Craig Moffett

over Steve, help get about is year that, the and the trajectory think elevated to some question If you kind higher. And margins. drivers think can Steve, getting understand or I normalize business? on why the do as if margins -- reasonably the your next of you For How then out a Julie longer-term? called can of you’re could. XX% in so the both I that, SG&A and maybe also margins high reasons margin close you still just the you SG&A us and for

Steven Cochran

any commercial agree if general, in think clearly and services, or anyway and we not transition we less I obviously of add, and we EBITDA migrate Julie, our -- to and to exactly what video much give I that won’t businesses Well, those direction less as and have but both year, over I you margin think continue data gross but go to the then base and more higher next profiles. where and customer would -- much higher on say margin more

cap, it. by that generated of thought that as I of And with the always EBITDA we being being long to that part video so kind was where we cap that And was margins was cable margins but we with mindset no product think out are. XX% a industry a now it, of time, continue those reason the much to video won’t move why the make a and see kind change, different in we it’s fact of that that, was think

and as the we any to as we think move. next XX% think years. So we on five we I think will that be don’t cap, over video think kind obviously XX of -- We’ll don’t

Julie Laulis

The of too, on to side focus close improving Craig. do it. agree. we we on attention. continuously expense part is pay the a And of part I mix DNA so here, And tend It’s big the very

Craig Moffett

I could ask question. And corollary if a

excessive Your will, how in you about talk and intensity should because atmospherics, kind pointed around video, the capital denominator, the just against think that intensity if trends? without think past intensity, you’ve is I capital smaller. declines of you’ve capital you just about longer-term capital for cautioned intensity can out we But same enthusiasm the

Steven Cochran

Yes.

opportunities to perfectly I will revenue. go as we industry best anything, is the clearly, mean Will think base the long business. mean -- talking base fiber, of -- the capital. want of think And percent I line in it expand go business capital not as down is And especially to So within to use No, not as capital customers, I grow I where in more base a think about be invest honest, the that’s with our the invest expand as back low? going. than our business. commercial down we for network,

we many of while cash efficiency that actually business. in made our growth it and is into what we’ve so just the find network and redeploy we the will already, to believe of the opportunities on nature the And investments the base because is the go the that back hope our down

won’t So best to and general, be we the way in we shareholder guidance go the probably return. in we’re we’ll think this because give give on less for get but business invest probably opportunities because able to guidance that’s to even looking

Operator

Your from question comes Cusick next JPMorgan. Philip with

Philip Cusick

you Julie, looks us what promotions more what like? give and in sales can update competitive that markets your are an less on typical mix and of

Julie Laulis

Sure.

So where had off we with establishing refer were to of what as XXXX, sort cooling period Phil, we customers. would in I value our a

across packaging value. really in periods we always variety is out we what our appealed on tests year. pricing we January low we basically pulled of then sale the launched we this well, flagship used are our different meg periods pricing of our -- short majority the of we figure doing of off customer our service. most. And -- our typically and year, to markets And time, establish what those sale. again, everyday service, everyday This So of promotions XXX a they’re started have and our to, with price Then choices did of

All here’s promotion a that the interesting point, on get when We said So to XX% our the promotions tiers have someone service. just and They XXX a and in that around new that meg people that gets are over an above not level services coming not who maybe promotion, that say, above of discounted. is that they and taking level. are packaging are do them. pricing

off occasion, service around certain it So meg promotions markets the $XX retail X the and, is service. the will have longer. flagship be on that thing that certain typically, rate for does And and XX demographics, in our months,

Philip Cusick

more in happening about you’ve some markets. competitive talked that And pushing the the Is again, -- not of today? harder some of anymore

Julie Laulis

debate. technically we definitely unlimited our not, Whether markets our and our anymore No, honestly, have data. call competition. sort one-size-fits-all would do of markets we of those versus or in our all not figures biggest we reduced that’s markets, lever because pricing what in hypercompetitive market But have -- Yes. large. I -- -- are get it could And by is, our some what hypercompetitive

Philip Cusick

year. EBITDA And we’ve picking and happen? revenue ramping think Any that between performance to integration reason up, doesn’t savings about talked through the

Julie Laulis

gathering. see I how I Actually, about is our momentum -- really strategy No. is year our playing when out up, think shaping is for the year and

the up, end time of billing point and the year in we’re the If towards take we in people an rate new ARPU Instead, our the start kicking on you well we take this more that XXXX. think just in about as packaging. out it, that packages more the for that sell-in, goes and pricing have usage-based synergies higher rolling And unlimited, drive across-the-board HSD really NewWave and we and did as year at by, as have adjustment the put those in into didn’t January.

I side. So our momentum is on think

Operator

next Your go Nispel with KeyBanc. from Please Brandon ahead. question comes

Brandon Nispel

addressable tried Julie, those what business footprint I’m to services? quantify accelerating talk for Clearwave. you And some to curious. Have then investments market you going there where in about is ever Can with support? mentioned are you the your

Julie Laulis

is what of our the I of is services So, in world? business TAM in what Brandon, asking, quantifying, think you’re terms sort

Brandon Nispel

Right.

Julie Laulis

CABO. that done legacy for So we’ve

We have for not not done yet. that for Certainly, Fidelity NewWave.

Steven Cochran

And we Clearwave. for have it

Julie Laulis

Clearwave. And have we for it

So it. in have part, we

sort And those and results so of extrapolate. used we

of examples. are here In in Clearwave, terms a of investments couple

driven to upgrading We gig for gig, our by there of are from that’s providers asking the mobile are core that. who in being process XXX and XX

already the done the would basically, by -- sales end be the that are of So there, year. and we

also capital so already putting fiber We they’re well. in can that large buy really are equipment accelerate they order in to construction and doing what more on

also, are standpoint, from We headcount. an adding optional

in that So few operating on the side, those and just the we’re a of both are making side examples capital investments, Clearwave.

Brandon Nispel

it. service I’m products, you I business, enterprise, then are this quite TAM guess what carrier Got catch that I curious, didn’t the set commercial within is guess provide? primarily And the SMB? primarily And it the number. I customers,

Julie Laulis

I of apologize, the question. part first missed Brandon. your I

Brandon Nispel

One TAM guys just your footprint, you business trying had the to get footprint. and I was Cable the that for

Julie Laulis

That’s penetration about will but We typically that not the before. total talk not our something marketplace, shared we’ve TAM. in our

Steven Cochran

after say, the we our going than recently started Needless of really market penetration SMB because of and the to Yes. in owned much enterprise market addressable our customers lower is penetration and higher of just level services. we our kind the businesses

well obviously have penetration can, continuing so the gain commercial but And we move better whatever upmarket importantly, the gains driving and opportunities. to we a customer see that to customers continuing that’s in more is higher-revenue of and opportunity those serve space we the share

Julie Laulis

the coming And quarter-over-quarter. upmarket segment Right. from growing are that are that of percentage sales

Operator

from next Bisson Wolfe Stephan Research. Your question comes with

Stephan Bisson

Just margins? a and of it are how couple. I compared CABO? looks I to road improving and they describe was shifting on far connectivity down kind to wondering, the how could guess you Fidelity’s profile

Julie Laulis

could start. You

Stephan Bisson

Sure.

Just are where strategy the where at would NewWave was say to in we to they’re when ours. a they Their looks penetration than similar from video standpoint are closer I process, was NewWave much acquired.

going. there’s that’s a business I from lot is far more concept the mentality and as people kind going of embraced think as that think where I a as standpoint, already how a it’s

so makes much think of we And part that the that transition easier.

aligned I that And we with feel they standpoint, where so very are. think from

Julie Laulis

to But from look a perspective, margin to to Right. alike CABO’s there’s financials. continue room

Stephan Bisson

opportunity margin you improvement the where see is And in that most Great. those assets?

Julie Laulis

in there, of financials, of it bit to to a it’s look-alike HSD everything. our there’s bit margins overall a to of little thrown I would sort I the guess whether ARPU from Well, little synergies call

Steven Cochran

are. upmarket to to got in of expanding. they’re the growing They’re nice a commercial. same continue commercial. lot and move They’ve They’re things we doing Yes, opportunities

think it’s of I continue adds that. all a so take those expanding fit. strategy to working It well that’s very great really for footprint just And us and for just additional reasons, a

Operator

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

Julie Laulis

speaking quarter. a We Ashley. Conference webcast KeyBanc joining Markets will all Relations Thank for next to us the our we for look you. ir.cableone.net. Investor to site I with be quarter. participating and a great I Monday, thank our which next in Capital at you want Thank everyone associates Technology at you, chat call appreciate be forward on of fireside today’s will

Operator

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

disconnect. now may You

Cable One (CABO) 10 Aug 192019 Q2 Earnings call transcript