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CABO Cable One

Participants
Kevin Coyle Senior Vice President and Chief Financial Officer
Julia Laulis President and Chief Executive Officer
Philip Cusick JPMorgan
Frank Louthan Raymond James
Stephan Bisson Wells Fargo
Craig Moffett MoffettNathanson
Call transcript
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Operator

Good day, and welcome to the Cable ONE Q1 2018 Earnings Conference Call. [Operator Instructions] Please note, today’s event is being recorded. I would now like to turn the conference over to Kevin Coyle, CFO. Please go ahead, sir.

Kevin Coyle

Thank you, Rocco. morning. Good ONE’s Earnings Cable Quarter First to Call. XXXX Welcome

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

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

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

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

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

Julia Laulis

unexpected. paths Good XXXX long-term morning, quarter joining there for can’t for us and but times they you many solid our thank first I say are Kevin. are are industry, call. our for to These earnings a you, interesting Certainly, business. Thank

EBITDA strategic of brought where well in to Cable as EBITDA instead the industry-leading began CapEx and than units service. XXXX. excellence ONE team, pursued ways. to adjusted to to We business focus to path us video be we in It place adjusted years to HSD we linear as margins. higher spinoff several shift, identified stopped them, were of Our Rather appeared the offered what services, prior trends and pivoted video continuing counting was a summer residential expect when grow the our to operational grow had around and cash with That less sustainably XXXX coupled fight inevitable we which has us flows. our significantly for

You on that confident the take in long-term of meant strategy. what at ONE’s I seeing legacy the story labeled to than time differentiated based spin, with Cable Well, to you I’d of ONE. our for results, recall after that we compared success end backdrop, more share like first Cable quarter’s we operational the has may philosophy. quarter am ever look perspective, XXXX at ourselves contrarian pivot With From our moment a an of to were at XXXX. the where let’s this

dropped have PSUs PSUs video XX% residential have business Our have attrition. grown and headcount our units approximately improvement grown but XX%, almost through XX%, our XX% down HSD our and process is

what is that financial X%. and to does perspective? grown XX XX% XX, months a full XX%, to OpEx Comparing down ended year translate from has has March debt dropped So XXXX, the revenue total bad our XXXX,

keep mind the that spin the Now which of point after strategy. in the revenue XXXX, of shows that believe majority in that the tipping come growth past we’re has we

success. Meanwhile, comparing when the key quarter, for EBITDA EBITDA full to year the and points in to with adjusted modest continue right revenue adjusted direction, margins XXXX coupled XXXX. up We first our up growth, in which X,XXX with strong continues to XX% trend are ingredients margin in basis recipe see

we X%. period, have Over the capital same reduced nearly by our expenditures

positioned balance and on rate market, inflection performance. to go We the in how clear With strategy, point ourselves solid since to adjustments a and normalize. based beginning to recent XXXX have this volume focused significant start of to we sharpen and continue made see well progress we’re and the we

of future grow excited As evolve, we Cable continue I’m to and the for ONE.

Division, what to remains schedule. more we XXXX. The remained NewWave of far Northeast myself, focus continued of I’d of a ahead about talk the primary of or the and like well our quarter. integration too going Integration is quarter a Before first ahead Communications, bit I now during call get

system anticipate process we provide more a generate allow gain ONE Division will billing to We the as more robust of in Northeast those a billing to provisioning reduce which that legacy conversion, system platform by duplicate will are systems, Cable customers will the and savings. for subscribers of fall. operational well us as be Migrating efficiencies, customer-friendly completed all

provide the standardize the to experience and our seamless and will across Division. sustainable practices, see Over Cable we in operational Division best continue Northeast order to continue as next Northeast as we changes the for Despite practices in growth few business customers. to to policies and a ONE quarters, well modification legacy consistent

In unlock growth as closely that residential in our competitive is long into to ONE. our discounts which measures quarter. in anticipated. services, the remain expect rates market- deceleration although lengthy but HSD results. a that confident disciplined These produced in shortened, and more We targeted pricing, resemble cessation a example first packaging of customers we based name place in cycle Division legacy and and sell- favorable on testing We choosing responsiveness, our to and has the We more benefit Cable measures unit originally putting were increased upgrade higher-tier increased than a the included will deep call of and we One synergies integration last ARPU, still did some see make will for short-term the quickly progresses, that close we in collection alongside ONE, term. a Cable more us opt these of the to Northeast we early stages, few. mentioned

pricing to positioning. as product as just mentioned. growth that ARPU we I premium the unit about increased the well product time, At end the same learned elasticity, a the bit course, our Of emphasis contributed of desires and suite of deceleration customer on

unit apply slowing growth follow expanded address make We is Switching informed I’d rate, offers will gears, sustainable continue drive which tools to inflation long-term the to to monitor ARPU. can and like this and business decisions the our that target intelligence growth. trend to often of

that also happened we growth to initiatives things same as a stopping as our ARPU. rate, cycle, mentioned collection deep implementing expected, recently low and the drive before everyday up discounts shorter such slowed pricing, As I and

market-based We will best our ARPU needs At the from more offers, customers. to time, normalize. to find anticipate testing, that will meet gather of and we hone our we pull will unit the and that data we levers to continue will growth both our

As factors far as of there numbers. HSD a combination our ARPU, were impacting QX

a ARPU a our good adjustment and at Plan Cable ONE ONE our includes leased extent. modems, also quarter boosted service we Lite first, which Looking implemented to rate home WiFi whole wireless first HSD legacy for that

sell-ins saw well as tier increased also to vastly as discounts. tiers reduced premium We subscriptions such improved with

Northeast the growth, quarterly factors rate we particularly of some On discounting. side, impacting Division saw reduced modem the sequential the same and HSD adjustment ARPU

sequential confident is the by with that as forward, growth caused on the that change In raised growth strategy alignment addition, unit recent voice our was based discounting as an ARPU. expected HSD ARPUs our results with Ultimately, over and of associated well video of allocation sustainable, in I’m testing corresponding half and the decreases a going of ARPU.

Turning to business.

launched previously markets in and has accelerated and fiber-based the group that six architecture Piranha reliable met significant market share mid-market service new first launched Piranha An to in bandwidth launch quarter. both success with extremely Fiber revenue the SMB Our in shared much these growth. Fiber We offer businesses, offered markets. opportunity, projects anticipate new driving

markets, will for of start insight customer the cost-effective, our voice also hosted across which trials business of quarter scalable first several saw provide The flexible as solution this customers. the and to our demand

while and help On money customers solutions self-service the allowing front, us manage resources. out that are operations save our rolling we time effectively or to expanding

having Cable legacy to office. kit, self-installs XX% picked an their example, quarter. costs home right in For at program first schedule to for less a allows an our visit. installed self- customers optional or residential reached up across is which ONE customers also receive and technician HSD on Self-install them timing in flexibility mailed our This the a easy-to-use than

attrition results. just and our saw noncustomer-centric year-over-year X% improved experience cessation over on Increased of automation financial of our more ONE as we quarter to our and And to business. our customer will FTEs help decrease the first Kevin legacy continue from unnecessary practices contacts Cable details efficiency. now improve we of provide Additionally,

Kevin Coyle

Julia. Thanks,

and reflect Also, call discussed our XXXX earnings revised adjustments. Before within XXXX quarter form completed XXXX. as categories during and include XXXX immaterial XX-K accounting first labor results that capitalized the details, was getting the acquisition our remind fourth second quarter properly quarter NewWave filing, we into our certain to our to of not, the quarter the operations, our as in financial other I information for historical while everyone do results NewWave want first of

had quarter which is statements. reflect Our of the adjustments, revised impact such to first financial to our immaterial and XXXX results been

apply first in to on the amounts. went standard basis, into new XXXX. the Additionally, retrospective recognition We reported to effect quarter certain the of revenue elected a resulting in previously adjustments accounting standard

the first such and been not XXXX reflect recast standard, impact have statements. applying to our was quarter material financial Our results to impact the of

legacy refer to our wanted on review serviceable the by to and residential passed as December we million our Cable today can expected mention. Form results XX-Q XXXX. Based business There of item issued I X.X from addresses XX,XXX reduced approximately further filing, our ONE validation reported million internal You number later to X.X within for is the be of one which is to of other homes the we for of XX, footprint, details. and

$XXX.X results. revenues Revenues million, first in Residential quarter a for prior and $XX.X from our NewWave quarter. million year XXXX into year-over-year. quarter XX.X% increased Now the the including to service increased getting XX.X% operations business of were revenues XXXX contribution the $XXX.X million compared first data

at compared business increase the in quarter, Net Excluding year services $XX.X quarter and prior revenues in million the our first XX.X% data year-over-year. million $XX.X grew was NewWave XX.X%. operations, of and residential an XX.X% to income

effective income primarily decreasing been in The in reform as the of a increase. of lower net was XX.X% net NewWave, tax the result XX.X% by million, first with $XX.X our rate Excluding first income legislation. XXXX tax federal tax increase driven quarter from quarter have a to XXXX would income XX.X%

and to XXXX recur by million Excluding in $X.X general increased expenses decreased growth expense of that million XX.X% million of did ONE higher would million, of from the a first first offset $XXX.X million, of first have an partially from $XX.X were operations, million for contribution contract These XXXX. XXXX. $X.X the been NewWave, expenses not quarter the prior attributable the in X.X% of and year-over-year, severance administrative the Meanwhile, first million, insurance driven was incurred costs XXXX. NewWave primarily and Without year selling, million in legacy expenses volume same increase million. quarter costs $XX.X in group group $X.X Cable EBITDA $X.X $X.X resulting quarter. million $X.X acquisition-related $X.X $XXX.X by XXXX, of repair insurance million of and maintenance Adjusted operating expenses from labor decreases year-over-year, claim $X.X from adjusted of increased of million the EBITDA quarter of quarter cost higher

from margin adjusted quarter ONE year prior the for XX.X%. legacy Our EBITDA basis Cable XX.X% XXX points to in increased

with We’re million represented prior the XXXX million first and this for XXXX. for also million to EBITDA performance expenditures the XXXX Capital was expenditures of quarter first XX% and Adjusted revenue quarter, XX.X% approximately very of quarter. quarter $XX.X in the the $XX in of $XX million increase XX%. which from an NewWave $XX million pleased million, quarter quarter. of The the $XX.X less increase for capital of the of expenditures EBITDA fourth an of million from of year totaled saw or capital operations, $XX XXXX increase $XX.X adjusted

expenditures revenues. than expected capital first capital or been was would quarter. lighter expenditures Excluding the $XX.X NewWave, for during of have XX.X% Spending million

expect XXXX. the a our as in expenditures high of quarters to that revenues percentage be we for ramp in so subsequent spending However, CapEx capital do teens up will

million XX. service GigaONE’s in liquidity as and XX-channel migrations. Our a for all standpoint, eventually we cash capital still of of services, and we to technology Cable excellent XXXX higher had video initiatives From product approximately in bonding March like low-capacity spending into digital markets, position implementing the as to of remain ONE integration offer $XXX rebuilding hand due is NewWave launching on

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

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

summary, our results in reflected numbers So first we’re with in very financial our quarter thus as pleased far.

on focusing integration Operator, the look our and forward of throughout for into ready beyond. questions. operating NewWave, realization of we’re continued and the of continue remainder operations to our now We and Northeast continued Division, synergies XXXX growth the

Operator

[Operator question Today’s first from of go Instructions] JPMorgan. Cusick comes Philip ahead. Please

Philip Cusick

guess, first, I you going Julia, price elasticity? you more you talk seeing you lot. help precisely, a are forward? learning that about can might mentioned What

Julia Laulis

Thanks, Phil. Yes.

our in So many process in we the markets. of of are tests multiple

We’ve and years as in still on And tests. And market is end, went being flagship these the number working that for it are higher everyday on I excited a that seeing low we pricing do We are stopped so unlock are been the always service, in what concentrated But tests our marketed sort we could tools which actually and these early am do we’ve discount normalize of on most business that at MB using to for opting what customers tests. it. for in so, of growth to about and of and discounting intelligence and the and fuel we’ve working XXX levels service. marketed. that’s stages. The we able to is our $XX, selling – unit

product point. all and people see suite on what like price our We’re what pushing at ends of to

take – our XXX churn we’re choosing above. than all a and and or rates need perceived for So seeing of service at flagship, again, we’re is they what must and that. have people a levels so And need higher measuring least

Philip Cusick

testing that the interesting. the on Much your of pulling strategies promotions, several these exceeded list expectations pricing, there? terms the you’ve potential And on the has discussed last should options the out in calls, of back

Julia Laulis

to early I Well, as testing is What The exciting. I in me. still see exciting said, it’s is Phil. phases,

going to think totter, think tilt to or seesaw is point the end that’s up as to I our of where you high I have to goal. the other a come it’s of low, way, you to middle and up kind end and us sort and – it of maybe the one other is teeter- before

be to go. But matter. close our and to time the to stay So things ready continue will measure to tell market, as the we stay customers that close then, we’ll

Philip Cusick

strategic Okay. side. in And then of the terms

from NewWave deal that conversion the billing up, deal is you you think opportunity? integrated next strategic is leverage finished And As do what and you NewWave the the how learned about the transaction? can into next doing have

Julia Laulis

bunch Phil. got there, a in You’ve

yet over Next for sense opportunistically, again and patiently, opportunity, strategic look a says and we makes value over what that aggressively, from standpoint. us Kevin creation for

manner. operate comes things the is And going going our that. have absolutely of and we upon way core like quality the that attention some think is one well going competencies, integration a of and it’s we first I the that built which fast. doing execution It’s in and mind to to our NewWave

is on manner. belief that, will may the for in my the the we attack that it future, be So horizon same in anything

Kevin Coyle

to Phil, it past just to else. America. ourselves than natural of that. We’ve cable more we in systems a that said add view anyone do aggregator in as We rural efficiently the

We, NewWave. NewWave. have continue all able very integration we opportunities processes if our And have we the price, think time. and helped for of new as at can in right opportunities be the a much look to find said, already second hopefully, down, that we’ll to those I Julia the

So look. to we’ll continue

Philip Cusick

a it terms sparse? of pretty a opportunities? pipeline? do you Since out decent there Is is you there what bring Or in of pipeline see it up,

Kevin Coyle

I can’t XXXX. became found But been hopefully, opportunities. on we’ve I have we looking since Very that. of Phil, continuously still looked number mean, a a public now more company NewWaves. there. be really out pipeline there’ll a in NewWave. there’s comment We’ve to And at fortunate

Philip Cusick

next you week. will guys see thank Good

Operator

comes go from today next James. Louthan our Raymond of And question Frank ahead. Please

Frank Louthan

you. Thank Great.

[indiscernible] no there And market find they to Or any back look of build maybe [indiscernible] at in purge exist? some customer homes? longer that some to the maybe other you homes opportunities other does any go is to these your If opportunity and that…

Kevin Coyle

up. Frank, break started you not to sure our Frank, question. hear we the I’m apologies. could

Frank Louthan

some purge marketing maybe – some be look do more you and – to other that the or look just something customer have builds homes cost any anymore? When the have just don’t mapping to there low- over account any to passed, years, the an opportunity at go do of these back, some built find at Sorry. and some and and opportunity there low-cost just able the homes Are geo maybe share? is customers homes that maybe Is don’t been there? get some exist

Julia Laulis

Frank, this is Julia.

with out that lists to bumping do were think USPS other homes up addresses and I wrong. against just passed you saw had the change take updating, to that

operators I homes exactly all think that an struggle, get that on to this basis ongoing honestly, count. is quite and passed something right do cable

to that is we our that geo-spatial very we use and a accurate. count intention that for passed are so addressing get on, can working something very, database, is Our homes is very,

Frank Louthan

thank great Okay, you.

Operator

ahead. Bisson Fargo. from next question comes today’s Wells And Please Stephan go of

Stephan Bisson

Good morning. A of questions. couple

discounting, that on-boarded? been subs the was subs And have of how First, this? just just that much the to of amount recently or new cessation was

Julia Laulis

it was When for we stopped Stephan, the discounting, new.

who anyone So discount a carried onboard with came that.

we’re Now short the keep probably – very we in discount periods. have mind,

would typically, months. been have So three that

WiFi guaranteed our great wireless through it to that of at a placement from is with period you was We because with our that if ONE that helping home they with pricing and included pretty anything increase guaranteed that us on we think for if rent call time. items, last ONE value. price. get you fee. out of wireless it’s new there want the so much WiFi including if So MB do The just kept with that $X.XX, fall modem, low been you’re current service, include for that everyday full their But modem coming discount all and need, $XX, does you XXX experience whole is extenders, fee modem and coming that’s has

Stephan Bisson

then to you gross of side choppiness, customer And mentioned a the that is more bit the side, or on more near? little seems Great. kind the that reaction, be of churn ad

Julia Laulis

No, yes. side, is beautiful. Yes, on it’s connect Churn the Stephan.

Stephan Bisson

Great, thanks so much.

Operator

ahead. Moffett go Craig next question MoffettNathanson. Please And from comes the of

Craig Moffett

you. Thank with broadband think If sensitivity drivers talked theme it’s – ARPU increase of and second. Julia, for I broadband discounts. going the the price I’m a to rental modem modem eliminating promotional stay about you this rental – ARPU, of about and

the up-tiering us? You’ve got you’ve underlying to themselves, which what’s high. on handle underlying to products a try or of growth if obviously And in for customers then and pricing into Can got get rates of caps, of due of those the disaggregate sort opting growth tiers. wondering the very just voluntary are things conceptualize driving customers the products I is the rates can ARPU higher-speed to of themselves try we’re exceeding usage I’m seeing, you also that growth the to what level

Julia Laulis

Yes. And it high. is

expect, it mentioned. but pieces of And that you you and the exercise. exact so to you today, share as I will might going not that we’ve tell done gone through Craig, I’m some

discounting, that’s ARPU. obviously, the So drive to going stop up

well. take playing so we’re part and If which by won’t as as an was of become as voluntary again effect. – versus becomes details the a The one well. the the up each There it. are how pieces those much will modem and had to drove rates usage-based get it testing And into less And tiers, NewWave. is parts. we plans and with have increase, the I change, say different sell-in legacy were sell-in kind of is, But do those you of we this, the higher large that allocation was obviously, some though. for that slightly it more. I surprised data

Craig Moffett

sort of the like-for-like a raising can what’s of elastic category the be a long have north in of sort can price over get Do head term? you Just star which sense how the rate sustain. of of your at pricing to think sort you a you

Julia Laulis

north I to direction. down. learning – drive that mean And that know have best we’re what seesaw a have growth. come need don’t we drive won’t I teeter-totter, to that we’re where is push going do we analogy a to necessarily And levers my ARPU again, I to growth, as will star. it that

Craig Moffett

it. Julia. got Alright, you, Thank

Operator

I’d final and this ladies our gentlemen, concludes management over to session. remarks. like conference back question-and-answer turn the to any And the for team

Julia Laulis

Thank of thank to start I Cable solid to for our want a XXXX. ONE associates you, operator. all

be We stronger together. continue to

We today’s you there. and will Morgan Conference some and Media J.P. we on Communications for We to Global in you Thank the seeing next us you. Boston week, attending look joining appreciate be Technology of forward call.

Operator

thank has attending you And thank conference and for all you, ma’am. The concluded, now today’s we presentation.

now disconnect wonderful have You your a lines, may day. and

Kevin Coyle

Thank you.