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CABO Cable One

Participants
Steven Cochran SVP & CFO
Julia Laulis President & CEO
Stephan Bisson Wolfe Research
Craig Moffett Moffettnathanson
Philip Cusick JPMorgan
Zack Silver B. Riley FBR
Call transcript
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Operator

Good day, and welcome to the Cable One Q1 2019 Fiscal Earnings Report. All participants will be in listen-only mode. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Mr. Steven Cochran, Senior Vice President and CFO. ahead. go Please

Steven Cochran

Good quarter Sean. you welcome Cable to us Thank earnings afternoon call. first results. our XXXX we have We're One's as you, review and glad join to

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

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

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

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

Julia Laulis

call. you, for has afternoon Steven. Clearwave you earnings thank joining performance. already for operational early Thank our started XXXX related quarter of been impressive and Fidelity assets of us X announced exciting while off We Cable video, first certain closing One. for in and again the on delivering Good acquisition XXXX Communications the January, April data, Communications, and business acquisition of voice the yet all

residential a growth of PSUs by X.X%. were XX,XXX results gain sequential of HSD residential which grew on highlighted strong basis, Our PSUs represented nearly X.X%. Year-over-year, net HSD a

year start dividends pricing at the clearly we improved robust retention. decision and saw to of launch Our and connects paid strategic as packaging the

decision the EBITDA of Despite revenue services factors, implement one-month compared growth total impact revenue As XXXX. business to of muted to discussed residential X.X% HSD rate combined those of adjustment, X.X%, of a Clearwave. from video growth we our overall and call, when an the adjusted saw growth delay with or related not growth adjustment, first our quarter and February HSD on including XX.X%, X.X% our still of excluding

residential percentage XX.X%. climbed services our We EBITDA of delivered adjusted quarter, business of revenue million, of an from the HSD strong and During to X% year-over-year. increase $XXX.X

basis adjusted Our over XXX the XX.X% was quarter, quarter was point of first EBITDA the which margin for XXXX. improvement

a how meeting effective our in increases long-term ARPU this With is continued positioned appreciate XXXX costs, of good to of growth, are to important customer As first management and I annual goals. veteran we have on industry, quarter to grown expectations. a solid our deliver well

and Clearwave well include closed and growth results how As we heard operate their the Clearwave date. first and Clearwave learning we our associates that help their from more acquisition can continues plans. are before, you've these new to quarter operations January Xth accelerate we of as about XXXX on processes

we announced last of the month. Additionally, Fidelity acquisition

and this be very accretive, to following well-managed, excited this believe geographically culturally-aligned a We similar opportunity will are We closing. transaction acquire immediately operation. about

years Fidelity's million which more tax a $XX One's, approximately $XX of estimated rate acquisition nears benefits realize three should expected the annual to on transition. also closing a value We estimated in Cable model The allow provide run synergies is expect present million to within to seamless closely basis. of cost transaction. business for

is things their about like we their one and Fidelity lot like their ours. that most fact, of markets look the a In performance people,

expected practices we the folks into integration be have Fidelity the close. expansion We and trips quarter with their following NewWave and be to insight nicely throughout can of us, the aligns realized growth integration into adjusted to EBITDA assimilation and NewWave completion margin the meet synergies our accelerate the our also to plan fourth timeline contributing made future. XXXX the with best to joining final The Fidelity multiple will that new anticipated associates beginning are integration, who the so together, with gain

the as very to happy changes I our our and we our we During had positive are and customer and earlier, packaging, growth. pricing mentioned call, with it impact satisfaction last detailed on the

adjustments. We a the see are contribution residential also to increase service modem revenue growth on X.X% continued any our equally to moves as pleased positive from related unit, without HSD a our rental impact per ARPU year-over-year rate $XX.XX,

unlimited XX% the our choose new service megabits higher roughly opted of customers plan. new to or nearly of customers quarter, During our speed first our we our and data saw purchase XXX XX%

monitor results the migration, We existing new to will and customer to-date. like sales continue but we

the Turning The helped services Clearwave continued this legacy by quarter. Clearwave. pushing revenue, the $X.X customers, by X,XXX services, of business numbers million were our quarter acquisition services and increase impacted in business inclusion helped up its our $XXX.XX steady approximately to XX% to business for more nearly year-over-year which growth. services Meanwhile, contributed expanded revenues than ARPU, added positively business

continue as to customer to efficiencies well improved experience. investments We increase operational business an make as provide

be system years, that improvements, two with allow products. to us to will we number our of billing changes next will enhancing including superior provide growing the enterprise our and services a E-rate Over support business

CRM upgraded transitioning and lay platform. be entry order our updated business will groundwork an billing to our automated which version the our Additionally, product, team for it between will of

the teams Another and gigabit MEF E-LAN services XX highlight second, per and the technology or was Forum attainment of Metro for services. E-Access certification E-Line, and business X for X.X Ethernet

network. government, pieces will education help first addition medical and business across the certification the to and of receive in standard in MSO the this the to we verticals. country to sales our working carrier this drive are We believe now out are that We in key roll

uniform continues. transition we rebranding will of trucks, signage, markets on month. see in Sparklight this customers billing. begin to will This to to and One our end and Cable Our our announced at the work We last the Sparklight campaign us begin transition summer month re-brand legacy

the our story. our in energized new We this are forward evolution to chapter looking are by to next and brand

I associates our move Cable top, at accomplished business lot all and during forward. One the the to quarter quite a do first As that I appreciate said our

excited of XXXX. all details for results. provide quarter We more now, And about are first Steven will on our the our financial plans rest

Steven Cochran

Julie. you, Thank

The financial first million XXXX. $XXX.X to produced in prior performance strong achieved continuation results, XXXX representing the first quarter, of compared $XXX.X X.X% financial of for representing a of in a were the the Revenues quarter increase. quarter XXXX million year

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

$XXX.X of costs revenues or to XX.X% quarter, for quarter XXXX of during incurred million $XXX.X an increase and in first $XX.X $X.XX marketing expenses quarter were quarter total share basis per Net million. $XX.X operations. an Selling, was share. increased additional operations, X.X% quarter XX.X% revenues Net XXXX, Clearwave year $XX.X of million quarter. was revenue the in on for prior Clearwave per X% income Operating of $XX.X million $XX.X primarily XX.X% was and respectively. the fully income to the in XXXX attributed revenues and and the the prior diluted expenses expenses were acquisition-related XXX increase increase first SG&A The of compared a was or cost in point million improvement. the in of million from million in revenues the basis to Adjusted administrative general Excluding quarter, first the first related or year-over-year. to or XX.X% a EBITDA year

expenditures XXX year-over-year capital $XX.X at $X from million the expenditures million of were acquisition. borrowed of Capital paid to current Included Our the In help million related quarter term adjusted XXXX, for Clearwave loans XXXX respectively. million XXXX $XX average EBITDA going $XXX.XX $XX.X the In first of of points share and million we XXXX, we margin operations. XX.X% increased for dividends quarter to first X,XXX $X.X finance XX.X%. per basis quarter of the in and totaled to in an shareholders. shares cost million $XXX Clearwave repurchased and January to

billion amount XXXX our We future against of interest institution interest rate of remain payments cash into financial the at based agreements, $XXX the in of liquidity quarter, including we purpose interest for March June impact from in rate floating million also rate rate variable swap notional a interest rate payment the during the as years million Under forward-starting fixed receive potential had a position swap agreements on as base of the and increases swap From on beginning $X.X in a average X.XX% excellent we of standpoint, debt. at two a $XXX LIBOR. hedging make over two XX rate approximately counterparties on hand weighted next we entered XX.

hand against loan debt was us EBITDA generate significant free which debt was our of and with times, continue included X.X adjusted million $XXX million balance of ample approximately borrowings $X.X cash to bonds. cash end, after netting and on $XXX to at our quarter approximately We billion, term providing Overall, debt flow, liquidity.

One's down in other mature the Subsequent to $XXX approximately when and purposes. March of experience XX, revolving A XXXX the available our differences we loan methodologies draw million existing credit the of second due other a that term borrowing quarter note. of Fidelity is facility units had in delayed announced of the to established corporate the respectively XXXX acquisition, term for we between Cable general as and end. premium maturing million the under to $X,XXX also PSUs million a residential $XXX established new $XXX XXXX of notes credit migration to together These the billing million existing for capacity quarter cash A used hand facility expected first B quarter finance system refinanced We yesterday, just new the connection loan in item NewWave's we $XXX systems. to revolving close of existing video with of In intended $XXX call $X,XXX steps term residential increase a with be billing two these during senior which new $XXX quarter fourth to our a redeem loans million tracking term and to in fourth transactions quarter to of Proceeds with and loan in draw loan unsecured million. One and to platform, our multi-dwelling on A, the non-operational delayed bulk approximately XXXX. from are expanded

video these XX.X%. have XX our the Excluding would during PSU residential been loss adjustments, last months

our In business are growth residential and services. with pleased results. first We quarter HSD particular, of financial our

will that continues contribute growth position that questions. us Our activity ready financing expansion. EBITDA acquire healthy our recent adjusted steady further businesses strategically to our deliver continuation margin Sean, balance strengthens forward. has sheet growth to going core now allowed of we're A and the to for and financial strategy

Operator

now go will from Research. first Wolfe the ahead. Our Please session. [Operator with We begin Stephan Bisson Instructions] question-and-answer question comes

Stephan Bisson

afternoon. Good

couple a of questions Just from me.

-- data subs? voice billing subs was any there the or First, the video on on from conversion, positive $X,XXX system the NewWave impact impact impact

Steven Cochran

the on just them It's as based them units apartment as units, mechanism of XXX number not. one as would bulk, say, them counting we have as bulk an was of, and got the or were they them and There one, of accounting count we counted one we count has would XXX. they counted where -- them

Stephan Bisson

Okay. $X.X And type is And of color that the reasonable could then quarter? EBITDA you million of give rate? us the on any in the on run revenue, contribution Clearwave, a

Steven Cochran

Yes.

extent So January we I to reasonable on it's full it the Xth. a month, closed that think wasn't

starting So good for continues grow. a if pro you that to business as we're rate that where headed then that's essentially point

Stephan Bisson

And EBITDA contribution. on the any color

I than higher think the be the... should margin

Steven Cochran

Yes.

I real guidance is existing our that -- margin think on only it's think that I -- given higher mean, the I business. than that's we've

Stephan Bisson

couple just And a of expenses. other then the on lastly

year be lower to the you in a million expense think QX. rebranding said I done evenly that you little throughout had $XX than and of were

ratable So trail And off? when about quarters? rest should the think over remaining expenses, beginning those system then be we conversion to three the should

Julia Laulis

-- Julie. Stephan, first it's So,

bulk $X and inclusive and On through the expenses, we'd a When spend as Cable would that be NewWave year talking two-year expenses, rest rebranding. XXXX. you're expenses conversion million system over legacy business period services? talking the about will pick this about between up the rebranding of One the we million Rebranding $XX and we were in you with said of go occurring

Steven Cochran

essentially, of $X.X of end out of of about to ERP and the adjusted that million of two billing the effect backed the I conversion combination there rollover was related think which the that's the -- No, total is rest the is is the conversion. EBITDA items

were early and of system, conversion, And of so going through financial into throughout will occur that the the our most process ERP conversion, which 'XX. XXXX is which in

Stephan Bisson

so much. thanks Great,

Operator

go Our next Please with ahead. MoffettNathanson. comes Moffett question Craig from

Craig Moffett

particularly Julie, from just talk growth acceleration year could ago. the as you've broadband about I'm you a wondering, had, if rate about

I'm be For of can and relative you recognition wondering, the much think you the if just now footprint you your really might a showing certainly long of your nature in terms things to talk about what demographics holding as anymore. the up that of whether have the seem back impact time, gap to are of that can close and there was made think -- doesn't larger the your rural biggest you growth. a It be some have peers? penetration footprint

Julia Laulis

Craig. bet, You

gap think things are we've started it's to of that that the do most are are -- as a are as already there not thing. There close to contribute there we this, I that growing is penetration. will lot just in one that, things,

been have also packaging. long We time, we at added with more marketing customer our we've aimed doing meg service, lot pricing and still period all a our for XXX a choice of new do, which but

very was it and say the quite our same so, was and message would And I discounted-oriented. that again grown had marketing it scale, over over honestly price-oriented and old

I'd and and stopping and started detailed XXX much our really with very intelligence first basis. full right a great our what say, of has $XX the an and hitting growth sale are that all a megs to And launch in the our properties, basis the value. goes advertising right the are gain for ARPU it's a it from to on legacy marketing was lot the pull the now across with mark. value. scenes from Because establishing tough it the of the So based and to in the levers to we unit for running Then that value offer. the depth the is and business products and results and add behind terms us all with NewWave about quarter, again, a testing more say us And it of really

social go are ready incredibly electing about that We quantitative transition piece people too got satisfied are like And package I into, what results our media. said, through growth, Sparklight, really to this things is think we and driving very we research sustainable is, with and and a look, from went to to of roots know to with community. they're back we as our connecting that

look again, So very if localized. it at you is our advertising,

You usually in that the back where get they Does resonating those community market have the really and PR see your and component, answer to it's we our a with ads question? non-customers.

Craig Moffett

along new the does. It assuming there introducing that change new and will And the be with branding? be marketing that Sparklight all I'm messaging -- you'll with

Julia Laulis

as the is amount And just well pressure of marketing help. going to

Craig Moffett

okay. it, Got

Steven Cochran

or giving I it's in nothing too relevant. usage to isn't we our to DSL the I One just that compete is up of the add continues the that and think of as go just might importance others use, whether nearly number against over the top markets they

value that And we packages services, DSL more is as so even make switch our the from in to that offer. people greater

Craig Moffett

Is XXX larger And think can month. in yours about level of disclose per you similar I service what your talked is? of -- a most peers XXX or that XXX have range? gigabytes to

Julia Laulis

is. It

experiencing between our and XXX of usage. couple of Our is gigs. stats about that pricing standard sell-in We're A is at meg XX% related XXX was level packaging growth in the data end to XX%. that and usage quarter the above average XX%

are taking So new XXX above XX% meg -- that level the are of of coming service. are on-board the customers customers taking

As $XX I about a XX% data the month. that's are and mentioned, taking additional an plan unlimited

and aside, us for in average low the And pricing higher said We churn new new which historical So low. our better a our as levels. starting just rate I was lower. hit launched and just bringing at past, flexible the and new January, going well. record as is low has churn a packaging, is growth In an

Craig Moffett

Thank you.

Operator

with from Markets. Our KeyBanc go Capital Please next comes ahead. Nispel Brandon question

Unidentified Analyst

if I had overlap is wondering, And was [ph] from about costs talk to Thanks. the year? you could you guys Fidelity you just positioning today. you that could up, about This Fidelity for on the talk Brandon. competitive integration with this what for Maddy incur and follow looks guys. Hi expect Fidelity like the to

Julia Laulis

there's of sort about think in they're Louisiana you the a if Texas, in Illinois, and they're hole in Missouri, doughnut, Fidelity, a us, of middle Oklahoma.

either like Integration are or markets. One One Cable is would an say smaller none. all-around Their they competitive footprint than year, legacy So just this I costs NewWave. Cable

Steven Cochran

minimal. Pretty

Julia Laulis

Yes.

Unidentified Analyst

you you you expect year for know -- -- next do what then? would Do costs integration

Julia Laulis

Capital.

operating or talking capital both? you're So, or

Unidentified Analyst

Both.

Steven Cochran

Yes. from as expect probably -- more that I to be. going integration what to side. the -- integration we're what we we'll the capital a our operational talk on standpoint don't -- think closing lot think they we I closer think about I don't get will of NewWave to similar costs

Julia Laulis

No.

Unidentified Analyst

you. Thank

Operator

Our next Philip with question from comes JPMorgan. Please ahead. Cusick go

Philip Cusick

follow-ups A couple of maybe.

one-time like the apartment year-over-year. the Julie, was You the I looks you from excluding video that But was Did think, -- changes, since step-ups I worse that? XXXX. miss best mentioned it it

Steven Cochran

think best. I the think I since the video she what that's We best HSD the connects didn't highest talked Yes. highest, -- growth say don't being was said. or spin. churn and about We HSD the

Julia Laulis

anything didn't I say surprisingly, video. Not about

Philip Cusick

No, I had so, wouldn't help I it thought wrong. And then, you understand... us have can so

Steven Cochran

mean, was side. this -- before it the loss I is than it the greater year was video year It on

Philip Cusick

And then on reasonable? ads that? million about that's Is assume top of assume $X.X synergies EBITDA. impact the can understand cost-cutting a you there are Can EBITDA? of commercial the If Clearwave some that in I I help margin, on then and revenue $X.X million us XX% at of

Steven Cochran

this transaction scale of a part and just from will I there get. for standpoint there and will clearly, you some never mean, things Yes, larger being some. even be of synergies, we a did be synergies company but

capital than investments deal as make can we there also throughout more have much think and efficiently -- this as in better the investments But are deal don't anything, anything, there some the an in growth internal make was synergies there. organization were at because some least, about as we this deploy And there. than that. There And the about we so from tax we standpoint as learning. about was that to ability benefits

our is more So source a stronger what growth to lot investments make generating about. is the a and to Company free is cash flow, of huge have drive part this even a of ability to

Philip Cusick

it's me with you remind and how subscribers you Clearwave? but already -- Can business out maybe over can there, many broadband came

Steven Cochran

customers. It was X,XXX

Julia Laulis

X,XXX.

Steven Cochran

Yes. Which is about broadband right for too. number I think

Philip Cusick

some Julie, come can promotions subscriber of markets. your been? across momentum And about in of those it talk Thank also, been what impact has markets the much you believe, more that really has board? has introduced you. the you. you And some And from I Thank improved flexible or

Julia Laulis

Yes.

we've more pricing. is done what So market-based

it's standardized there a few So pricing isn't different outlined across all markets, offers. but standardized, mostly that are markets get

So say, has that from would I come the growth our across board.

the So that markets ones. competitive be to heavily promotions flexible tend get more the

would growth from the there. is I say from coming not other So markets. is stabilized, the coming the but It's growth

Philip Cusick

Thank you.

Operator

Our next Riley Silver Zack question comes Please B. FBR. go ahead. with from

Zack Silver

for Thanks the question. taking

and peers that's useful. given But remains your of service, for service low latency which low be essentially is could as as or announced One And seen to that of that's this on, where think some something a you to something see into? gamers customers go the recently maybe you a acts I latency whether that upsell marketing there works activities, an maybe in do you potentially new that? could area these do

Julia Laulis

time team as sort We I is nothing that discuss frontier of Low new can about like here at any certainly has the There this sort is service now. something won next certainly do that by operators related been to ourselves see that that now latency speed of and others. it the discusses.

Zack Silver

follow-up; you think low to something that monetized as like has But be speed do lately can that been? just

Julia Laulis

I is yes. think a possibility, there

Zack Silver

no The Fidelity. acquisitions, you've in Julie mean one either Clearwave deal at what I And this of constraints two different you've you one with given -- both in I you were these there if every guess, Steven. And very for for which more then one had you, -- capacity seen do available is and to two -- do or think of done you them, -- point? and interesting

Julia Laulis

to that which pick us Mother's Day. Zack is think best. asking to it's So, I close child interesting like we we're

Steven Cochran

is would say what both. that Yes. every Is mother right? And

Julia Laulis

for reasons. like both We different

Steven Cochran

its has very -- -- mean, both time. I I together Yes. deal think to fortunate I do were same two these these were come to think very every it and we we you uniquenesses and at I have -- of the felt

two we and that us, Just great opportunities. great teams different feel two both of more and with have and capital but anything, people uses different than great coming needs for

fits excited that inexpensive growing, And fit great businesses and just being create us to it be with forward. to that buy a and to able we're so, to relatively yes, value good really, lot really are going culturally do a is opportunity of able debt

Zack Silver

guess, much Do Fidelity's a I NewWave, Got different of Fidelity. more this sort there? try did mean it, less as there network you be I then, done in is there way. CapEx there. one incremental I mean, meeting as that's helpful. And was see as But some upgrades I'll to CapEx with NewWave or incremental

Julia Laulis

Well, Fidelity is family-owned business. a

So different did respect, NewWave look they in as PE-backed. somewhat that than

like the want next to a going So mousetrap. us we'll like that we be has us look is is decide -- one to But would like standardized, to we're so thing. better which we measure, because networks Fidelity the to in large Fidelity or look

Zack Silver

Got it.

Steven Cochran

to we be, safe to very comfortable that put in we is will similar model place, still that we decide when and if ultimately required do make very what capital but feel accretive. work say, And going exactly to assumptions a the it's we're that in then that invest capital we

Zack Silver

guys. All That thank right, you, makes sense.

Operator

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

Julia Laulis

for a you. forward call solid start joining quarter. Thank for to Thank of speaking you, all to appreciate today's next We and Cable look Sean. I our to associates One XXXX. to you everyone want thank us we

Operator

you conference concluded. now and Thank has disconnect. attending now for today's you The presentation, may