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CABO Cable One

Participants
Steven Cochran Chief Financial Officer
Julia Laulis President and Chief Executive Officer
Greg Williams Cowen
Call transcript
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Operator

Good afternoon, and welcome to the Cable One Earnings Report Q2 2020 Conference Call. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Mr. Steven Cochran, Chief Financial Officer. Please go ahead, Mr. Cochran.

Steven Cochran

afternoon, call. to us We Good quarter One's today. Lexi. earnings XXXX appreciate you, and Cable welcome second Thank you joining

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

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

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

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

Julia Laulis

afternoon. Steven. call. I to for joining thank Good us quarter for you, Thank earnings everyone our second want

One new the of closed and service want I discussing welcome from family very excited This to are Internet join we Before an Cable ValueNet, brands. on ValueNet all-fiber provider our the Kansas. quarter, in X, operating associates transaction July have to

in the We will quarter. starting begin to third results in see financial them our

ValueNet, with later call. to addition a in other highlight you, spoke In completed will last few Steven since investments we which we the

are times especially resiliency of business of in face results seeing quarter the epitomize model, second our now. Our uncertainty, like we the of

the residential data foregoing the choices in we To our grew added quarter. our costs. customers our efforts by to result flexible our We and communities, our adjusted the and customers, associates for believe health and which accelerated new those margin years and XX.X%. on while new we EBITDA recognized to our health negative more paid for us demand of are excluded made safety first associates, points handle results, has and XXXX, we for that connect to deliberate increased second was completing quarter and well years and who many HSD growth HSD revenues that, increased disconnections, crisis quarter-over-quarter EBITDA we our increased XX,XXX from basis of we ago. XX.X% XXX And the investment impacting a positioned demand. never X,XXX the with commitment XX.X%. that Even For a of by trend high XX.X%, HSD-only as focused end slightly increasing elements business of than adjusted meet too, Meanwhile, our customers need service. approximately quarter, in of value-priced our reinforced of at resulted and year-over-year the revenues of us adapted, increasing losses the video reliable, most the and the since residential risk The

steady a our to an business exposure reflected the and Our services-centric enabled away has product transition in is and strategic today. shift HSD low from model video relatively

the increases quarter-over-quarter with continued On we services XX.X%. revenue side, business of saw growth

increased. need business for and enterprise has has existing new larger where among on communications pandemic presented superior some and sales has technology small the caused pressure also While primarily both to it opportunities, businesses customers, the

or we symmetrical, less maximum our or their fiber services approximately that upgraded of markets. XXX services. paused of small During increased speed subscribers to X EPON our offering additional from the downgraded continue offering business quarter, of representing the Throughout customers, base our number services the X% gig restarted than medium the quarter, and businesses customer outpaced that second X to expand to we gig for and the corona

the usage We the associates that associated to offset trajectory on responses Those that X, been customers. majority our additional invest pattern. quarter, to on on data, went our the and in are the we that many gigabits adjusted when business once residential some based to impacting that products evaluating COVID-XX impacted on the expenses, closely XX% residential charge. data to its cascading XXXX, anticipated owners who EBITDA will in nearly by work needs increase pandemic us have usage our noted changes July to second XXX some the There data at our over and XX% making with impacts per adversely no the HSD was quarter economy, plans, certain again quarter plans XX and of our million small when by and and our more continue of considering growing effect roughly into and $XX month. customers' negatively Data additional and We forgo were plan, caused expenses increased crisis. depending reduced existing during adjustments but fit revenue other mostly sequentially and last we year-over-year second our in still growth increased XXX unknowns areas. of by provide than gigabits the revised we

continue plans. we the our these expect to vast With stay enhancements, majority data residential that within will of customers their

during June set traffic and averaging the supporting as XX. in part for announced which ahead Connective Earlier that pandemic. second the on traffic network our customers communities curve than less Our ended the in many FCC extension Pledge, remain in XX% the of of of summer, for place COVID-XX of relief measures the the during Keep this well Americans quarter of our downstream with less the steadfast first consumption end usage and upstream as year the quarter. through need than we the peak end of We we XX% of remains

to as impacted This month coronavirus low-income to We first the most this our designed help three challenges. per continuing as XX of the $XX is plan HSD well residential through for of are from service offer end months families megabit for year. those

access individuals during I connected and are WiFi payment to public and residential small financially nearly pandemic footprint the Additionally, order measures this keep have crisis. our for hotspots addressing who of our associates permanently keeping care their workers as to and Other fees values, communities the broadband resources and waving essential this communities XX, including donating a needs plans; to XXXX, mentioned, with extending with health meals well our through and of time. first and free flexible end and XXX responders to plans. late include: previously we voice by offering and respond working year the customers in and across as to partnering to unique with July and them local connected, centers been harmed challenges; business hospitals, data continue by HSD through In keep boosting as the the banks within communities, capacity other our medical majority for institutions data and needs during our critical residential nonprofits connection providing time food

a responsive, hundreds and the agile they, and and than by in row, it our our to to their this call, to markets schools our back-to-school of the has proud bridge bears the we have health matter each Cable humbled primary one quarter our recently on instituted from have families. to donated the For associates what schools eyes outstanding care title our team. so Chromebooks customers come been were safety their on $XX,XXX turn, very more our said ball, across gave focus One in to K-XX XXXX repeating. supplies. taking expect communities. crisis, Throughout but I technology, and No and has able am they I initiatives other, for thrown for schools multiple help first we remained while footprint taking in curve to associates, seventh with mid-March, the our associates, we of students of divide limited and never year and our our provide so service our our off In us. customers protect digital

time place. the XX% and includes This more for center a operational three our future. quarter home new this at with working of and months reflects in This successfully procedures foreseeable than associates corporate from call full our

to associates roles health to those March, their our state continue will on who XX% asked customers promise pay a critical their pay unable hourly are what to safety In following wind which Purpose from the to providing to September, until rigorous are connect we and program. we local to down pay, leave also matters. began in our early time Associates of place federal, support premium perform protocols home plan based to base homes procedures at purpose be completing to in and guidelines. operations to jobs and

additional of associate for paid Additionally, XX COVID-XX, to themselves allow to we provide to hours up financial family in flexibility uncertainty or off. by time impacted members our caring reduce programs time-off enhanced and emergency

combined provides connected. weeks For leave customers two-third our associates maintaining an in have family extremely of job time, associates in in still pay. supporting more XX operations emergency and need keep while leave These communities order proven through our additional measures protected critical time, of difficult at an to regular

conditions communities around to a management impacting address and operations monitor and associates the as months worked team on the and incident pandemic. cross-functional our situations several has Our over this result clock the of unique a modify market-by-market past and basis

pause completed upgrades rapidly decisions One are due management our and in bring and constant keeping of associates well to bring transition the up and service. enabling with of of Sparklight plant changing Fidelity to we be us incident Sparklight vast of by underway, our leadership track, continues, to the with in recently associates and activities including acquisition NewWave to excited in is our announced team, addition Fidelity to the year-end. integration trucks The uniforms, remains After umbrella. quickly Missouri to in critical under pandemic, a well rebrand to contact Arkansas customers on our Communications Cable expected make environment. back and the is levels In order this Work signage NewWave to brief informed, team to majority our pivot

a Sparklight consolidated continue local companies. efficient management, allow practices Fidelity also both but on which operations geographically us under we only not and let Additionally, more structure, best from capitalize for a Oklahoma will to common

as with three-year we a we are on a complete to timetable, have last liquidity projects, second long coupled line integration, from integration us experience period results time resulted to well were knowledge now the discuss has As And will we fortunate as Steven mentioned prepare. to financial schedule. and That pre-closing quarter, our quarter and our ahead prior position, in leverage. of and gained being

Steven Cochran

Julie. Thank you,

were of XX.X% increase produced quarter results. of $XXX.X by second strong prior the XX.X%. and Revenue a year revenue HSD residential to of XXXX the for This fueled representing increase. a financial quarter increase was second increase XX.X% $XXX.X million a quarter, compared revenue services The in business million

second well. quarter point compared Adjusted total million second quarter. increased X.X% of net Connected income improvement. the for $XX.X the a $XX.X XX.X% or FCC's in or increase expenses point the in were in Excluding basis to Fidelity of Selling, This quarter per for includes million of year from year improvement were in XX.X% prior basis a XX% in share significant million the million increased that share. bad disconnect income second our of or committed operations, to not XXX the Keep debt $XXX and general customers Americans second QX quarter in $XX Net million or revenues was was on XX.X% was quarter, to reserve Operating were part expenses the revenues XX.X% $XXX.X EBITDA revenues million, and in basis year and $XX.X revenues fully non-paying administrative a Pledge. of XXX per prior year-over-year. to the a prior as quarter, account the $XX.XX compared diluted as quarter revenues

million XXX revenues. the of of have attributed of adjusted sequential from elevated we labor million margin the XX.X%. expenditures EBITDA increase XX% going increased second $XX.X of and to in materials, supply second our purchases to HSD points to dividends and in XX.X% paid XXXX, capital year-over-year, which to XXXX, ensure installation quarter and Capital supporting shareholders. totaled EBITDA adequate the XX.X% adjusted expenditures majority we quarter Our equates In chain. basis $XX.X to for of We

proceeds we had X.X by finance billion As generate approximately public $X.XX dividend of loans of increased lease $X.X the quarter. cash in liquidity quarterly share. a end, XX, borrowings From hand approximately liabilities, during this our and the netting standpoint, to we consisting second net week, offering per a million announced the liquidity. earlier annualized of our on equity us in flow. continue was balance raised EBITDA to on $XXX was revolver use available $X.XX million general million used at strategic the portion acquisitions adjusted and our cash At to as quarter June expect our borrowings, A $XXX against to proceeds corporate repay providing and million we outstanding including Overall, debt were $XXX we last We $XXX.X in significant investments. term and purposes, remainder for of to and of under quarter debt for free hand cash after had we additional ample revolver. debt with times, approximately

questions, I'd several recent had acquisition activity. busy on our to investment smaller working an few taking We've update on strategic Before a transactions. like give months and

third As Julie mentioned price consolidated operations XXXX, in reflected ValueNet approximately the we $X.X generated will closed was acquisition with in The be ValueNet million X. purchase reporting. quarter revenues July starting $XX.X on earlier, million. and on in base results their our

We in will financials. also less and quarter, related CAF our remains pro Wisper XX% Nextlink of Connect served in its significant acquired We company. Capital was across Cable for Wisper's rata ISP, reflected Stephens the During Fund interest the America in six the also auction, entered quarter CAF another and in early and the largest which fixed quarter winner. closed who we I'll II broadband an II transaction call fixed earnings XX% wireless short, currently with into a July, Internet, second of One. be the approximately founder, this for second our that third partnered Partners purchase provider winner states we wireless so than II Wisper investment a to share quarter, third Stooke, Also during Nathan owner. by agreement

in states owner run to company, in and service. our business. which majority the operates Cable also One founder, and is partner CEO Bill provides of Nextlink six the Baker, new the continues day-to-day

has their investment broadband networks sheet our in reflected of unserved second II and the surrounding position, fixed program, business a our and complement underserved CAF Nextlink cost. great Wisper is We the believe in quarter been balance our areas bringing ownership markets. expanding the wireless parts on less-dense Given both Through to that add are America. to

aligned Given that to strategically and over will we feel our broadband rural focus, are companies contribute value creation these time. our

July, the Finally, country entered equity further contribute Anniston scale have we invest Hargray whereby we that minority to to an we our in earlier Hargray into for company. system Anniston, area agreement it in in with currently will interest will Alabama Communications, was presence. the limited to which market, an use Hargray be announced able the regional a its of in

the transaction, for growth, investments. of will we Hargray's result a increasing while as Additionally, share our continued opportunities

approvals We expect this other conditions. transaction to close in the fall, customary pending certain and regulatory closing

will will at be Given that interest recording investment we our less than this well. be as ownership XX%, cost

June last annualized had customers approximately of residential approximately million. XX,XXX and $XX HSD of XXXX, quarter XX, Anniston revenue generated As

our We Organization, partners team looking Partners follow and We the and management their are business. to Pritzker Michael to Redwood balanced strategy forward led by partnering grow investment the to CEO, cash Gottdenker; at The Stephens with Capital deploy to Partners. continue and plan

of drive combination opportunities growth. rural well as in for long-term broadband-related capital to markets now as we entails projects that acquisitions before, ready said are questions. a intended we've seeking investments, Lexi, As and

Operator

[Operator ahead. today question Greg Williams Instructions] first with Cowen. go comes from Your Please

Greg Williams

taking Great. my Thanks for questions.

just on like ARPU. board. First across It ARPU posted one, I'm the solid trying ARPU of to looks gains understand strength. you the just sustainability the

I a then they card margin You and should some same you good your them a perspective? ValueNet some at have my Hargray EBITDA July the data. you taking from speeds. on profiles? How of an extra X, lot little rate detail guys changed faster question, provide mentioned think on Did to time, of provided transactions. customers But similar the And bit second

Julia Laulis

in the ValueNet, and take the question. Hargray let Steven jump ARPU I'll on

Greg. right, You're exactly

and of rates. longer obviously service, service. higher level, get is a levels our new XXX of those standard on to meg continue the case in than or was higher no levels. as we sell-in customers higher XX% electing are XXX-meg to higher board are the at past, service to at coming That in more Our sell at

took Now fees, something but own ARPU continues higher behalf its it well unlimited well Connected not, to did tiers for on not sell-in we would customers the pricing Cable was was premium go no during back in period, that disconnects, assessing appeal signs pretty did down, fell that was that flex our it we I so shows overage of drive during up as known so our also and the Recall sell-in were One's having well. that of where up. to and period, that Keep that One as Americans is start as closer any we Pledge There unlimited the migrate and to – on overage up will ARPU. so to effect, once that no NewWave NewWave's slowing fees Cable ARPU packaging, expect our bringing historical the

Steven Cochran

question, operator, as very as Their a high the ValueNet, And do, they're then doesn't margins but a smaller is size. on good. for I as margin we margins have mean, obviously, their good were company

and And One's rest margins them, company. we where that, Cable would nicely and the will like the looks margins can scale region-specific give with margins. margins. from we over so specific those a a it standpoint, or of don't system system even we areas align lot – the that help the Anniston, time, anticipate On But with

Greg Williams

thank Great, you.

Steven Cochran

you. Thank

Operator

any We back to like closing Ms. I turn would conference time question-and-answer remarks. have now over the allocated the Julie reached for session. to Laulis our for

Julia Laulis

Lexi. you, Thank

say insight newest exceptional to attorney with valuable Board connectivity is Before our we already world riches highly familiar to ending during our benefits the purpose – eager reap is these very are to to a continuing want like associates working Sherrese of take live turbulent of out you welcome very for thank you. provide communities to enriches their all addition than you. times and of to I call, Sherrese Directors. more would I'm to and I regarded our that important company's a to of closing, alongside and ever, the of industry, be of the In Board, grateful experienced our Smith, acumen. member each moment An her our who is Thank the and to

Operator

Thank Thank now concluded. you, for Ms. The has today's you conference Laulis. attending presentation.

disconnect. You may now