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Cable One (CABO)

Participants
Julia Laulis President and Chief Executive Officer
Steven Cochran Senior Vice President and Chief Financial Officer
Greg Williams Cowen
Zach Silver B. Riley
Brandon Nispel KBCM
Call transcript
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Operator

Good evening, and welcome to the Cable One CABO Earnings Report Q3 2020 Conference Call. All participants will be in a listen-only mode. [Operator Instructions] After today's presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note this event is being recorded. I would now like to hand the conference over to Mr. Cochran. Steven ahead. go Please

Steven Cochran

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

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

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

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

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

Julia Laulis

It and Wisper. announced systems of challenges, some Moreover, those in Valu-Net our the our on history. One seasons business. in continue afternoon to our busy hurricane by completed quite southeast else you, we QX, spoke active recent and associates with everyone we joining in we Thank of earnings to of call. deal Steven. minority our on effects previously last to Cable everyone most has were since third Good us the COVID-XX in pandemic of been quarter at you. the impacted one Like interest acquisition Notwithstanding

that or for We we with Broadband into Mega be Investments, partnership short. MBI will also entering a that announced

and the will priced upsized Communications X% system more the end facilities in financial minority new our extended on and due $XXX call. later we and notes and quarter, will our MBI through us get the into of senior that we the provide Alabama our transactions of credit more XXXX Steven contribution Hargray details in debt closed unsecured investment Following of million Anniston, forward. going flexibility the

hurricanes While Mississippi Texas, quick fortunate and that our Louisiana we X associates families storms and were had succession, systems remain tropical hit our in and their we've safe. very

their back who thank thoughts also efforts as possible running associates the assistance event. recovery those to have donated and storms. Cable to our season and while take took for who and restoration to hurricane $XX,XXX One to to we with residents for get made necessary up customers patience the repairs service want support been to impacts recovering American following this the their our potential prepare by moment which in who these to Our community and stepped are thank assist services Red those with all the of the Cross, To swiftly. of storms. I our I as worked throughout are for communities, affected the impacted and from still restored quickly who want of a diligently customers following care

associates In $XX,XXX Additionally, to company our their repairs the support impacted their to associates to in who storm-damaged Cable to was which spirit, needed One natural established by donated nearly company disaster homes. team making relief matched fund, donations disasters. are Cable the assist true fellow One

our performance. to now Turning

to plans were of third model poised and the Our handle success our quarter We accelerated continued reflected strategy. demand. that recent the enhanced believe results business our

the essential our communities services In followed to connectivity commitment to addition, are by serve. associates values, our purpose who shared we unified on and deliver our through

of XXX XX.X% of growth in in adjusted of of to margin revenues points quarter-over-quarter and EBITDA resulted strategic acquisitions, basis XX.X%, growth XX.X%. these combined factors, All adjusted with our EBITDA

for added sequential see growth in year-to-date elevated of XX,XXX to organically over years significantly added XXXX. usage. organically for while X.X this months customer did To customers. on the have nonpaying QX, to we and continue record experienced policies growth than quarter, growth and and the We XXXX, we a exclude residential our data since of we customers. we perspective We customers year-over-year number, end basis, to data the HSD both In were gradually XXXX reliable high-speed residential increased a in of nine reflected Year-to-date, than XX% roughly more acquisitions need new if service, increase over various through third that some on HSD during the more robust X,XXX end our give XX.X%. added normal we Valu-Net XX,XXX which between customers, we spin-off returning our collection our period included customers

to repaying short-term We to plans agreeing outstanding that are the pleased report payment of customers our number or either balances expectations. their exceeded

we but debt As larger-than-normal during second a only bad we result, for our accrued we reduced customer quarter. improve not reserve net the the adds, did

the customers XX,XXX agreed QX. businesses by we investments having data in in approximately which Additionally, have minority grew invest in or to

saw are XX.X% reported to revenue value digital bridge over growth our to results, in the contribute customers quarter-over-quarter. continued our not commitment divide these creation in rural communities our shared While highlight of they Business time. and do service

are pleased in a businesses of including businesses fiber the internet operating, the cut to and services end for and to than ways previously, disaster, or pressure keep their sales small team outside business our the we devices business and noted enterprise have mission-critical point-of-sale card limited adjusting as the a service by to and With from respectively. new year. such finding win power This have product event and led enter machines to our connect suite pandemic both service stay with construction-related to With has opportunity we ability to having been technicians allows businesses, for customers, more to solution customers. working our and we major for simple credit backup ever launch As crucial of home HSD Internet connected, outage.

about product as excited launch both well for upgrade and as are customers. existing new this We opportunities

efficiencies focus system be we on bearing end tests project, Our processes, us the quarter, business entry will experienced the CRM. and of functions Salesforce we see up billing through increased the automation as with back-office savings our will and helped of manual improving which This service some is between has enormous order fourth achieve more wrapping at the time enhancements fruit way. along

to crisis. the connected. our quarter, third of flexible businesses keeping in to We customers and month. and roughly the adjusted and associated work third impact of to that from revenues will million increased increased million to second quarter usage our be with nearly need we than was gigabits dropped Average to expense by who small our approximately which from business negative data continue closely XX% quarter, from more current the are reduced the growth. know by during strive in the slightly the weather year-over-year supportive in the $X.X many to lifeblood so responses more assistance a third communities, We offset EBITDA HSD COVID-XX $XX In these customers per small residential quarter XXX

This we to expect charges majority increased for quarter, data customers those process throughout to we quarter we plans. of pre-pandemic resumed as the and plans As residential last quarter, our service gradually the resumed fourth our revert a standard we exceeding announced levels.

the and remained our our and data traffic plans. with of the continue As XX% usage of of throughout a in for within utilization peak downstream an utilization we the day to network end their our priority. has customer customers during for stay upstream large in are At third in seeing communities reminder, than the led to majority the top quarter, average increased low, XX% vast our peak during behavior COVID customers traffic. pandemic which a shifts need at notable Supporting change rather remains periods.

part call, America the of on of pledge. the mentioned last through multiple we we place year extended measures quarter end in that the our FCC's Keep first in were have Connected As relief set the as

households. recently low-income on for end to to and participate this residentially most To initiative, the from We which for and and available XX communities. One pandemic-related to first signed our continue remote access addition further across well Connects nearly Super in the to Designed our Highways who month be students the make service. families pivot and per free in as low-income to the as we in students assist remain of fluid months to are Cable coronavirus available public internet home, for In to the coming second of incident our continuing meet keep communities per Education to low-income offer from Wi-Fi megabit Bridge and $XX team that us families hotspots cross-functional of to needs planned that and plan be connected, three be will enabling impacts just are our critical year. footprint to realize rapidly ACA the help through order states challenges, months, districts this provide impacted and those customers helps at dynamic customers learning remains Broadband K-XX will associates, the our decisions and school ready and management XXX

over our want I team. my to it hand Cable I One Steven, reiterate Before in to pride

to As of many what our our customers unwavering to team. this our and understandable as be to that say lead have the liquidity promise to with And very fatigue challenges and to quarter associates the I month Steven discuss remain we our succumb leverage. honored easy of they position, this steadfast matters will in pandemic, responding enter people faced gratitude support our feeling. weariness financial their our are eighth well year, truly as most. results despite to third this can I and would many am it keep now, connected

Steven Cochran

Julie. Thanks,

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

was a current collections were partial XX.X% and the from was reserve point the in the receivables was quarter a income XXX third for $XXX.X share in debt per quarter; the in quarter, quarter better business QX share. million in third of basis expenses which million income $XX.X year basis to the diluted on compared quarter. increased $XX.XX X.X% revenues basis improvement. of we $XX.X residential operations, the year or per a $XX.X were estimated than Valu-Net fully point reversal in Net Excluding Adjusted bad established of Net prior includes originally This third million increased the revenues and million. environment. prior enlarged prior of EBITDA revenue of services total in revenue a third improvement. quarter expenses were acquired Fidelity or the $XX.X million the in XX.X% XX.X% operations, and Operating XX.X% year-over-year; and as to increased XXX of increased administrative compared or million general I'll $XXX.X revenues XX.X% HSD to XX.X%; X.X%. Selling, revenues the quarter year or revenue as refer

XX.X%. of Our XXX for XX.X% million $XX.X margin totaled third adjusted which adjusted equates basis increased year-over-year, to XXXX, points from XX.X% EBITDA. Capital EBITDA expenditures of the to quarter going

debt we million lease total From a generate times. borrowing and on additional to quarter, integration XXXX, significant consisting nearly adjusted free into after $XX.X was standpoint, liquidity to our revolver. we annualized and invested network we shareholders $XXX.X Overall, quarter had debt and quarter expansion over At debt the was paid finance X.X available quarter of billion, our cash end, approximately the cash on $XX million activities, year-to-date last dividends During million September $XXX or approximately to netting of we equivalents liabilities. third against cash $X.XX of of and our had to million loans under $X.X In EBITDA our And continue as term XXth, $XX for flow. hand share. bringing of we in hand cash CapEx million. per balance

for essentially competitive as of approximately MBI Tier checks-off They when of all and XXXX. focus quarter financing Before markets, of profile to with with broadband we evaluating update team including purchase purchase as XXX,XXX initial than million low to Northland operate a XXX,XXX services X with and September, option grow announced company, and in minority homes fit give some in cost assets our September today The Eagle of resulting next acquisitions, that passing data opportunity well company our with on late shares in broadband strategic a an customers and investment One to was recent built Communications, $XXX management currently beginning and We from Vive the video partnership XX, world criteria the like our as of questions, penetration. business partner acquisition, America. MBI, a One, of deliver a plan residential acquisition I'd remaining mix the as cultural NewWave a another whereby strategic formed Cable interest Buy to approximately Cable deploy initial Cable estimated One and cash has XXXX, in the similar to on vision the XX% the MBI primarily business look We across name. taking In investment more X with end annualized interest will alongside an the through same to we the see great activity. by high-speed last the strong for HSD week. $XXX and by under this our of from million. consisting of markets Broadband rural MBI close revenues Communications revenue unified a and series and geographical in Tier Broadband, M&A. to

term of to and $XXX on loan BX and the through of our mature maturities from to $XXX the financial and We upsized our were took revolver to borrowing our BX BX our announcement, approximately to the time, our from loan Following we approximately loan the to At upsized million term in through we improve increased extended we MBI proceeds revolver used from BX, XXXX. million. loan $XXX capacity million, cash term loan repay review XXXX. scheduled million and with and opportunity though The hand, same $XXX $XXX BX, million of May structure. XXXX term together our AX term the the

closing notes The advantage favorable took of conditions. proceeds including we use rate. to investment. of X, corporate conditions investments, credit may strategic acquisitions the a senior market annual include which offering for $XXX coupon the November And by net close to is unsecured to MBI million new pricing XX-year offering at XXXX, also X% customary purposes, expect the subject and We general notes from expected on

X,XXX QX, our customers. acquisition and fully which the at reflected approximately As million of beginning revenue HSD Valu-Net residential a quarter, in are in reminder, numbers the closed $X.X we contributed and their

Additionally, on October with Xst, Hargray. we completed our transaction

So starting $X.X we included revenues third which for Amanda, XX,XXX with be not questions. in HSD operating for and quarter, fourth Anniston now quarter are results, million accounted the of our residential will ready subscribers.

Operator

mute? me, Thank you. Phil head. Instructions] from the are you first Please [Operator comes rejoin from Your go Phil, Cusick queue. Pardon question JPMorgan. on Please

from Greg Williams first Cowen. Your ahead. question comes from Please go

Greg Williams

Broadband. and million. a up EBITDA. Steve, But good you thanks. with the were for Great, some on what can they $XXX around Mega question an provide you color posting annualized coming I number was

home you And Will additional uppers. before areas, like? whether fixer to the it's to Just a continue telco the seems wondering on characterization? bifurcated another to look the greenfield fiber of structure, lot it rights. way in And in specifically what of execute ballpark. fiber you it structure, the if buzz call or along M&A some question just brownfield, I'm powder deals? does the the M&A that allows Mega There's deal fair landscape been a the sort And the dry home. for Is around that then Broadband XXXX on given rural

tone a and pressure seeing in in Thanks. are your heightened noted You AT&T territory? more fiber. aggressive And you

Steven Cochran

Yes.

margins. on So a we the math Clearly, kind what given can company, logical we and of EBITDA disclosed what are as on disclosed owned. private MBI, private you do comfortable equity they're

for are a say under – I had and the under-invested of of now. think growing executing because very a couple they that plan and piece set in been they're years they've managed, assets quickly is I would a been probably they brought

growth stage. And so extreme they're in that

acquisition, think as date type to a think, a standpoint. I been what then operation geography a yes, And our nicely standpoint go both I from to of And very well sheet, strategy do, complementary later. we strength finance an and of clearly, balance position of as our from so very part growing and strengthen has it come find

October, the kind sheet. markets advantage we're reloading And good balance so And with that. to our we were in to take able do of able of

active. feel got to capacity of continue we like we've to So plenty be

on As right a There's lot I landscape, there have that's of been far deals done. think been going as now. the lot out there's – M&A a

I find looking as leveraging be the Cable or attractive to their and company being leverage transactions table. creative to to to able to to find an for to be hope brings been feel outside Julie, we have Cable the and ownership One able investor do culture the very relationships you? who we fortunate sell that One are to processes, both think with partner groups who like we have to people with continue in. go an And what as well alternative of either

Julia Laulis

Yes, sure.

as As I been on And X% far for remembering We've say also the the everything it footprint of as that to no, greenfield. available has have ground home, XX%, the would we in anything pressure, fiber to poles. to bears we the either first, probably with now, I it have around that than on relates fiber them. fiber less home years fiber our to total think, or building hanging

So we've that it just is seen something date. to not

Greg Williams

you. thank Great,

Operator

Thank you.

from comes question Riley. go next from Your B. Silver Please ahead. Zach

Zach Silver

Okay, great. taking Thanks for the question.

for one on the just is of stopping other their with similarly First of side that me AT&T sales DSL. related

pretty – you that? can at what And you have you an are see the that if their same do offering. And what's think, home How Internet threat wondering see big expecting of opportunity competitive a was time sense how ambitious I T-Mo, that is? fixed plans big rolling to your out of for markets of Just in? you

Julia Laulis

of of overlap that of the we people soon homes top was taking on opportunity about there. that took are advantage happening, is marketing the situation. And And look. is our footprint saw we as far as as went a and As XX,XXX the AT&T,

we that sure quite we that service builds to making will think our on going like anything mindset are to above-average or whether serve have and local scanning or well. and us it's T-Mobile, hiring. of or folks we're in our that's that it As competitive reliable any constantly relates on products top honestly, our our markets, in competitor, We marketing a

what T-Mobile them happens. see but they're and never not we'll Right So speeds that's we watch us, something the now, out. is would count worrying that about talking

Zach Silver

Great.

environment guys one puts second FCC. democratic some us years? evolving the the FCC couple about if then of for regulatory to see does you And you controlled Okay. become just Can next give the you how takes change and over the is

Julia Laulis

who going to yet, I can't crystal election that. but even of ball the we're won tell

Zach Silver

Fair enough.

Julia Laulis

it's So, us. Therefore, never possible we We the in for majority, net if Senate therefore, still know of is I It's that if, way customers, House the do in throttled we wouldn't if concern Democrat wouldn't guess that the the traffic. I'm happen. fact, stays on it's isn't prioritized democratic, I they you would my authority that. outcome. huge White there with hanging – right an because only regulation. even the assume rate thing goes neutrality – have our looking overall, for is, would back, don't if but now FCC do it be But on good will doesn't it, Republican work think about good a specter not We which, And the the don't the or final out if mean, in a that this, not bringing that.

Zach Silver

sense. Got makes it. That

more one just think I could. I if

CBRS licenses. for Can the about acquisitions? you rationale – some licensed talk nibbled on you Just those

Steven Cochran

just of fixed RDOF once Wisper, some basically the we, really we have wireless to investment. for There's looking them various realizing then application, entity between real-time control, of were and And was Wisper. up of them out transaction a our no pretty control. applications, file acquired the change an rules ability CBRS and we around change you so the specific Sure, the things, had could being and close to ended sell that and CBRS and other we because license

related really was that all that's So to.

Zach Silver

Thanks, Got Thanks, Steven. right. it. All Julia.

Operator

from next Raymond Instructions] James. go Please [Operator ahead. question from comes you. [indiscernible] Thank Your

Unidentified Analyst

on This Rob Frank is for here. guys. Hi

that, lower CBRS any So plans update going color Thank with update I that's how to get a the additional following an on like could is for then spectrum? if that's the up on And there provide an plan, to plans? still it to was end pertains you if if so, to you. give you we your on think are willing forward, your as other CBRS, could us it relative $XX going? respect product? been performing month And guys

Steven Cochran

Sure.

gives – as so are wireless spectrum is Wisper One fixed CBRS sub-XXX customers nothing the it of used primarily certainty just spectrum control business. more CBRS as the low-end auction. more part unlicensed technology, who I we And and on think for there's on licensed So to to it. the the compared specifically so relates there of Wisps them it Cable on have it's And the that plan, most operating

our was meet there in to need. many one So in, a them that there place, but of at good know time. any have had been ads. definitely – in upgraded a ever than of we Many remotely a part I nothing it point to X,XXX And more don't material plan that came has services.

Julia Laulis

The accelerated, before it other so but is buying above meg. bigger COVID, was trend, things people it COVID, plans XXX many into and the during like happening

XXX That any selling meg XXX So the flagship. And meg that our level have above is plan our more XX%. other than is to say a plan. is people plan now

faster in time. taking not are people much So this speeds, lower point at

Unidentified Analyst

you. Thank Great.

Operator

Thank you.

Please Young line your comes from Pardon next Our ahead. question Evan from KBCM. live. you are is mute? me Evan on Evan, go

Brandon Nispel

Hello.

Operator

Hello.

Steven Cochran

Evan.

Julia Laulis

can We hear you.

Brandon Nispel

Great.

Sorry about that. Brandon, It's Evan. not

it's been strong. people People really question a Internet. from obviously, people already working would Julie, a thought Subscriber would purchased purchasing in growth, lot XXXX, one have for that are But of Internet. see. home, you. have Let's are

investments of is about How of it made on megs. of just understand unlimited secondly, So to as XXX thinking I'm of basis then ton months. stats us a curious be then these and you plan minority your from. are thinking were you've And lot couple you interest? above investors performance obviously, are to on just the think on forma of that them terms data? the Steven, helpful these of help in selling you investments, Can how in do where the thoughts share considered your for, full Thanks. share given leverage owner a And can you the of assets? coming on a those about you're And in subscribers going pro some in helping sell last if

Julia Laulis

in. I'll jump on

yes, been we've with It's came to been interesting and been why it's have research during they – usage rates we the data the come So who's see to door their rates. in watch. Because retention them, their door. in COVID, done a fascinating group

there the speed product were of reliability. walks have think service it – We for cell-only need we ever. came our would be I a customers, it came of it. time pandemic-related. us the a And They previous came fiber home internet believe thought i.e. all life. customers, a would people could DSL robust, folks kind in always they more did when driving But We reliable and would markets. door know would customers broadband that from or in come in was not to they been that the no be

are seeing and bit although of seeing seeing well. anecdotally also to We uptick we're more there area, moves probably and read also our our folks is rural areas an researcher into competitive now, a about moving as you

existing they base. subscriber They are – profile to credit are us and for the some when came they a So them in moving. to had door, our they reliability that of looked very came similar speed

the demographics, actually our retaining, do. children cohort, higher terms they They services to they were customers existing and a as younger in have are of rate home. less our at In than tended a

liking they XXX meg So of or to seem the selling XX%. people Again, like are tier they plans – have they we what are have said found. above –

was That it growth at said, the it grow. our levels. Our XXX, of think. gig is major may is what months we two, I as about gave many that pre at pandemic. reasons, not it for data unlimited the And for coming pandemic in was. up it Number have point for pre-COVID. data once unlimited the option we're as at number to get unlimited being so heart And the free people time. the it ARPU makes imperative in we selling half this that back during of XXX several in seeing contributor is data to sense one, But And level away

Steven Cochran

And Brandon, the we're I them. we're how still think then think on deals, to working I – going exactly communicate on

at that in we I internally the can to looking want that the over time, we shareholders And over early opportunities, competitors how very finding to have of that create keep think businesses are figuring them and their on mind have best these focused stages out we've think been value communicate how time. our and own plans their private keeping in and own while things they to private. then

like want about we our good a more vision. of that leverage like really balance actually, have have allow find do. And to how couple story and trying way we've to investments of feel so we And run them run the and them. the tell of about are they these the attributes that we the to share teams partnered right that who to them And do to their actually the than businesses one with fact leverage

So that balance They levered all at really One that of of they by in without only us have to because at assets are are all. and done really own returns a sheet have. their the share would – those forma pro putting our secured they're none Cable facilities we're secured None by not able look of risk. what like

that level. have we at to no debt the So obligation

putting that it but higher at do north us businesses which allows X be are sheet haven't risk And that without question? at environment balance your to way, our able at answer looked so for equity leverage, times of those really that we to all really returns it. in Does

Brandon Nispel

you. Thank Okay.

off. Sort

Steven Cochran

least a this at got I time. Well, question

I it. Amanda, our XXX%. questions by think I that's Anyway. we think Well, increased

Operator

turn conference Thank conclude Julie. the over our you. back session. This does I'd now question-and-answer to

Julia Laulis

in thank want forward and speaking We our New the us for all Amanda. resiliency today's uncertain Thanks great again to these quarter to of to everyone you, associates on another I for to joining Thank their you for times. call. dedication look Year. during and

Operator

attending Thank concluded. you. Thank presentation. for is conference you now The today's

may disconnect. You now