Cable One, Inc. — 2023 Form 10-K
Reporting period: Fiscal year ended December 31, 2023. This is an annual filing, not a standalone fourth-quarter report; the provided filing text does not give a clear set of Q4-only financial results. Cable One provides broadband, video and voice services across 24 U.S. states, with about 1.1 million customer relationships and 2.8 million homes passed at year-end.
Financial performance and liquidity
| Metric | 2023 | 2022 | Change |
|---|---|---|---|
| Revenue | $1,678.1 million | $1,706.0 million | Down 1.6% |
| Income from operations | $526.9 million | $539.0 million | Down 2.2% |
| Net income | $267.4 million | $234.1 million | Up 14.2% |
| Adjusted EBITDA (non-GAAP) | $916.9 million | $911.9 million | Up 0.6% |
| Cash from operating activities | $663.2 million | $738.0 million | Down 10.1% |
| Capital expenditures | $371.0 million | $414.1 million | Down 10.4% |
| Cash and cash equivalents, year-end | $190.3 million | $215.2 million | Down $24.9 million |
Operating income equaled approximately 31.4% of revenue and Adjusted EBITDA approximately 54.6% of revenue in 2023. Adjusted EBITDA is a non-GAAP measure and does not reflect interest, taxes, capital expenditures or required debt payments.
- Revenue mix: Residential data generated $979.3 million (58.4% of revenue), up 4.8%; business services generated $304.5 million (18.1%), down 0.2%; residential video generated $258.0 million (15.4%), down 20.7%; residential voice generated $37.1 million, down 13.9%.
- Costs and earnings: Operating expenses excluding depreciation and amortization declined 6.4%, chiefly from $49.9 million lower programming and franchise costs as video customers fell. SG&A increased 1.2%. Interest expense rose 23.6% to $170.1 million, primarily due to higher interest rates. The effective tax rate fell to 21.8% from 33.7%; the filing attributes the net-income increase in part to lower tax expense and favorable other income.
- Cash flow and investment: Operating cash flow declined amid higher cash taxes and interest payments and less favorable working-capital timing. Investing cash use was $341.9 million, including $371.0 million of capital expenditures; financing cash use was $346.1 million. The company paid $66.3 million of dividends and repurchased $99.6 million of shares in 2023.
- Debt and liquidity: Year-end debt carrying value was $3.68 billion, including $2.11 billion under senior credit facilities, $650 million of 4.00% notes due 2030 and $920 million of convertible notes due 2026 and 2028. The revolving facility had $338 million drawn and $662 million available. The company reported covenant compliance and said cash, credit facilities and operating cash flow should fund requirements over the next 12 months, subject to business and market conditions. $1.2 billion of variable-rate debt was covered by interest-rate swaps; a hypothetical 100-basis-point increase in SOFR would increase annual interest expense by $9.1 million, based on year-end exposure.
Material changes versus 2022
- Total customer relationships declined 1.3% to 1.097 million; residential relationships fell 1.6%, while business relationships rose 1.1%. Homes passed increased 2.6% to 2.775 million.
- Total PSUs fell 3.9%. Residential video PSUs declined 21.6%, residential voice PSUs 13.3%, and residential data PSUs 0.3%; business data PSUs grew 2.3%.
- Residential data ARPU rose 4.3% to $84.57. In Q4, broader, value-conscious customer acquisition efforts supported sequential residential data PSU growth but also reduced residential data ARPU for the quarter.
- Debt refinancing in February 2023 increased revolving commitments to $1.0 billion, extended the revolver maturity to 2028 and certain term-loan maturities to 2029, and transitioned applicable benchmarks from LIBOR to SOFR. The company drew on the revolver and upsized a term loan to refinance its Term Loan A-2; it repaid $150 million of revolver borrowings during 2023.
Outlook, commentary and risks
- Management expects long-term growth in residential data and business services, while anticipating continued declines in residential video customers and revenue. No quantified financial guidance is provided in the filing text.
- Capital priorities include network capacity, fiber density, reliability and market expansion. Cable One began deploying symmetrical Gigabit service in selected markets in 2023 and plans to begin DOCSIS 4.0 deployment by the end of 2024. It also plans a new billing-system implementation beginning in 2024.
- Key risks include intensifying competition from fiber overbuilders, telephone companies, fixed wireless and streaming providers; slower broadband growth and pricing pressure; rising programming, pole-attachment and operating costs; and potential regulation of broadband, including net-neutrality proposals.
- The Affordable Connectivity Program was expected to run out of authorized funding by April 2024; its termination could affect customer retention and data-service profitability. Regulatory changes could also add compliance costs or limit pricing and network-management flexibility.
- Leverage, variable interest rates, debt covenants, refinancing needs and possible dilution or cash obligations under convertible notes are material financial risks. The company also has an MBI call option through June 2024 and a potential put obligation in 2025; it said it did not expect to exercise the call and had not secured funding it believed necessary if either option were exercised.
- Unusual items affected comparability: 2023 other income included a $28.0 million noncash gain on the MBI net option and a $12.3 million noncash mark-to-market gain on Point Broadband. Equity-method investment losses were $54.3 million, largely reflecting Clearwave Fiber and MBI. The auditor reported unmodified opinions on the financial statements and internal control; management also concluded controls were effective.
Important facts for investors to verify
- Whether residential data customer growth and ARPU stabilize after the Q4 pricing and customer-acquisition changes, and how competition affects churn and margins.
- Whether business services can return to growth, and whether ongoing video subscriber losses continue to reduce programming costs enough to offset lost revenue.
- Debt repayment, interest-rate exposure, covenant headroom and funding capacity for the MBI options, capital spending, dividends and repurchases.
- Progress and cost of DOCSIS 4.0, fiber expansion and the 2024 billing-system rollout; also monitor the ACP’s status and any broadband regulatory changes.
- How much reported earnings depend on noncash valuation adjustments and equity-method investments; assess Adjusted EBITDA alongside GAAP earnings, operating cash flow and capital expenditures.