Cable One, Inc. — Q2 2022 Form 10-Q
Reporting period: Quarter and six months ended June 30, 2022. Cable One provides residential and business data, video, and voice services in 24 states. Results include acquired Hargray and CableAmerica operations and exclude fiber operations contributed to Clearwave Fiber beginning January 1, 2022, limiting direct year-over-year comparability.
Key financial metrics
Amounts in millions except per-share data, percentages, and subscriber counts.
| Metric | Q2 2022 | Q2 2021 | Six months 2022 | Six months 2021 |
|---|---|---|---|---|
| Revenue | $429.1 | $401.7 | $855.8 | $743.0 |
| Operating income | $121.1 | $115.4 | $272.3 | $217.8 |
| Operating margin | 28.2% | 28.7% | 31.8% | 29.3% |
| Net income | $69.2 | $106.2 | $240.7 | $174.7 |
| Diluted EPS | $11.11 | $16.68 | $38.05 | $28.00 |
| Adjusted EBITDA (non-GAAP) | $227.5 | $213.2 | $454.0 | $393.6 |
| Adjusted EBITDA margin | 53.0% | 53.1% | 53.1% | 53.0% |
- Revenue mix and trends: Q2 residential data revenue rose 12.4% to $233.3 million; video fell 2.8% to $84.8 million and voice fell 11.5% to $10.7 million. Business services revenue was essentially flat at $76.7 million. For the first half, residential data grew 18.5% and business services 11.8%.
- Cash flow and investment: First-half operating cash flow was $353.1 million, compared with $347.6 million. Capital expenditures were $206.7 million, up from $161.2 million; operating cash flow less capex was approximately $146.3 million, versus $186.5 million. Cash declined by $108.8 million to $280.0 million.
- Debt and liquidity: Debt carrying value was $3.87 billion at June 30; cash-adjusted debt was approximately $3.59 billion. The company had $448.8 million available under its revolving facility after letters of credit. Current assets of $396.0 million exceeded current liabilities of $235.3 million. The company reported compliance with all debt covenants.
- Margins and earnings: Q2 operating margin eased to 28.2% from 28.7%; first-half operating margin improved to 31.8% from 29.3%. Q2 net income fell 34.8%, while first-half net income rose 37.8%. First-half results included a $90.9 million non-cash gain from revaluing MBI options; prior-year comparisons included a $33.4 million Hargray step-acquisition gain and a $35.4 million tax benefit that did not recur in 2022.
Material changes and management commentary
- At June 30, data subscriptions totaled approximately 1.059 million, up 4.2% year over year; video subscriptions fell 23.1% to 221,000 and voice subscriptions fell 9.0% to 140,000. Total residential and business PSUs declined 2.6% to 1.420 million.
- Management prioritizes higher-margin residential data and business services, while expecting further declines in residential video and voice. It cited normalized residential-data growth after elevated pandemic growth, and continues investing in network capacity, fiber, DOCSIS upgrades, and customer experience. No numerical earnings or revenue guidance was provided.
- Interest expense increased 10.8% in Q2 and 18.3% for the first half, attributed primarily to higher rates and debt outstanding. Two swaps fixed the base rate on $1.2 billion of LIBOR-linked debt; the remaining variable-rate exposure and LIBOR transition remain relevant risks.
- Strategic transactions included the January Clearwave Fiber contribution, in which Cable One retained an approximately 58% interest valued at $440 million, and the April contribution of its Tallahassee system to MetroNet for $7 million cash and a less-than-10% equity interest valued at $7 million. The company also recorded an $8.3 million Q2 non-cash loss on dispositions; first-half dispositions and the Clearwave contribution together generated a reported net non-cash gain of $13.8 million.
- First-half capital returns included $191.7 million of share repurchases and $33.1 million of dividends. The board authorized a new $450 million repurchase program in May; $403.4 million remained authorized at quarter-end. Management said it expects comparable quarterly dividends, subject to board approval.
Outlook, risks, and contingencies
- Management said cash, operating cash flows, and credit facilities should support operations and planned funding needs over the next 12 months, while noting that results depend on future performance and economic conditions.
- A potentially material funding obligation is the MBI option arrangement: Cable One may call for purchase of the remaining interests from January 2023 through June 2024; if it does not, other investors may put those interests to Cable One in July–September 2025. The purchase price is formula-based, and the company said it has not yet obtained the capital it believes would be needed.
- The filing cites competition, technology change, programming costs, supply-chain and labor pressures, regulation, cybersecurity, acquisition execution, leverage, rising variable-rate borrowing costs, and dividend sustainability among key risks. Management reported no material change to previously disclosed risk factors.
- The company reported no material legal proceedings, no material changes to contractual obligations, and no off-balance-sheet financing arrangements. It assessed its $44.1 million of letters of credit supporting Wisper’s FCC program as having remote non-performance risk and accrued no liability.
Most important facts for investors to verify
- How much of revenue and EBITDA growth reflects acquired operations versus organic performance, and how Clearwave’s contribution affects comparisons.
- Whether residential-data subscriber and ARPU growth can offset continuing video and voice subscriber losses and competitive pressure.
- Debt-service sensitivity to interest rates, remaining variable-rate exposure, and the company’s ability to manage debt maturities and the LIBOR transition.
- The potential MBI purchase price and funding plan if the call or put option is exercised.
- Capital allocation sustainability, including elevated capex, buybacks, dividends, and available liquidity.
- Drivers and recurring nature of non-cash fair-value gains, disposition items, and tax fluctuations affecting reported net income.