Cable One, Inc. — 2021 Form 10-K
Reporting period: Fiscal year ended December 31, 2021. This is an annual filing, not a standalone fourth-quarter report; quarterly results are not clearly provided in the supplied filing text.
Business context
Cable One provides residential and business data, video and voice services, primarily in non-metropolitan markets across 24 states. At year-end it served approximately 1.2 million customers across 2.7 million homes passed. Its strategy emphasizes higher-margin residential data and business services while de-emphasizing residential video and voice.
Financial and operating performance
| Metric | 2021 | 2020 |
|---|---|---|
| Revenue | $1.606 billion | $1.325 billion |
| Net income | $291.8 million | $304.4 million |
| Diluted EPS | $46.49 | $51.27 |
| Adjusted EBITDA (non-GAAP) | $839.3 million | $674.1 million |
| Cash from operating activities | $704.3 million | $574.4 million |
| Capital expenditures | $391.9 million | $293.2 million |
| Cash and cash equivalents, year-end | $388.8 million | $574.9 million |
- Revenue rose 21.2%; the company attributed $206.9 million of the increase to Hargray operations included after its May 2021 acquisition. Adjusted EBITDA increased 24.5%. Its calculated Adjusted EBITDA margin was approximately 52.3%, versus 50.9% in 2020.
- Net income declined 4.1%. 2020 included an $82.6 million non-cash gain on the Anniston Exchange; 2021 included higher interest and depreciation and amortization expenses, alongside a lower effective tax rate.
- Residential data revenue grew 24.8% to $835.7 million; business services revenue grew 31.6% to $308.8 million. Residential video revenue increased 2.1% to $339.7 million, while residential voice revenue was nearly flat at $47.5 million. Data, video and business services accounted for 52.0%, 21.2% and 19.2% of revenue, respectively.
- Data PSUs grew 23.0% and total customer relationships grew 18.9%. Results include acquisitions, so these growth rates are not purely organic. Data ARPU increased 5.5% to $78.93; business services ARPU increased 15.9% to $264.76.
- Cash from operations less capital expenditures was approximately $312.4 million, calculated from reported figures. Net cash used in investing activities was $2.472 billion, primarily reflecting acquisitions and investments. Cash declined by $186.1 million during the year.
- Operating expenses, excluding depreciation and amortization, were 28.4% of revenue versus 31.6% in 2020; SG&A was 21.6% versus 19.3%. Programming costs and retransmission fees represented 64%–66% of residential video revenue in each of the last three years.
Debt and liquidity
- Year-end long-term debt carrying value was $3.800 billion, including $2.312 billion in term loans, $650 million in 4.00% senior notes due 2030 and $920 million in convertible notes due 2026 and 2028. The company also had $459.8 million available under its revolving credit facility, after letters of credit.
- The Hargray acquisition was funded with cash and new debt, including an $800 million term loan and convertible-note proceeds. Interest expense increased 54.1% to $113.4 million. Approximately $1.2 billion of variable-rate debt was hedged with interest-rate swaps; management estimated a 100-basis-point LIBOR increase would raise annual interest expense by $11.1 million.
- The company reported compliance with debt covenants at year-end and said existing cash, credit facilities and operating cash flow were expected to support requirements over the next 12 months. It had not secured the capital it believed necessary if the MBI call or put option resulted in buying the remaining MBI interests.
Material changes, outlook and risks
- In May 2021 Cable One acquired the remaining approximately 85% of Hargray for approximately $2.0 billion; Hargray contributed $206.9 million of revenue and $15.4 million of net income after acquisition. CableAmerica was acquired for $113.1 million in cash on December 30, 2021.
- In January 2022, the company contributed certain fiber operations, including most Clearwave operations and some Hargray fiber assets, to Clearwave Fiber. Cable One retained an approximately 58% equity interest, valued at $440 million at closing; the contributed operations represented about 3% of consolidated fourth-quarter 2021 revenue.
- Management expects long-term growth in residential data and business services, continued decline in residential video customers and revenue, and further infrastructure investment, including DOCSIS 4.0 upgrades expected to begin in late 2022. No specific financial guidance was provided in the supplied text.
- Over 90% of homes passed had access to Sparklight TV, an IPTV service; completion in non-Hargray markets was expected by early 2022. Management expects the shift from linear video to IPTV to free network capacity for data services.
- Key risks include competition from fiber, municipal, wireless and streaming providers; rising programming costs; acquisition integration and synergy execution; leverage, variable rates and LIBOR transition; supply-chain and labor constraints; cybersecurity and network disruptions; and potential regulatory changes, including net-neutrality requirements.
- COVID-19-related fee waivers and collection suspensions ended in 2020. The company reported continued data-customer growth but cited uncertainty around bad debt, supply availability, labor, expenses and the durability of customer gains. A new ERP system was implemented in 2021; management noted potential operational and control risks.
- Management and the auditor concluded internal control over financial reporting was effective, but Hargray—representing 12.9% of 2021 revenue—was excluded from the 2021 control assessment and audit scope. Hargray controls were designed for inclusion beginning January 1, 2022.
- The filing reports no material pending legal proceedings and no material impairment charges in the periods presented. The MBI net-option valuation was a significant unusual item: its fair-value liability was $123.6 million at year-end, with a $50.3 million non-cash loss recognized in 2021.
Important facts for investors to verify
- Separate organic growth from acquisition-driven growth, particularly for Hargray, and assess post-acquisition margins and integration progress.
- Review debt maturities, variable-rate exposure, covenant capacity and the potential funding needs of the MBI option, exercisable in 2023–2024 or potentially put in 2025.
- Compare data and business-services growth against video subscriber attrition, programming costs and required network investment.
- Assess whether cash generation after capital expenditures can sustain dividends and investment plans; the $2.75 quarterly dividend remained subject to Board approval.
- Review the subsequent Clearwave Fiber joint venture’s economics, governance and effects on consolidated results, as well as Hargray’s integration into financial controls.