Cable One, Inc. — Q1 2024 Form 10-Q
Reporting period: Three months ended March 31, 2024; comparison is with Q1 2023 unless otherwise noted. Cable One provides broadband, video and voice services across 24 U.S. states and reported approximately 1.1 million customer relationships and 2.8 million homes passed.
Financial and operating performance
| Metric | Q1 2024 | Q1 2023 | Change |
|---|---|---|---|
| Revenue | $404.3 million | $421.9 million | -4.2% |
| Operating income | $119.9 million | $132.1 million | -9.3% |
| Net income | $47.3 million | $57.4 million | -17.6% |
| Diluted EPS | $8.11 | $9.62 | -15.7% |
| Adjusted EBITDA | $217.1 million | $228.8 million | -5.1% |
| Cash from operations | $164.8 million | $161.8 million | +1.8% |
| Capital expenditures | $65.9 million | $96.1 million | -31.4% |
Operating margin was approximately 29.6%, down from 31.3%; Adjusted EBITDA margin was approximately 53.7%, versus 54.2%. Operating cash flow less capital expenditures was approximately $98.9 million, compared with $65.7 million in Q1 2023. Cash and cash equivalents were $210.7 million at quarter-end, up from $190.3 million at December 31, 2023.
Revenue mix showed residential data at $235.8 million (-2.8%), residential video at $60.4 million (-14.1%), residential voice at $8.6 million (-12.2%), and business data at $56.6 million (+3.7%). Total data subscriptions increased 0.3% year over year to 1.066 million; total video subscriptions declined 20.2% to 133,000 and voice subscriptions declined 10.2% to 115,000.
Balance sheet, debt and liquidity
- Total debt carrying value was $3.594 billion, including $19.0 million current and $3.574 billion long-term; gross debt principal was approximately $3.621 billion. Cash was $210.7 million.
- Revolver borrowings were $288 million, with $712 million available under the $1.0 billion facility as of March 31. In April 2024, the company repaid a further $50 million, reducing the balance to $238 million.
- Current assets were $347.3 million and current liabilities were $186.7 million. The company reported compliance with all debt covenants.
- Operating cash flow increased modestly, primarily from favorable working-capital changes, while lower capital expenditures drove the improvement in investing cash use. Financing cash outflow was $74.3 million, including $54.8 million of debt payments and $16.8 million of dividends.
- The quarterly dividend was $2.95 per share. No open-market repurchases were made; $143.1 million remained under the repurchase authorization. January share withholding for equity awards is reported separately from program repurchases.
Material changes, outlook and risks
Revenue and earnings fell as residential data revenue declined and video and voice subscriptions continued to contract. Management attributed the residential data revenue decline mainly to a 2.7% reduction in ARPU from targeted pricing and product offerings, partly offset by subscriber growth. Business data revenue grew with subscriber gains. Lower video-related programming costs helped reduce operating expenses, but higher marketing costs increased SG&A. Net income also reflected $7.2 million of non-cash expense from remeasuring the MBI options; the prior-year period included a $12.3 million non-cash investment mark-to-market gain.
Management expects long-term growth in residential and business data, continued declines in video and residential voice, and ongoing investment in network capacity, fiber expansion and DOCSIS 4.0. It stated that cash, credit facilities and operating cash flows are expected to support requirements over the next 12 months, while noting funding depends on future performance and conditions. No specific quarterly or full-year financial guidance was provided in the filing.
Cable One holds a 45% MBI interest and has a call option to acquire the remaining interests through June 30, 2024; management said it does not currently expect to exercise it. MBI investors may put their interests to Cable One in July–September 2025, which would obligate the company to purchase them. The company said it has not secured the capital it believes would be needed for either option exercise. Key stated risks include competition from fiber, fixed wireless and streaming providers; data-demand and customer trends; programming costs; regulation; cybersecurity; acquisition and systems-integration risks; and substantial debt, variable interest rates and dividend capacity. Legal matters were described as ordinary-course, with no existing matter believed likely to have a material adverse effect. Management reported effective disclosure controls and no material change in internal control over financial reporting.
Important facts for investors to verify
- Whether residential data ARPU and customer growth stabilize amid targeted pricing and competition.
- Whether business data growth can offset continued video and voice subscriber and revenue declines.
- Debt repayment pace, variable-rate exposure and the effect of interest rates despite $1.2 billion of interest-rate swaps.
- Funding requirements and potential purchase price if MBI options are exercised, including the 2025 put obligation.
- Capital expenditure needs, dividend sustainability and any future share repurchases; management’s outlook is conditional and contains no numerical guidance.