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Share Name | Share Symbol | Market | Type |
---|---|---|---|
Cable One Inc | NYSE:CABO | NYSE | Common Stock |
Price Change | % Change | Share Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|
1.85 | 0.48% | 389.24 | 394.79 | 380.02 | 383.86 | 76,294 | 01:00:00 |
Cable One, Inc. (NYSE: CABO) (the “Company” or “Cable ONE”) today reported financial and operating results for the quarter ended September 30, 2019.
Third Quarter 2019 Highlights:
Other Highlights:
(1)
Adjusted EBITDA, Adjusted EBITDA margin and Adjusted EBITDA less capital expenditures are defined in the section of this press release entitled “Use of Non-GAAP Financial Measures.” Adjusted EBITDA and Adjusted EBITDA less capital expenditures are reconciled to net income, Adjusted EBITDA margin is reconciled to net profit margin and Adjusted EBITDA less capital expenditures is also reconciled to net cash provided by operating activities. Refer to the “Reconciliations of Non-GAAP Measures” tables within this press release.
Third Quarter 2019 Financial Results Compared to Third Quarter 2018
Revenues increased $16.7 million, or 6.2%, to $285.0 million for the third quarter of 2019, including a $7.0 million contribution from Clearwave Communications (“Clearwave”) operations, which was acquired in January 2019. The remaining increase was driven primarily by organic residential data and business services revenue growth, partially offset by decreases in residential video and advertising sales revenues. For the third quarter of 2019 and 2018, residential data revenues comprised 47.1% and 46.3% of total revenues and business services revenues comprised 17.8% and 14.7% of total revenues, respectively.
Operating expenses (excluding depreciation and amortization) were $94.9 million in the third quarter of 2019 compared to $92.0 million in the third quarter of 2018. The increase was primarily attributable to additional expenses related to Clearwave operations, higher regulatory costs resulting from certain passthrough fees that were historically reported on a net basis and higher compensation and rent expenses, partially offset by lower programming expenses. As a percentage of revenues, operating expenses were 33.3% for the third quarter of 2019 compared to 34.3% for the year-ago quarter.
Selling, general and administrative expenses were $58.9 million for the third quarter of 2019 and decreased $0.6 million, or 1.0%, compared to the third quarter of 2018. The decrease was primarily attributable to lower marketing expenses, professional fees and general and workers’ compensation insurance costs, partially offset by higher rebranding expenses and acquisition-related costs as well as additional expenses related to Clearwave operations. Selling, general and administrative expenses as a percentage of revenues were 20.7% and 22.2% for the third quarter of 2019 and 2018, respectively.
Depreciation and amortization expense was $48.7 million for the third quarter of 2019 and decreased $1.7 million, or 3.3%, compared to the third quarter of 2018. The decrease was due primarily to assets that became fully depreciated since the third quarter of 2018, partially offset by new assets placed in service since the third quarter of 2018 and additional depreciation and amortization related to Clearwave operations. The Company recognized $2.4 million and $3.1 million of net losses on asset disposals during the third quarter of 2019 and 2018, respectively.
Interest expense increased $0.6 million, or 4.0%, to $16.1 million, driven primarily by additional outstanding debt and interest rate swap settlements, partially offset by lower interest rates on variable rate term loans, including loans used to redeem the Company’s higher rate senior unsecured notes in the second quarter of 2019.
Other income of $1.6 million and $1.5 million in the third quarter of 2019 and 2018, respectively, consisted primarily of interest and investment income.
Income tax provision was $15.8 million in the third quarter of 2019 compared to $11.0 million in the prior year quarter. The effective tax rate was 24.1% and 22.4% for the third quarter of 2019 and 2018, respectively. The increase in the effective tax rate primarily related to a decrease in income tax benefits attributable to state effective tax rate changes, partially offset by an increase in income tax benefits attributable to equity-based compensation awards.
Net income was $49.8 million in the third quarter of 2019 compared to $38.3 million in the prior year quarter.
Adjusted EBITDA was $140.0 million and $122.7 million for the third quarter of 2019 and 2018, respectively, an increase of 14.1%. Capital expenditures totaled $65.8 million and $68.3 million for the third quarter of 2019 and 2018, respectively. Adjusted EBITDA less capital expenditures for the third quarter of 2019 was $74.1 million compared to $54.4 million in the prior year quarter.
Liquidity and Capital Resources
At September 30, 2019, the Company had $145.8 million of cash and cash equivalents on hand compared to $264.1 million at December 31, 2018. The Company’s debt balance was approximately $1.3 billion and $1.2 billion at September 30, 2019 and December 31, 2018, respectively. The Company also had $343.3 million available for borrowing under its revolving credit facility as of September 30, 2019.
The Company paid $12.8 million in dividends to stockholders during the third quarter of 2019.
Conference Call
Cable ONE will host a conference call with the financial community to discuss results for the third quarter of 2019 on Thursday, November 7, 2019, at 5 p.m. Eastern Time (ET).
Shareholders, analysts and other interested parties may register for the conference in advance at http://dpregister.com/10135869. Those unable to pre-register may join the call via the live audio webcast on the Cable ONE Investor Relations website or by dialing 1-844-378-6483 (Canada: 1-855-669-9657/International: 1-412-542-4178) shortly before 5 p.m. ET.
A replay of the call will be available from Thursday, November 7, 2019 until Thursday, November 21, 2019 on the Cable ONE Investor Relations website.
Additional Information
The information in this press release should be read in conjunction with the condensed consolidated financial statements and notes thereto contained in the Company’s Quarterly Report on Form 10-Q for the period ended September 30, 2019 (the “Third Quarter 2019 Form 10-Q”), which will be posted on the “SEC Filings” section of the Cable ONE Investor Relations website at ir.cableone.net when it is filed with the U.S. Securities and Exchange Commission (the “SEC”). Investors and others interested in more information about Cable ONE should consult the Company’s website, which is regularly updated with financial and other important information about the Company.
Use of Non-GAAP Financial Measures
The Company uses certain measures that are not defined by generally accepted accounting principles in the United States (“GAAP”) to evaluate various aspects of its business. Adjusted EBITDA, Adjusted EBITDA margin, Adjusted EBITDA less capital expenditures and capital expenditures as a percentage of Adjusted EBITDA are non-GAAP financial measures and should be considered in addition to, not as superior to, or as a substitute for, net income, net profit margin, capital expenditures as a percentage of net income or net cash provided by operating activities reported in accordance with GAAP. Adjusted EBITDA and Adjusted EBITDA less capital expenditures are reconciled to net income, Adjusted EBITDA margin is reconciled to net profit margin and capital expenditures as a percentage of Adjusted EBITDA is reconciled to capital expenditures as a percentage of net income. Adjusted EBITDA less capital expenditures is also reconciled to net cash provided by operating activities. These reconciliations are included in the “Reconciliations of Non-GAAP Measures” tables within this press release.
“Adjusted EBITDA” is defined as net income plus interest expense, income tax provision, depreciation and amortization, equity-based compensation, severance expense, (gain) loss on deferred compensation, acquisition-related costs, (gain) loss on asset disposals, system conversion costs, rebranding costs, other (income) expense and other unusual expenses, as provided in the “Reconciliations of Non-GAAP Measures” tables within this press release. As such, it eliminates the significant non-cash depreciation and amortization expense that results from the capital-intensive nature of the Company’s business as well as other non-cash or special items and is unaffected by the Company’s capital structure or investment activities. This measure is limited in that it does not reflect the periodic costs of certain capitalized tangible and intangible assets used in generating revenues and the Company’s cash cost of debt financing. These costs are evaluated through other financial measures.
“Adjusted EBITDA margin” is defined as Adjusted EBITDA divided by total revenues.
“Adjusted EBITDA less capital expenditures,” when used as a liquidity measure, is calculated as net cash provided by operating activities excluding the impact of capital expenditures, interest expense, income tax provision, changes in operating assets and liabilities, change in deferred income taxes and other unusual expenses, as provided in the “Reconciliations of Non-GAAP Measures” tables within this press release.
“Capital expenditures as a percentage of Adjusted EBITDA” is defined as capital expenditures divided by Adjusted EBITDA.
The Company uses Adjusted EBITDA, Adjusted EBITDA margin, Adjusted EBITDA less capital expenditures and capital expenditures as a percentage of Adjusted EBITDA to assess its performance, and it also uses Adjusted EBITDA less capital expenditures as an indicator of its ability to fund operations and make additional investments with internally-generated funds. In addition, Adjusted EBITDA generally correlates to the measure used in the leverage ratio calculations under the Company’s credit facilities to determine compliance with the covenants contained in the credit agreement. Adjusted EBITDA and capital expenditures are also significant performance measures used by the Company in its annual incentive compensation program. Adjusted EBITDA does not take into account cash used for mandatory debt service requirements or other non-discretionary expenditures, and thus does not represent residual funds available for discretionary uses.
The Company believes Adjusted EBITDA, Adjusted EBITDA margin and capital expenditures as a percentage of Adjusted EBITDA are useful to investors in evaluating the operating performance of the Company. The Company believes that Adjusted EBITDA less capital expenditures is useful to investors as it shows the Company’s performance while taking into account cash outflows for capital expenditures and is one of several indicators of the Company’s ability to service debt, make investments and/or return capital to its shareholders.
Adjusted EBITDA, Adjusted EBITDA margin, Adjusted EBITDA less capital expenditures, capital expenditures as a percentage of Adjusted EBITDA and similar measures with similar titles are common measures used by investors, analysts and peers to compare performance in the Company’s industry, although the Company’s measures of Adjusted EBITDA, Adjusted EBITDA margin, Adjusted EBITDA less capital expenditures and capital expenditures as a percentage of Adjusted EBITDA may not be directly comparable to similarly titled measures reported by other companies.
About Cable ONE
Cable One, Inc. (NYSE: CABO) is a leading broadband communications provider serving more than 900,000 residential and business customers in 21 states through its SparklightTM and Clearwave brands. Sparklight provides consumers with a wide array of connectivity and entertainment services, including high-speed internet and advanced Wi-Fi solutions, cable television and phone service. Sparklight Business and Clearwave provide scalable and cost-effective products for businesses ranging in size from small to mid-market, in addition to enterprise, wholesale and carrier customers.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
This communication may contain “forward-looking statements” that involve risks and uncertainties. These statements can be identified by the fact that they do not relate strictly to historical or current facts, but rather are based on current expectations, estimates, assumptions and projections about the Company’s industry, business, financial results and financial condition. Forward-looking statements often include words such as “will,” “should,” “anticipates,” “estimates,” “expects,” “projects,” “intends,” “plans,” “believes” and words and terms of similar substance in connection with discussions of future operating or financial performance. As with any projection or forecast, forward-looking statements are inherently susceptible to uncertainty and changes in circumstances. The Company’s actual results may vary materially from those expressed or implied in its forward-looking statements. Accordingly, undue reliance should not be placed on any forward-looking statement made by the Company or on its behalf. Important factors that could cause the Company’s actual results to differ materially from those in its forward-looking statements include government regulation, economic, strategic, political and social conditions and the following factors, which are discussed in the Company’s latest Annual Report on Form 10-K as filed with the SEC and the Third Quarter 2019 Form 10-Q to be filed with the SEC:
Any forward-looking statements made by the Company in this communication speak only as of the date on which they are made. The Company is under no obligation, and expressly disclaims any obligation, except as required by law, to update or alter its forward-looking statements, whether as a result of new information, subsequent events or otherwise.
CABLE ONE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
(Unaudited)
Three Months Ended September 30,
(dollars in thousands, except per share data)
2019
2018
$ Change
% Change
Revenues:
Residential data
$
134,320
$
124,089
$
10,231
8.2%
Residential video
80,999
84,583
(3,584)
(4.2)%
Residential voice
10,254
10,169
85
0.8%
Business services
50,662
39,567
11,095
28.0%
Advertising sales
5,054
6,288
(1,234)
(19.6)%
Other
3,702
3,572
130
3.6%
Total Revenues
284,991
268,268
16,723
6.2%
Costs and Expenses:
Operating (excluding depreciation and amortization)
94,898
91,956
2,942
3.2%
Selling, general and administrative
58,861
59,439
(578)
(1.0)%
Depreciation and amortization
48,737
50,414
(1,677)
(3.3)%
Loss on asset disposals, net
2,362
3,140
(778)
(24.8)%
Total Costs and Expenses
204,858
204,949
(91)
(0.0)%
Income from operations
80,133
63,319
16,814
26.6%
Interest expense
(16,079)
(15,460)
(619)
4.0%
Other income, net
1,582
1,503
79
5.3%
Income before income taxes
65,636
49,362
16,274
33.0%
Income tax provision
15,801
11,048
4,753
43.0%
Net income
$
49,835
$
38,314
$
11,521
30.1%
Net Income per Common Share:
Basic
$
8.77
$
6.75
$
2.02
29.9%
Diluted
$
8.68
$
6.70
$
1.98
29.6%
Weighted Average Common Shares Outstanding:
Basic
5,682,167
5,674,224
7,943
0.1%
Diluted
5,741,666
5,717,575
24,091
0.4%
Deferred gain (loss) on cash flow hedges and other, net of tax
$
(28,066)
$
1
$
(28,067)
NM
Comprehensive income
$
21,769
$
38,315
$
(16,546)
(43.2)%
NM = Not meaningful.
CABLE ONE, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(dollars in thousands, except par values)
September 30, 2019
December 31, 2018
Assets
Current Assets:
Cash and cash equivalents
$
145,848
$
264,113
Accounts receivable, net
30,931
29,947
Income taxes receivable
1,761
10,713
Prepaid and other current assets
17,578
13,090
Total Current Assets
196,118
317,863
Property, plant and equipment, net
997,145
847,979
Intangible assets, net
1,030,993
953,851
Goodwill
358,014
172,129
Other noncurrent assets
26,057
11,412
Total Assets
$
2,608,327
$
2,303,234
Liabilities and Stockholders' Equity
Current Liabilities:
Accounts payable and accrued liabilities
$
113,397
$
94,134
Deferred revenue
22,567
18,954
Current portion of long-term debt
17,215
20,625
Total Current Liabilities
153,179
133,713
Long-term debt
1,278,110
1,142,056
Deferred income taxes
267,797
242,127
Other noncurrent liabilities
134,482
9,980
Total Liabilities
1,833,568
1,527,876
Stockholders' Equity
Preferred stock ($0.01 par value; 4,000,000 shares authorized; none issued or outstanding)
-
-
Common stock ($0.01 par value; 40,000,000 shares authorized; 5,887,899 shares issued; and 5,709,593 and 5,703,402 shares outstanding as of September 30, 2019 and December 31, 2018, respectively)
59
59
Additional paid-in capital
48,059
38,898
Retained earnings
939,602
850,292
Accumulated other comprehensive loss
(91,201)
(96)
Treasury stock, at cost (178,306 and 184,497 shares held as of September 30, 2019 and December 31, 2018, respectively)
(121,760)
(113,795)
Total Stockholders' Equity
774,759
775,358
Total Liabilities and Stockholders' Equity
$
2,608,327
$
2,303,234
CABLE ONE, INC.
RECONCILIATIONS OF NON-GAAP MEASURES
(Unaudited)
Three Months Ended September 30,
(dollars in thousands)
2019
2018
$ Change
% Change
Net income
$
49,835
$
38,314
$
11,521
30.1%
Net profit margin
17.5%
14.3%
Plus:
Interest expense
$
16,079
$
15,460
$
619
4.0%
Income tax provision
15,801
11,048
4,753
43.0%
Depreciation and amortization
48,737
50,414
(1,677)
(3.3)%
Equity-based compensation
3,058
2,418
640
26.5%
Severance expense
37
1,111
(1,074)
(96.7)%
Loss on deferred compensation
41
100
(59)
(59.0)%
Acquisition-related costs
1,228
10
1,218
NM
Loss on asset disposals, net
2,362
3,140
(778)
(24.8)%
System conversion costs
1,114
1,735
(621)
(35.8)%
Rebranding costs
3,246
423
2,823
NM
Other income, net
(1,582)
(1,503)
(79)
5.3%
Adjusted EBITDA
$
139,956
$
122,670
$
17,286
14.1%
Adjusted EBITDA margin
49.1%
45.7%
Less:
Capital expenditures
$
65,836
$
68,302
$
(2,466)
(3.6)%
Capital expenditures as a percentage of net income
132.1%
178.3%
Capital expenditures as a percentage of Adjusted EBITDA
47.0%
55.7%
Adjusted EBITDA less capital expenditures
$
74,120
$
54,368
$
19,752
36.3%
NM = Not meaningful.
Three Months Ended September 30,
(dollars in thousands)
2019
2018
$ Change
% Change
Net cash provided by operating activities
$
122,691
$
111,015
$
11,676
10.5%
Capital expenditures
(65,836)
(68,302)
2,466
(3.6)%
Interest expense
16,079
15,460
619
4.0%
Amortization of debt issuance cost
(1,118)
(1,076)
(42)
3.9%
Income tax provision
15,801
11,048
4,753
43.0%
Changes in operating assets and liabilities
(6,516)
(6,586)
70
(1.1)%
Change in deferred income taxes
(11,065)
(9,067)
(1,998)
22.0%
Loss on deferred compensation
41
100
(59)
(59.0)%
Acquisition-related costs
1,228
10
1,218
NM
Severance expense
37
1,111
(1,074)
(96.7)%
System conversion costs
1,114
1,735
(621)
(35.8)%
Rebranding costs
3,246
423
2,823
NM
Other income, net
(1,582)
(1,503)
(79)
5.3%
Adjusted EBITDA less capital expenditures
$
74,120
$
54,368
$
19,752
36.3%
NM = Not meaningful.
CABLE ONE, INC.
OPERATING STATISTICS
(Unaudited)
As of September 30,
Year-Over-Year Change
2019
2018
Amount
%
Homes Passed
2,139,971
2,089,306
50,665
2.4%
Residential Customers
743,946
730,252
13,694
1.9%
Data PSUs
618,983
598,001
20,982
3.5%
Video PSUs
283,303
312,564
(29,261)
(9.4)%
Voice PSUs
91,097
101,443
(10,346)
(10.2)%
Total residential PSUs
993,383
1,012,008
(18,625)
(1.8)%
Business Customers
77,133
70,927
6,206
8.7%
Data PSUs
70,155
62,798
7,357
11.7%
Video PSUs
14,760
16,357
(1,597)
(9.8)%
Voice PSUs
29,998
26,529
3,469
13.1%
Total business services PSUs
114,913
105,684
9,229
8.7%
Total Customers
821,079
801,179
19,900
2.5%
Total non-video
523,016
472,367
50,649
10.7%
Percent of total
63.7%
59.0%
Data PSUs
689,138
660,799
28,339
4.3%
Video PSUs
298,063
328,921
(30,858)
(9.4)%
Voice PSUs
121,095
127,972
(6,877)
(5.4)%
Total PSUs
1,108,296
1,117,692
(9,396)
(0.8)%
Penetration
Data
32.2%
31.6%
0.6%
Video
13.9%
15.7%
(1.8)%
Voice
5.7%
6.1%
(0.4)%
Share of Third Quarter Revenues
Residential data
47.1%
46.3%
0.8%
Business services
17.8%
14.7%
3.1%
Total
64.9%
61.0%
3.9%
ARPU - Third Quarter
Residential data(1)
$
72.09
$
68.83
$
3.26
4.7%
Residential video(1)
$
93.42
$
88.45
$
4.97
5.6%
Residential voice(1), (2)
$
36.85
$
32.95
$
3.90
11.8%
Business services(2), (3)
$
219.92
$
187.69
$
32.23
17.2%
Number of Employees
2,300
2,249
51
2.3%
(1)
Average monthly revenue per unit (“ARPU”) values represent the applicable quarterly residential service revenues (excluding installation and activation fees) divided by the corresponding average of the number of PSUs at the beginning and end of each period, divided by three.(2)
The increases in residential voice and business services ARPU from the prior year were partially a result of certain passthrough fees that were historically reported on a net basis. Residential voice and business services ARPU for the third quarter of 2019 would have been $33.11 and $215.83, respectively, if reported on a comparable basis.(3)
ARPU values represent quarterly business services revenues divided by the average of the number of business customer relationships at the beginning and end of each period, divided by three.
View source version on businesswire.com: https://www.businesswire.com/news/home/20191107005062/en/
Trish Niemann Corporate Communications Director 602-364-6372 patricia.niemann@cableone.biz
Steven Cochran Chief Financial Officer investor_relations@cableone.biz
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