Company Overview
Cable One Inc. (CABO) is a leading broadband communications provider delivering exceptional service and enabling more than 1 million residential and business customers across 24 states to thrive and stay connected to what matters most. The company's rich history dates back to its founding in 1986, when it started as a small cable TV operator in Mississippi. Over the past four decades, Cable One has evolved into a diversified telecommunications provider, offering a suite of services including high-speed internet, cable television, and telephone services.
One of Cable One's key strengths is its robust infrastructure and cutting-edge technology, which enable the company to stay ahead of the curve in a rapidly changing industry. The company has consistently invested in upgrading and expanding its network, ensuring that its customers have access to the latest broadband capabilities. As of 2024, Cable One's network consisted of a fiber-to-the-premises or hybrid fiber-coaxial architecture, with ample unused capacity to meet the growing data demands of its customer base.
Strategic Evolution
Cable One's journey from a regional cable television provider to a leading broadband communications company has been marked by strategic shifts and adaptations to industry trends. In the early 2000s, the company began investing heavily in upgrading its network infrastructure to offer high-speed internet services, capitalizing on the growing demand for residential and business broadband. This strategic move paid off, as by 2013, Cable One had seen significant growth in its residential data and business data customer bases, which became the company's primary revenue drivers.
One of the major challenges Cable One faced was the industry-wide trend of declining profitability in its video services business. This was primarily due to rising programming costs, competition from streaming content providers, and the increasing preference for wireless voice services over residential landline voice services. In response, Cable One implemented a strategy to de-emphasize its video business and focus on growing its higher-margin residential data and business data services.
To further expand its geographic reach and customer base, Cable One has undertaken several strategic acquisitions in recent years. Notable among these were the acquisitions of Hargray Communications in 2021 and Fidelity Communications in 2022. These acquisitions have allowed the company to scale and diversify its operations, strengthening its position in the market.
Financials
Cable One operates in three primary product lines: residential data, residential video, and business data services. In the first nine months of 2024, residential data revenues accounted for 58.4% of total revenues, residential video service revenues accounted for 14.4%, and business data revenues accounted for 14.3%. The remaining 13.3% came from business video, business voice, and other ancillary services.
The company's financial performance has been a mixed bag in recent years. In 2024, Cable One reported total revenues of $1.58 billion, a 5.9% decrease from the previous year. This decline was primarily driven by a 5.5% drop in residential data revenues, which accounts for the largest portion of the company's top line. However, the company's business data revenues grew by 2.6% during the same period, highlighting the success of its strategic focus on this higher-margin segment.
In the most recent quarter, Cable One reported revenue of $387,213,000 and a net loss of $105,238,000. The company's operating cash flow (OCF) for the quarter was $167,621,000, while free cash flow (FCF) stood at $95,716,000.
The decrease in residential data revenues was primarily due to the discontinuation of the affordable connectivity program, which resulted in the loss of approximately 10,000 existing PSUs through the end of Q3 2024. Additionally, the company experienced above-average churn activity amongst the remaining ACP customer cohort in the early part of Q4 2024.
Despite the revenue challenges, Cable One has remained disciplined in its approach to cost management. In 2024, the company's operating expenses decreased by 5.3% year-over-year, driven by lower programming and franchise costs, as well as a reduction in labor and other compensation-related expenses. This cost-cutting helped the company maintain a healthy adjusted EBITDA margin of 54.1% in 2024, though it was down from 54.6% in the prior year.
Cable One's adjusted EBITDA was $854 million for 2024, compared to $916.9 million for 2023, a decrease of 6.9%. Capital expenditures totaled $286.4 million for 2024, which equates to 33.5% of adjusted EBITDA, compared to $371 million and 40.5% in the prior year. Adjusted EBITDA less capital expenditures was $567.6 million for 2024 compared to $545.9 million for the prior year, a 4% increase.
Liquidity
Cable One's liquidity position remains stable. As of December 31, 2024, the company had approximately $154 million of cash and cash equivalents on hand. The company also had $937 million available for additional borrowings under its $1.25 billion committed revolving credit facility.
The company had a total debt balance of approximately $3.6 billion as of December 31, 2024, consisting of $1.7 billion in term loans, $920 million in convertible notes, $650 million in unsecured notes, $313 million of revolver borrowings and $4 million of finance liabilities. The company's debt-to-equity ratio was 2.003 as of December 31, 2024.
Cable One's current ratio and quick ratio both stand at 1.305, indicating a healthy short-term liquidity position.
Competitive Landscape
One of the key factors impacting Cable One's financial performance has been the rise of fiber competition in its markets. As of 2024, the company estimates that approximately 50% of its footprint is now overlapped by fiber networks, primarily from incumbent telecom providers. This increased competition has put pressure on Cable One's ability to attract and retain customers, particularly in the residential segment.
To address these competitive challenges, Cable One has been focused on enhancing the customer experience through the deployment of intelligent Wi-Fi solutions and cybersecurity offerings. The company has also invested in modernizing its billing and operational systems, which is expected to yield cost savings and improve the efficiency of its service delivery.
Future Outlook
Looking ahead, Cable One's management team remains optimistic about the company's long-term growth prospects. The company is targeting a balanced approach, focusing on both residential data and business data services. In the residential segment, the company plans to use a combination of targeted pricing and product strategies, as well as enhanced customer retention programs, to stabilize its ARPU and grow its subscriber base.
On the business side, Cable One sees significant opportunities for continued growth, particularly in the carrier, enterprise, and wholesale market segments. The company's robust network infrastructure and strategic partnerships with leading technology providers position it well to capitalize on the increasing demand for high-speed, reliable connectivity among commercial customers.
While Cable One did not provide specific financial guidance for 2025, they stated that broadband revenue growth remains their top priority. The company plans to focus on a market and segment-specific approach to drive unit growth and ARPU expansion where appropriate. Cable One will continue to target high-value customers through personalized products and programs, while also growing their pay-as-you-go product for value-conscious customers.
On the business side, Cable One expects to see strong continued growth in their Carrier, Enterprise and Wholesale segments, as well as a continued focus on maximizing revenue growth in their SMB market. The company is confident that the hard work done in 2024 has set the foundation for long-term broadband revenue and cash flow growth.
Overall, Cable One's transformation from a regional cable TV operator to a diversified broadband communications provider has been a challenging, yet necessary, journey. The company's ability to navigate the evolving competitive landscape and technological changes will be crucial to its long-term success. With a focus on innovation, customer experience, and operational efficiency, Cable One is well-positioned to continue shaping the future of connectivity in its markets.