Release Date: August 01, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Cable One Inc (CABO, Financial) executed on a phased plan for long-term growth, driving deeper market penetration and strengthening its competitive position.
- The company experienced improved connects and disconnects on a year-over-year basis for the second consecutive quarter, despite challenges such as the discontinuation of the Affordable Connectivity Program.
- There was strong demand for premium speed tiers, with 45% of new customers opting for higher speeds, resulting in increased overall sell-in ARPU.
- Cable One Inc (CABO) implemented a new program to increase rates for nearly half of its HFC customers, with an option to offset this increase through auto pay and paperless billing, potentially boosting retention rates.
- Business broadband saw a 1.6% increase in year-over-year revenues, with strong demand in carrier, wholesale, and enterprise customer segments, including a notable long-term contract in the Carrier Services segment.
Negative Points
- Total revenues for the second quarter of 2024 decreased to $394.5 million from $424 million in the same quarter of 2023, primarily due to lower ARPU in the residential data customer base.
- Residential data revenues decreased by 6.7% year-over-year, driven by a 6.9% decrease in ARPU due to targeted pricing and product offerings.
- The company faced challenges from the ending of the Affordable Connectivity Program, resulting in a net decrease of about 4,000 customers.
- Selling, general, and administrative expenses increased due to nonrecurring severance costs and continued investment in long-term transformative operating platforms.
- Cable One Inc (CABO) has a significant fiber overlap in its markets, with 42% of its markets overbuilt with fiber, posing competitive challenges.
Q & A Highlights
Q: Can you provide insights on whether EBITDA has reached its trough, considering recent investments and organizational changes?
A: Todd Koetje, CFO: We believe the initiatives we've implemented have had the expected outcomes, and we anticipate stabilization in ARPU. EBITDA margins were consistent sequentially, and with ARPU stabilizing and a stable customer base, we expect profitability to expand from here.
Q: Could you clarify the impact of the Affordable Connectivity Program (ACP) on your subscriber numbers?
A: Julia Laulis, CEO: We lost 4,000 ACP customers in Q2 out of 48,000 total ACP customers. Currently, 91% of ACP customers are retained. However, future churn is possible as customers adjust to ongoing billing amounts.
Q: Regarding ARPU stabilization, should we expect it to stabilize sequentially or year-over-year?
A: Julia Laulis, CEO: The stabilization is expected sequentially. Half of our current HSD customers received a $5 rate increase, which can be offset by enrolling in auto pay. This initiative is expected to stabilize ARPU in the second half of the year.
Q: How do you view the potential for broadband subscriber growth in the second half of the year?
A: Julia Laulis, CEO: Despite ACP headwinds, we are making steady progress. Our focus is on a phased growth plan to increase penetration across all customer segments. We are seeing improved connects and reduced churn, indicating positive momentum.
Q: Are your competitors building fiber in your markets achieving positive returns on capital?
A: Todd Koetje, CFO: The cost of capital and access to capital have changed, making it challenging for competitors to achieve positive returns, especially in rural markets. We expect a slower pace of fiber overbuilds due to these economic dynamics.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
