Cable ONE Reports Fourth Quarter and Full Year 2018 Results

PHOENIX–(BUSINESS WIRE)–Cable One, Inc. (NYSE: CABO) (the “Company” or “Cable ONE”) today
reported financial and operating results for the quarter and year ended
December 31, 2018.

Fourth Quarter 2018 Highlights:

  • Total revenues were $269.9 million in the fourth quarter of 2018
    compared to $257.7 million in the fourth quarter of 2017, an increase
    of 4.7%. Residential data revenues increased 12.3% and business
    services revenues increased 10.3% year-over-year.
  • Net income was $42.0 million in the fourth quarter of 2018, a decrease
    of 70.9% year-over-year primarily as a result of a significant benefit
    from the Federal tax reform legislation enacted in the fourth quarter
    of 2017. Adjusted EBITDA(1) was $127.6 million, an increase
    of 8.8% year-over-year. Net profit margin was 15.6% and Adjusted
    EBITDA margin(1) was 47.3%.
  • Net cash provided by operating activities was $100.2 million in the
    fourth quarter of 2018, a decrease of 4.3% year-over-year. Adjusted
    EBITDA less capital expenditures(1) was $69.0 million in
    the fourth quarter of 2018, an increase of 3.4% year-over-year.

Full Year 2018 Highlights:

  • Total revenues were $1.1 billion in 2018 compared to $960.0 million in
    2017, an increase of 11.7%. Residential data revenues increased 18.4%
    and business services revenues increased 19.0% year-over-year.
  • Net income was $164.8 million in 2018, a decrease of 29.9%
    year-over-year primarily as a result of the aforementioned Federal tax
    reform legislation. Adjusted EBITDA was $500.8 million, an increase of
    12.9% year-over-year. Net profit margin was 15.4% and Adjusted EBITDA
    margin was 46.7%.
  • Net cash provided by operating activities was $407.8 million in 2018,
    an increase of 25.7% year-over-year. Adjusted EBITDA less capital
    expenditures was $283.1 million in 2018, an increase of 7.1%
    year-over-year.

Other Highlight:

  • In January 2019, the Company completed the acquisition of Clearwave
    Communications, a facilities-based service provider that owns and
    operates a high-capacity fiber network offering dense regional
    coverage in Southern Illinois (“Clearwave”).
(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.

Fourth Quarter 2018 Financial Results Compared to Fourth Quarter
2017

Revenues increased $12.2 million, or 4.7%, to $269.9 million for the
fourth quarter of 2018, driven primarily by residential data and
business services revenue growth, partially offset by decreases in
residential video and voice revenues. For the fourth quarter of 2018 and
2017, residential data revenues comprised 46.8% and 43.7% of total
revenues and business services revenues comprised 14.9% and 14.2% of
total revenues, respectively.

Operating expenses (excluding depreciation and amortization) were $91.8
million in the fourth quarter of 2018 compared to $92.0 million in the
fourth quarter of 2017. As a percentage of revenues, operating expenses
were 34.0% for the fourth quarter of 2018 compared to 35.7% for the
year-ago quarter.

Selling, general and administrative expenses were $57.6 million for the
fourth quarter of 2018 and increased $2.4 million, or 4.4%, compared to
the fourth quarter of 2017. The increase was primarily attributable to
system conversion and acquisition-related costs incurred during the
quarter and an increase in bonus expense. Selling, general and
administrative expenses as a percentage of revenues were 21.4% for both
the fourth quarter of 2018 and 2017.

Depreciation and amortization expense was $49.5 million for the fourth
quarter of 2018 and increased $2.2 million, or 4.6%, compared to the
fourth quarter of 2017. The increase was due primarily to new assets
placed in service since the fourth quarter of 2017, partially offset by
assets that became fully depreciated since the fourth quarter of 2017.
The Company recognized $1.7 million and $3.8 million of net losses on
asset disposals during the fourth quarter of 2018 and 2017, respectively.

Interest expense increased $1.8 million, or 13.5%, to $15.3 million,
driven by an increase in interest rates year-over-year.

Income tax provision was $13.5 million in the fourth quarter of 2018
compared to an income tax benefit of $98.0 million in the prior year
quarter. The year-over-year change was a result of Federal tax reform
legislation enacted in the fourth quarter of 2017, which resulted in a
reduction in statutory tax rates and a remeasurement of the Company’s
deferred tax liability.

Net income was $42.0 million in the fourth quarter of 2018 compared to
$144.3 million in the prior year quarter.

Adjusted EBITDA was $127.6 million and $117.3 million for the fourth
quarter of 2018 and 2017, respectively, an increase of 8.8%. Capital
expenditures totaled $58.6 million and $50.5 million for the fourth
quarter of 2018 and 2017, respectively. Adjusted EBITDA less capital
expenditures for the fourth quarter of 2018 was $69.0 million, an
increase of $2.3 million, or 3.4%, from the prior year quarter.

Full Year 2018 Financial Results Compared to Full Year 2017

Revenues increased $112.3 million, or 11.7%, to $1.1 billion for 2018,
driven primarily by residential data and business services revenue
growth. For 2018 and 2017, residential data revenues comprised 46.0% and
43.4% of total revenues and business services revenues comprised 14.5%
and 13.7% of total revenues, respectively. Full year results for 2017
include eight months of NewWave Communications (“NewWave”) operations,
as the acquisition was completed on May 1, 2017.

Operating expenses (excluding depreciation and amortization) were $370.3
million in 2018 compared to $337.0 million in 2017. The increase in
operating expenses attributable to the NewWave operations was $30.5
million. Excluding the impact of the NewWave operations, operating
expenses increased $2.7 million, or 1.0%. The increase was due primarily
to higher programming and repairs and maintenance costs. As a percentage
of revenues, operating expenses were 34.5% for 2018 compared to 35.1%
for 2017.

Selling, general and administrative expenses were $222.2 million for
2018 and increased $17.8 million, or 8.7%, compared to 2017. The
increase in selling, general and administrative expenses attributable to
the NewWave operations was $12.8 million, including $4.6 million for
system conversion costs. Excluding the impact of the NewWave operations,
selling, general and administrative expenses increased $5.0 million, or
2.7%. The increase was primarily attributable to higher insurance,
marketing, rebranding and compensation expenses, partially offset by
lower acquisition-related costs. Selling, general and administrative
expenses as a percentage of revenues were 20.7% and 21.3% for 2018 and
2017, respectively.

Depreciation and amortization expense was $197.7 million for 2018 and
increased $16.1 million, or 8.9%, compared to 2017. The increase was due
primarily to additional depreciation and amortization from a full year
of the NewWave operations.

The Company recorded $14.2 million and $0.6 million of net losses on
asset disposals during 2018 and 2017, respectively. The prior year
amount consisted of a $7.2 million net loss on asset disposals and a
$6.6 million gain on the sale of a portion of the Company’s previous
headquarters property. The year-over-year increase in the net loss on
asset disposals was primarily attributable to a write-off of excess
equipment and a higher amount of assets retired as new assets replaced
them.

Interest expense increased $13.6 million, or 28.9%, to $60.4 million,
driven by additional outstanding debt incurred to finance the NewWave
acquisition and an increase in interest rates year-over-year.

Income tax provision was $47.2 million in 2018 compared to an income tax
benefit of $45.0 million in 2017, which was a result of the 2017 Federal
tax reform legislation.

Net income was $164.8 million in 2018 compared to $235.2 million in 2017.

Adjusted EBITDA was $500.8 million and $443.6 million for 2018 and 2017,
respectively, an increase of 12.9%. Capital expenditures totaled $217.8
million and $179.4 million for 2018 and 2017, respectively. Adjusted
EBITDA less capital expenditures for 2018 was $283.1 million, an
increase of $18.8 million, or 7.1%, from the prior year.

Liquidity and Capital Resources

At December 31, 2018, the Company had $264.1 million of cash and cash
equivalents on hand compared to $161.8 million at December 31, 2017. The
Company’s debt balance was approximately $1.2 billion at both December
31, 2018 and 2017. The Company also had $195.9 million available for
borrowing under its revolving credit facility as of December 31, 2018.
The Company repurchased 38,814 shares for $26.6 million during 2018,
including 4,786 shares repurchased in the fourth quarter for $4.0
million.

In January 2019, the Company borrowed $250.0 million of term loans
maturing in 2026 to finance, in part, the Clearwave acquisition.

Conference Call

Cable ONE will host a conference call with the financial community to
discuss results for the fourth quarter and full year 2018 on Wednesday,
February 27, 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/10128581.
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 Wednesday, February 27, 2019
until Wednesday, March 13, 2019 on the Cable
ONE Investor Relations
website.

Additional Information Available on Website

The information in this press release should be read in conjunction with
the consolidated financial statements and notes thereto contained in the
Company’s Annual Report on Form 10-K for the period ended December 31,
2018, 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
and Adjusted EBITDA less capital expenditures 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 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, and Adjusted EBITDA margin is reconciled to net profit
margin, in the “Reconciliations of Non-GAAP Measures” tables
within this press release. Adjusted EBITDA less capital expenditures is
also reconciled to net cash provided by operating activities 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 (benefit), 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 operating 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 (benefit), changes in operating assets and liabilities,
change in deferred income taxes and other unusual operating expenses, as
provided in the “Reconciliations of Non-GAAP Measures” tables
within this press release.

The Company uses Adjusted EBITDA, Adjusted EBITDA margin and Adjusted
EBITDA less capital expenditures 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 and senior unsecured notes to determine
compliance with the covenants contained in the credit facilities and
ability to take certain actions under the indenture governing the notes.
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 and Adjusted EBITDA margin 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 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 and Adjusted EBITDA less capital
expenditures 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 800,000 residential and business customers in
21 states. Cable ONE 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. Cable
ONE Business provides 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:

  • rising levels of competition from historical and new entrants in the
    Company’s markets;
  • recent and future changes in technology;
  • the Company’s ability to continue to grow its business services
    products;
  • increases in programming costs and retransmission fees;
  • the Company’s ability to obtain hardware, software and operational
    support from vendors;
  • the effects of any acquisitions by the Company;
  • risks that the Company’s rebranding may not produce the benefits
    expected;
  • adverse economic conditions;
  • the integrity and security of the Company’s network and information
    systems;
  • the impact of possible security breaches and other disruptions,
    including cyber-attacks;
  • the Company’s failure to obtain necessary intellectual and proprietary
    rights to operate its business and the risk of intellectual property
    claims and litigation against the Company;
  • the Company’s ability to retain key employees;
  • legislative or regulatory efforts to impose network neutrality and
    other new requirements on the Company’s data services;
  • additional regulation of the Company’s video and voice services;
  • the Company’s ability to renew cable system franchises;
  • increases in pole attachment costs;
  • changes in local governmental franchising authority and broadcast
    carriage regulations;
  • the potential adverse effect of the Company’s level of indebtedness on
    its business, financial condition or results of operations and cash
    flows;
  • the possibility that interest rates will rise, causing the Company’s
    obligations to service its variable rate indebtedness to increase
    significantly;
  • the Company’s ability to incur future indebtedness;
  • fluctuations in the Company’s stock price;
  • the Company’s ability to continue to pay dividends;
  • dilution from equity awards and potential stock issuances in
    connection with acquisitions;
  • provisions in the Company’s charter, by-laws and Delaware law that
    could discourage takeovers; and
  • the other risks and uncertainties detailed from time to time in the
    Company’s filings with the SEC, including but not limited to its
    latest Annual Report on Form 10-K as 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
December 31,

 
(dollars in thousands, except per share and share data) 2018     2017 $ Change     % Change
Revenues:
Residential data $ 126,397 $ 112,556 $ 13,841 12.3 %
Residential video 82,555 86,608 (4,053 ) (4.7 )%
Residential voice 9,934 11,184 (1,250 ) (11.2 )%
Business services 40,236 36,466 3,770 10.3 %
Advertising sales 7,474 7,348 126 1.7 %
Other   3,256     3,536     (280 ) (7.9 )%
Total Revenues 269,852 257,698 12,154 4.7 %
Costs and Expenses:
Operating (excluding depreciation and amortization) 91,791 92,013 (222 ) (0.2 )%
Selling, general and administrative 57,632 55,229 2,403 4.4 %
Depreciation and amortization 49,506 47,350 2,156 4.6 %
Loss on asset disposals, net   1,659     3,752     (2,093 ) (55.8 )%
Total Costs and Expenses   200,588     198,344     2,244   1.1 %
Income from operations 69,264 59,354 9,910 16.7 %
Interest expense (15,279 ) (13,457 ) (1,822 ) 13.5 %
Other income, net   1,485     425     1,060   249.4 %
Income before income taxes 55,470 46,322 9,148 19.7 %
Income tax provision (benefit)   13,462     (97,971 )   111,433   NM
Net income $ 42,008   $ 144,293   $ (102,285 ) (70.9 )%
 
Net income per common share:
Basic $ 7.40   $ 25.38   $ (17.98 ) (70.8 )%
Diluted $ 7.34   $ 25.09   $ (17.75 ) (70.7 )%
Weighted average common shares outstanding:
Basic 5,674,067 5,684,785 (10,718 ) (0.2 )%
Diluted 5,723,528 5,750,420 (26,892 ) (0.5 )%
 
Other comprehensive income, net of tax $ 254   $ 89   $ 165   185.4 %
Comprehensive income $ 42,262   $ 144,382   $ (102,120 ) (70.7 )%
                       
NM = Not meaningful.
 
CABLE ONE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE
INCOME
(Unaudited)
 
    Year Ended December 31,  
(dollars in thousands, except per share and share data) 2018    

2017(1)

$ Change

    % Change
Revenues:
Residential data $ 492,816 $ 416,355 $ 76,461 18.4 %
Residential video 343,344 332,536 10,808 3.3 %
Residential voice 41,278 43,733 (2,455 ) (5.6 )%
Business services 155,993 131,082 24,911 19.0 %
Advertising sales 24,919 24,824 95 0.4 %
Other   13,945     11,426     2,519   22.0 %
Total Revenues 1,072,295 959,956 112,339 11.7 %
Costs and Expenses:
Operating (excluding depreciation and amortization) 370,269 337,040 33,229 9.9 %
Selling, general and administrative 222,216 204,384 17,832 8.7 %
Depreciation and amortization 197,731 181,619 16,112 8.9 %
Loss on asset disposals, net   14,167     574     13,593   NM
Total Costs and Expenses   804,383     723,617     80,766   11.2 %
Income from operations 267,912 236,339 31,573 13.4 %
Interest expense (60,415 ) (46,864 ) (13,551 ) 28.9 %
Other income, net   4,487     668     3,819   NM
Income before income taxes 211,984 190,143 21,841 11.5 %
Income tax provision (benefit)   47,224     (45,028 )   92,252   NM
Net income $ 164,760   $ 235,171   $ (70,411 ) (29.9 )%
 
Net income per common share
Basic $ 28.98   $ 41.40   $ (12.42 ) (30.0 )%
Diluted $ 28.77   $ 40.92   $ (12.15 ) (29.7 )%
Weighted average common shares outstanding:
Basic 5,684,375 5,680,073 4,302 0.1 %
Diluted 5,725,963 5,747,037 (21,074 ) (0.4 )%
 
Other comprehensive income, net of tax $ 256   $ 94   $ 162   172.3 %
Comprehensive income $ 165,016   $ 235,265   $ (70,249 ) (29.9 )%

_______

NM = Not meaningful.
(1) Results for 2017 include only eight months of NewWave operations.
 
CABLE ONE, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
 

(in thousands, except par value and share
data)

  December 31, 2018     December 31, 2017
Assets
Current Assets:
Cash and cash equivalents $ 264,113 $ 161,752
Accounts receivable, net 29,947 29,930
Income taxes receivable 10,713 21,331
Prepaid and other current assets   13,090     10,898  
Total Current Assets 317,863 223,911
Property, plant and equipment, net 847,979 831,892
Intangible assets, net 953,851 965,745
Goodwill 172,129 172,129
Other noncurrent assets   11,412     10,955  
Total Assets $ 2,303,234   $ 2,204,632  
 
Liabilities and Stockholders’ Equity
Current Liabilities:
Accounts payable and accrued liabilities $ 94,134 $ 117,855
Deferred revenue 18,954 15,008
Current portion of long-term debt   20,625     14,375  
Total Current Liabilities 133,713 147,238
Long-term debt 1,142,056 1,160,682
Deferred income taxes 242,127 207,154
Other noncurrent liabilities   9,980     13,111  
Total Liabilities   1,527,876     1,528,185  
 
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 5,703,402 and 5,731,442 shares
outstanding as of December 31, 2018 and 2017, respectively)
59 59
Additional paid-in capital 38,898 28,412
Retained earnings 850,292 728,386
Accumulated other comprehensive loss (96 ) (352 )
Treasury stock, at cost (184,497 and 156,457 shares held as of
December 31, 2018 and 2017, respectively)
  (113,795 )   (80,058 )
Total Stockholders’ Equity   775,358     676,447  
Total Liabilities and Stockholders’ Equity $ 2,303,234   $ 2,204,632  

Contacts

Trish Niemann
Corporate Communications Director
602-364-6372

Steven Cochran
Chief Financial Officer
602-364-6210

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