Cable One Inc

Previous wording

We are a leading broadband communications provider committed to connecting customers and communities to what matters most. We strive to deliver an effortless experience by offering solutions that make our customers’ lives easier, and by relating to them personally as our neighbors and local business partners. Powered by our fiber-rich infrastructure, the Cable One family of brands provides residential customers with a wide array of connectivity and entertainment services, including Gigabit speeds, advanced Wi-Fi and video. For businesses ranging from small and mid-market up to enterprise, wholesale and carrier, we offer scalable, cost-effective solutions that enable businesses of all sizes to grow, compete and succeed. We believe the services we provide are critical to the development of new businesses and drive economic growth in the non-metropolitan, secondary and tertiary markets that we serve in 24 Western, Midwestern and Southern states. As of March 31, 2024, approximately 74% of our customers were located in seven states: Arizona, Idaho, Mississippi, Missouri, Oklahoma, South Carolina and Texas. We provided services to approximately 1.1 million residential and business customers out of approximately 2.8 million homes passed as of March 31, 2024. Of these customers, approximately 1,066,000 subscribed to data services, 133,000 subscribed to video services and 115,000 subscribed to voice services.

Current wording

We are a leading broadband communications provider committed to connecting customers and communities to what matters most. We strive to deliver an effortless experience by offering solutions that make our customers’ lives easier, and by relating to them personally as our neighbors and local business partners. Powered by our fiber-rich infrastructure, the Cable One family of brands provides residential customers with a wide array of connectivity and entertainment services, including Gigabit speeds, advanced Wi-Fi and video. For businesses ranging from small and mid-market up to enterprise, wholesale and carrier, we offer scalable, cost-effective solutions that enable businesses of all sizes to grow, compete and succeed. We believe the services we provide are critical to the development of new businesses and drive economic growth in the non-metropolitan, secondary and tertiary markets that we serve in 24 Western, Midwestern and Southern states. As of June 30, 2024, approximately 74% of our customers were located in seven states: Arizona, Idaho, Mississippi, Missouri, Oklahoma, South Carolina and Texas. We provided services to approximately 1.1 million residential and business customers out of approximately 2.8 million homes passed as of June 30, 2024. Of these customers, approximately 1,063,000 subscribed to data services, 126,000 subscribed to video services and 112,000 subscribed to voice services.

Previous wording

We generate substantially all of our revenues through three primary product lines. Ranked by share of our total revenues through the first three months of 2024, they are residential data (58.3%), business data (14.0%) and residential video (14.9%). The profit margins, growth rates and/or capital intensity of these three primary product lines vary significantly due to competition, product maturity and relative costs.

Current wording

We generate substantially all of our revenues through three primary product lines. Ranked by share of our total revenues through the first six months of 2024, they are residential data (58.4%), residential video (14.7%) and business data (14.2%). The profit margins, growth rates and/or capital intensity of these three primary product lines vary significantly due to competition, product maturity and relative costs.

Previous wording

Residential data service revenues decreased $6.9 million, or 2.8%, due primarily to a 2.7% decrease in ARPU as a result of the implementation of targeted pricing and product offerings in certain markets, including amongst value-conscious customers, partially offset by an increase in residential data subscribers.

Current wording

Residential data service revenues decreased $16.4 million, or 6.7%, due primarily to a 6.9% decrease in ARPU as a result of the implementation of targeted pricing and product offerings in certain markets, including amongst value-conscious customers.

Previous wording

Residential video service revenues decreased $9.9 million, or 14.1%, due primarily to a decrease in residential video subscribers, partially offset by a rate adjustment enacted during the three months ended March 31, 2024.

Current wording

Residential video service revenues decreased $9.0 million, or 13.5%, due primarily to a decrease in residential video subscribers, partially offset by a rate adjustment enacted during the first quarter of 2024.

Previous wording

Residential voice service revenues decreased $1.2 million, or 12.2%, due primarily to a decrease in residential voice subscribers.

Current wording

Residential voice service revenues decreased $1.3 million, or 13.7%, due primarily to a decrease in residential voice subscribers.

Previous wording

Business data revenues increased $2.0 million, or 3.7%, due primarily to an increase in business data subscribers.

Current wording

Business data revenues increased $0.9 million, or 1.6%, due primarily to an increase in business data subscribers.

Previous wording

Business other revenues decreased $2.5 million, or 11.4%, due primarily to a decrease in business video subscribers.

Current wording

Business other revenues decreased $2.4 million, or 11.2%, due primarily to a decrease in business video subscribers.

Previous wording

Operating expenses (excluding depreciation and amortization) were $106.5 million for the three months ended March 31, 2024 and decreased $5.6 million, or 5.0%, compared to the three months ended March 31, 2023. The decrease in operating expenses was primarily attrib utable to $9.2 million of lower programming costs as a result of video customer losses, partially offset by higher rent expense of $1.2 million, network backbone costs of $1.0 million and software costs of $0.9 million. Operating expenses as a percentage of revenues were 26.3% and 26.6% for the three months ended March 31, 2024 and 2023, respectively.

Current wording

Operating expenses (excluding depreciation and amortization) were $105.8 million for the three months ended June 30, 2024 and decreased $7.0 million, or 6.2%, compared to the three months ended June 30, 2023. The decrease in operating expenses was primarily attributable to $8.5 million of lower programming costs as a result of video customer losses and a $2.3 million decrease in labor and other compensation-related costs due in part to certain organizational changes implemented during the second quarter of 2024. These decreases were partially offset by higher health insurance costs, network backbone costs and property and other taxes. Operating expenses as a percentage of revenues were 26.8% and 26.6% for the three months ended June 30, 2024 and 2023, respectively.

Previous wording

Selling, general and administrative expenses were $90.4 million for the three months ended March 31, 2024 and increased $3.6 million, or 4.2%, compared to the three months ended March 31, 2023. The increase in selling, general and administrative expenses was primarily attributable to $3.4 million of higher marketing costs. Selling, general and administrative expenses as a percentage of revenues were 22.4% and 20.6% for the three months ended March 31, 2024 and 2023, respectively.

Current wording

Selling, general and administrative expenses were $90.8 million for the three months ended June 30, 2024 and increased $4.6 million, or 5.3%, compared to the three months ended June 30, 2023. The increase in selling, general and administrative expenses was primarily attributable to $5.5 million of severance costs due to recent organizational changes and $1.2 million of system conversion costs that did not occur in the prior year, partially offset by lower professional services costs and rent expense. Selling, general and administrative expenses as a percentage of revenues were 23.0% and 20.3% for the three months ended June 30, 2024 and 2023, respectively.

Previous wording

Depreciation and amortization expense was $85.6 million for the three months ended March 31, 2024 and increased $0.2 million, or 0.2%, compared to the three months ended March 31, 2023. Depreciation and amortization expense as a percentage of revenues was 21.2% and 20.2% for the three months ended March 31, 2024 and 2023, respectively.

Current wording

Depreciation and amortization expense was $85.3 million for the three months ended June 30, 2024 and decreased $1.9 million, or 2.2%, compared to the three months ended June 30, 2023. Depreciation and amortization expense as a percentage of revenues was 21.6% and 20.6% for the three months ended June 30, 2024 and 2023, respectively.

Previous wording

Interest expense, net, was $35.8 million for the three months ended March 31, 2024 and decreased $1.4 million, or 3.9%, compared to the three months ended March 31, 2023. The decrease in net interest expense was due primarily to higher interest and investment income.

Current wording

Interest expense, net, was $35.0 million for the three months ended June 30, 2024 and decreased $3.8 million, or 9.7%, compared to the three months ended June 30, 2023. The decrease in net interest expense was due primarily to lower outstanding debt balances and higher interest and investment income.

Previous wording

Equity method investment loss, net, was $8.5 million for the three months ended March 31, 2024 and consisted of our $8.2 million and $0.3 million pro rata share of net losses from our Clearwave Fiber and MBI investments, respectively. Equity method investment loss, net, was $16.5 million for the three months ended March 31, 2023 and consisted primarily of our $14.2 million and $2.4 million pro rata share of net losses from our Clearwave Fiber and MBI investments, respectively.

Current wording

Equity method investment loss was $9.1 million for the three months ended June 30, 2024 and consisted of our $7.9 million and $1.3 million pro rata share of net losses from our Clearwave Fiber and MBI investments, respectively. Equity method investment loss, net, was $13.5 million for the three months ended June 30, 2023 and consisted primarily of our $13.0 million and $0.8 million pro rata share of net losses from our Clearwave Fiber and MBI investments, respectively.

Previous wording

Unrealized gain on cash flow hedges and other, net of tax was $18.3 million for the three months ended March 31, 2024 compared to a $17.9 million unrealized loss for the three months ended March 31, 2023. The $36.2 million change was due to smaller increases in forward interest rates for the three months ended March 31, 2024 compared to the prior year period.

Current wording

Unrealized loss on cash flow hedges and other, net of tax was $0.7 million for the three months ended June 30, 2024 compared to a $21.7 million unrealized gain for the three months ended June 30, 2023. The $22.4 million change was due to a decline in forward interest rates during the three months ended June 30, 2024 compared to an increase in the prior year period.

Previous wording

Other expense, net, was $7.1 million for the three months ended March 31, 2024 and consisted primarily of a $7.2 million non-cash loss on fair value adjustment associated with the MBI Net Option. Other income, net, was $1.4 million for the three months ended March 31, 2023 and consisted primarily of a $12.3 million non-cash mark-to-market gain on the investment in Point Broadband, partially offset by a $8.0 million non-cash loss on fair value adjustment associated with the MBI Net Option and $3.3 million of debt issuance costs written off in connection with the entry into the New Credit Agreement.

Current wording

Other expense, net, was $7.8 million for the six months ended June 30, 2024 and consisted primarily of a $15.6 million non-cash loss on fair value adjustment associated with the MBI Net Option, partially offset by a $7.7 million gain related to the C-band spectrum relocation funding received from the federal government. Other expense, net, was $5.2 million for the six months ended June 30, 2023 and consisted primarily of a $14.7 million non-cash loss on fair value adjustment associated with the MBI Net Option and $3.3 million of debt issuance cost write-offs in connection with the entry into the New Credit Agreement, partially offset by a $12.3 million non-cash mark-to-market gain on our investment in Point Broadband.

Previous wording

Income tax provision was $21.1 million and $22.3 million for the three months ended March 31, 2024 and 2023, respectively, and our effective tax rate was 27.4% and 23.2% for the three months ended March 31, 2024 and 2023, respectively. The increase in the effective tax rate was due primarily to a decrease in income tax benefits of $2.1 million resulting from lower equity method investment net losses in the current quarter.

Current wording

Income tax provision was $38.9 million and $43.2 million for the six months ended June 30, 2024 and 2023, respectively, and our effective tax rate was 25.7% and 23.3% for the six months ended June 30, 2024 and 2023, respectively. The increase in the effective tax rate was due primarily to a decrease in income tax benefits of $3.2 million resulting from lower equity method investment net losses in the current period.

Previous wording

Adjusted EBITDA is defined as net income plus net interest expense, income tax provision, depreciation and amortization, equity-based compensation, severance and contract termination costs, acquisition-related costs, net (gain) loss on asset sales and disposals, system conversion costs, net equity method investment (income) loss, net other (income) expense and other unusual items, as provided in the reconciliation tables below. As such, it eliminates the significant non-cash depreciation and amortization expense that results from the capital-intensive nature of our business as well as other non-cash or special items and is unaffected by our 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 our cash cost of debt financing. These costs are evaluated through other financial measures.

Current wording

Adjusted EBITDA is defined as net income plus net interest expense, income tax provision, depreciation and amortization, equity-based compensation, severance and contract termination costs, acquisition-related costs, net (gain) loss on asset sales and disposals, system conversion costs, rebranding costs, net equity method investment (income) loss, net other (income) expense and any special items, as provided in the reconciliation tables below. As such, it eliminates the significant non-cash depreciation and amortization expense that results from the capital-intensive nature of our business as well as other non-cash or special items and is unaffected by our 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 our cash cost of debt financing. These costs are evaluated through other financial measures.

Previous wording

Our primary funding requirements are for our ongoing operations, capital expenditures, potential acquisitions and strategic investments, payments of quarterly dividends and share repurchases. We believe that existing cash balances, our Senior Credit Facilities and operating cash flows will provide adequate support for these funding requirements over the next 12 months. However, our ability to fund operations, make capital expenditures, make future acquisitions and strategic investments, pay quarterly dividends and make share repurchases depends on future operating performance and cash flows, which, in turn, are subject to prevailing economic conditions and to financial, business and other factors, some of which are beyond our control.

Current wording

Our primary funding requirements are for our ongoing operations, capital expenditures, potential acquisitions and strategic investments, payments of quarterly dividends and share repurchases. We believe that our existing cash balances, our Senior Credit Facilities and operating cash flows will provide adequate support for these funding requirements over the next 12 months. However, our ability to utilize those funding sources to fund ongoing operations, make capital expenditures, make future acquisitions and strategic investments, pay quarterly dividends and make share repurchases depends on future operating performance and cash flows, which, in turn, are subject to prevailing economic conditions and to financial, business and other factors, some of which are beyond our control.

Previous wording

As part of our 45% minority equity interest in MBI, we acquired the right, but not the obligation, to purchase all but not less than all of the remaining equity interests in MBI that we do not already own between January 1, 2023 and June 30, 2024 (the "Call Option"). Investors affiliated with GTCR LLC, a private equity firm based in Chicago, have the right, but not the obligation, to sell (and to cause all members of MBI other than us to sell) to us and, in such case, we are obligated to purchase all but not less than all of the direct and indirect equity interests in MBI that we do not already own between July 1, 2025 through September 30, 2025 (the "Put Option"). The purchase price payable upon the exercise of the Call Option or the Put Option, as applicable, will be calculated under a formula based on a multiple of MBI’s adjusted EBITDA as specified in the definitive documentation governing our investment in MBI. We have not yet obtained the capital that we believe will be necessary to pay the purchase price if either the Call Option or the Put Option are exercised. At this time, we do not expect to exercise the Call Option.

Current wording

As part of our 45% minority equity interest in MBI, we acquired the right, but not the obligation, to purchase all but not less than all of the remaining equity interests in MBI that we do not already own if we so elect between January 1, 2023 and June 30, 2024 (the "Call Option"). We did not elect to exercise the Call Option. Investors affiliated with GTCR LLC, a private equity firm based in Chicago, have the right, but not the obligation, to sell (and to cause all members of MBI other than us to sell) to us and, in such case, we are obligated to purchase all but not less than all of the direct and indirect equity interests in MBI that we do not already own, pursuant to such right which may be exercised between July 1, 2025 through September 30, 2025 (the "Put Option"). The purchase price payable upon the exercise of the Put Option, if applicable, will be calculated under a formula based on a multiple of MBI’s adjusted EBITDA as specified in the definitive documentation governing our investment in MBI. If the Put Option is exercised, we expect the transaction would be consummated within three to nine months thereafter, subject to customary closing conditions and regulatory approvals. We believe that our existing cash balances, the anticipated available capacity under the Revolving Credit Facility at the time of the transaction and our operating cash flows will be sufficient to fund the purchase price payable if the Put Option is exercised without needing to raise additional incremental capital. However, we may also opportunistically pursue additional incremental financing transactions depending on market conditions and other factors.

Previous wording

The $3.0 million year-over-year increase in net cash provided by operating activities was primarily attributable to favorable changes in working capital, partially offset by a decrease in Adjusted EBITDA.

Current wording

The $11.1 million year-over-year decrease in net cash provided by operating activities was primarily attributable to a decrease in Adjusted EBITDA, partially offset by favorable changes in working capital.

Previous wording

The $30.7 million decrease in net cash used in investing activities from the prior year period was due primarily to a $29.1 million decrease in cash paid for capital expenditures and $2.3 million of proceeds from the sale of certain buildings held for sale during the first quarter of 2024.

Current wording

The $36.8 million year-over-year decrease in net cash used in investing activities was due primarily to a $40.4 million decrease in cash paid for capital expenditures and a $2.3 million increase in proceeds from the sale of assets during the first half of 2024.

Previous wording

The $0.8 million increase in net cash used in financing activities from theprior year period was due primarily to a $41.8 million increase in net debt repayments, and higher withholding taxes for equity awards, partially offset by $41.8 million of share repurchases during the first quarter of 2023 that did not recur.

Current wording

The $39.9 million year-over-year decrease in net cash used in financing activities was due primarily to payments of $83.1 million for share repurchases and $8.1 million for debt issuance costs during the first half of 2023 that did not recur, partially offset by a $49.8 million increase in net debt repayments.

Previous wording

On May 20, 2022, our Board authorized up to $450.0 million of share repurchases (with no cap as to the number of shares of common stock). We had $143.1 million of remaining share repurchase authorization under the Share Repurchase Program as of March 31, 2024. Additional purchases under the Share Repurchase Program may be made from time to time on the open market and in privately negotiated transactions. The size and timing of these purchases are based on a number of factors, including share price and business and market conditions. Since we first became publicly traded in 2015 through March 31, 2024, we have repurchased 646,244 shares of our common stock at an aggregate cost of $556.9 million. We may, from time to time, continue to opportunistically repurchase shares depending on the trading price of our common stock, market conditions and other factors. We did not repurchase any shares during the three months ended March 31, 2024.

Current wording

On May 20, 2022, our Board authorized up to $450.0 million of share repurchases (with no cap as to the number of shares of common stock). We had $143.1 million of remaining share repurchase authorization under the Share Repurchase Program as of June 30, 2024. Additional purchases under the Share Repurchase Program may be made from time to time on the open market and in privately negotiated transactions. The size and timing of these purchases are based on a number of factors, including share price and business and market conditions. Since we first became publicly traded in 2015 through June 30, 2024, we have repurchased 646,244 shares of our common stock at an aggregate cost of $556.9 million. We may, from time to time, continue to opportunistically repurchase shares depending on the trading price of our common stock, market conditions and other factors. We did not repurchase any shares during the six months ended June 30, 2024.

Previous wording

We currently expect to continue to pay comparable quarterly cash dividends on shares of our common stock, subject to approval of the Board. During the first quarter of 2024, the Board approved a quarterly dividend of $2.95 per share of common stock, which was paid on March 8, 2024, resulting in a total dividend distribution of $16.8 million.

Current wording

We currently expect to continue to pay comparable quarterly cash dividends on shares of our common stock, subject to approval of the Board. During the second quarter of 2024, the Board approved a quarterly dividend of $2.95 per share of common stock, which was paid on June 14, 2024, resulting in a total dividend distribution of $17.1 million.

Previous wording

We repaid $150.0 million of the outstanding Revolving Credit Facility borrowings during 2023. In February 2024, we repaid an additional $50.0 million of the outstanding Revolving Credit Facility borrowings, reducing the outstanding balance to $288.0 million as of March 31, 2024. In April 2024, we repaid another $50.0 million of the outstanding Revolving Credit Facility borrowings, further reducing the outstanding balance to $238.0 million.

Current wording

We repaid $150.0 million of the outstanding Revolving Credit Facility borrowings during 2023. In each of February 2024 and April 2024, we repaid $50.0 million of the outstanding Revolving Credit Facility borrowings, reducing the outstanding balance to $238.0 million. In July 2024, we repaid an additional $50.0 million of the outstanding Revolving Credit Facility borrowings.

Previous wording

As of March 31, 2024, we had approximately$1.8 billion of aggregate outstanding term loans and$288.0 million of borrowings and $712.0 million available for borrowing under the Revolving Credit Facility. A summary of our outstanding term loans as of March 31, 2024 is as follows (dollars in thousands):

Current wording

As of June 30, 2024, we had approximately $1.76 billion of aggregate outstanding term loans and $238.0 million of borrowings (and $762.0 million available for borrowing) under the Revolving Credit Facility. A summary of our outstanding term loans as of June 30, 2024 is as follows (dollars in thousands):

Previous wording

We recorded debt issuance cost amortization of $1.1 million and $1.3 million for the three months ended March 31, 2024 and 2023, respectively, within interest expense in the condensed consolidated statements of operations and comprehensive income. During 2023, we capitalized $7.7 million and wrote-off $3.3 million of debt issuance costs during the three months ended March 31, 2023 in connection with the entry into the New Credit Agreement.

Current wording

We recorded debt issuance cost amortization of $1.1 million and $1.2 million for the three months ended June 30, 2024 and 2023, respectively, and $2.2 million and $2.5 million for the six months ended June 30, 2024 and 2023, respectively, within interest expense in the condensed consolidated statements of operations and comprehensive income. We capitalized $7.8 million and wrote-off $3.3 million of debt issuance costs during the six months ended June 30, 2023 in connection with the entry into the New Credit Agreement.

Previous wording

The unamortized debt discount associated with the Convertible Notes was$11.0 million and $12.0 million as of March 31, 2024 and December 31, 2023, respectively. We recorded debt discount amortization of $1.1 million for both the three months ended March 31, 2024 and 2023 within interest expense in the condensed consolidated statements of operations and comprehensive income.

Current wording

The unamortized debt discount associated with the Convertible Notes was $9.9 million and $12.0 million as of June 30, 2024 and December 31, 2023, respectively. We recorded debt discount amortization of $1.1 million for both the three months ended June 30, 2024 and 2023, and $2.1 million for both the six months ended June 30, 2024 and 2023, respectively, within interest expense in the condensed consolidated statements of operations and comprehensive income.

Previous wording

We have entered into a letter of credit agreement with MUFG which provides for an additional $75.0 million of letter of credit issuing capacity, of which$10.5 million was utilized as of March 31, 2024.

Current wording

We have entered into a letter of credit agreement with MUFG which provides for an additional $75.0 million of letter of credit issuing capacity, of which $10.6 million was utilized as of June 30, 2024.

Previous wording

We are party to two interest rate swap agreements to convert our interest payment obligations with respect to an aggregate of $1.2 billion of our variable rate SOFR indebtedness to a fixed rate. Under the first swap agreement, with respect to a notional amount of $850.0 million, our monthly payment obligation is determined at a fixed base rate of 2.595%. Under the second swap agreement, with respect to a notional amount of $350.0 million, our monthly payment obligation is determined at a fixed base rate of 2.691%. Both interest rate swap agreements are scheduled to mature in the first quarter of 2029 but each may be terminated prior to the scheduled maturity at our election or that of the financial institution counterparty under the terms provided in each swap agreement. We recognized income of $8.2 million and $5.6 million on interest rate swaps during the three months ended March 31, 2024 and 2023, respectively, which were reflected within interest expense in the condensed consolidated statements of operations and comprehensive income.

Current wording

We are party to two interest rate swap agreements to convert our interest payment obligations with respect to an aggregate of $1.2 billion of our variable rate SOFR indebtedness to a fixed rate. Under the first swap agreement, with respect to a notional amount of $850.0 million, our monthly payment obligation is determined at a fixed base rate of 2.595%. Under the second swap agreement, with respect to a notional amount of $350.0 million, our monthly payment obligation is determined at a fixed base rate of 2.691%. Both interest rate swap agreements are scheduled to mature in the first quarter of 2029 but each may be terminated prior to the scheduled maturity at our election or that of the financial institution counterparty under the terms provided in each swap agreement. We recognized income of $8.2 million and $7.2 million on interest rate swaps during the three months ended June 30, 2024 and 2023, respectively, and income of $16.4 million and $12.8 million on interest rate swaps during the six months ended June 30, 2024 and 2023, respectively, which were reflected within interest expense in the condensed consolidated statements of operations and comprehensive income.

Previous wording

Our capital expenditures by category for the three months ended March 31, 2024 and 2023 were as follows (in thousands):

Current wording

Our capital expenditures by category for the six months ended June 30, 2024 and 2023 were as follows (in thousands):