Press Release

Cable ONE Reports Fourth Quarter and Full Year 2018 Results

Company Release - 2/27/2019 4:15 PM ET

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  
 
CABLE ONE, INC.
RECONCILIATIONS OF NON-GAAP MEASURES
(Unaudited)
 
  Three Months Ended December 31,

(dollars in thousands)

2018   2017  

$ Change

    % Change
Net income $ 42,008 $ 144,293 $ (102,285 )   (70.9 )%
 
Net profit margin 15.6 % 56.0 %
 
Plus: Interest expense 15,279 13,457 1,822 13.5 %
Income tax provision (benefit) 13,462 (97,971 ) 111,433 NM
Depreciation and amortization 49,506 47,350 2,156 4.6 %
Equity-based compensation 3,224 2,822 402 14.2 %
Severance expense 729 2,512 (1,783 ) (71.0 )%
(Gain) loss on deferred compensation (191 ) 839 (1,030 ) (122.8 )%
Acquisition-related costs 1,734 662 1,072 161.9 %
Loss on asset disposals, net 1,659 3,752 (2,093 ) (55.8 )%
System conversion costs(1) 1,135 - 1,135 NM
Rebranding costs 545 - 545 NM
Other income, net (1,485 ) (425 ) (1,060 ) 249.4 %
Adjusted EBITDA $ 127,605 $ 117,291 $ 10,314 8.8 %
 
Adjusted EBITDA margin 47.3 % 45.5 %
 
Less: Capital expenditures   58,596     50,533     8,063   16.0 %
Adjusted EBITDA less capital expenditures $ 69,009   $ 66,758   $ 2,251   3.4 %
 
NM = Not meaningful.

(1) Comprised of $0.8 million of billing system conversion costs related to NewWave and $0.3 million of enterprise resource planning system (“ERP”) implementation costs.

 
Three Months Ended December 31,

(dollars in thousands)

2018 2017

$ Change

  % Change
Net cash provided by operating activities $ 100,152 $ 104,698 $ (4,546 ) (4.3 )%
Capital expenditures (58,596 ) (50,533 ) (8,063 ) 16.0 %
Interest expense 15,279 13,457 1,822 13.5 %
Amortization of debt issuance cost (1,075 ) (991 ) (84 ) 8.5 %
Income tax provision (benefit) 13,462 (97,971 ) 111,433 NM
Changes in operating assets and liabilities 13,667 (2,531 ) 16,198 NM
Change in deferred income taxes (16,347 ) 97,041 (113,388 ) NM
(Gain) loss on deferred compensation (191 ) 839 (1,030 ) (122.8 )%
Acquisition-related costs 1,734 662 1,072 161.9 %
Severance expense 729 2,512 (1,783 ) (71.0 )%
System conversion costs(1) 1,135 - 1,135 NM
Rebranding costs 545 - 545 NM
Other income, net   (1,485 )   (425 )   (1,060 ) 249.4 %
Adjusted EBITDA less capital expenditures $ 69,009   $ 66,758   $ 2,251   3.4 %
 
NM = Not meaningful.

(1) Comprised of $0.8 million of billing system conversion costs related to NewWave and $0.3 million of ERP implementation costs.

 
CABLE ONE, INC.
RECONCILIATIONS OF NON-GAAP MEASURES
(Unaudited)
 
    Year Ended December 31,  

(dollars in thousands)

2018    

2017(1)

 

$ Change

  % Change
Net income $ 164,760 $ 235,171 $ (70,411 )   (29.9 )%
 
Net profit margin 15.4 % 24.5 %
 
Plus: Interest expense 60,415 46,864 13,551 28.9 %
Income tax provision (benefit) 47,224 (45,028 ) 92,252 NM
Depreciation and amortization 197,731 181,619 16,112 8.9 %
Equity-based compensation 10,486 10,743 (257 ) (2.4 )%
Severance expense 2,347 5,652 (3,305 ) (58.5 )%
Loss on deferred compensation 425 2,753 (2,328 ) (84.6 )%
Acquisition-related costs 1,773 5,942 (4,169 ) (70.2 )%
Loss on asset disposals, net 14,167 574 13,593 NM
System conversion costs(2) 5,037 - 5,037 NM
Rebranding costs 968 - 968 NM
Other income, net (4,487 ) (668 ) (3,819 ) NM
Adjusted EBITDA $ 500,846 $ 443,622 $ 57,224 12.9 %
 
Adjusted EBITDA margin 46.7 % 46.2 %
 
Less: Capital expenditures   217,766     179,363     38,403   21.4 %
Adjusted EBITDA less capital expenditures $ 283,080   $ 264,259   $ 18,821   7.1 %
 
NM = Not meaningful.
(1) Results for 2017 include only eight months of NewWave operations.

(2) Comprised of $4.6 million of billing system conversion costs related to NewWave and $0.4 million of ERP implementation costs.

 
Year Ended December 31,

(dollars in thousands)

2018

2017(1)

$ Change

% Change
Net cash provided by operating activities $ 407,769 $ 324,486 $ 83,283 25.7 %
Capital expenditures (217,766 ) (179,363 ) (38,403 ) 21.4 %
Interest expense 60,415 46,864 13,551 28.9 %
Amortization of debt issuance cost (4,163 ) (3,174 ) (989 ) 31.2 %
Income tax provision (benefit) 47,224 (45,028 ) 92,252 NM
Changes in operating assets and liabilities 18,621 20,185 (1,564 ) (7.7 )%
Change in deferred income taxes (34,973 ) 87,223 (122,196 ) NM
Loss on deferred compensation 425 2,753 (2,328 ) (84.6 )%
Acquisition-related costs 1,773 5,942 (4,169 ) (70.2 )%
Severance expense 2,347 5,652 (3,305 ) (58.5 )%
Write-off of debt issuance costs (110 ) (613 ) 503 (82.1 )%
System conversion costs(2) 5,037 - 5,037 NM
Rebranding costs 968 - 968 NM
Other income, net   (4,487 )   (668 )   (3,819 ) NM
Adjusted EBITDA less capital expenditures $ 283,080   $ 264,259   $ 18,821   7.1 %
 
NM = Not meaningful.
(1) Results for 2017 include only eight months of NewWave operations.

(2) Comprised of $4.6 million of billing system conversion costs related to NewWave and $0.4 million of ERP implementation costs.

 
CABLE ONE, INC.
OPERATING STATISTICS
(Unaudited)
 
As of December 31,   Year-Over-Year Change
2018   2017 Amount   %
Homes Passed (1) 2,093,501 2,145,577 (52,076 ) (2.4 )%
 
Residential Customers 734,250 731,011 3,239 0.4 %
 
Data PSUs 600,716 584,854 15,862 2.7 %
Video PSUs 310,475 346,712 (36,237 ) (10.5 )%
Voice PSUs 99,070   110,013   (10,943 ) (9.9 )%
Total residential PSUs 1,010,261 1,041,579 (31,318 ) (3.0 )%
 
Business Customers 70,615 66,526 4,089 6.1 %
 
Data PSUs 62,358 58,299 4,059 7.0 %
Video PSUs 15,948 17,176 (1,228 ) (7.1 )%
Voice PSUs 26,864   24,868   1,996   8.0 %
Total business services PSUs 105,170 100,343 4,827 4.8 %
 
Total Customers 804,865 797,537 7,328 0.9 %
Total non-video 478,442 435,087 43,355 10.0 %
Percent of total 59.4 % 54.6 %
 
Data PSUs 663,074 643,153 19,921 3.1 %
Video PSUs 326,423 363,888 (37,465 ) (10.3 )%
Voice PSUs 125,934   134,881   (8,947 ) (6.6 )%
Total PSUs 1,115,431 1,141,922 (26,491 ) (2.3 )%
 
Penetration
Data 31.7 % 30.0 % 1.7 %
Video 15.6 % 17.0 % (1.4 )%
Voice 6.0 % 6.3 % (0.3 )%
 
Share of Fourth Quarter Revenues
Residential data 46.8 % 43.7 % 3.1 %
Business services 14.9 % 14.2 % 0.7 %
Total 61.7 % 57.9 % 3.8 %
 
ARPU - Fourth Quarter
Residential data (2) $ 69.90 $ 63.92 $ 5.98 9.4 %
Residential video (2) $ 88.20 $ 82.42 $ 5.78 7.0 %
Residential voice (2) $ 32.97 $ 33.69 $ (0.72 ) (2.1 )%
Business services (3) $ 186.71 $ 182.85 $ 3.86 2.1 %
 
Number of Employees 2,224 2,310 (86 ) (3.7 )%
(1)   Homes passed represents the estimated number of residential and business serviceable addresses within the Company's footprint. During the first quarter of 2018, the number of legacy Cable ONE homes passed was reduced by approximately 74,000 to adjust for duplicate and non-serviceable addresses.
(2) Average monthly revenue per unit 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.
(3) Average monthly revenue per unit values represent quarterly business services revenues (excluding installation and activation fees) divided by the average of the number of business customer relationships at the beginning and end of each period, divided by three.

Trish Niemann
Corporate Communications Director
602-364-6372

Steven Cochran
Chief Financial Officer
602-364-6210

Source: Cable One, Inc.