Cable ONE (CABO) Q3 Earnings Top, Revenues Lag Estimates

Cable ONE Inc. (NYSE:CABO) reported mixed financial results in the third quarter of 2017. The bottom line surpassed the Zacks Consensus Estimate, while the top line missed.

Net Income

Quarterly net income was $31.5 million, reflecting an increase of 50.8% from the third quarter of 2016. Third-quarter 2017 earnings per share of $5.48 surpassed the Zacks Consensus Estimate of $4.91.

Cable One, Inc. Price, Consensus and EPS Surprise

Cable One, Inc. Price, Consensus and EPS Surprise | Cable One, Inc. Quote

Revenues

Total revenues were $253.8 million, up 23.5% year over year. However, it missed the Zacks Consensus Estimate of $255.8 million. Of the total, Residential Data revenues were approximately $109.3 million, reflecting an increase of 26%. Residential Video revenues totaled $88.6 million, up 20%. Residential Voice revenues were $11.3 million, reflecting an increase of 7.5%. Business Services segment generated $35.2 million in revenues, up 38.4%. Advertising sales were $5.9 million, reflecting a decline of 8.9%. Other revenues were $3.6 million, up 40.3%.

Operating Metrics

In the reported quarter, operating expenses totaled around $192 million, up 18.7% year over year. Operating income was $61.9 million, up 41.3% year over year. Adjusted EBITDA was $115.5 million, increasing 32.5% year over year. Adjusted EBITDA margin was 45.5% compared with 42.4% in the year-ago quarter. Net profit margin was 12.4% compared with 10.2% in the year-ago quarter.

Cash Flow

In third-quarter 2017, Cable ONE generated $88.9 million of cash from operations compared with $68 million in the prior-year quarter. Free cash flow in the reported quarter was $36.5 million compared with $41.7 million in the prior-year quarter.

Liquidity

At the end of the third quarter of 2017, Cable ONE had $118.7 million of cash and cash equivalents compared with $138.04 million at the end of 2016. Total debt, at the end of third-quarter 2017, was $1,176.9 million compared with $530.89 million at the end of 2016. At the end of the reported quarter, the debt-to-capitalization ratio was 0.69 compared with 0.54 at the end of 2016.

Operating Statistics

As of Sep 30, total customer base of Cable ONE was 796,110, up 21% year over year. Non-video customer base was 359,649, reflecting an increase of 10.9% year over year. Non-video customers accounted for 55.6% of the legacy Cable ONE customer count compared with 49.3% at the end of the year-ago quarter.

Residential Segment: Total customers were 731,099, reflecting an increase of 20.4% year over year. Data PSUs were 581,510, up 24.6%. Video PSUs were 353,860, up 12.1%. Voice PSUs count totaled 111,295, up 10.7%. Total PSUs were 1,046,665, up 18.6%.

Business Segment: Total customers were 65,011, up 28.3% year over year. Data PSUs were 56,143, up 27.9%. Video PSUs were 16,853, up 22.1%. Voice PSUs totaled 24,220, up 36.9%. Total PSUs were 97,216, up 28.9%.

Average Revenue per User (ARPU): Residential data ARPU was $62.49, reflecting an increase of 0.7%. Residential video ARPU was $81.96, up 6.7%. Residential voice ARPU was $33.26, declining 2.7%. Business services ARPU was $181.37, up 7.4%.

Zacks Rank and Other Stocks

Cable ONE is among the top 10 cable companies in the United States, serving more than 800,000 residential and commercial customers in 21 states with high-speed internet, cable television and telephone service. However, we are concerned about the company’s operation in a saturated and competitive multi-channel U.S. video market, sharing space with leading cable MSOs like Comcast Corp. (NASDAQ:CMCSA) , Charter Communications Inc. (NYSE:T) and AT&T Inc. (NYSE:T) in an intensely competitive cable TV market.

Cable ONE currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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