Cable One reported a narrow 0.7 percent decline in total revenue to $198.2 million in the third quarter, as the company continued to aggressively highlight its movement away from residential video and toward residential and commercial broadband services.
The Phoenix, Ariz.-based mid-sized MSO reported the loss of another 18,842 video subscribers in the third quarter, marking a 36 percent decline in its pay-TV base from the end of 2012, when it embarked on its pivot. Cable One now has 366,294 residential video customers.
"It's been three years since we steered away from residential video services and the triple play and toward broadband and commercial services," said Thomas Might, president and CEO of Cable One, addressing investors. Since that time, he said, the company has seen an 11 percent expansion in EBITDA, as residential and commercial broadband has grown from 37 percent of revenue to 48 percent in the third quarter of 2015.
"This is really new math," Might said. "Every dollar that moves [through residential and commercial broadband] is worth multiple dollars of operating cash flow because the margins are so much higher."
For the third quarter, Cable One's revenue from residential broadband services grew 10.2 percent to $73.1 million.
Notably, however, the MSO only added 572 residential broadband customers in the quarter, so much of the revenue increase came from a consumer price increase. Cable One finished the third quarter with 457,973 residential high-speed broadband customers, up only 2.1 percent in one year.
"Absent unit growth in video or broadband, what remains are price hikes and cost cuts," said Craig Moffett, analyst with MoffettNathanson, in a note to investors on Cable One following the release of the company's third-quarter earnings. "ARPU is rising in video and broadband, and they have another recently announced $5 per month broadband price increase that kicks in in October. They have already jacked up video rates sharply to 'fix' video profitability. With solid cost management, they've managed to sustain and even grow EBITDA without volume growth (EBITDA was up 6.2% YoY)."
Moffett added that if Cable One doesn't offset the loss of its video customers with more broadband customers, the company's revenue will start to fall off "sharply."
And it appears that Cable One is aware of the situation. Just a day after releasing its third-quarter earnings, the company announced that more than 200 cities and towns across the United States "will be able to lay claim to the title 'Gig city' with the 2016 launch of GigaONE, the company's new Gigabit service." Cable One said its new GigaONE service is 40 times faster than the average speed currently offered across the United States, and will be available to the majority of Cable One customers by the end of 2016.
Specifically, Cable One said it will begin offering residential 1 Gbps service over its existing hybrid fiber-coax network in the first quarter of 2016 in a handful of cities in Oklahoma, Texas, Arizona and elsewhere.
Meanwhile, Cable One's business services revenue grew 15.2 percent to $22.4 million, with customers increasing by 1,482 in the quarter to 46,233.
The company said truck rolls declined 36 percent year over year in the third quarter, thanks to improved service efficiencies and its overall strategic shift.
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