Cable One reported a 2.3% uptick in first-quarter revenue to $207.4 million, as the company's priority sectors, residential high-speed internet and business services, continued to grow, while the MSO’s largely abandoned video customer base continues to shrink.
Residential data revenue increased 8.1% year over year to $90.2 million, while business services revenue was up 13% to $27 million
However, residential video revenue declined 3.2% year over year in the first quarter to $72.4 million, with residential video customers shrinking by 12,627 to a base of just 293,726 pay-TV users. The Phoenix, Ariz.-based MSO’s video base shrunk by 12.7% in the 12-month period ending March 31.
Net income was $33.2 million in the first quarter, an increase of 22.8% year-over-year.
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Cable One’s five-year-old strategy of growing residential HSI and biz services at the expense of TV, for which it has a disadvantageous bargaining position with programmers relative to larger cable companies, has largely been lauded by Wall Street.
But among telecom and media investment analysts, the company does have its bulls—MoffettNathanson’s Craig Moffett probably being the most notable. Moffett questions the sustainability of Cable One’s business model, given the slow growth of its residential broadband user base.
Despite the proliferation of enticements like gigabit speed services and just-announced home Wi-Fi optimization, Cable One reported just an 8,386-user uptick in residential broadband users in Q1. The company’s residential HSI base, which now stands at 477,439, has growth only 2.2% in the last year.
Moffett believes the only way for Cable One to sustain growth is to engage in the “complicated politics of relentless price increases. But the analyst concedes that the MSO might have the leverage to get this done.
“Their adherents on Wall Street, of which there are many (at least to judge by the stock price), would argue that Cable One has only scratched the surface, and that they have a lot of pricing runway ahead,” Moffett said in a note to investors this morning. “Never mind that the per capita income in Cable One’s footprint is the lowest (by far) of the companies we cover, or that the percentage of customers living below the poverty line is the highest (also by far). What matters is that there is very little competition in Cable One’s footprint. If you want high speed broadband, where else are you going to go?”
For her part, Cable One CEO Julie Laulis dismissed the notion that the company’s broadband pricing is skyrocketing. “Our standard service is 100 Mbs for $55 a month,” she told investors this morning during the company’s Q1 call. “If you lease modem, it’s $8 more. Now included at no additional cost is our beautiful Wi-Fi One product. And we’re keeping that price steady as long as we can. It’s a great value.
During the call, Moffett asked Cable One veteran Laulis, who was bumped to the CEO position in December, if she’d be doing anything different than her predecessor, Thomas Might.
“As far as strategic issues go and anything being new and different, I’ve been part of this team for 18 years now,” Laulis said. “I’m a wholehearted believer in everything we’re doing… We have an industrial engineering mindset, and we’re looking to improve all aspects of our business.”