Cable One reported a 6.5% drop in net income to $24.4 million in the fourth quarter, despite a 16.9% revenue uptick in residential broadband services revenue and a 13% increase in revenue from business services.
The Phoenix, Arizona-based cable operator’s residential video base continued its steady decline, dropping another 9,026 customers in the fourth quarter. The company’s pay-TV base has dropped 12.4% over the last year and now stands at 306,563.
Residential high-speed data, one of Cable One’s two growth priorities along with business services, added only 2,385 customers in the fourth quarter. The company’s residential HSD base grew only 1.8% over the last four quarters to 469,053.
Notably, Cable One’s EBITDA grew by only 0.7% in the fourth quarter to $88.6 million. For his part, MoffettNathanson analyst Craig Moffett wonders if the cable operator can maintain its premium 12.2 x trading multiple, given that its residential HSD business might not be growing fast enough.
“Our concern going in [to Q4] was that, as soon as the company lapped its gigantic year-ago [residential HSD] price increases, subscriber losses would continue, pricing would fall to earth … and the underlying volatility in results would rise to the surface. EBITDA would hit a wall,” Moffett said in a note to investors this morning.
“The future is now,” he added.
With residential broadband growing so slowly, and residential video declining so quickly, and no price increase on the horizon, “where will growth come from now?” Moffett asked. “Revenue growth fell to 1.6% year-over-year, and EBITDA growth fell to just 0.7%.”
As analysts like Moffett pondered the longer term implications of Cable One’s financials, and how they might affect potential M&A suitors like Altice N.V., Julie Laulis made her first quarterly earnings appearance since taking over as CEO of Cable One in December, commenting on the operator’s $735 million purchase of Missouri-based MSO New Wave.
“New Wave is like a mini Cable One,” she told investment analysts during today’s earnings call. “They are about a quarter our size, their markets are very similar to the ones we operate in, and they focus primarily on residential HSD and business services.
Cable One expects the acquisition of New Wave to close in the second quarter.