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CABO earnings / call

CABO earnings call transcript, November 5, 2026

CABO Q3 Earnings Release

ReplayOfficial webcast

Key takeaways from this call : results vs expectations, guidance, what analysts asked

  • James Holanda 34%
  • Todd Koetje 33%
  • Jordan Morkert 9%
  • Management 6%
  • Analysts 15%

Management

  • James Holanda

    Chief Executive Officer

    10 min

  • Todd Koetje

    Chief Financial Officer

    9 min

  • Jordan Morkert

    Vice President of Investor Relations

    3 min

Analysts · 4

Transcribed automatically by Lician from the company's public webcast; it can contain errors and speaker names are best effort.

  1. Prepared remarks0:00
  2. Operator

    To withdraw your question, press star 1 again. I will now hand the conference over to Jordan Morkert, Vice President of Investor Relations. Jordan, please go ahead.

  3. Jordan MorkertVice President of Investor Relations

    Good afternoon, and welcome to Cable One's third quarter 2026 earnings call. We're glad to have you join us as we review our results. Before we proceed, I would like to remind you that today's discussion contains forward-looking statements relating to future events that involve risks and uncertainties, including... Statements regarding future revenue, customer growth, connects, churn rates in ARPU, future competition, the anticipated benefits of our mobile service offering, new product rollouts, future customer... ...trends, future benefits from our cost savings initiatives, anticipated cost savings and other benefits to be derived from our investments and growth enablement platforms, the expected benefits to be derived from the transition of our advertising sales operations to a... ...third-party provider, our plans to expand our multi-gig capabilities in more markets, future cash flow and capital expenditures, potential uses for our cash flow, MBI's future operating or financial... ...performance, future tax savings, our expectations for monetizing our remaining equity investments, and our future financial performance, capital allocation policy, leverage ratios and related targets, and potential financing. ...plans. You can find factors that could cause CABO1's actual results to differ materially from the forward-looking statements discussed during today's call, in today's earnings release, and in our SEC filings, including our 2025...

  4. ...annual report on Form 10-K and our forthcoming third quarter 2026 quarterly report on Form 10-Q. CABO1 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, future events, or otherwise. Additionally, today's remarks will include a discussion of certain financial measures that are not presented in conformity with U.S. Generally Accepted Accounting Principles, or GAAP. When we refer to free cash flow during today's call, we mean adjust the EBITDA less capital expenditures as defined in our earnings release. Reconciliations of non-GAAP financial measures discussed on this call to the most directly compared... comparable GAAP measures can be found in our earnings release or on our website at ir.cable1.net. Joining me on today's call is our CEO, Jim Holanda, and CFO, Todd Cucci. With that, I'll turn the call over to Jim.

  5. James HolandaChief Executive Officer

    Thank you, Jordan, and good afternoon, everyone. We appreciate you joining us today. Q3 reflected meaningful progress in customer trends. We delivered our strongest quarterly Connect performance. In 12 quarters and our best net ads in seven quarters. While net ads remain negative, the trend improved meaningfully. Today, I'll provide updates on residential broadband and business services, the work underway to improve retention and the customer experience, recent additions to our senior leadership team, and the steps were taken to manage our cost structure. Todd will provide more detail on our financial performance. and ongoing balance sheet management initiatives. Turning to residential broadband, our Connect performance was our strongest in 12 quarters. While we still experienced subscriber losses, net losses narrowed to approximately 7,500 from approximately 17,100 in Q2, representing our best net ad result in seven quarters. Our more balanced acquisition approach continues to show results. Our door-to-door sales efforts nearly doubled from the second quarter, while digital connects grew approximately nine percent. Together, these channels accounted for nearly 44 percent of total connects, up from approximately 38 percent in the second quarter, and approximately 27 percent a year ago. Retention remains an opportunity and a priority. We're making progress on the initiatives discussed on prior calls.

  6. These include free speed upgrades and equipping our retention teams with new tools, including a CRM platform and implementation. AI into our customer management tools. We're also taking a more deliberate approach to promotional roll offs to help manage churn. Alongside those efforts, we remain focused on broadening the value we offer customers through products and services such as mobile. premium wi-fi, cyber security, and tech assist. In Q3, tech assist sales orders more than doubled from the prior quarter, while premium wi-fi subscriptions and attachment rates also increased. These offerings can help deepen customer relationships, support retention, and contribute to ARPU. Competitive pricing and promotional activity remained elevated and put pressure on ARPU in revenue. ARPU declined approximately $2 sequentially. in Q3. We do not expect ARPU to move in a straight line from quarter to quarter as we respond to competition and customer needs. Our focus remains on balancing subscriber growth, retention, and revenue over time. Moving on to business services, we are encouraged by improving sales momentum. Overall sold revenue increased 17% in the third quarter with growth across each of our primary sales channels. Making Q3 our strongest sales quarter of the year. Enterprise and carrier were important contributors with sold revenue increasing approximately 26% and 21% respectively.

  7. Compared with the second quarter. We're also broadening our product portfolio. Following the introduction of UCAS, our cloud-based business communication solution, we've seen encouraging early customer adoption, helping... increase the value of those customer relationships. Additionally, we're piloting mobile for business customers, creating another opportunity to meet more of the needs beyond core connectivity. Together, these offerings support our strategy to deepen customer relationships and grow revenue over time. Our focus now is on scaling these opportunities while improving the speed and consistency with which sold revenue converts to installed billable revenue. Turning to residential mobile, we continue to scale the offering with performance in line with our expectations. Our focus remains on building awareness of Sparklight as a mobile provider and growing adoption amongst our broadband customers. While the business is still small, we continue to see mobile as an opportunity to strengthen those relationships and increase customer lifetime value. Since our last call, we've strengthened our senior leadership team with the addition of Heather McCown. as Chief Operating Officer, Mike Karaschia and Jared Sone as Senior Vice Presidents of Operations, and Courtney Long as Senior Vice President of Customer Experience. Together, they bring extensive experience across broadband. operations, customer care, and business transformation, including leadership roles at several major providers.

  8. These appointments add depth to our team and provide more direct support for our regional operations with a focus on consistent execution and stronger customer relationships. As these leaders build on the work already underway, our priorities remain consistent, sustain our momentum in customer acquisition, and use the tools we put in place to improve retention and the customer experience. Over time, we expect their experience and leadership to help us operate more efficiently and deliver stronger performance. That work also includes aligning our cost structure with the revenue trends. While maintaining the quality of service our customers expect. We continue to expect our key platform investments to deliver additional cost savings and operating efficiencies. We're also taking further steps. to align our cost base with the needs of the business, including an early retirement offering launched this quarter. Across customer service, sales and operations, we're using AI tools and simplifying process. to improve productivity and efficiency while making it easier for customers to do business with us. To close, we made meaningful progress in customer trends this quarter with stronger connect performance and our best net ad performance. Seven quarters building on this momentum remains a priority as we work to improve retention expand the value we deliver to customers and manage our cost structure. The experienced leaders we've added to the team will help advance these priorities.

  9. We have more work ahead, but I remain confident in the long-term opportunity for our business. That confidence is grounded in the strength of our network, the cash flow the business generates, and the opportunities we see to deepen customer relationships and improve execution across. our markets. With that, I'll turn it over to Todd to provide more detail on our financial performance and ongoing balance sheet management activities.

  10. Todd KoetjeChief Financial Officer

    Thanks, Jim. Total revenues for the third quarter of 2026 were $332.2 million. Compared to $376 million for the third quarter of 2025. Residential data revenues decreased by $23.5 million or 10.3% year-over-year, due primarily to a 4.5% decline in ARPU and a 5.3% decrease in subscribers. Business data revenues decreased by $3.9 million year-over-year, or 6.7%, with $2.3 million of the decline attributable to the tower contracts divested in early 2026. Residential video declined by $9.3 million, or 20.7%. Advertising sales, which are included in other revenues, decreased approximately $2.8 million year-over-year, reflecting the July 1st transition of our advertising sales operations to a third-party provider. Under this arrangement, advertising revenues are reported net of a agency fees with a corresponding reduction in expenses. The revenue decline was largely offset by lower costs, and we expect the arrangement to improve the business's contribution to adjusted EBITDA over time. Expenses increased by $2.7 million, or 2.8%, compared to the third quarter of last year, due to higher software and contract labor costs, partially offset by lower programming costs. OpEx represented 29.7% of revenues in Q3 of 2026, and 25.5% in Q3 of 2025. Selling general and administrative costs for the third quarter of 2026. increased by $18.5 million, or 18.4% year-over-year, due primarily to lower labor expense and reduced billing system conversion costs. SG&A was 24.8% of revenues in Q3 of 2026, compared to

  11. 26.8% in the prior year quarter. Adjusted EBITDA for the third quarter of 2026 was $159.8 million, or 48.1% of total revenues, compared to $201.9 million. And 53.7% in Q3 of 2025. Capital expenditures totaled $77.9 million in the third quarter, representing 48.8% of adjusted EBITDA. The 6.1% of the year quarter of 2026 was $179.9 million in the third quarter, representing 48.8% of adjusted EBITDA. The $1 million year-over-year increase in CapEx was driven by the increased momentum in new connect activity, as well as our investments in the latest in-home advanced Wi-Fi technologies and security solutions to drive in. Increased customer satisfaction and related loyalty. We expect full-year CapEx to be in the high $200 million range as we continue to invest in future growth while simultaneously remaining focused on debt. reduction initiatives. Adjusted EBITDA West CapEx was $81.9 million in Q3 of 2026 versus $130.1 million in Q3 of last year. quarter, we recognized several non-cash impairment charges and fair value adjustments related to our franchise agreements, goodwill, and our investment in MBI. These accounting charges do not impact our cash flow, liquidity. Operating strategy or long-term growth initiatives. Additional details are included in our earnings release and form 10Q. During the quarter, we drew a net of $500 million under our revolver as of September 30th. Our cash balance was $674.8 million, while our gross debt totaled $3.55 billion, consisting of approximately $1.65 billion of term loans, $1.05 billion of revolver borrowings, $503 million of unsecured notes.

  12. $345 million of convertible notes, and $3 million of finance lease liabilities. We also had $200 million undrawn under our $1.25 billion committed revolver at the end of the quarter. Taking into account our net debt and Q3 results, our net... Leverage ratio was 4.1 times on a trailing 12-month basis. Our balance sheet continues to be supported by substantial cash balance and strong operating liquidity. We remain focused on strengthening it. And continue to actively evaluate a range of financing alternatives with the objective of maintaining financial flexibility over the long term. With respect to MBI, we continue to evaluate the appropriate next steps and do not have any additional updates. To announce today with that we can open it up for questions.

  13. Q&A15:12
  14. Operator

    The first question is from the line of Greg Williams of TD Cohen. Your line is now open. Please go ahead.

  15. Question · TD Cowen

    Greg WilliamsAnalyst · TD Cowen

    Great, thanks for taking my questions. Yeah, the data sub losses improved better than expected, as you noted, but the broadband ARPU was down 4.5% to 78.48, I think. Is that the sort of strategy? Going forward to sort of trade subscriber gains for, you know, maybe downside ARPU or trading P4Q, if you will, or should we see a more balanced approach going forward? And, you know, when would we see that? The second question is, understanding you're still evaluating next steps and MBC. Yeah, and you can't really say much, but any commentary on the timing and resolution and anything you can do from a balance sheet perspective, you know, while you're in limbo here. Thanks.

  16. James HolandaChief Executive Officer

    Hi, it's Jim.

  17. And let me start with the second question first. And just just point to the 10 queue as it relates to where everything is at item 17 under subsequent events lays out pretty much exactly where we are. And so would refer folks there for any additional details. And, you know, clearly balancing overall ARPU and subscriber gains and longer term penetration gains given the opportunity here is something we remain focused on as I mentioned in the you know it's not linear it's going to bounce around I think from quarter to quarter based based on promo roles and and and go to market strategies and offers is as well as rate adjustments from time to time you know and the idea I think as I mentioned gosh I guess to two quarterly calls ago was you know I think over the long term our expectation is that ARPU is going to come down a little bit as as we try and and balance. out our opportunity in terms of penetration gains and and so we made meaningful progress in Q3 in that regard and you know we. look forward to those trends continuing it's mainly come on the connect side, as I mentioned my remarks and I think the additional opportunity that we're highly focused on is on the retention side we have a lot of new tools. at our disposal now that we are using day to day and hopefully that can help results over time as well. Got it. Thank you.

  18. Operator

    A reminder that if you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star one again.

  19. The next question is from the line of Frank.

  20. Lothan of Raymond James. Your line is open. Please go ahead.

  21. Question

    ?
    FrankAnalyst

    Thank you. Walk us through kind of the sub growth there. You still sort of missed EBITDA. I assume there's a pricing issue there. What exactly are you doing to kind of trying to get that going? And then give us an update on the fiber overlap and the fixed wireless overlap in the market. Thanks.

  22. Management

    Hey, Frank.

  23. Todd KoetjeChief Financial Officer

    It's Todd. I appreciate the question on the sub growth and the pricing dynamic. I think Jim addressed that pretty well. along the previous answer as it relates to, you know, we have an opportunity on that penetration side of the equation that we've talked about quite extensively now for a while. We're starting to see very good progress around that in terms of new customer connects given that dynamics in the industry, both broadband and throughout the telecom dynamics, the pricing dynamics do sell in at a lower rate than obviously what our enterprise ARPU is. So EBITDA, while it is impacted from a lower ARPU, on a more immediate basis, our view is value creation over the long term is much more sustainable for our stakeholders by growing subscribers and a lot of the initiatives that we've put in place and our content. continuing to put in place our focus, not only on the new subscriber side of the equation, but as Jim said on the retentive side of the existing base, we do have some new tools that we feel confident about for that and then, as it relates to your second question you remind me exactly what. we're looking for there yeah can you give us an update on how much fiber coverage you have and overlap with fixed wireless in your market currently yeah I just want to make sure it was related to the fiber of the fiber overlap really didn't move much in the quarter I mean a little bit it's definitely.

  24. still increasing and so you're in that kind of you know mid to high 50s as a percent overlap there which consistent with what we discussed in the past our fiber to the home. percentage of our total passings a little over 11% as we've talked about in the past it's a little bit higher than what it was before so you get basically an overall what I'd call gig capable competitive overlap that's kind of in that. the high 60s and then fixed wireless is you know very ubiquitous across our our footprint doesn't mean that's all three of the major wireless providers in every market but there is one or two in nearly every market we operate. great sorry for the redundancy juggling two different R&D calls. that's all right don't worry about it.

  25. Operator

    the next question is from the line of Craig Moffitt.

  26. your line is open please go ahead.

  27. Question

    ?
    Craig MoffittAnalyst

    hi thank you.

  28. let's stay with the operating side of the business for a second. there were so many changes in the broadband market during the quarter with real. aggressive pricing from especially AT&T early in the quarter and then the price increases late in the quarter and and then obviously Starlink ramping up through the course of the quarter. I wonder if you could just talk a little bit about kind of how the quarter progressed given all those big changes and. And maybe in particular, given your relatively rural footprint, what are you seeing from Starlink and and it is the fear that a lot of investors have that that's kind of FWA 2.0. Appropriate question, Craig, you know, I. The third quarter, to be honest with you, we were not focused on. Competitive pricing and because we have a lot of little fiber companies across 20% of the footprint, we have one, two or three FWA providers that have pricing kind of all over the map. Let alone Starlink, let alone then what our larger competitors like AT&T are doing. Our focus on the third quarter, what was to really balance out our sales channels and focus on. Our go-to-market offer strategies, which basically we're focused on selling gig or higher speeds across as much of the footprint as we possibly can. We think that serves us best over the long run because so many of our FWA and Starlink competitors can't compete with those speeds today. We have the ability to have it competitive.

  29. Management

    Priced across 100% of our footprint, regardless of the competitive landscape there. And that strategy served us well in the third quarter in terms of our results. And so we continue to lean into that. We have a very robust. Network with a lot of excess capacity. And so certainly one of my early observations was, why are we taking advantage of that capability and that capacity and have an improved product experience for our customers? And we'll continue to stay kind of focused on that. You know, interestingly, already we're seeing cyber offer, right? I think you were right to point out that everyone kind of reset price. At the beginning of the fourth quarter, it lasted all of 30 days, nearest I can tell. We're already seeing cyber offers in the market from some competitors. And so we certainly expect. And plan for the pricing dynamic to remain kind of very up and down and various competitive constituents have to do what they need to do, whether you're a fiber overbuilder trying to drive penetration, whether you're the eight. TNT FWA provider that's trying to get to get a hold now in these market and being aggressive. It's just all over the map. And the best course for us is to focus on a price point that makes sense, both for existing customers and especially our new customers as we compete. For these customers and give them the absolute highest quality service that the network can deliver. Thank you.

  30. Operator

    The next question is from the line of Sam McHugh.

  31. of BNP Peribus. Your line is now open. Please go ahead.

  32. Question

    ?
    Sam McHughAnalyst

    Yeah.

  33. Thank you, guys.

  34. Excuse me. Jim, just to follow up on your comments about anything to come down a little bit. I think in the past you talked about this two to five percent reduction maybe needed to stabilize the subscriber losses. I think we're down three and a half from peak now. How much further down from here do you think we need to go if you could maybe give a bit more of an update on what you said before? And then secondly, in business data revenues, I think last couple of quarters it has inflected pretty negatively. Can you talk a bit? about what's happening now on pricing? Is it FWA competition, fiber, any help that would be helpful to you? Thank you. Yeah, on your first question, I still think the comments I made, I think that was two calls. to go are still pretty directionally accurate in terms of how we think about the business and where competitors are at. Having said that to Craig's question just before, will people start to act irrationally, potentially, but then. All of a sudden, as aggressive as Starlink had been, now we see the search pricing and people complaining all over the place in the Midwest and who knows where that that's going to ultimately land. But if we kind of stick to the principles in the game plan. And that I just outlined in terms of just focusing on what we have control over. I still think that kind of $2 to $5 range is off of that, you know, kind of $81, $82 peak is.

  35. Todd KoetjeChief Financial Officer

    Is probably still directionally correct. And just to clarify, was your second question on business services revenue? Correct. Business-based revenues. Yeah. And Sam, it's Todd. I can take that one. One of the things I had in my prepared remarks that I can elaborate on a little bit more again. As it relates to business data, business data was impacted by that asset sale that we completed in the first quarter. That was about a $9 million full year run rate of revenue. Approximately, you know, $6 million of, you know, cash flow on that. So when you pro forma that. Business services was down slightly, but business data has actually been effectively flat to growing. And what Jim talked about in his prepared remarks was the sell in into enterprising carrier actually is selling across the entire business services segment, but specifically business. This is specifically enterprising carrier. We're both up plus 20 points just on a sequential quarter, which gives us a lot of confidence and how that team is really starting to hit its stride. That's the highest quarter from a sold revenue perspective since 2023. So the momentum is there. It will begin to show more on, you know, what I'd say some of the subsequent quarters, but ARPU there has been pretty flat as well. It was a little softer at the beginning of the year in SMB, as we've talked about in the past. Enterprise and carrier seeing some good selling, but for the third quarter, both were relatively flat on the ARPU side of the equation. I just wanted to make sure that you adjusted for the asset sale that impacts the reported figures there.

  36. Thank you for reminding me that, Todd. I had totally forgotten, so my bad. Thank you.

  37. Operator

    There are no further questions at this time. We've reached the end of our Q&A session. I'll now turn the call back to Jim for closing remarks.

  38. James HolandaChief Executive Officer

    Yeah, thanks, Connor. Let me just close by thanking our teammates all across the country for the work they do every day to earn our customers' business. Obviously, there is a lot underway across the company in terms of operational initiatives and execution, and I just appreciate all the effort. that it takes from our teammates to move these priorities forward while keeping our customers and our teammates kind of front and center of all of that work. This quarter's progress is encouraging, and our task is now to build on it and translate better customer trends into stronger results. So thank you all for your time today. We appreciate it.

  39. Operator

    This concludes today's call.

  40. Thank you for attending.

  41. Operator

    You may now disconnect.

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