Cable One, Inc.

Hello and welcome to today's Cable One fourth quarter of 2021 earnings call. My name is Elliot and I will be coordinating your call today. If you would like to register a question during the presentation, you may do so by pressing star followed by one on your telephone keypad. I would now like to hand over to our host, Stephen Cochran, CFO. Please go ahead.

Thank you, Elliot. Good afternoon and welcome to Cable One's fourth quarter and full year 2021 earnings call. We're glad to have you join us as we review our results. Before we proceed, I'd like to remind you that today's discussion contains forward-looking statements relating to future events that involve risks and uncertainties. You can find factors that could cause Cable 1's actual results to differ materially from the forward-looking statements discussed during today's call, in today's earnings release, and in our recent SEC filings. Cable 1 is under no obligation and expressly disciplines 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. Reconciliations of the non-GAAP financial measures discussed on this call to the most directly comparable GAAP measures can be found in our earnings release or on our website at ir.gable1.net. Joining me on today's call is our President and CEO, Julie Lawless. With that, let me turn the call over to Julie.

Thank you, Stephen, and good afternoon, everyone. We appreciate you joining us on today's call. The fourth quarter of 2021 completed one of our strongest organic growth years on record. Excluding the impact of our Hargrave acquisition, revenues in adjusted EBITDA for 2021 increased by 5.6% and 11% respectively on a year-over-year basis, and adjusted EBITDA margin was 53.5%. which is a 260 basis point increase over prior year. Our full year results, including Hargrave operations, produced a 21.2% year-over-year increase in total revenues, a 24.5% year-over-year increase in adjusted EBITDA, and an adjusted EBITDA margin of 52.3%, which was 140 basis point improvement year-over-year. Our unique and at times contrarian strategy has paid dividends as evidenced by our success since becoming a publicly traded company in 2015. Contrarian because of our pivot from video to focus on broadband, years in advance of our peers, and unique because of our rural footprint we chose to operate in and the way in which we approach acquisitions and investments. All of this and more has resulted in strong financial results each year since 2015. In 2021, demand for our residential HFC products continued to outpace pre-pandemic trends, exceeding our projections. Driven by continued strong connects and low churn and strategic M&A activities, we added approximately 180,000 residential HFC customers year over year, an increase of 23.2%. Excluding the acquisitions we closed throughout the year, we added approximately 50,000 residential HSD customers, representing an organic growth rate of 6.4%. While our expectation is that we will eventually return to pre-pandemic growth rates, our HSD penetration rate of 38.7% at year end illustrates not only how far we have come, but the opportunities that still lie ahead. As of January 1st, Less than 28% of our markets had a competitor who offers residential broadband download speeds of 100 megs or higher. This relatively small increase in competition across our footprint came about primarily as a result of our acquisitions. As I've said before, we run our business as if every market is highly competitive, offering superior products and services, and maintaining a local focus on customer needs. During a time when some are pointing to an increasingly competitive broadband marketplace as a negative for all internet service providers, we achieved our second-best year in terms of organic customer growth. The demand for our premium HFC products also reached a new high last year. During the fourth quarter, nearly four out of five new customers selected a speed tier at or above 200 megs. which we began offering nearly six years ago, is available across approximately 99% of the markets we serve. Sell-in to this service has more than doubled since 2020 to over 14%. These new sales, combined with upgrades of our existing customers and the offering of unlimited data, resulted in full-year HSD ARPU growth of 5.5% in 2021. As demand for faster speeds continue to grow, we continue to evaluate our suite of service offerings and make adjustments designed to better align with customer needs and behaviors. Because our 200 meg offering has become the most demanded plan, near the end of the first quarter, we will be discontinuing our 100 meg speed tier and migrating those customers to our 200 meg speed tier. At an initial increase of $5 more per month, we believe we are ensuring an experience that lives up to our customers' expectations while also maintaining a great value proposition. Turning to our network, although average data usage increased year-over-year to nearly 550 gigabits per month, our downstream and upstream utilization during peak hours is just 20%. We understand how essential network reliability is, and these continued results are yet another example of our ongoing investment and commitment to providing a reliable customer experience. As we look into business services, a look into business services shows a model of resilience with revenues increasing each successive quarter in 2021 and finishing the year with growth of 31.6% year-over-year, or 8% when excluding both Hargrave and Anniston operations. I'd like to round out discussing another quarter of strong growth by turning to the results of our minority investments where residential HSD and business data customers grew by approximately 13,200 on a sequential basis from Q3. While these new customers are not reported in our results, the continued growth of these businesses highlight the value of our strategic partners to Cable One. Keep in mind that point broadband net ads are now included in this figure. Moving to M&A. On December 30th, we closed on our previously announced acquisition of Cable America, a data, video, and voice provider in central Missouri for $113.1 million in cash on a debt-free basis. As we bring Cable America into our family of brands, We look forward to learning from our new associates as well as building on best practices from our prior integrations. Additionally, at the beginning of January, we closed on a joint venture transaction in which we contributed certain ClearWave and Hargrave fiber assets to a newly formed entity, ClearWave Fiber. ClearWave Fiber intends to invest heavily in bringing fiber to the premise service to residential and business customers across its existing footprint and in near-adjacent areas. With this new joint venture, KBALONG will not only have trusted leadership and equity partners to accelerate fiber-to-the-premise investment opportunities at ClearWave Fiber, but we should also benefit from improved free cash flow at KBALONG. The time and effort spent on ClearWave Fiber is directly correlated with our ongoing integration process for Hargrave. Our teams work diligently throughout the quarter to identify resources and platforms best suited for the new entity. As mentioned previously, we believe this joint venture has the potential to accelerate cost savings associated with the Hargrave integration. While we are prioritizing the Hargrave integration, Fidelity remains ahead of our original run rate cost synergy estimates laid out at the time of the acquisition. Before handing the call over to Steven, I'd like to thank associates across our family of brands for another outstanding year. Together, we continue to face pandemic challenges, manage unprecedented HSD growth, and work to complete a multitude of projects, all with an eye on improving the customer experience. Our associates have no equals in fulfilling our purpose of keeping our customers and communities connected to what matters most. They are truly the heart of Cable 1 and the reason for our ongoing success. We continue to focus on creating a workplace in which our associates feel valued and included, and we were honored that our associates recognized that commitment through our recent ranking on the Forbes list of America's Best Midsize Employers, as well as in the results of our annual Associate Satisfaction Survey. Our associates gave highest marks for taking associate safety seriously and pride in working for Cable One. Responses to both surveys illustrate that our associates believe in our purpose and are committed to our organization and to serving the communities in which we live and work. As a reminder, at our upcoming Investor Day, next Thursday, March 3rd, you will hear even more from senior leadership and our lead independent director, Tom Gaynor, about Cable One's rich history what makes us different, and the significant opportunities that still lie ahead. And now, Steven.