Cable One, Inc.

Ladies and gentlemen, thank you for standing by. My name is Desiree and I will be your conference operator today. At this time, I would like to welcome everyone to the Cable 1-4th Quarter and Full Year 2023 earnings call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, again, press the star 1. I would now like to turn the conference over to Todd Cucci, Chief Financial Officer. Please go ahead.

Good afternoon and welcome to Cable 1's fourth quarter and full year 2023 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. You can find factors that can 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 SEC filings, including our annual report on Form 10-K. Cable 1 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 adjusted EBITDA less capital expenditures as defined in our earnings release. Reconciliations of 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.kable1.net. During today's call, whenever we refer to our results on an adjusted basis, We are excluding certain non-core assets we divested in the second quarter of 2022, which exclusively provided business services. 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, Todd, and good afternoon, everyone. We appreciate you joining us for today's call. With nearly a decade under our belt as a public company, I'd like to start off today's call with a brief reflection on our contrarian roots and how I believe they contribute to our success today and into the future. We have always been a different kind of operator. Our safe harbor strategy that concentrated on small cities and large towns, early pivot away from video to broadband, and focus on attractive rural broadband acquisition. are just a few examples of how we have set ourselves apart from other providers in the past. Today, we continue to lean into those contrarian roots, leveraging our differences and evolving for the future. We have a plan to achieve balanced growth over time, a robust infrastructure to support customers' increasing needs for bandwidth, and a diversified rural footprint where our local operations and the neighborly experience we provide is a meaningful differentiator. We believe this combination will continue to drive high margins and generate significant free cash flow. In the fourth quarter of 2023, Cable 1 was among the few operators who grew customers, expanding our residential broadband base by more than 1,600 customers, notably This growth was driven by both an improvement in new connects year over year and sustained load term rates. We have re-engineered our go-to-market approach to strategically target new customer segments with attractive pricing and product offerings, deploy countermeasures to address competition, and expand our network footprint. We believe these changes to our tactical plan drove our results. This customer growth momentum began at the end of the third quarter, persisted throughout the fourth, and continues to date. Similarly, our unconsolidated investments continue to show strong customer and financial growth. While we are focused on increasing our residential market share, we also understand the importance of achieving balanced growth over time. Our ultimate financial objective remains to consistently generate significant free cash flow for our investors, something we accomplished again in 2023, reaching yet another all-time high for full-year adjusted EBITDA and less capital expenditures with a 9.7% growth year-over-year. This underscores our ability to perform financially, even amid challenging market conditions. We generated this free cash flow while continuing to invest in our already robust network, ensuring we remain ahead of the consumption curve. Nearly a quarter of our residential internet customers now use more than a terabyte of data per month, a 17% increase over the same period last year. We have managed this surge effectively, as overall network utilization during peak hours remained at approximately 20% for both downstream and upstream traffic. Given this available capacity, we are well positioned to moderate our capital spending in support of our efforts to sustain a trajectory of continued free cash flow growth over the long term. As always, we remain steadfast in our commitment to maintain a network so robust that our customers never second guess the reliability of their service. Beginning in the fourth quarter, we increased efforts to broaden our reach by marketing to value conscious customers in ways we haven't previously emphasized. We also introduced value added benefits such as free unlimited data to retain the customers we have served exceptionally well for decades. And we have surgically implemented changes to our pricing and packaging to broaden our appeal among new and existing customers. We are pleased with the early results we are seeing and will continue making significant investments in our marketing and branding strategies to ensure our message reaches a wide audience. Although we face some wired competition, we anticipate that our footprint will remain relatively less competitive than urban markets, providing meaningful opportunities for increasing penetration. However, When a new provider prepares to enter one of our markets, we are ready to respond aggressively with a comprehensive and multidimensional playbook. In targeted situations, we will also compete more aggressively on price. We have a clear understanding of the capital constraints and the return dynamics faced by new entrants to our markets, especially during times of heightened capital and construction costs. We believe that these dynamics, Coupled with our responses have already caused potential newcomers to rethink their entry into some of our markets. In terms of wireless competitors, it bears repeating that we believe Cable 1 offers a superior service, and our new value-based offers go head-to-head on price. Fixed wireless is known to have capacity limitations, with recent reports indicating usage limits and potential throttling. In contrast, our network effortlessly accommodates customers with high data usage needs. It's worth noting that across our footprint, our new customer offers include unlimited data, underscoring our ongoing commitment to listening to our customers and prioritizing their needs with the services we provide. Our efforts to strategically target value-conscious customers and fiercely compete where necessary resulted in downward pressure on ARPU for our residential data customers during the fourth quarter. We anticipated this and expect that we can continue to effectively manage ARPU going forward as we fine-tune our tactics to achieve balanced growth over time. Although targeting the value segment is expected to pressure ARPU in the near term, We view this as an acceptable trade-off for defending our markets, expanding our customer base, and enhancing long-term value. As I said earlier, we understand that achieving balanced growth is essential for our long-term success, and we believe we are currently taking the necessary steps to achieve that. Ultimately, our philosophy aligns with the wisdom of the late, great Charlie Munger, who consistently thought partnerships with companies that, quote, generate substantial cash flow, end quote. In 2023, despite competitive and economic challenges, we achieved our highest level of free cash flow ever. With our focus on subscriber growth in 2024 and discipline over operational and capital expenditures, we are poised to continue growing free cash flow over time. Before I turn it over to Todd, I want to emphasize that the heart of our operation is a personal approach to service delivery. This is another differentiated aspect of our business model. It is rooted in the fact that a majority of our associates and a substantial number of leaders are integral members of the communities in which they live and work. Our customers are their friends and family. Their loyalty and trust matters to our associates. I recently heard a story from one of our systems that beautifully illustrates this commitment. One of our hard-grade technicians was on a service call to troubleshoot a video problem for an elderly customer. As it turned out, it wasn't an issue with our video service. The customer's TV was broken. Recognizing the customer was not in a financial position to purchase a new one, the technician, unbeknownst to anyone, purchased a brand new TV out of his own pocket, delivered it, and set it up for this customer. I could share dozens of similar examples, but I'll simply reiterate, our people truly are the backbone of our company and our success. And now, Todd, who will provide a full recap of our fourth quarter and full year financial performance.