Data Drives Growth for Cable One

By Markets Fool.com

Continue Reading Below

Image source: Getty Images.

Cable One (NYSE: CABO), a provider of video, internet, and voice services, reported its second-quarter results after the market closed on Aug. 3. Revenue grew slightly, driven by the company's growing residential data and business services segments, and profits soared due to a significant drop in costs. Strength in these fast-growing portions of Cable One's business was offset by falling subscriber counts in the residential video and voice segments. Here's what investors need to know about Cable One's second-quarter results.

Cable One: The raw numbers

Metric

Q2 2016

Q2 2015

Growth (YOY)

Revenue

$204.6 million

$202.7 million

0.9%

Net income

$26.6 million

$21.4 million

24.3%

Earnings per share

$4.62

$3.67

25.9%

YOY = year over year. Data Source: Cable One Q2 earnings report.

Continue Reading Below

What happened with Cable One this quarter?

Strong growth in data services counteracted declining video and voice revenue.

  • Residential data revenue rose 18.7% year over year to $86 million, making it the largest source of revenue for the company.
  • Residential video and voice revenue slumped 14.2% and 11.5% to $74 million and $10.9 million, respectively.
  • Business services revenue rose 12% to $24.5 million.
  • The number of residential customers declined by 2.7% year over year, with double-digit declines in voice and video offset by a 1.8% increase in data customers.
  • The number of business customers rose by 10.9% year over year, driven by a 7.8% increase in data customers.
  • Average monthly revenue per user increased in all segments.
  • Adjusted EBITDA rose 14.6% year over year to $88.9 million.
  • Free cash flow was $51.3 million, up 28.1% year over year.

What management had to say

Cable One CEO Tom Might outlined the company's progress during the second quarter:

Our residential HSD and business services focus continues to produce strong results as we reach the midpoint of 2016. Our revenue growth has turned positive, and our Adjusted EBITDA margins are among the best in the industry as our higher margin products have shown double digit revenue increases and video no longer dominates our revenues.

Residential data is now the largest contributor to Cable One's revenue, accounting for 42% of sales during the second quarter. Residential video generated just 36.2% of revenue, down for 42.5% during the second quarter of 2015.

Looking forward

While revenue grew slowly during the second quarter, a reduction in operating costs helped the company post a double-digit increase in EPS. Total costs declined by 7.7% year over year, driven in part by a 7.4% reduction in headcount. EPS was helped further by share repurchases, on which the company spent $11.9 million during the second quarter.

The share of Cable One's revenue generated from residential data and business services continued to grow during the quarter, reaching 54.1%, up from 46.6% during the same period last year. While the company has seen its subscriber count shrink over the past twelve months, growth in data and business services is a sign that Cable One is moving in the right direction.

A secret billion-dollar stock opportunity
The world's biggest tech company forgot to show you something, but a few Wall Street analysts and the Fool didn't miss a beat: There's a small company that's powering their brand-new gadgets and the coming revolution in technology. And we think its stock price has nearly unlimited room to run for early in-the-know investors! To be one of them, just click here.

Timothy Green has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Cable One. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.