Despite Shrinking Subscriber Base, Cable One Posts Strong Quarter

By Timothy GreenMarketsFool.com

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Cable One (NYSE: CABO), a provider of video, voice, and data services, reported its third-quarter results after the market closed on Nov. 2. Both revenue and earnings grew, driven by strong growth in the company's residential data and business services segments. Cable One continues to lose voice and video subscribers, but higher revenue per subscriber across all segments is helping to offset a declining subscriber base. Here's what investors need to know about Cable One's third-quarter results.

Cable One: The raw numbers

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Data source: Cable One Q3 earnings report.

What happened with Cable One this quarter?

Revenue growth was driven by residential data and business services.

  • Residential data revenue rose 18.8% year over year to $86.8 million. It's now the largest segment for Cable One.
  • Business services revenue increased by 13.2% year over year to $25.4 million.
  • Residential video revenue slumped 9.1% to $73.8 million, residential voice revenue fell 12.3% to $10.5 million, and advertising sales dropped 11.2% to $6.5 million.
  • The number of homes passed grew 1.1% year over year to 1.657 million.
  • The total customer count declined by 1.4%, but the number of non-video customers rose 14.7%, accounting for 49% of all customers.
  • The number of residential customers subscribing to data services rose 1.9% to 467 thousand, while video and voice suffered double-digit customer declines.
  • The number of business customers rose 9.6% year over year to 50,689, driven by strong growth in data.
  • Average monthly revenue per user increased in all segments.
  • Adjusted EBITDA rose 12.6% year over year to $87.2 million.
  • Adjusted EBITDA less capital expenditures increased by 28.2% year over year to $60.8 million.

What management had to say

Cable One CEO Tom Might pointed to a significant increase in the company's adjusted EBITDA margin:

Cable One also provided trailing-12-month subscriber figures:

Looking forward

Operating expenses grew by just 1.9% during the third quarter, which allowed Cable One's bottom line to grow faster than revenue. The company's headcount was down 7.6% year over year, which helped to keep costs in check. Operating income surged nearly 30% year over year, with a higher tax rate reducing net income growth.

The general trends at Cable One remained the same during the third quarter. Video and voice subscribers are in decline, while high-value data and business services subscribers are on the rise. The net result is growing revenue and rising profits.

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Timothy Green has no position in any stocks mentioned. The Motley Fool 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.