Cable One, Inc. Q4 2025 earnings call

Good afternoon, and welcome to Cable One's fourth quarter and year-end 2025 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, the future competitive structure of our markets, the planned expansion of our mobile service offering, new product rollouts, anticipated cost savings and other benefits to be derived from our billing system migration and our other investments in growth enablement platforms, anticipated benefits from our mobile service offering, future cash flow and capital expenditures, potential uses for our cash flows, our ability and sources of capital to fund the retirement of our 0% convertible notes in Q1.

The upcoming MBI transaction, including the put purchase price, MBI's future debt levels, integration timing, anticipated costs and tax efficiencies, combined leverage ratios and closing date, the anticipated timing for closing of certain asset sales, as well as the merger of Point Broadband with Clearwave Fiber and expected benefits from those transactions, future tax savings and our future financial performance, capital allocation policy, leverage ratios and financing plans.

You can find factors that could cause Cable One'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 forthcoming 2025 annual report on Form 10-K. Cable One 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. 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.cableone.net. Joining me on today's call is our CEO, Jim Holanda, and CFO, Todd Koetje. I'll turn the call over to Todd.

Thanks, Jordan, and good afternoon, everyone. We really appreciate you joining us today. Before I get started, I want to say how pleased we are to have Jim with us at Cable One and joining us for today's call, and I'm honored to introduce him to our stakeholders who may not yet know him. I'll begin by covering a few takeaways from our fourth quarter and full year results, then spend some time highlighting the key initiatives we are prioritizing as we look ahead and continue to build upon the transformation we've embarked on over the last couple of years. After my remarks, I'll turn it over to Jim to share his initial thoughts on the business and the operating environment, and then Jordan will walk us through the more detailed financials. Let's jump in.

During the fourth quarter, residential broadband connect activity showed year-over-year growth, while disconnects improved significantly compared to the previous quarter. As a result, net subscriber results in the fourth quarter improved relative to the declining trends we experienced earlier in 2025, though net subscriber figures remained negative. We continue to operate in a challenging macro environment with competitive pressure from fixed wireless and fiber overbuilds. Against that backdrop, our focus over the last two years has been on equipping the business to operate in a more competitive landscape by transforming our leadership, modernizing our growth enablement platforms, and redefining go-to-market playbooks. With a considerable amount of the foundational work largely behind us, our focus is on defending our existing customer base, capitalizing on profitable growth opportunities, and executing on key efficiency initiatives. I'll first review residential broadband customer trends.

Residential data customers declined by approximately 10,700 in the fourth quarter. Gross connect activity improved sequentially through the first three quarters of 2025 and meaningfully year-over-year in the fourth quarter, while disconnects improved significantly in Q4 versus the third quarter. The fourth quarter represented a step forward relative to the declining trends of the first three quarters of the year. This reflects progress. It is by no means a standard we view as acceptable. The team is highly aligned and focused on driving continued improvement. A key driver of this improvement has been the continued refinement of our go-to-market approach, enabled by the completion of our billing platform transformation.

We have introduced new products, pricing, and offers to better serve value-conscious customers. We're also enhancing the experience for all customers through complementary services that support the in-home customer experience, including premium Wi-Fi powered by Wi-Fi 7, enhanced online security, and holistic technical support for anything in the home our network is enabling. As of the end of the year, over a third of our residential broadband customers were benefiting from the advanced in-home capabilities and experience delivered by our partnership with eero, representing growth of more than 30% year over year. Sell-in adoption for this service exceeded 80% during the quarter as customers continue to recognize the experience enhancements we've invested in, and we mutually benefit from the improved customer satisfaction and reduced churn.

Simplified pricing and clear product structures are enabling our Sparklight teams to more effectively match customers with the right offerings, deliver a more consistent customer experience across our footprint, and stay competitive. At the same time, churn reduction remains a key area of focus. Competitive pressure and customer sensitivity around promotional roll loss continue to influence customer behavior, particularly in a heightened value-conscious environment. That said, we saw meaningful improvement in disconnects during the fourth quarter, and we're applying both discipline and urgency to retention improvement measures. Turning to ARPU, results this quarter were consistent with our expectations and in line with the stability we discussed last quarter, which was remaining within $1 of our second quarter ARPU level. As we've noted previously, some of our go-to-market customer acquisition and retention initiatives will put downward pressure on ARPU.

We expect that pressure to be partially offset by continued adoption of value-enhancing products and services, including higher speed tiers, premium Wi-Fi, eero Plus, TechAssist, our auto-pay program, and other offerings that improve the customer experience. Shifting to competition, I'll start with fixed wireless, which is now essentially ubiquitous across our footprint with multiple providers. Our perspective here remains consistent. Our fiber-based wired network delivers greater reliability, higher speeds, lower latency, and substantial scalable capacity for our broadband customers who continue to demonstrate growing demand for our services. In addition, our network's excess capacity allows us to offer value-conscious packages to new customers while still protecting our accretive unit economics. Utilization trends continue to demonstrate that our network is well-suited to meet growing consumer demand.

In the fourth quarter, average monthly data usage reached approximately 835 Gb per customer, a new high, with more than 30% of customers exceeding 1 TB per month. Despite this growth, peak hour downstream and upstream utilization remained at or below 20%, demonstrating that network capacity remains well ahead of demand and will not be a barrier to growth. Moving on to wired competition, nearly 60% of our passings now face gig-capable wired broadband competition. Of that 60%, just over 50% reflects fiber to the home, largely from incumbent telco providers, while approximately 10% represents markets where we are the fiber to the home provider competing against an upgraded gig-capable MSO. In approximately 15% of our passings, we compete against two other gig-capable wired broadband providers. We are aware of the broader industry consolidation occurring across the broadband landscape.

Following Verizon's acquisition of Frontier, our overlap with Frontier remains less than 10% of our footprint, and a meaningful portion of that overlap has already been upgraded to fiber over the past several years. Similarly, AT&T's acquisition of Lumen's Mass Markets fiber business has minimal direct overlap with our smaller towns and communities, and only a small contingent of passings in our markets were included in that transaction to our knowledge. Looking ahead, we expect many markets to settle into a structure with two wired multi-gig broadband providers alongside wireless options, both fixed and mobile-only, as well as satellite adoption on the rural edge. Over time, we anticipate seeing an environment in which roughly 80% of households are served by wired providers, with the remaining 20% served by wireless or satellite solutions.

Relative to our current penetration, that structure provides a continued opportunity to grow share over the long term and generate attractive shareholder returns. We continue to make progress on our mobile initiatives, moving from the concept to live pilot over the last several months. Importantly, we view this as a complementary product that strengthens our overall value proposition, increases customer lifetime value, and supports both retention and acquisition within residential broadband.

During the fourth quarter, we launched a mobile pilot in six markets, and the service is live today with a small number of customers. Our focus has been on operational readiness, ensuring provisioning, billing, customer care, and field processes are fully integrated before scaling more broadly. Early feedback has been constructive, the team is preparing for a broader launch across the footprint expected in late Q1.

With the pilot complete and the necessary platforms in place, we are positioned to scale mobile in a disciplined and financially responsible manner. Turning to business services, we continue to broaden our commercial reach and sharpen our sales execution. During the quarter, we launched a broker and agent sales channel, expanding our go-to-market efforts into under-penetrated customer segments. Early engagement has been encouraging, and we believe this channel can drive incremental revenue and deepen our presence in targeted commercial verticals over time. Performance in our carrier, wholesale, and enterprise segments strengthened. Average monthly installs during the final three months of 2025 increased compared to the prior year period, reflecting improved execution and growing demand across these solutions. In markets where network density and responsiveness matter most, our dark fiber and direct internet access offerings remain strong differentiators.

We're also pleased to welcome Ed Butler as Senior Vice President of Business Services effective January 2nd. Ed joins Cable One from Mega Broadband, one of our long-standing investments, where he most recently served as Chief Commercial Officer. Under Ed's leadership, we plan to accelerate new product launches designed to expand wallet share within our existing customer base while strengthening our value proposition to acquire new customers. His proven sales leadership will play an important role in advancing our business services strategy. Turning to MBI and integration planning. As we've disclosed, the put option has been exercised, and we expect the transaction to close in October. Given that timing, we've been deliberate about using the lead time we have today to plan thoughtfully with a target towards core integration in under a year from close.

Thanks, Todd. I'm pleased to join today's call and to share a few thoughts on the business. I'm excited to be here at Cable One and have hit the ground running, spending time with the team, listening, learning, and staying focused on execution. We've got a great foundation and a business I believe in, operating in markets where reliable connectivity is critical and a strong network that can scale to meet the needs of residential and commercial customers alike. This is a competitive environment, but it's also one with meaningful opportunity. We serve customers who care deeply about value, experience, and reliability, and our focus is on earning their loyalty every day by differentiating our products and local service. As someone who has many years of competitive experience in the industry, I am excited to dig in and drive improvements.

Importantly, we are pursuing these opportunities from a position of financial strength. We have a strong balance sheet, substantial liquidity, and a business model that generates significant and durable free cash flow. That financial flexibility gives us the ability to invest in growth, reduce debt, and navigate competitive cycles. I'd like to briefly highlight a few priority areas. First, deepening customer relationships. Retention is a powerful driver of long-term value, and we see opportunity to strengthen it through consistent service quality, clear communication, and offerings that provide an enhanced value proposition. Second, thoughtful expansion of our converged offerings. That includes exploring complementary services that enhance the core broadband relationship, investing in advanced in-home technologies, and partnering where it improves both the customer experience and the economics. Third, how we reach and serve new customers.

We'll continue to evolve our sales and service model using digital tools, data, and AI in practical ways to improve efficiency, responsiveness and overall experience while maintaining the local approach that differentiates us. Across both residential and business services, we see opportunity to compete for share, deepen penetration with higher value products, and grow where the economics make sense. All of this is supported by continued investment in our network, which remains central to delivering the performance and highest reliability standards our customers expect, and by ongoing commitment to disciplined debt repayment and a conservative balance sheet management philosophy. To close, I'm encouraged by what I've seen so far. The priorities are clear, the foundation is strong, and I am confident in the team's ability to execute with discipline as we look ahead.

With that, I'll turn it over to Jordan, who will provide a recap of our fourth quarter and full year financial performance.

Now turning to our financial results, touching on key Q4 metrics before discussing full year 2025. For the fourth quarter of 2025, total revenues were $363.7 million compared to $387.2 million for the fourth quarter of 2024, a decrease of 6.1% year-over-year. Residential data and business data revenues decreased by 4.2% and 1.3% respectively. Operating expenses were $93.9 million in the fourth quarter of 2025 compared to $99.9 million in the fourth quarter of last year. The $6 million or 6% decrease was driven primarily by a reduction in programming costs as a result of decreased video subscribers. OpEx was 25.8% of revenues for both Q4 of 2025 and Q4 of 2024.

Selling, general, and administrative expenses were $92.9 million and $96.4 million in the fourth quarters of 2025 and 2024 respectively. The $3.5 million or 3.6% decrease was due primarily lower rebranding and labor costs. SG&A expense represented 25.5% and 24.9% of revenues for Q4 2025 and Q4 2024 respectively. Adjusted EBITDA of $193.9 million decreased 8.1% year-over-year while adjusted EBITDA margin contracted 120 basis points to 53.3%. Capital expenditures for the fourth quarter of 2025 were $74 million, a 2.9% increase from the prior year quarter and included $12.7 million for new market expansion projects and $1.6 million for integration activities.

Adjusted EBITDA less capital expenditures totaled $119.9 million in Q4 2025 compared to $139.1 million in the same quarter last year. Shifting to our full year results, total revenues for 2025 were $1.5 billion compared to $1.58 billion in 2024, with $35 million of the decrease attributable to residential video. Residential data revenues decreased $24.2 million or 2.6% year-over-year due to a 5.8% decline in subscribers, partially offset by a 0.6% increase in ARPU. On the business data side, revenues grew 0.35% year-over-year as growth in our fiber and carrier segments was partially offset by modest subscriber declines and pricing pressure in our SMB business.

Operating expenses were $392.1 million or 26.1% of revenues for 2025 versus $416.8 million or 26.4% of revenues in 2024, with the decrease driven largely by a reduction in programming costs. Selling general and administrative expenses were $381.1 million or 25.4% of revenues in 2025 compared to $366 million or 23.2% last year. The increase in SG&A was due primarily to investments in growth enablement platforms that are expected to generate meaningful operating and SG&A cost savings over time. Adjusted EBITDA for 2025 was $801.7 million or 53.4% of revenues compared to $854 million or 54.1% of revenues in 2024.

Capital expenditures were $285.3 million in 2025, a decrease of 0.4% year-over-year and in line with our previously discussed estimate. During 2025, we invested $32.8 million of CapEx for new market expansion projects and $10.3 million for integration activities. For 2026, we expect capital expenditures to remain substantially consistent with 2025 levels. We generated $516.5 million of adjusted EBITDA less capital expenditures or free cash flow during 2025. In 2024, free cash flow was $567.6 million.

Utilizing our substantial operating cash flows, supplemented by over $130 million of pre-tax proceeds from the monetization of certain equity investments, we prudently and opportunistically paid down a significant amount of our debt during 2025. In addition to $18 million of scheduled term loan amortization payments, we also voluntarily paid down the entire $313 million outstanding balance under our revolving credit facility and repurchased $72.4 million of our senior notes and term loans at very attractive discounts, bringing our total debt pay down to $403.4 million during the year. As you've heard us say, and more importantly, you've seen us do, we will continue to target paying down debt with the focus on deleveraging the balance sheet.

As of year-end, we had $152.8 million of cash and equivalents on hand, and our total debt balance was approximately $3.2 billion, consisting of approximately $1.7 billion in term loans, $920 million in convertible notes, $582 million in unsecured notes, and $3 million of finance lease liabilities. In addition, our $1.25 billion revolving credit facility was fully undrawn as of year-end, providing us with a significant source of committed debt financing. Our net leverage ratio on a last quarter annualized basis was 3.9x. Approximately 85% of our debt contains fixed or synthetically fixed base interest rates that are substantially below current market rates.

Although we have ample capacity under our revolver to retire our convertible notes that mature in March, and we have the ability and the capacity to effect the MBI transaction without needing additional external financing, we continue to actively monitor and evaluate the capital markets for opportunities to proactively affect longer-term capital solutions. Touching on 2026 for a moment, we currently expect our cash income taxes to be between approximately $40 million and $50 million as we continue to track towards cash tax savings of approximately $120 million through 2027 as a result of the tax legislation passed in 2025. Finally, I want to say a few words on our recently announced transactions. In early January, the MBI put option was exercised, and we entered into a purchase agreement to acquire the remaining 55% of MBI that we don't already own.

In 2025, MBI generated $308.9 million of revenue and had approximately 206,000 residential and business data customers across a network spanning approximately 674,000 passings as of year-end. Assuming the acquisition closes on October 1st, we estimate that the MBI purchase price will be approximately $480 million and that the amount of MBI's total net indebtedness at closing will be between $845 million and $895 million, resulting in a pro forma combined leverage a little above 4 times. In anticipation of the closing of this transaction, our teams have been mobilizing for months to proactively prepare for a swift and efficient integration.

As also previously announced earlier this year, we are part of an agreement whereby two of our remaining non-consolidated strategic investments, Point Broadband and Clearwave Fiber, will be coming together in a scaled fiber to the home platform. In conjunction with this transaction, we have agreed to roll over our existing equity investment in both Point and Clearwave and remain a meaningful shareholder in this scaled and growing platform. The combination of these two businesses affords Cable One with greater visibility to investment value maximization, opportunities to drive best practices and greater operational efficiencies, as well as bring greater alignment across the shareholder base as we continue to expand broadband access to rural and underserved communities across the U.S. This transaction, which is subject to customary closing conditions, is expected to close during the second quarter of this year.

Before we open it up for questions, I want to reiterate that while the current environment remains competitive and dynamic, we are confident in the strategy we're executing in the direction of the business. Over the past several quarters, we've made deliberate investments in our people, our platforms, and our go-to-market approach. With much of that foundational work now in place, our focus is squarely on execution, driving more consistent customer outcomes, operating efficiently, and reinforcing the durability of our business model. With that, we are ready to take your questions.