Author Topic: CABO - Cable One  (Read 36156 times)

ArminvanBuyout

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CABO - Cable One
« on: September 20, 2015, 02:16:13 PM »
Anyone have any thoughts on Cable One?

Was spun off from Graham Holdings on July 1st, and is now trading at around the spin-off value.

I personally am quite bullish on the company due to its transformation from video to broadband.


Liberty

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Re: CABO - Cable One
« Reply #1 on: September 21, 2015, 05:35:33 AM »
"Most haystacks don't even have a needle." |  I'm on Twitter  | This podcast episode is a must-listen

folivera13

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Re: CABO - Cable One
« Reply #2 on: September 21, 2015, 05:21:19 PM »

zippy1

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Re: CABO - Cable One
« Reply #3 on: November 05, 2015, 05:31:13 AM »
Q3 results.
http://finance.yahoo.com/news/cable-one-reports-third-quarter-030500247.html
Quote
Key third quarter highlights:

Net Income was $19.4 million and Adjusted EBITDA1 was $77.4 million, an increase of 6.2% compared to the third quarter of 2014, with an Adjusted EBITDA Margin1 of 39.1% compared to 36.5% in the third quarter of 2014.
Net cash provided by operating activities was $77.5 million. Free Cash Flow1 was $46.0 million, an increase of 123.5% compared to the third quarter of 2014.
Business services revenues were $22.4 million, an increase of 15.2% compared to the third quarter of 2014.
Residential data revenues were $73.1 million, an increase of 10.2% compared to the third quarter of 2014.
Residential data and business services revenues grew to 48.2% of total revenues compared to 43.0% in the third quarter of 2014.
Non-video customers grew from 31% in the third quarter of 2014 to 42% of total customers.
Capital expenditures totaled $31.4 million, a decrease of 39.9% compared to the third quarter of 2014.

dwy000

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Re: CABO - Cable One
« Reply #4 on: November 05, 2015, 09:07:50 AM »
Had to reluctantly exit this one.  The only reason for hanging on is the hope that Charter or Comcast will ultimately come in and consolidate them.  Their operating strategy is highly questionable.  They are almost asking video customers to leave.  Dropped the Viacom channels as well as another content provider and replaced them with no name channels - all while jacking up the price.  No wonder there is 20% y-o-y reductions in video customer count.  I get their arguments but can't say I agree with it.  I think it will take down their attractiveness as an acquisition target and will hurt long term value.

seeker

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Re: CABO - Cable One
« Reply #5 on: November 05, 2015, 01:59:36 PM »
Had to reluctantly exit this one.  The only reason for hanging on is the hope that Charter or Comcast will ultimately come in and consolidate them.  Their operating strategy is highly questionable.  They are almost asking video customers to leave.  Dropped the Viacom channels as well as another content provider and replaced them with no name channels - all while jacking up the price.  No wonder there is 20% y-o-y reductions in video customer count.  I get their arguments but can't say I agree with it.  I think it will take down their attractiveness as an acquisition target and will hurt long term value.

You are missing the picture. They are clearly de-emphasizing video as these customers are not as profitable. Viewing trends are clearly moving to broadband and they have been ahead of the curve. HSD margins are 5x video margins and Business Services margins are 6x video margins. Both segments growing very well. Video subs are down 36% since 2012, yet EBITDA is up 11% over 2012 and EBITDA margins are 450bps higher than 2012. So not sure why you think their operating strategy is questionable.

Further, their capex is drastically being reduced after a 3-4 year period of network investment. The operating leverage has just started to show and will continue to progress in the future. Just look at how their margins are expanding. Capex has been elevated as a result of the investment cycle and will go down to mid/high teens in 2016, bumping up FCF by a lot. 

In addition, they just rolled out their 1Gbps service across their entire footprint, which will encourage customers to upgrade and thereby increase ARPU. They have little competition and little overlap with FiOS so this is pretty big for them. On top of that, they just announced a 10% price increase across ALL customers, which went live October 1st so this is not in 3Q numbers. On the call, CEO said October saw the highest number of new HSD subs in the last 15 months, so the price increases have gone over very well.

This puts run-rate EBITDA at around $340mm, and in 2016 should be around $360mm. At 10x, that would put the stock at $545, and that is before any share repurchases. Should do around $180mm in FCF, at a 5% yield that would put the stock around $600. On top of that you have potential take out, hopefully that doesn't come too soon though.

dwy000

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Re: CABO - Cable One
« Reply #6 on: November 05, 2015, 04:22:44 PM »
No argument as to the direction that cable is headed over the long term.  But the rationale of intentionally pricing profitable customers off of your system doesn't make a lot of sense to me.  It's certainly in contrast to the model being followed by the Malone/Roberts of the cable world.

The basic infrastructure for provision of video and HSD to the home is one and the same so you're basically putting more revenue over the same wire.  As long as you can do it at positive margins why encourage people to leave as opposed to maximize the combined margin per customer (which is the model for the Charter/Comcasts of the world).  Getting rid of video and phone subs won't reduce capex by all that much. Even though the video margin is much lower, it's still very positive and helps support the capex costs.  For a business where volumes are pretty stagnant or declining and growth is largely coming from price increases, driving away existing profitable customers doesn't seem like a strong long term plan.


frommi

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Re: CABO - Cable One
« Reply #7 on: January 04, 2016, 10:27:08 AM »
This puts run-rate EBITDA at around $340mm, and in 2016 should be around $360mm. At 10x, that would put the stock at $545, and that is before any share repurchases. Should do around $180mm in FCF, at a 5% yield that would put the stock around $600. On top of that you have potential take out, hopefully that doesn't come too soon though.

Did you factor in the price increase? According to cuyler the whole price increase will trickle down to EBITDA, so i currently calculate with ~230 million in FCF for 2016 (last q it was 46m*4+800m*10%*62%(revenue*price increase*taxrate) ). Any growth/market share gains because of the 1GBit option come on top of that. Maybe i am too optimistic, but this can easily be a double in 2016/2017.

For a business where volumes are pretty stagnant or declining and growth is largely coming from price increases, driving away existing profitable customers doesn't seem like a strong long term plan.

In the last presentation there are some charts where you see the growth of business services and residential data are in double digits. They are now at the inflection point where growth of these units overrules the decline of residential video/phone. It will take off in the next years and overall revenue will start growing again, when they can keep up the current pace. Nothing of that is discounted in the share price.
« Last Edit: January 04, 2016, 10:44:04 AM by frommi »

mountboney

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Re: CABO - Cable One
« Reply #8 on: March 03, 2016, 08:59:11 AM »
Looks like the transition to Data from Video emphasis is playing out well. 4q run rate ebitda $350mm up significantly from last year. Market likes it.

muscleman

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Re: CABO - Cable One
« Reply #9 on: August 15, 2016, 09:23:56 AM »
Does anyone find it strange that the account receivables is far less than account payables?
Other cable companys usually have the reverse.
I am muslceman. I have more muscle than brain!