Cable One, Inc. · NYSE:CABO
Cable One — UBS Global Media and Communications Conference 2016
33 slides from Cable One's conference presentation, Dec 5, 2016
Slide 1: Investor Presentation - UBS Global Media and Communications Conference
INVESTOR PRESENTATION CABLEOQ~_wiE’ UBS Global Media and Communications Conference New York City December 5, 2016
Slide 2: Disclaimer
Disclaimer This presentation has been prepared by Cable One, Inc. (Cable ONE or the Company). This presentation includes “forward looking statements” that reflect Cable ONE’s current views and information currently available. This information is, where applicable, based on assumptions and analysis t
Slide 3: Use of Non-GAAP Financial Metrics
Use of Non-GAAP Financial Metrics ‘The Company uses certain measures that are not defined by generally accepted accounting principles in the United States (‘GAAP") to evaluate various aspects of is business. Adjusted EBITDA (labeled “Adj EBITDA” in this presentation), Adjusted EBITDA Margin (labeled
Slide 4: Presenters
Presenters Tom Might Kevin Coyle Chairman & CEO CFO CABLEONE'| 4
Slide 5: The Cable ONE Story
The Cable ONE Story In 2011, Cable ONE became disenchanted with the long-term prospects of a video-based triple-play strategy. In 2012, we re- strategized and headed in a different, more sustainable direction, even though video still dominated our revenues at that time. Graham Holdings Company spun
Slide 6: The four key parts of Cable ONE's 2012 strategic shift
The four key parts of Cable ONE’s 2012 strategic shift Accept and accelerate inevitable and favorable industry product trends. Invest in higher growth and higher margin products. Harvest others. Focus on profitable customers. Count cash flows, not subs. Rethink cable math to more accurately measure
Slide 7: 1. Accept and accelerate
1. Accept and accelerate inevitable and favorable industry product trends. Invest in higher growth and higher margin products. Harvest others.
Slide 8: Let me take you back to 2011!
Let me take you back to 2011!
Slide 9: Two legs of the triple-play showed signs of long-term disruption and decline
Two legs of the triple-play showed signs of long-term disruption and decline beyond the industry’s control. Cable ONE began to shift away from the standard triple-play model in 2012, represented by vertical dotted lines throughout these slides. These industry trends influenced our decision. Eight-ye
Slide 10: Industry profitability rose due to two high growth, higher margin non-video businesses
But industry profitability rose anyway due to the emergence of two high growth and higher margin non-video businesses. Cable ONE decided to accelerate this profitable trend in 2012, rather than fight it. Industry* Adj EBITDA Expands as Video Declines 2008 2009 ©2010 2011 201220132014 2015 Video subs
Slide 11: Residential HSD and Business Services now dominate Cable ONE's Adj EBITDA
Residential HSD and Business Services now dominate Cable ONE’s Adj EBITDA. Our industry leading margins reflect our accelerated change in product mix. Now that video no longer dominates our revenues, we should start to see some revenue growth as well. Revenues by Product ($M) Adj EBITDA by Product (
Slide 12: 2. Focus on profitable customers
2. Focus on profitable customers. Count cash flows, not subs. 12
Slide 13: Cable ONE vs. Industry metrics demonstrate a new path to long-term profits
These extraordinary comparisons of Cable ONE vs. Industry metrics demonstrate a new path to long-term profits. This is what happens when an MSO stops subsidizing video. Video Unit Growth Rates Adj EBITDA Margin 0% 44% 4% 42% 8% 40% 12% 38% -16% 36% -20% M% 2011 2012 2013 2014 2015 2016A* 20114 2012
Slide 14: Roughly 70% of new package sales are now HSD-only
As a result of numerous significant changes, roughly 70% of all new package sales are now HSD-only at Cable ONE. Some think that dropping Viacom in 2014 was our strategic awakening. As you can see, we were already two years into our non-video centric strategy by then. It was a tactic! Share of Month
Slide 15: 3. Rethink cable math
3. Rethink cable math to more accurately measure sources of profit and loss. Measure success by Adj EBITDA and Adj EBITDA-Capex, not by Gross Margins. 15
Slide 16: Cable ONE Math is founded on a few contrarian beliefs
Cable ONE Math is founded on a few contrarian beliefs. The results changed our behavior dramatically. 1. Virtually all Opex and Capex is variable in the long run. > All MSO’s have between $22 to $27 per PSU of enduring Indirect Costs. > All MSO’s have $8 to $12 per PSU of enduring Capex per PSU. 2.
Slide 17: If virtually all costs are variable, building simple macro product models becomes easy
If virtually all costs are variable, building simple macro product models becomes easy and compelling. Cable ONE was selling a $75 triple-play in 2011, when our total cost for three PSUs was $120. But, the Gross Margin looked great! 2009-2011 Average Total Cost per PSU orex:carex- 2012-2015 Average
Slide 18: Hypothetical model of the residential business: Cable ONE Math
This is a hypothetical model of how we think about our residential business. We call it “Cable ONE Math.” This simple product profit model provides far more strategic clarity than any detailed model. (We do use other models for package and customer profit analysis.) ILLUSTRATIVE VIDEO HSD PHONE REVE
Slide 19: 4. Manage unnecessary costs out of the business
4. Manage unnecessary costs out of the business. Build on the successes of our 2008 Operations Strategy initiative. 19
Slide 20: With 2016 Total Expenses below 2010, associates have mastered cost management
With 2016 Total Expenses below 2010, our associates have mastered this task. 1. Less customer effort equals higher customer satisfaction. > “The Best Service Is No Service” by Bill Price. > Reduce the number of customer contacts per PSU (CPX). > Eliminate causes, automate responses, increase self-he
Slide 21: A few stats substantiate associates' success at managing costs
It only takes a few stats like these to substantiate our associates’ success at managing costs. This is an eight-year effort that predated our strategic shift, but fit perfectly with our new notion that virtually all costs were variable in the long-run. Cable ONE Annual Average Headcount Cable ONE A
Slide 22: The Cable ONE Story
The Cable ONE Story In 2011, Cable ONE became disenchanted with the long-term prospects of a video-based triple-play strategy. In 2012, we re- strategized and headed in a different, more sustainable direction, even though video still dominated our revenues at that time. Graham Holdings Company spun
Slide 23: Financial Review
Financial Review Kevin Coyle - CFO
Slide 24: After five years the proof is in the numbers
Put it all together after five years and the proof is in the numbers. Revenue, Adj EBITDA and Capex all hit inflection points just after the spin-off, as profitable Residential HSD and Business Services became the majority of Cable ONE’s revenue. Total Revenue ($M) Adj EBITDA and Adj EBITDA Margin (
Slide 25: Focus on Residential HSD and Biz Services has reshaped Cable ONE's economics
Our decisive focus on Residential HSD and Biz Services starting in 2012 has reshaped Cable ONE’s economics. By accelerating inevitable and favorable industry trends, our total results are emulating HSD and Business Services rather than Video and Phone sooner than they would have. Cable ONE Adj EBITD
Slide 26: Residential HSD and Business Services now dominate Cable ONE's Adj EBITDA
Residential HSD and Business Services now dominate Cable ONE’s Adj EBITDA. Our industry leading margins reflect our accelerated change in product mix. Now that video no longer dominates our revenues, we should start to see some revenue growth as well. Revenues by Product ($M) Adj EBITDA by Product (
Slide 27: Five quarters since the spin-off show inflections
Five quarters since the spin-off show inflections in Adj EBITDA margin, capex and even revenues, recently. Total Revenue ($M) 15 3 203203 $205 29205 $2005198 at a2 a3 aa Adj EBITDA ($M) 2015 = 20 m2014 2015 = 2016A* $67 $38 $38 Adj EBITDA Margin 20142015 2016" at a2 a3 aa at a2 a3 aa + 20104 equals
Slide 28: Many 3Q16 metrics point in the right direction
Many 3Q16 metrics point in the right direction. (Unaudited and in '000s) Three Months Ended September 30, 2016 2015 Net Income $20,874 $19,412 $1,462 75% ‘Adj EBITDA $87,155 $77,424 $9,731 12.6% ‘Adj EBITDA Margin 42.4% 39.1% Total Revenue $205,536 $198,215 $7,321 3.7% Residential Data Revenue $86,7
Slide 29: Appendix
Appendix > Reconciliations of Net Income to Adjusted EBITDA > Reconciliation of Net Cash Provided by Operating Activities to Adjusted EBITDA less Capital Expenditures CABLEONE '|29
Slide 30: Reconciliation of Net Income to Adjusted EBITDA
Reconciliation of Net Income to Adjusted EBITDA 2010 2011 2012 2013 2018 2015 -2016A* Net Income $96 $98 $a $105 $147 $89 $99 Net Profit Margin 2% 13% 2% 13% 18% 1% 12% Plus: Interest expense. - - - - - 16 30 Provision forincome taxes a2 3 56 60 a 56 6 Depreciationand amonization 25 wz wz 126 134 aa
Slide 31: Reconciliation of Net Income to Adjusted EBITDA by Quarter
Reconciliation of Net Income to Adjusted EBITDA BY QUARTER ($M) 2014 2015 2016 1Q 29 3 4Q 1Q 2Q 3Q 4Q 1Q -2Q -3Q Net Income $24 $27 $69 $27 $22 S21 S19 $26 27 $27 $24 Net Profit Margin 12% 13% 35% 13% 11% 11% 10% 13% 13% 13% 10% Plus: Interest expense se - 1 8 7 8 8 8B Provision for income taxes 3 7
Slide 32: Reconciliation of Net Cash Provided by Operating Activities to Adjusted EBITDA less Capex
Reconciliation of Net Cash Provided by Operating Activities to Adjusted EBITDA less Capital Expenditures BY YEAR AND 3Q16 ($M) 2012 «2013-2014. 2015 = 20160" 3Q16 Net cash provided by operating activities $231 $237 $206 $246 $258 $68 Amortization of financing costs : : : = (2) (0) Deferred income ta
Slide 33: Cable ONE
CABLEOQ~_wiE’
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