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Internet, cable TV, and phone provider Cable One (NYSE:CABO) fell short of analysts' expectations in Q1 CY2024, with revenue down 4.2% year on year to $404.3 million. It made a GAAP profit of $8.11 per share, down from its profit of $9.62 per share in the same quarter last year.
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Cable One (CABO) Q1 CY2024 Highlights:
- Revenue: $404.3 million vs analyst estimates of $408.4 million (1% miss)
- Adjusted EBITDA: $217.1 million vs analyst estimates of $220.9 million (1.7% miss)
- EPS: $8.11 vs analyst expectations of $10.37 (21.8% miss)
- Gross Margin (GAAP): 73.7%, in line with the same quarter last year
- Free Cash Flow of $98.86 million, up 174% from the previous quarter
- Residential Data Subscribers: 967,400
- Market Capitalization: $2.23 billion
Founded in 1986, Cable One (NYSE:CABO) provides high-speed internet, cable television, and telephone services, primarily in smaller markets across the United States.
Cable and SatelliteThe massive physical footprints of fiber in the ground or satellites in space make it challenging for companies in this industry to adjust to shifting consumer habits. Over the last decade-plus, consumers have ‘cut the cord’ to their traditional cable subscriptions in favor of streaming options. While that is a headwind, this affinity to streaming means more households need high-speed internet, and companies that successfully serve customers can enjoy high retention rates and pricing power since the options for internet connectivity in any geography is usually limited.
Sales GrowthExamining a company's long-term performance can provide clues about its business quality. Any business can put up a good quarter or two, but the best consistently grow over the long haul. Cable One's annualized revenue growth rate of 8.9% over the last five years was weak for a consumer discretionary business. Within consumer discretionary, a long-term historical view may miss a company riding a successful new product or emerging trend. That's why we also follow short-term performance. Cable One's recent history shines a dimmer light on the company as its revenue was flat over the last two years.
This quarter, Cable One missed Wall Street's estimates and reported a rather uninspiring 4.2% year-on-year revenue decline, generating $404.3 million of revenue. Looking ahead, Wall Street expects revenue to decline 2% over the next 12 months.
Cash Is KingAlthough earnings are undoubtedly valuable for assessing company performance, we believe cash is king because you can't use accounting profits to pay the bills.
Over the last two years, Cable One has shown strong cash profitability, giving it an edge over its competitors and the option to reinvest or return capital to investors while keeping cash on hand for emergencies. The company's free cash flow margin has averaged 18.4%, quite impressive for a consumer discretionary business.
Cable One's free cash flow came in at $98.86 million in Q1, equivalent to a 24.5% margin and up 50.5% year on year. Over the next year, analysts' consensus estimates show they're expecting Cable One's LTM free cash flow margin of 19.6% to remain the same.
Key Takeaways from Cable One's Q1 Results We struggled to find many strong positives in these results. Its adjusted EBITDA and EPS fell short of Wall Street's estimates. Overall, this was a mediocre quarter for Cable One. The company is down 5.4% on the results and currently trades at $375 per share.