Cable One Inc.

Overview Key strengths Key risks Only provider that delivers internet speed of 1 billion bits per second (Gbps) in most markets. Increasing competition from local telcos aggressively building out fiber-to-the-home (FTTH) services. Favorable margins in the low- to mid-50% area. Competition from wireless players offering fixed wireless broadband services could limit net adds from digital subscriber lines (DSL) over the near to intermediate term. High industry barriers to entry given capital spending requirements and rights of way. Participation in lower-income markets that have kept broadband penetration rates below incumbent peers. Good revenue visibility from increased demand for high-margin broadband. Potential acquisitions could keep leverage high. We currently project EBITDA growth of 1%-3% per year through 2024 due to broadband average

...We believe Cable One Inc. can attain low-single-digit percent annual EBITDA growth for the next few years. We currently project EBITDA growth of 1%-3% per year through 2024 due to broadband average revenue per user (ARPU) growth and modest growth in business services despite limited broadband subscriber growth. Even though the company has less FTTH competition in its footprint (about 25% compared with peers at about 45%), we believe that its strategy to maximize profitability (as measured by EBITDA margins) could result in broadband subscriber growth no better than 2% for the foreseeable future. Furthermore, Cable One maintains industry-leading high-speed data (HSD) ARPU, so we believe it would struggle to increase its HSD revenue (and earnings) without gaining new subscribers. Still, with less than a quarter of its customers currently using its 1 Gbps service, we believe the company can continue to increase ARPU by tiering customers to its faster speeds. We believe intensifying FTTH competition...

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