Executive Summary / Key Takeaways

• Strategic Pivot for Sustainable Growth: Cable One is executing a multi-year transformation, shifting from a premium, high-ARPU strategy to a balanced growth model focused on expanding its residential and business data customer base while maintaining ARPU stability, underpinned by significant investments in network intelligence and customer experience.
• Technological Moats and Operational Efficiencies: The company's robust fiber-rich network, multi-Gigabit capabilities, and innovative solutions like Intelligent Wi-Fi, SecurePlus, and AI-driven operational tools are key differentiators, enhancing service reliability, driving ARPU growth, and generating substantial cost savings from a recently completed unified billing system migration.
• Financial Resilience and Capital Discipline: Despite recent non-cash asset impairments and short-term residential broadband customer losses, Cable One maintains strong free cash flow generation, a conservative balance sheet, and has strategically suspended its dividend to accelerate debt reduction and fund organic growth initiatives, positioning it to manage upcoming debt maturities and potential MBI consolidation.
• Navigating Intense Competition: Cable One faces ubiquitous fixed wireless and increasing fiber overbuild, but its localized approach, differentiated product offerings (FlexConnect, Internet Lift), and superior network performance for high data usage are designed to defend and grow market share, with early signs of competitive stabilization and positive connect trends.
• Outlook and Key Catalysts: While 2025 residential broadband customer growth is not expected, ARPU is projected to remain stable, and significant cost savings from billing migration ($15 million annual run-rate) and tax benefits ($40 million in 2025) are anticipated. The mobile service pilot and MBI acquisition (estimated $460-$510 million purchase price, closing Q4 2026) represent future growth and deleveraging catalysts.

The Evolution of Connectivity: Cable One's Strategic Transformation

Cable One, Inc. (CABO) has long been a foundational provider of data, video, and voice services across 24 Western, Midwestern, and Southern U.S. states since its incorporation in 1980 and public listing in 2015. The company's journey has seen it evolve from a traditional cable operator to a broadband-centric powerhouse, particularly since 2013, when it began a significant expansion of its residential and business data services. This evolution is not merely a historical footnote; it is the bedrock upon which Cable One's current strategic pivot is built, emphasizing a disciplined, multi-year plan for sustained profitable growth in an increasingly competitive landscape.

At its core, Cable One's strategy is to grow its higher-margin residential and business data services, acknowledging the industry-wide trends of declining profitability in video and residential voice due to escalating programming costs, retransmission fees, and the rise of streaming and wireless alternatives. This strategic shift is reflected in its revenue mix, with residential data contributing 59.7% of total revenues, business data 15.1%, and residential video 13.0% for the first six months of 2025. The company's approach is highly localized and segment-specific, allowing it to tailor product offerings and pricing strategies to drive either unit growth or ARPU expansion, depending on market dynamics and competitive intensity.

Technological Edge: The Backbone of Cable One's Competitive Moat

Cable One's ability to compete effectively and drive its growth strategy is deeply rooted in its robust and continuously evolving network infrastructure and technological differentiators. The company's broadband plant primarily consists of a fiber-to-the-premises or hybrid fiber-coaxial network, designed with ample unused capacity. This foundational strength allows Cable One to offer internet products at some of the fastest speeds available in its markets, including Gigabit download data service to all of its 2.9 million passings and Multi-Gigabit service rolled out to over 40% of its markets.

The tangible benefits of this technology are significant and quantifiable. Despite growing data demands—with average customer usage nearing 800 gigabytes per month and over 27% of customers regularly surpassing a terabyte—Cable One's network peak utilization remains remarkably low at just 19% downstream and 18% upstream. This demonstrates substantial headroom to support continued growth without immediate capacity limitations or significant increases in capital intensity, offering a clear advantage over fixed wireless alternatives that can experience throttling or inconsistent speeds during peak usage.

Beyond raw speed and capacity, Cable One is investing heavily in network intelligence and customer experience. Key technological advancements include:

• DOCSIS 4.0 Deployment: The company has deployed DOCSIS 3.1 and begun the rollout of DOCSIS 4.0, which is expected to deliver up to 10-gig speeds through intelligent, capital-efficient infrastructure, with future advancements potentially reaching 25 gigabits or more. This ensures Cable One remains at the forefront of speed capabilities.
• Intelligent Wi-Fi (powered by eero): This solution optimizes in-home Wi-Fi, providing features like parental controls, enhanced security, and self-service troubleshooting. For investors, this translates into improved customer satisfaction and retention, as evidenced by higher retention rates for customers utilizing this service. Approximately 35% of customers who lease equipment are currently on Intelligent Wi-Fi, indicating a significant adoption opportunity.
• SecurePlus: An $8 per month top-tier security package, SecurePlus has seen a 15% increase in customer adoption since the start of 2025. It is also part of the Ultimate Wi-Fi bundle, priced at $24.99 per month, which 17% of new customers chose in Q1 2025. These offerings create meaningful ARPU growth opportunities while enhancing customer loyalty and retention by addressing critical cybersecurity needs.
• Tech Assist: A new $10 per month support service, Tech Assist offers expert help with a wide range of Wi-Fi connected devices. While not expected to generate material revenue in 2025, it reflects a focus on customer-centric innovation and is anticipated to generate meaningful results from 2026 onwards.
• AI Integration: Cable One is strategically integrating AI across its operations. An AI model reviews 100% of call center contacts in minutes, providing real-time feedback to agents for superior customer service. An AI-powered project management tool streamlines projects and reduces redundancies. Crucially, an internal AI tool has developed a churn propensity model for residential customers, improving accuracy in identifying at-risk customers and lowering costs by replacing a third-party model. This tool also includes a customer lifetime value model, which has already helped reduce customer losses in competitive markets. "Ask Tommy," an AI-powered assistant, aids field technicians with appointment management and provides AI-driven technical expertise for faster issue resolution. These AI initiatives directly contribute to operational efficiency, cost savings, and enhanced customer retention.
• Sparklight TV (IPTV): This internet protocol-based video service allows the company to reclaim bandwidth from linear video, freeing up network capacity to increase data speeds and capacity across its network, directly supporting its core data growth strategy.
• Fiber Instant-On MDU Trial: A pilot program for multiple dwelling units (MDUs) will enable customers to activate new high-speed data service with multi-gig symmetrical speeds in minutes, streamlining the customer onboarding process and potentially accelerating penetration in these segments.

These technological advancements are not merely features; they are strategic investments that fortify Cable One's competitive moat, enabling it to deliver superior service, drive ARPU expansion through value-added offerings, and achieve operational efficiencies that contribute directly to its financial performance and long-term growth strategy.

Financial Performance and Operational Momentum

Cable One's financial performance in recent periods reflects both the challenges of a dynamic market and the early impacts of its strategic transformation. For the six months ended June 30, 2025, total revenues were $761.67 million, a 4.6% decrease year-over-year. This decline was primarily driven by a 2.5% decrease in residential data revenues and a significant 15.8% drop in residential video revenues, reflecting the company's de-emphasis on video and subscriber attrition.

Despite the top-line pressure, residential data ARPU showed resilience, increasing 2.4% year-over-year in Q2 2025 to $81.23, driven by segmented pricing changes, promotional expirations, and greater adoption of value-enhancing services like SecurePlus and Ultimate Wi-Fi. Business data revenues, a key growth area, increased 1.2% year-over-year in Q2 2025 to $57.39 million, benefiting from strength in high-value fiber and carrier segments and new multi-million dollar long-term contracts.

A notable financial event in Q2 2025 was a net loss of $438.0 million, compared to a net income of $38.2 million in Q2 2024. This was largely due to $586.0 million in non-cash asset impairments related to indefinite-lived franchise agreements ($497.2 million) and goodwill ($88.8 million). These impairments were triggered by a decline in Cable One's stock price and were attributed to reduced estimated future cash flows due to increased competition and an increased discount rate. While impacting reported earnings, these non-cash charges do not affect the company's cash flows or operational strategy.

Operating expenses for the six months ended June 30, 2025, decreased by 4.8% year-over-year to $202.21 million, primarily due to $10.7 million lower programming and franchise costs from video customer losses. Selling, General, and Administrative (SG&A) expenses, however, increased by 3.4% to $187.41 million, largely due to an $8.6 million increase in billing system conversion costs. These investments are strategic, with the completed billing migration expected to yield "several million dollars in annual cost savings starting in late 2025," contributing to an overall $15 million annual run-rate cost savings across operating and SG&A expenses.

Capital expenditures for the six months ended June 30, 2025, were $139.50 million, a modest 1.5% increase year-over-year, demonstrating capital efficiency despite ongoing network enhancements. The company's capital expenditures have trended downward in recent years, and it plans for total CapEx in the "low $300s" for the full year 2025. Free cash flow (Adjusted EBITDA less capital expenditures) was $134.8 million in Q2 2025, representing a healthy 66.4% of Adjusted EBITDA.

Liquidity and Capital Allocation: A Disciplined Approach

Cable One maintains a disciplined and conservative approach to its balance sheet and capital allocation. As of June 30, 2025, the company held $152.88 million in cash and cash equivalents. Total debt stood at approximately $3.50 billion, with a net leverage ratio of 4.1x on a last quarter annualized basis. A significant portion of this debt, nearly $2.8 billion, benefits from fixed or synthetically fixed base interest rates "substantially below current market rates," mitigating interest rate risk.

A pivotal strategic decision was the suspension of the quarterly cash dividend in Q2 2025. This move, not driven by debt covenant concerns, is projected to free up approximately $67 million annually, totaling over $200 million in discretionary free cash flow over the next three years. These funds are earmarked for accelerated debt repayment, refinancing support, and ongoing investment in organic growth initiatives. This proactive measure enhances financial flexibility, particularly as the company approaches the March 2026 maturity of its $575.0 million 0% convertible notes. Management is confident that existing cash balances, anticipated available capacity under its $1.25 billion revolving credit facility ($1.02 billion available as of June 30, 2025), and operating cash flows will be sufficient to fully retire these notes without needing additional incremental financing.

Furthermore, Cable One is actively monetizing its equity investments. It has completed or announced the monetization of five equity investments over the last two years, including Metronet and Ziply (on track for 2025 close), which are expected to generate over $100 million in combined after-tax proceeds. These proceeds will further supplement cash and liquidity. The passage of the One Big Beautiful Bill Act (OBBBA) is also expected to yield approximately $40 million in cash tax savings in 2025 and an aggregate of $120 million through 2027, providing additional financial tailwinds.

The company's strategic partnership with Mega Broadband Investments Holdings LLC (MBI) remains a key future consideration. Cable One holds an approximately 45% equity interest in MBI, and an amended agreement in December 2024 reinstated a call option for Cable One to acquire the remaining interests. If the put option held by other MBI investors is exercised, the closing is anticipated on October 1, 2026. The estimated purchase price for the remaining equity interests is between $460 million and $510 million, with MBI's total net indebtedness at acquisition estimated between $845 million and $895 million. This potential acquisition is factored into Cable One's leverage outlook, with management expecting the pro forma leverage ratio to remain below 4x post-consolidation.

Competitive Landscape and Strategic Positioning

Cable One operates in a fiercely competitive environment, facing a multi-pronged assault from various players. Its primary direct competitors include incumbent telephone companies deploying fiber (e.g., AT&T (T)), municipal and cooperative overbuilders, fixed wireless data providers (e.g., cellphone internet), and over-the-top video providers.

Fiber-to-the-home overbuild from incumbent telco providers now impacts approximately 53% of Cable One's passings, an increase from 50% in the prior quarter. AT&T is noted as the largest contributor to this increasing overlap, aggressively pushing its "Internet Air" fixed wireless product in smaller markets where its copper network has not been upgraded to fiber. While this intensifies competition, Cable One believes that incumbent fiber builds may actually reduce the likelihood of new third-party entrants, helping to maintain a more manageable two-party market structure where long-term economics are more favorable.

Against this backdrop, Cable One leverages its deep local knowledge and "neighborly service" as key differentiators. Its network's superior reliability, unlimited data offerings, and consistent speeds are critical advantages against cellphone internet, especially given the high and growing data consumption of its customers. The company is actively developing and deploying targeted products to compete directly with these alternatives:

• FlexConnect: A "pay-as-you-go" internet offering, FlexConnect is designed to compete directly with cellphone internet by providing flexible speed options and unlimited data without long-term commitments. While initial uptake has not met expectations, management remains confident in its long-term potential as a tool for attracting value-conscious customers.
• Internet Lift: Aimed at "value by need" customers who meet specific eligibility criteria, Internet Lift is an incremental broadband revenue opportunity that early pilot results indicate does not cannibalize the existing customer base.

Cable One's competitive strategy also involves disciplined pricing and product adjustments. While some markets have seen targeted pricing changes that led to temporary ARPU dips and elevated churn (e.g., from promotional roll-offs and AutoPayPlus rollout), these are part of a broader, segmented approach. The company has observed "more rational pricing" from some competitors, reflecting the economic realities of building and operating in its non-metropolitan, secondary, and tertiary markets, where raw material costs, challenging topography, and limited labor act as barriers to entry.

Despite the competitive pressures, Cable One's customer retention remains strong, with churn levels at 5-year lows even when including the impact of Affordable Connectivity Program (ACP) customer losses. This resilience in churn, coupled with sequential month-over-month growth in connects during the first half of 2025, suggests that the company's strategic actions are beginning to yield positive results.

Outlook and Investment Implications

Cable One's outlook for 2025 reflects a period of strategic execution and transition. While the company does not expect to grow total residential broadband customers in 2025 due to Q2 losses, it anticipates total residential broadband revenue for the full year to be flat or decrease modestly compared to 2024. Residential data ARPU is expected to remain stable for the remainder of the year, supported by higher sell-in of gig and multi-gig products, new offerings, and promotional roll-offs.

The completion of the unified billing system migration is a significant operational milestone, expected to generate "several million dollars in annual cost savings starting in late 2025," contributing to an overall $15 million annual run-rate savings. These efficiencies, combined with anticipated cash tax savings of $40 million in 2025 and $120 million through 2027, will bolster the company's financial position and support its growth initiatives.

The CEO succession plan, with Julia M. Laulis retiring by year-end 2025, introduces a period of leadership transition. While the search for a successor is underway, the company emphasizes a stable transition and continued execution of its long-term growth strategy. The mobile service pilot, expected to go live in pilot markets by year-end 2025, represents a new avenue for enhancing customer lifetime value and reducing churn, potentially complementing the core broadband offering.

Conclusion

Cable One stands at a pivotal juncture, transforming its business model to thrive in an intensely competitive telecommunications landscape. The company's deep-rooted history, coupled with its strategic pivot towards higher-margin residential and business data services, is underpinned by significant investments in a technologically advanced and intelligent network. While recent non-cash asset impairments and short-term residential broadband customer losses highlight the challenges, Cable One's disciplined capital allocation, including the strategic dividend suspension, positions it with enhanced liquidity to manage debt maturities and pursue organic growth.

The core investment thesis for Cable One hinges on its ability to leverage its technological differentiators—from multi-Gigabit fiber capabilities and intelligent Wi-Fi to AI-driven operational efficiencies and new value-focused product offerings—to defend its market position against formidable competitors like fiber overbuilders and fixed wireless providers. The company's focus on customer experience, coupled with its commitment to long-term sustainable growth and a conservative balance sheet, suggests a resilient future. Investors should monitor the execution of its new product rollouts, the realization of anticipated cost savings, and the successful integration of its mobile pilot program as key indicators of its continued transformation and potential for long-term value creation.