On August 6, Cable One (NYSE:CABO) walked investors through a quarter that reads like two different companies. Residential broadband customers kept leaving, yet management pointed to improving connect trends, rising average revenue per user, and an aggressive debt paydown as signs the business is stabilizing underneath the subscriber losses. The result is a report that gives both the bulls and the bears real ammunition.
Bull Case: Signs Of A Turning Tide
Cable One’s acquisition numbers moved in the right direction in the second quarter. Connect activity improved sequentially from the first quarter and grew in each month of Q2, and door-to-door sales have more than doubled as a share of quarterly connects over the past year. Residential broadband ARPU also rose sequentially, lifted by promotional roll-offs, changes to the AutoPay Plus program, and customers adding higher-value products. Essentially all of Cable One’s network can already deliver gigabit speeds, and the company expects most customers on multi-gig infrastructure by year-end, upgrades it credits to disciplined investment rather than new capital spending.
Business services found firmer ground too, with enterprise, wholesale, and carrier offerings benefiting from long-term contracts and recurring revenue, and Cable One rounded out that lineup with a new unified communications product called UCaaS. Underneath all of it, the company cut its debt balances by $63 million in the quarter, close to $60 million of that through voluntary repurchases at a discount, pushing year-to-date debt reduction to nearly $130 million with $700 million still undrawn on its revolver.
Bear Case: Where The Pressure Still Builds
The subscriber numbers remain the core problem. Cable One lost 17,000 residential broadband customers in the second quarter as elevated churn persisted, and residential data revenue fell 7.3% year-over-year on a 6.6% drop in subscribers even as ARPU held roughly flat. Total revenue slid to $348.9 million from $381.1 million a year earlier, and the SMB broadband business stayed under pressure while business data revenue fell 6.6% year over year, partly reflecting tower assets the company sold earlier in the year.
Profitability moved the wrong way as well. Adjusted EBITDA fell to $173.5 million, or 49.7% of revenue, down from 53.3% of revenue a year earlier, while capital expenditures climbed to $74 million, up $5.6 million year-over-year. That combination pushed adjusted EBITDA less capex down to $99.5 million from $134.8 million a year ago. Cable One also booked non-cash impairment charges tied to its franchise agreements, goodwill, and its MBI investment, and net leverage stood at 4.2 times against a gross debt load of $3.06 billion, as management flagged continued competitive intensity in fiber overbuild markets.
What The Smart Money Sees
Hedge fund ownership of Cable One climbed from 23 funds to 25 in the most recent quarter, a modest uptick in institutional interest. Short sellers are still leaning hard against the stock, though, with 16.41% of the float sold short, a level that points to a sizable bear camp. Rising fund ownership alongside heavy short interest suggests a market that remains genuinely split on where Cable One goes from here.
The Path Still Runs Uphill
Cable One’s second quarter leaves an open question rather than a clear answer. The bulls can point to improving connect trends, rising ARPU, and a debt load down almost $130 million this year as evidence the turnaround is underway. The bears can point to 17,000 lost broadband customers, shrinking margins, and a leverage ratio still north of four times as reasons to stay cautious.
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