Kevin Coyle – Chief Financial Officer Julia Laulis – President & Chief Executive Officer

Philip Cusick – JPMorgan Craig Moffett – MoffettNathanson Stephan Bisson – Wells Fargo Greg Miller – SunTrust

Good day, and welcome to the Cable ONE First Quarter Earnings Report 2017 Conference Call and Webcast. All participants will be in a listen-only mode. [Operator Instructions] After today's presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Kevin Coyle. Please go ahead.

Thank you, operator. Good morning everyone and welcome to Cable ONE's first quarter 2017 earnings call. We're excited to have you with us this morning as we review our results. Before we proceed, I would like to remind you that today's discussion may contain forward-looking statements relating to future events and expectations. You can find factors that could cause Cable ONE's actual results to differ materially from these projections listed in today's press release and in our recent SEC filings. Cable ONE is under no obligation, and in fact expressly disclaims any obligation to update its forward-looking statements whether as a result of new information, future events, or otherwise. Additionally, today's remarks will include a discussion of certain financial measures that are not presented in conformity with U.S. Generally Accepted Accounting Principles. Reconciliations of non-GAAP financial measures discussed on this call to the most directly comparable GAAP measures can be found in our earnings release or on our website at ir.cableone.net. Joining me on today's call is our President and CEO, Julie Laulis. And with that, let me turn the call over to Julie.

Thank you, Kevin. Good morning and thanks everyone for joining our first quarter 2017 earnings call. I will highlight few notable items, and then Kevin will provide a full recap of our financial performance. We saw in the first quarter that our continued focus on executing our strategy produced solid growth in both residential HSD and business services. Residential HSD units grew more than 2% for the quarter and residential HSD revenues were up more than 8%. Business customers grew 8.5% and business revenues increased more than 13% for the quarter. Total revenues were up over 2.3% to $207.4 million. As we've said in the past, our focus is on long-term profitability and not short-term results. So we don't put too much weight on the results of any single quarter. This is largely because a number of variables can cause unevenness in a quarter-over-quarter compassion. For example, we are following a non-recurring schedule rate adjustments which we saw in the first quarter of 2017 as a result of our video rate adjustment taken during the quarter. First quarter results were also impacted by the accounting changes related to the capitalization of certain labor costs that we discussed in our last earnings call. For the first quarter, adjusted EBITDA was $97.9 million, an increase of 14.6% year-over-year which included the positive impact of those capitalized labor costs. If we exclude those costs, adjusted EBITDA growth would have been 7.7% year-over-year. To reinforce our strategic focus on residential HSD, we continue to enhance our residential HSD product with new value added services that make the lives of our customer easier and distinguish us from other providers in our market. For example, we are launching WiFi ONE, Cable ONE's first advanced WiFi solution that will provide our customers with enhanced WiFi signal strength and extend and improve the WiFi signal throughout their homes. WiFi certified Cable ONE technicians will utilize signal mapping software to find the optimum location of the WiFi gateway in the customers' home and determine the proper hardware configuration based on the customer's number of wireless devices and the design and structure of their home. DVR technology solutions will be customized based on individual customers needs. WiFi ONE will give our customers the freedom to access our super fast internet speeds from multiple devices anywhere in their home, helping to eliminate dead zones and buffering. This advanced WiFi service combined with the fastest speeds in the majority of the markets we serve will give our customers a superior internet experience. The rollout of GigaONE, our 1 gigabit service to all of our markets is also progressing nicely. At the end of the first quarter, more than 75% of our homes cost and our legacy footprint had access to GigaONE. Our other major area of strategic focus is business services. Our newest product in this area is called Piranha Fiber, which we market as ferociously fast internet. Piranha Fiber offers businesses up to 2 gigabit symmetrical service using an extremely reliable fiber-based architecture and shared bandwidth service. We are currently the only company providing this type of product in the markets we serve. We have launched Piranha Fiber in two markets already and we will continue to introduce this differentiating mid-market business services product to other Cable ONE area. We announced on Monday that we have completed our acquisition of NewWave Communications and we are very excited to welcome all of the NewWave associates to the Cable ONE family. Cable ONE now has more than 2,400 associates, serving over 800,000 customers, representing 102 million PSUs in 21 states. We believe this new division of Cable ONE will be a great fit because of our similar strategies, customer demographics and products. NewWave's legacy markets are well suited to our strategy and offer us cost synergies as well as opportunities for revenue and adjusted EBITDA margin expansion in the long run. In the short run, we may see some erosion of our adjusted EBITDA margins until we realized these synergies. That being said, I am confident that our dedicated associates including those who became part of Cable ONE from NewWave earlier this week will continue their tremendous efforts during integration and beyond to help us achieve our goals. Now, I will turn it over to Kevin for more details on our first quarter results.

Thanks Julie. As Julie already mentioned, we are very pleased with the results that we achieved in the first quarter. Let me share a few highlights from the first quarter with you. Adjusted EBITDA as Julie mentioned grew 14.6% with a margin of 47.2%. This result was affected by a change in accounting estimate that we've mentioned previously related to capitalize labor costs. Excluding the impact of this change, adjusted EBITDA would have increased 7.7% year-over-year. Adjusted EBITDA less capital expenditures was approximately $62 million, an increase of almost 7%. Residential HSD revenues increased by over 8%. Business service revenues increased by 13%. Residential HSD and business service revenues now comprised almost 57% of our total revenues, and total revenues were over $207 million in the first quarter of 2017 as compared to $203 million in the first quarter of 2016. So, our top line revenue growth is continuing. Now getting into the detailed results. For the first quarter of 2017, compared to the first quarter of 2016, revenues increased $4.6 million or 2.3%, due primarily to increases in residential data and business service revenues of $6.8 million and $3.1 million, respectively. For the first quarter of 2017, residential data revenues comprised 43.5% of our total revenues and business service revenues comprised 13% of our total revenues. So therefore, these two services now comprised 57% of our revenues. Residential video and voice revenues decreased $2.4 million and$1.4 million year-over-year, with the impact of customer losses partially offset by a rate adjustment for video customers implemented during the first quarter of 2017. Operating expenses decreased $7.3 million or 9.6% year-over-year and improved as a percentage of revenues to 33.3% compared to 37.7% for the first quarter of 2016. The improvement in operating expenses was driven by a $4.7 million reduction in labor costs resulting from the change in accounting estimate associated with capitalized labor costs in the first quarter of 2017, lower programming costs of $1.2 million associated with the reduction in residential video customers, lower backbone and internet connectivity fees of $0.8 million and lower repair and maintenance costs of $0.5 million. Excluding the favorable impact and the change in accounting estimate, operating expenses would have been $73.8 million in the first quarter of 2017, a decrease of $2.7 million or 3.5% year-over-year. Selling, general and administrative expenses increased $1.8 million, or 4.2% year-over-year and were 22% and 21.6% as a percentage of revenues in the first quarter of 2017 and 2016, respectively. The higher selling, general and administrative expenses in the first quarter of 2017 were primarily attributable to increases in acquisition-related costs of $1.4 million, compensation costs of $1.2 million, marketing expenses of $0.8 million and repair and maintenance costs of $0.4 million. These were partially offset by a reduction in labor costs of $1.2 million, resulting from the change in accounting estimate and lower group insurance costs of $0.9 million. Once again excluding the favorable impact of the change in accounting estimate, selling, general and administrative expenses would have increased $3.1 million or 7% year-over-year. We also recognized a net gain on disposal of assets of $6.1 million in the first quarter of 2017, primarily associated with the sale of our former corporate office property, which was treated as a non-operating asset during the period. Net income increased $6.2 million, or 22.8% to $33.2 million in the first quarter of 2017 compared to $27 million in the prior year period. Excluding the impact in the change in accounting estimate related to capitalized labor, net income would have increased $2.5 million, or 9.1% to $29.5 million in the first quarter of 2017 compared to the prior year. As we mentioned already, adjusted EBITDA was $97.9 million and $85.4 million in the first quarter of 2017 and 2016, respectively. The adjusted EBITDA growth of 14.6% in the first quarter of 2017 includes the positive impact of the aforementioned capitalized labor costs. Keep in mind, that this change which we mentioned during our last call simply makes our methodology consistent with industry practices. Excluding the impact of these costs, adjusted EBITDA would have been $92 million and adjusted EBITDA growth would have been 7.7% for the first quarter of 2017. Capital expenditures totaled $35.9 million and $27.4 million for the first quarter of 2017 and 2016, respectively. Including the capitalized labor costs, capital expenditures would have been $30 million. Adjusted EBITDA less capital expenditures for the first quarter of 2017 were $61.9 million, an increase of $3.9 million or 6.8% from the prior year period. As for liquidity, at March 31, 2017, we had almost $174 million of cash and cash equivalents on hand, compared to $138 million at December 31, 2016. Our debt balance was $544 million and $545.3 million at March 31, 2017 and December 31, 2016, respectively. We also had approximately $200 million available for borrowing under our revolving credit facility as of March 31. This facility is undrawn at the moment. On May 1, as Julia already mentioned, we completed the acquisition of NewWave for $735 million and concurrently modified our existing credit agreements to borrow $250 million of term loan A and $500 million of term loan B. The proceeds of the term loan borrowings and a portion of our existing cash on hand were used to fund the acquisition, repay our existing term loan A of $93.8 million and pay the related fees and expenses. Our financial capacity allowed us to make this acquisition and still maintain a very favorable leverage position. Our net debt to adjusted EBITDA will increase from 1.1 times to approximately 2.6 times, and secured debt to adjusted EBITDA will only be 1.7 times. During the first quarter of 2017, we repurchased 700 shares of our stock, under our repurchase program at an aggregate cost of about $400,000. One more time, turning to our change in a capitalized labor in the first quarter of 2017, as mentioned before changed our accounting estimate related to capitalization of certain internal labor and related costs associated with construction and customer installation activities. We previously indicated that we believe this change would result in an increase of capitalized labor costs in the range of $28 million to $33 million on an annual basis. Based on our first quarter results, we now anticipate that this range will be $24 million to $28 million for 2017. So in conclusion, our solid financial performance continued in the first quarter of 2017, and we are very excited about the acquisition of NewWave. And with that operator, we are now ready for questions.

We will now begin the question-and-answer session. [Operator Instruction]. The first question is from Philip Cusick from JPMorgan. Please go ahead.

Hi, guys. Thanks. Can you spend a minute, one reminding us what the NewWave revenue and EBITDA that should drop under the financials on day one? As well as the synergies you expect over time. It sounds like those come through maybe a little more slowly than people might hope? And then second, what type of systems if anything, does NewWave bring you that could help you and consumer or enterprise business side, anything you're picking up there in addition to subscribers? Thank you.

So, let me take the first part. This is Kevin. NewWave's revenues are currently running around $182 million, and their fourth quarter adjusted EBITDA was $64 million. That's where they are today. We have mentioned that we believe there will be synergies in the range of $24 million. Again, it will take several years to obtain all of the synergies that are coming from corporate overhead reduction or management of the systems in a more efficient way and also programming reduction. So, it's a three pronged approach. You are right. They will take a little bit of time. Some of the changes will be more eminent, some will take two to three years to have that change take effect.

Yeah. So this is Julie. On the system side, I believe that Cable ONE will bring a lot to bear on HSD service side. In terms of systems, NewWave does have some enterprise business services product that we will be exploring. And I think that's about the expense of that.

Great. Thanks, Julie.

The next question is from Craig Moffett from MoffettNathanson. Please go ahead.

Thank you. Julie, I guess a more general question is, now that you've been in the chair for a little while, I wonder if you could just reflect on how you would like to put your own stamp on the business? And are there strategic issues that you would like to pursue differently than your predecessors? Or cost items that are particularly high on your list? Or anything that would add some flavor to how you're thinking about this strategy of the business going forward?

You bet. Thanks Craig. As far as strategic issues, anything being the same or different, I have been a part of this team for almost 18 years now. And I am a whole-hearted believer in the strategy that we are pursuing. I see the tipping point of really being able to harness and push it forward to the long-term. When I think about my own stamp, I think about my history in the business which stands over 30 years. And one that has been expand with our people who provide services to our customers, so making sure that we stay intently focused on our customers on their needs on making their life easier. My belief as we do that, the profitability will follow for the long-term. In terms of costs, things that are high on my list, well we have an industrial engineering mindset and we continue to look at improved all aspects of our business. So, I think anything is fair game there, and it's something that is that we consider one of our strategic levers quite honestly.

Thank you. That's helpful, Julie.

The next question is from Stephan Bisson from Wells Fargo. Please go ahead.

Good morning. I was just – had a quick question for Julia. Can you give us some insight as to how you think about a rate increases on a data product? We know they aren't regular, but with the process you kind of go through this side, when is the time to raise rates and how much to raise them?

Sure. So first, I guess to summarize on the video side when we have increases from broadcasters or satellite programmers, we pass those along to our customers. When it comes to the data side, we haven't had a rate adjustment. Well actually, we've had one in five and a half years now. Our standard service which is 100 meg is $55. If you lease the modem from us and that's a choice of the customers, if you lease a modem from us, it's $8 more a month and now included in that at no additional cost is our beautiful WiFi ONE service at no additional costs. So, I think that our goal is to keep that price point steady for as long as we can. We think it's a great value and that's what we are trying to present to our markets.

Great. Thank you very much.

The next question is from Greg Miller from SunTrust. Please go ahead.

Yes. Thanks guys for taking the question. Just a question on the heels of the close of the merger, other opportunities that exist in the region, make sure we'd be thinking about additional contiguous acquisitions, no acquisitions at all. If you are, sort of what's the threshold of leverage that you're going to go up to, to execute upon these?

Greg, this is Kevin. As we have said before, we continue to look at opportunities as with NewWave. We want to be diligent and prudent about the acquisitions, and make sure if we do something it's accretive for all shareholders. We truly feel that NewWave was definitely that. We will continue to look at other opportunities. We obviously as you can see have a lot of capability with our liquidity today. We still have cash on hand. Our debt to cash flow is only in the mid 2s. We've told the market before that we are comfortable going into the mid 3s for opportunities. So, we'll continue to look at those opportunities. There are other things out there, but again we will be diligent and prudent about it. We don't want to grow just for the sake of growing. We want to make sure that whatever we do that it's accretive for shareholders. And as you can see with this acquisition, net of the tax benefits and the synergies we believe we can get, this one thing was done at 6.6 times cash flow, and we believe that is accretive for shareholders.

Great. Thanks. That helps.

This concludes our question-and-answer session. I would like to turn the conference back over to Mr. Coyle for any closing remarks.

Actually, this is Julie. Thank you, operator. Kevin and I will be attending the 45th Annual J.P. Morgan Technology Media and Telecom conference in Boston in late May, and we look forward to seeing some of you there. We appreciate you for joining us for today's call. Thank you.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.