Cable One, Inc. (CABO)

ITEM 7.    MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our audited consolidated financial statements and accompanying notes included in this Annual Report on Form 10-K, as well as the discussion in the section of this Annual Report on Form 10-K entitled “Business.” This discussion contains forward-looking statements that involve risks and uncertainties. Our actual results may vary materially from those expressed or implied by these forward-looking statements due to a number of factors, including those discussed in the sections of this Annual Report on Form 10-K entitled “Cautionary Statement Regarding Forward-Looking Statements” and “Risk Factors.”

Throughout this “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” all totals, percentages and year-over-year changes are calculated using exact numbers. Minor differences may exist due to rounding.

Overview

We are a leading broadband communications provider delivering exceptional service and enabling our customers to thrive and stay connected to what matters most. We strive to deliver an effortless experience by offering solutions that make our customers’ lives easier, and by relating to them personally as our neighbors and local business partners. Through Sparklight® and the associated Cable One family of brands, we are transforming the future of connectivity with a commitment to innovation, reliability and customer experience. We believe our robust infrastructure and cutting-edge technology keep our customers connected and help drive progress in education, business and everyday life. We believe the services we provide are critical to the development of new businesses and drive economic growth in the non-metropolitan, secondary and tertiary markets that we serve in 24 Western, Midwestern and Southern states. As of December 31, 2024, approximately 74% of our customers were located in seven states: Arizona, Idaho, Mississippi, Missouri, Oklahoma, South Carolina and Texas. We provided services to approximately 1.1 million residential and business customers out of approximately 2.8 million passings as of December 31, 2024. Of these customers, approximately 1,055,000 subscribed to data services, 114,000 subscribed to video services and 106,000 subscribed to voice services as of December 31, 2024.

We generate substantially all of our revenues through three primary product lines. Ranked by share of our total revenues during 2024, they are residential data (58.6%), business data (14.4%) and residential video (14.1%). The profit margins, growth rates and/or capital intensity of these three primary product lines vary significantly due to competition, product maturity and relative costs.

In 2024, our Adjusted EBITDA margins for residential data and business data are estimated to be approximately three and four times greater, respectively, than for residential video. We define Adjusted EBITDA margin for a product line as Adjusted EBITDA attributable to that product line divided by revenue attributable to that product line (see “Use of Adjusted EBITDA” below for the definition of Adjusted EBITDA and a reconciliation of Adjusted EBITDA to net income, which is the most directly comparable GAAP measure). This margin disparity is largely the result of significant programming costs and retransmission fees incurred to deliver residential video services, which in each of the last three years represented between 59% and 64% of total residential video revenues. Neither of our other primary product lines has direct costs representing as substantial a portion of revenues as programming costs and retransmission fees represent for residential video, and indirect costs are generally allocated on a per PSU basis.

We focus on growing our higher margin businesses, namely residential data and business data services. Our strategy acknowledges the industry-wide trends of declining profitability of video services and declining revenues from residential voice services. The declining profitability of residential video services is due primarily to increasing programming costs and retransmission fees and competition from other streaming content providers, and the declining revenues from residential voice services are due primarily to the increasing use of wireless voice services instead of residential voice services. Separately, we have also historically focused on retaining customers who are likely to produce higher relative value over the life of their service relationships with us, are less attracted by discounting, require less support and churn less, while more recently supplementing our growth by targeting a broader scope of incremental customers, including those who are more value-conscious. This strategy has focused on increasing Adjusted EBITDA, driving higher margins and delivering attractive levels of Adjusted EBITDA less capital expenditures over the long-term.

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Excluding the effects of our recently completed and any potential future acquisitions and divestitures, the trends described above have impacted, and are expected to further impact, our three primary product lines in the following ways:

•Residential data. We have experienced significant growth in residential data customers and revenues since 2013 and we expect growth for this product line to continue over the long-term, supplemented by growth in related services, such as intelligent Wi-Fi and network security solutions, that we are focused on growing. We believe upgrades made in our broadband capacity, our ability to offer higher access speeds than many of our competitors, the reliability and flexibility of our data service offerings, our Wi-Fi offerings and continuously growing data usage by consumers and their demand for higher speeds will enable us to continue growing ARPU from our existing customers over the long-term and capture additional market share. Our broadband plant generally consists of a fiber or HFC network with ample unused capacity, and we offer our data customers internet products at some of the fastest speeds available in our markets. During the fourth quarter of 2024, our average residential data customer used 774 Gigabytes of data per month, with over 27% of our customers using over 1 Terabyte of data per month. We believe that the capacity and reliability of our networks is equal to or exceeds that of our competitors in most of our markets and best positions us to meet the continuously increasing consumption demands of customers.

•Business data. We have experienced significant growth in business data customers and revenues since 2013. We attribute this growth to our strategic focus on increasing sales to business customers and our efforts to attract enterprise and wholesale business customers. We expect to experience continued growth in business data customers and revenues over the long-term. Margins for products sold to business customers have remained attractive, which we expect will continue.

•Residential video. Residential video service is an increasingly fragmented business, with programming costs and retransmission fees continuing to escalate in the face of a proliferation of streaming content alternatives. We intend to continue our strategy of focusing on the higher-margin businesses of residential data and business data services while de-emphasizing our video business. As a result of our video strategy, we expect that residential video customers and revenues will continue to decline. We now offer Sparklight TV, an IPTV video service that allows customers with our Sparklight TV app to stream our video channels from the cloud. This transition from linear to IPTV video service enables us to reclaim bandwidth, freeing up network capacity to increase data speeds and capacity across our network.

We continue to experience increased competition, particularly from telephone companies; fiber, municipal and cooperative overbuilders; cell phone internet providers; and OTT video providers. Because of the levels of competition we face, we believe it is important to make investments in our infrastructure. In addition, a key objective of our capital allocation process is to invest in initiatives designed to drive revenue and Adjusted EBITDA expansion. Approximately 61% of our total capital expenditures since 2017 focused on infrastructure improvements intended to grow these measures. We continue to invest capital to, among other things, increase fiber density and coverage, expand our footprint, increase plant and data capacity, enhance network reliability and improve the customer experience. We have rolled out multi-Gigabit download data service to over 40% of our markets and currently offer Gigabit download data service to all of our passings. We have also deployed DOCSIS 3.1 and begun the deployment of DOCSIS 4.0, which, together with Sparklight TV, further increases our network capacity and enables future growth in our residential data and business data product lines.

We expect to continue to devote financial resources to infrastructure improvements in existing and newly acquired markets as well as to expand high-speed data service in areas adjacent to our existing network. We believe these investments are necessary to continually meet our customers’ needs and remain competitive. The capital enhancements associated with acquisitions include rebuilding low-capacity markets; reclaiming bandwidth from analog video services; implementing 32-channel bonding; deploying DOCSIS 4.0; consolidating back-office functions such as billing, accounting and service provisioning; migrating products to Cable One platforms; and expanding our high-capacity fiber network.

Our primary financial goals are to continue growing residential data and business data revenues, to increase profit margins and to deliver strong Adjusted EBITDA and Adjusted EBITDA less capital expenditures over the long-term. To achieve these goals, we intend to continue our disciplined cost management approach, remain focused on customers with expected higher relative value, supplement our growth by targeting a broader scope of incremental customers, including those who are more value-conscious, combat competitive threats in our markets through more targeted pricing and product offerings and follow through with further planned investments in broadband plant upgrades, including the continued deployment of DOCSIS 4.0 capabilities and new data service offerings for residential and business customers. We also plan to seek broadband-related acquisition and strategic investment opportunities in rural markets in addition to the pursuit of organic growth through market expansion projects. Given our strategic focus on our higher margin residential data and business data product lines, we assess our level of capital expenditures relative to Adjusted EBITDA, unlike others in our industry who may compare their capital expenditures to revenues due to their much larger residential video customer bases.

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Beginning in the fourth quarter of 2023, we increased our efforts to supplement the growth of our residential data customer base by targeting a broader scope of incremental customers, including those who are more value-conscious, through more targeted pricing and product offerings. These efforts contributed to a reduction in residential data services ARPU during 2024.

Our business is subject to extensive governmental regulation, which substantially impacts our operational and administrative expenses. Thus, we could be significantly impacted by changes to the existing regulatory framework, whether triggered by legislative, administrative or judicial rulings. The FCC currently is considering several initiatives that could lead to increased regulation of our data, voice and video services. Some states, including Arizona and Missouri (where we have subscribers), have proposed administrative actions and/or legislation in the past, which if adopted could lead to increased regulation of our provision of data services. Several states, including Minnesota, Oregon and Washington (where we also have subscribers), have adopted legislation that requires entities providing broadband internet access service in the state to comply with net neutrality requirements or that prohibits state and local government agencies from contracting with internet service providers that engage in certain network management activities based on paid prioritization, content blocking or other discrimination. We cannot predict whether or when any future changes to the regulatory framework will occur at the federal or state level or whether or to what extent those changes may affect our operations or impose additional costs on our business.

We serve our customers through a plant and network with capacity generally measuring 750 megahertz or higher and have DOCSIS 3.1 capabilities throughout our systems. Our technologically advanced fiber-based infrastructure provides for delivery of a full suite of data, video and voice products. Our broadband plant generally consists of a fiber or HFC network with ample unused capacity, and all of our passings have access to Gigabit download speeds, including over 40% of our markets that have access to multi-Gigabit download speeds, which we believe meaningfully distinguishes our offerings from certain competitors in our markets. As a result of multi-year investments in our plant and network, we increased broadband capacity and reliability, which has enabled and will continue to enable us to offer even higher download speeds to our customers. In addition to the deployment of symmetrical Gigabit speeds over our data network in select markets beginning in 2023, we also began deploying DOCSIS 4.0 in the fourth quarter of 2024. These upgrades will allow us to further increase plant capacity in support of continually increasing data usage by consumers. We believe these investments will reinforce our competitive strength in this area.

In addition to our organic growth, we have also completed a number of acquisitions in recent years. In 2017, we acquired NewWave for $740.2 million. In 2019, we acquired Clearwave for $358.8 million and Fidelity for $531.4 million. In 2020, we acquired Valu-Net for $38.9 million and contributed the assets of our Anniston System to Hargray in exchange for an approximately 15% equity interest in Hargray. We subsequently acquired the remaining approximately 85% equity interest in Hargray in 2021 for approximately $2.0 billion. We also acquired certain assets and assumed certain liabilities from CableAmerica for $113.1 million in late 2021 and completed a small acquisition for $4.3 million in the third quarter of 2024.

In recent years, we have made investments in several broadband-centric providers serving non-urban markets that follow various strategies similar to our own. Such strategic investments capitalize on opportunities that may not have existed under a full ownership model, allow us to participate more aggressively in the fiber expansion business and may potentially provide future acquisition or investment opportunities, while allowing our management team to focus on our core business and without burdening our cash flow. In 2020, we invested a combined $634.9 million in CTI, Nextlink, Wisper and MBI and contributed the assets of the Anniston System to Hargray in exchange for an approximately 15% equity interest. In 2021, we invested a combined $95.8 million in Point, Tristar and Nextlink. In 2022, we contributed certain fiber operations to Clearwave Fiber in exchange for an approximately 58% equity interest in Clearwave Fiber valued at $440.0 million as of the closing date, divested our Tallahassee, Florida system and certain other non-core assets and invested a combined $41.8 million (including the $7.0 million fair value of our divested Tallahassee, Florida system) in Point, MetroNet, Visionary and Ziply. In 2023, we invested an additional $1.6 million in Visionary and an additional $27.8 million in Ziply. In addition, we redeemed our equity investment in Wisper for total cash proceeds of $35.9 million and divested our equity investment in Tristar for total cash proceeds of $20.9 million in 2023. In 2024, we invested an additional $20.0 million in Nextlink, increasing our equity interest to approximately 22% (see note 6 of the notes to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K for further details).

Refer to our amended Annual Report on Form 10-K/A for the year ended December 31, 2023 for discussion and analysis of our financial condition and results of operations for 2023 compared to 2022 contained in “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

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The FCC's Affordable Connectivity Program

In 2021, we participated in the FCC’s EBB program, which provided qualifying low-income consumers a discount on certain of our broadband internet access services for which we received reimbursement from the FCC. On December 31, 2021, the EBB program transitioned to the ACP as required by the Infrastructure Act. The ACP allowed us to seek reimbursement for certain broadband internet access service discounts provided to qualifying low-income consumers. The funding for the ACP authorized under the Infrastructure Act was depleted and the program ended in the second quarter of 2024. While only a relatively small percentage of our customers received ACP services, we lost approximately 10,000 residential data customers as a result of the discontinuation of the ACP during the nine months ended September 30, 2024.

Results of Operations

Key Performance Measures Summary

The following table summarizes certain key measures of our results of operations (dollars in thousands):

(1)Adjusted EBITDA is non-GAAP measure. See "Use of Adjusted EBITDA" below for a definition of Adjusted EBITDA and a reconciliation of Adjusted EBITDA to net income.

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PSU and Customer Counts

Selected subscriber data for the periods presented was as follows (in thousands, except percentages):

(1)Amount as of December 31, 2024 includes 2,100 residential data PSUs associated with a small acquisition in July 2024.

In recent years, our customer mix has shifted away from double- and triple-play packages combining data, video and/or voice services, which is in line with our strategy of focusing on our higher margin residential data and business data product lines. This is largely because some residential video customers have switched to OTT offerings and households continue to discontinue residential voice services. In addition, we have focused on selling data-only packages to new customers rather than cross-selling video to these customers.

Use of Nonfinancial Metrics and ARPU

We use various nonfinancial metrics to measure, manage and monitor our operating performance on an ongoing basis. Such metrics include passings (which we previously referred to as homes passed), PSUs and customer relationships. Passings represent the number of serviceable and marketable homes and businesses passed by our active plant. A PSU represents a single subscription to a particular service offering. Residential bulk multi-dwelling PSUs are generally classified as residential and are counted at the individual unit level. Business voice customers who have multiple voice lines are counted as a single PSU. A customer relationship represents a single customer who subscribes to one or more PSUs.

We believe passings, PSU and customer relationship counts are useful to investors in evaluating our operating performance. Similar measures with similar titles are common measures used by investors, analysts and peers to compare performance in our industry, although our measures of passings, PSUs and customer relationships may not be directly comparable to similarly titled measures reported by other companies.

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We use ARPU to evaluate and monitor the amount of revenue generated by each type of service subscribed to by customers and the contribution to total revenues as well as to analyze and compare growth patterns. Residential ARPU values represent the applicable residential service revenues (excluding installation and activation fees) divided by the corresponding average of the number of PSUs at the beginning and end of each period, divided by the number of months in the period, except that for any PSUs added or subtracted as a result of an acquisition or divestiture occurring during the period, the associated ARPU values represent the applicable residential service revenues (excluding installation and activation fees) divided by the pro-rated average number of PSUs during such period. Business services ARPU values represent business services revenues divided by the average of the number of business customer relationships at the beginning and end of each period, divided by the number of months in the period, except that for any business customer relationships added or subtracted as a result of an acquisition or divestiture occurring during the period, the associated ARPU values represent business services revenues divided by the pro-rated average number of business customer relationships during such period.

We believe ARPU is useful to investors in evaluating our operating performance. ARPU and similar measures with similar titles are common measures used by investors, analysts and peers to compare performance in our industry, although our measure of ARPU may not be directly comparable to similarly titled measures reported by other companies.

2024 Compared to 2023

Revenues

Revenues decreased $98.5 million, or 5.9%, due primarily to decreases in residential data, residential video, business other and residential voice revenues, partially offset by an increase in business data revenues.

Revenues by service offering for 2024 and 2023, together with the percentages of total revenues that each item represented for the years presented, were as follows (dollars in thousands):

ARPU for the indicated service offerings for 2024 and 2023 were as follows:

Residential data revenues decreased $53.4 million, or 5.5%, due primarily to a 4.9% decrease in ARPU as a result of the implementation of targeted pricing and product offerings in certain markets, including amongst value-conscious customers, and a reduction in subscribers, driven by the expiration of the ACP.

Residential video revenues decreased $35.9 million, or 13.9%, due primarily to a decrease in residential video subscribers, partially offset by a rate adjustment enacted in early 2024.

Residential voice revenues decreased $5.1 million, or 13.8%, due primarily to a decrease in residential voice subscribers.

Business data revenues increased $5.8 million, or 2.6%, due primarily to an increase in business data subscribers.

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Business other revenues decreased $9.8 million, or 12.0%, due primarily to a decrease in business video subscribers.

Costs and Expenses

Operating expenses (excluding depreciation and amortization) were $416.8 million for 2024 and decreased $24.1 million, or 5.5%, compared to 2023. The decrease in operating expenses was primarily attributable to $32.8 million of lower programming and franchise fees as a result of video customer losses and a $2.9 million reduction in labor and other compensation-related costs, partially offset by increases of $3.2 million in software costs, $2.1 million in network backbone costs and $2.0 million in rent expense. Operating expenses as a percentage of revenues were 26.4% and 26.3% for 2024 and 2023, respectively.

Selling, general and administrative expenses were $366.0 million for 2024 and increased $11.3 million, or 3.2%, compared to 2023. The increase in selling, general and administrative expenses was primarily attributable to increases of $6.8 million in rebranding costs, $6.2 million in system conversion costs and $2.4 million in software costs, partially offset by a $2.4 million decrease in labor and other compensation-related costs. Selling, general and administrative expenses as a percentage of revenues were 23.2% and 21.1% for 2024 and 2023, respectively.

Depreciation and amortization expense was $341.8 million for 2024 and decreased $1.1 million, or 0.3%, compared to 2023. Depreciation and amortization expense as a percentage of revenues was 21.6% and 20.4% for 2024 and 2023, respectively.

Interest Expense, Net

Interest expense, net, was $138.0 million for 2024 and decreased $13.6 million, or 9.0%, compared to 2023, driven primarily by lower average debt balances.

Other Income (Expense), Net

Other expense, net, was $59.7 million for 2024 and consisted primarily of a $71.5 million gain related to the MBI Amendment (as defined and described in the following section entitled "Financial Condition: Liquidity and Capital Resources - Liquidity"), a $7.7 million gain related to the C-band spectrum relocation funding received from the federal government and a $6.9 million non-cash gain associated with our Nextlink equity investment, partially offset by a $146.2 million non-cash loss on fair value adjustment associated with the Old MBI Net Option (as defined and described in the section entitled "Financial Condition: Liquidity and Capital Resources - Liquidity"). Other income, net, was $36.1 million for 2023 and consisted primarily of a $28.0 million non-cash gain on fair value adjustment associated with the Old MBI Net Option, a $12.3 million non-cash mark-to-market gain on the investment in Point and a $1.8 million gain on the redemption of the Wisper equity investment, partially offset by a $3.4 million loss on the sale of the Tristar equity investment and $3.3 million of debt issuance costs written off in connection with the entry into the New Credit Agreement (as defined and described in the following section entitled "Financial Condition: Liquidity and Capital Resources - Financing Activity").

Income Tax Provision

Income tax provision was $25.2 million for 2024 and decreased $47.6 million, or 65.4%, compared to 2023. Our effective tax rate was 10.3% and 17.7% for 2024 and 2023, respectively. The decrease in the effective tax rate was due primarily to a decrease of $19.0 million in deferred income tax expense related to state blended rate changes, partially offset by an increase of $30.6 million in income tax expense related to a change in the valuation allowance associated with the Old MBI Net Option.

Equity Method Investment Income (Loss), Net

Equity method investment loss, net, was $204.5 million for 2024 and consisted primarily of a $111.7 million non-cash impairment of our MBI investment and our $91.6 million and $2.8 million proportionate share of net losses from our Clearwave Fiber and MBI investments, respectively. Equity method investment loss, net, was $113.9 million for 2023 and consisted primarily of our $109.3 million and $5.1 million proportionate share of net losses from our Clearwave Fiber and MBI investments, respectively.

Net Income

Net income was $14.5 million for 2024 compared to $224.6 million for 2023.

Unrealized Gain (Loss) on Cash Flow Hedges and Other, Net of Tax

Unrealized gain on cash flow hedges and other, net of tax was $11.4 million for 2024 compared to an unrealized loss on cash flow hedges and other, net of tax of $13.3 million for 2023. The $24.6 million change was due to a year-over-year increase in forward interest rates.

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Use of Adjusted EBITDA

We use certain measures that are not defined by GAAP to evaluate various aspects of our business. Adjusted EBITDA is a non-GAAP financial measure and should be considered in addition to, not as superior to, or as a substitute for, net income reported in accordance with GAAP. Adjusted EBITDA is reconciled to net income below, the most directly comparable GAAP financial measure.

Adjusted EBITDA is defined as net income plus net interest expense, income tax provision, depreciation and amortization, equity-based compensation, severance and contract termination costs, acquisition-related costs, net (gain) loss on asset sales and disposals, system conversion costs, rebranding costs, government program exit costs, net equity method investment (income) loss, net other (income) expense and other special items, as applicable, as provided in the following table. As such, it eliminates the significant non-cash depreciation and amortization expense that results from the capital-intensive nature of our business as well as other non-cash or special items and is unaffected by our capital structure or investment activities. This measure is limited in that it does not reflect the periodic costs of certain capitalized tangible and intangible assets used in generating revenues and our cash cost of debt financing. These costs are evaluated through other financial measures.

We use Adjusted EBITDA to assess our performance. In addition, Adjusted EBITDA generally correlates to the measure used in the leverage ratio calculations under the New Credit Agreement and the Senior Notes Indenture (as defined and described in the following section entitled "Financial Condition: Liquidity and Capital Resources - Financing Activity") to determine compliance with the covenants contained in the New Credit Agreement and the ability to take certain actions under the Senior Notes Indenture. Adjusted EBITDA is also a significant performance measure that we have used in our incentive compensation programs. Adjusted EBITDA does not take into account cash used for mandatory debt service requirements or other non-discretionary expenditures, and thus does not represent residual funds available for discretionary uses.

We believe that Adjusted EBITDA is useful to investors in evaluating our operating performance. Adjusted EBITDA and similar measures with similar titles are common measures used by investors, analysts and peers to compare performance in our industry, although our measure of Adjusted EBITDA may not be directly comparable to similarly titled measures reported by other companies.

NM = Not meaningful.

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Financial Condition: Liquidity and Capital Resources

Liquidity

Our primary funding requirements are for our ongoing operations, capital expenditures, potential acquisitions and strategic investments, payments of quarterly dividends and share repurchases. We believe that existing cash balances, our Senior Credit Facilities (as defined below) and operating cash flows will provide adequate support for these funding requirements over the next 12 months. However, our ability to utilize those funding sources to fund ongoing operations, make capital expenditures, make future acquisitions and strategic investments, pay quarterly dividends and make share repurchases depends on future operating performance and cash flows, which, in turn, are subject to prevailing economic conditions and to financial, business and other factors, some of which are beyond our control.

As of December 31, 2023, we held a call option to purchase all but not less than all of the remaining equity interests in MBI that we do not already own between January 1, 2023 and June 30, 2024. The call option expired unexercised on June 30, 2024. Certain investors in MBI held a put option to sell (and to cause all members of MBI other than us to sell) to us all but not less than all of the remaining equity interests in MBI that we do not already own between July 1, 2025 and September 30, 2025 (these call and put options are collectively referred to as the "Old MBI Net Option").

In December 2024, we amended our agreement with MBI, to, among other things, (i) reinstate our expired call option to acquire the remaining equity interests in MBI, exercisable any time after the availability of MBI's June 30, 2025 financial statements (unless the Put Option (as defined below) has already been exercised) (the "Call Option"); (ii) amend the put option held by certain other investors in MBI to sell (and to cause all members of MBI other than us to sell) to us all membership interests not held by us such that the exercise can occur no earlier than January 1, 2026 (unless a change of control of Cable One occurs prior to that date), and the closing can occur no earlier than October 1, 2026 (unless we elect to cause the closing to occur earlier) (the "Put Option," and together with the Call Option, the "New MBI Net Option"); (iii) require us to make a $250 million net upfront cash payment to the other members of MBI (the "Upfront Payment"), which was paid on December 20, 2024; and (iv) provide for the other members of MBI to immediately receive, indirectly, the proceeds from $100 million of new indebtedness recently incurred by a subsidiary of MBI (the "New MBI Debt") (collectively, the "MBI Amendment"). The Call Price or Put Price payable by us upon the exercise of the Call Option or the Put Option, as applicable, is to be calculated under a formula based on a multiple of MBI’s adjusted earnings before interest, taxes, depreciation and amortization for the twelve-month period ended June 30, 2025, and MBI’s total net indebtedness. The aggregate amount of the Upfront Payment and the impact of the New MBI Debt will reduce the Call Price or Put Price payable upon the exercise of the Call Option or Put Option, as applicable, and the New MBI Debt (and the associated interest and fees) will be excluded from the calculation of MBI's total net indebtedness for purposes of determining such purchase price. Further, if the closing of the Put Option or Call Option occurs prior to October 1, 2026, the Call Price or Put Price payable will be discounted, from October 1, 2026 to the closing, at a per annum rate of 12%.

MBI's total revenues for the twelve months ended December 31, 2024 were approximately $320 million and MBI had approximately 220,000 residential data and business data customers and a network footprint with approximately 670,000 passings as of December 31, 2024. Based on available information as of the date of this Annual Report on Form 10-K, if the Call Option or Put Option is exercised, we estimate that (i) the Call Price or Put Price payable by us for the equity interests of MBI that we do not already own will range between approximately $410 million and $550 million; and (ii) MBI’s total net indebtedness that will be outstanding at the time it becomes a wholly-owned subsidiary will be approximately $845 million to $895 million. These estimates are based on MBI’s past performance and current forecasts and are subject to numerous assumptions and risks including, without limitation, factors that could impact MBI’s performance, such as competition, economic conditions, operating performance and other factors described under “Cautionary Statement Regarding Forward-Looking Statements” in this Annual Report on Form 10-K. Should the underlying assumptions prove incorrect, or if any of those risks materialize, the actual Call Price or Put Price payable upon the closing of an exercise of the Call Option or Put Option and the amount of MBI’s total net indebtedness outstanding at that time may differ from the estimated amounts described above.

We believe that our existing cash balances, the anticipated available capacity under the Revolving Credit Facility (as defined below) at the time of the transaction and our operating cash flows will be sufficient to fund the purchase price payable if either the Call Option or Put Option is exercised without needing to raise additional incremental capital. However, we may also opportunistically pursue additional incremental financing transactions depending on market conditions and other factors.

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The following table shows a summary of our net cash flows for the years indicated (dollars in thousands):

The $1.0 million year-over-year increase in net cash provided by operating activities was primarily attributable to favorable changes in working capital, largely offset by a decrease in Adjusted EBITDA.

The $222.5 million year-over-year increase in net cash used in investing activities was due primarily to $250.0 million of net cash paid in December 2024 for the Upfront Payment in connection with the MBI Amendment and $56.7 million of aggregate proceeds from the sale of equity investments during the prior year that did not recur, partially offset by a $72.7 million decrease in cash paid for capital expenditures and a $9.4 million decrease in cash paid for equity investments.

The $209.8 million year-over-year decrease in net cash used in financing activities was due primarily to a $105.7 million reduction in net debt payments, $99.6 million of share repurchases during the prior year that did not recur and a $6.5 million reduction in cash paid for debt issuance costs.

On May 20, 2022, the Board authorized up to $450.0 million of additional share repurchases (with no cap as to the number of shares of common stock). We had $143.1 million of remaining share repurchase authorization under the Share Repurchase Program as of December 31, 2024. Additional purchases under the Share Repurchase Program may be made from time to time on the open market and in privately negotiated transactions. The size and timing of these purchases are based on a number of factors, including share price and business and market conditions. Since we first became publicly traded in 2015 through the end of 2024, we have repurchased 646,244 shares of our common stock at an aggregate cost of $556.9 million. We may, from time to time, continue to opportunistically repurchase shares depending on the trading price of our common stock, market conditions and other factors. We did not repurchase any shares under the Share Repurchase Program during the twelve months ended December 31, 2024.

We currently expect to continue to pay comparable quarterly cash dividends on shares of our common stock, subject to approval of the Board. During the fourth quarter of 2024, the Board approved a quarterly dividend of $2.95 per share of common stock, which was paid on December 20, 2024, resulting in total dividends distributed during 2024 of $67.9 million. On February 4, 2025, the Board approved a quarterly dividend of $2.95 per share of common stock to be paid on March 7, 2025 to holders of record as of February 18, 2025.

Financing Activity

Senior Credit Facilities

Prior to February 22, 2023, we had in place the third amended and restated credit agreement among us and our lenders, dated as of October 30, 2020 (as amended prior to February 22, 2023, the "Credit Agreement"), that provided for senior secured term loans in original aggregate principal amounts of $700.0 million maturing in 2025 (the “Term Loan A-2”), $250.0 million maturing in 2027 (the “Term Loan B-2”), $625.0 million maturing in 2027 (the “Term Loan B-3”) and $800.0 million maturing in 2028 (the "Term Loan B-4"), as well as a $500.0 million revolving credit facility maturing in 2025 (the “Revolving Credit Facility” and, together with the Term Loan A-2, the Term Loan B-2, the Term Loan B-3 and the Term Loan B-4, the “Senior Credit Facilities”). The Revolving Credit Facility also gives us the ability to issue letters of credit, which reduce the amount available for borrowing under the Revolving Credit Facility.

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On February 22, 2023, we entered into the fourth amended and restated credit agreement with our lenders to amend and restate the Credit Agreement (as amended and restated, the "New Credit Agreement") to, among other things, (i) increase the aggregate principal amount of commitments under the Revolving Credit Facility by $500.0 million to $1.0 billion; (ii) extend the scheduled maturity of the Revolving Credit Facility from October 2025 to February 2028; (iii) upsize the outstanding principal amount under the Term Loan B-3 by $150.0 million to $757.0 million (the "TLB-3 Upsize"); (iv) extend the scheduled maturities of the Term Loan B-2 and the Term Loan B-3 from October 2027 to October 2029 (subject to adjustment as described in the notes to the table below summarizing our outstanding term loans as of December 31, 2024); (v) increase the fixed spreads on the Term Loan B-2 and the Term Loan B-3 from 2.00% to 2.25%; and (vi) transition the benchmark interest rate for the Revolving Credit Facility, the Term Loan B-2 and the Term Loan B-3 from the London Interbank Offered Rate ("LIBOR") to the Secured Overnight Financing Rate ("SOFR") plus a 10 basis point credit spread adjustment. Except as described above, the New Credit Agreement did not make any material changes to the principal terms of the Term Loan B-2, the Term Loan B-3, the Term Loan B-4 or the Revolving Credit Facility. Upon the effectiveness of the New Credit Agreement, we drew $488.0 million under the Revolving Credit Facility and, together with the net proceeds from the TLB-3 Upsize, repaid all $638.3 million aggregate principal amount of our then outstanding Term Loan A-2. In July 2023, we transitioned the benchmark interest rate for the Term Loan B-4 from LIBOR to SOFR plus a credit spread adjustment that ranges from approximately 11.4 basis points to 42.8 basis points based on the interest period elected.

On October 7, 2024, we entered into Amendment No. 2 (the "Amendment") with our lenders to amend the New Credit Agreement. The Amendment provides for (i) an increase of the aggregate principal amount of commitments under the Revolving Credit Facility by $250.0 million to $1.25 billion; and (ii) certain other amendments to the New Credit Agreement that are expected to provide us enhanced capital structure optionality in the event MBI becomes our wholly owned restricted subsidiary under the New Credit Agreement. The Amendment did not make any other material changes to the principal terms of the New Credit Agreement.

Under the New Credit Agreement, the interest margins applicable to the Senior Credit Facilities are, at the Company’s option, equal to either SOFR or a base rate, plus an applicable margin equal to, (i) with respect to the Revolving Credit Facility, 1.25% to 1.75% plus a 10 basis point credit spread adjustment for SOFR loans and 0.25% to 0.75% for base rate loans, determined on a quarterly basis by reference to a pricing grid based on the Company’s Total Net Leverage Ratio (as defined in the New Credit Agreement), (ii) with respect to the Term Loan B-2 and the Term Loan B-3, 2.25% plus a 10 basis point credit spread adjustment for SOFR loans and 1.25% for base rate loans and (iii) with respect to the Term Loan B-4, 2.0% plus an approximately 11.4 to 42.8 basis point credit spread adjustment based on the interest period elected for SOFR loans and 1.0% for base rate loans.

The Senior Credit Facilities contain customary representations, warranties and affirmative and negative covenants, including limitations on indebtedness, liens, restricted payments, prepayments of certain indebtedness, investments, dispositions of assets, restrictions on subsidiary distributions and negative pledge clauses, fundamental changes, transactions with affiliates and amendments to organizational documents. The Senior Credit Facilities also require that we maintain specified ratios of total net indebtedness and first lien net indebtedness to consolidated operating cash flow. The Senior Credit Facilities also contain customary events of default, including non-payment of principal, interest, fees or other amounts, material inaccuracy of any representation or warranty, failure to observe or perform any covenant, default in respect of our and our restricted subsidiaries’ other material debt, bankruptcy or insolvency, the entry against us or any of our restricted subsidiaries of a material judgment, the occurrence of certain ERISA events, impairment of the loan documentation and the occurrence of a change of control.

We repaid $200.0 million of outstanding Revolving Credit Facility borrowings during 2024. In December 2024, we borrowed $175.0 million under the Revolving Credit Facility in connection with the MBI Amendment.

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As of December 31, 2024, we had approximately $1.73 billion of aggregate outstanding term loan borrowings and $313.0 million of borrowings (and $937.0 million available for borrowing) under the Revolving Credit Facility. A summary of the term loans outstanding under the New Credit Agreement as of December 31, 2024 is as follows (dollars in thousands):

(1)Payable in equal quarterly installments (expressed as a percentage of the original principal amount and subject to customary adjustments in the event of any prepayment). All loans may be prepaid at any time without penalty or premium (subject to customary SOFR breakage provisions).

(2)The final maturity date of the Term Loan B-2 and the Term Loan B-3, in each case, will adjust to May 3, 2028 if greater than $150.0 million aggregate principal amount of the Term Loan B-4 (together with any refinancing indebtedness in respect of the Term Loan B-4 with a final maturity date prior to the date that is 91 days after October 30, 2029) remains outstanding on May 3, 2028.

Senior Notes

In November 2020, we completed a private offering of $650.0 million aggregate principal amount of 4.00% senior notes due 2030 (the “Senior Notes”). The Senior Notes bear interest at a rate of 4.00% per annum payable semi-annually in arrears on May 15th and November 15th of each year, beginning on May 15, 2021. The terms of the Senior Notes are governed by an indenture dated as of November 9, 2020 (the “Senior Notes Indenture”), among us, the guarantors party thereto and The Bank of New York Mellon Trust Company, N.A. (“BNY”), as trustee. The Senior Notes are required to be guaranteed on a senior unsecured basis by each of our existing and future wholly owned domestic subsidiaries that guarantees our obligations under the New Credit Agreement or that guarantees certain capital markets debt of ours or a guarantor in an aggregate principal amount in excess of $250.0 million.

At any time and from time to time prior to November 15, 2025, we may redeem some or all of the Senior Notes for cash at a redemption price equal to 100% of their principal amount, plus the “make-whole” premium described in the Senior Notes Indenture and accrued and unpaid interest, if any, to, but excluding, the applicable redemption date. Beginning on November 15, 2025, we may redeem some or all of the Senior Notes at any time and from time to time at the applicable redemption prices listed in the Senior Notes Indenture, plus accrued and unpaid interest, if any, to, but excluding, the applicable redemption date.

Upon the occurrence of a Change of Control and a Below Investment Grade Rating Event (each as defined in the Senior Notes Indenture), we are required to offer to repurchase the Senior Notes at 101% of the principal amount of such Senior Notes, plus accrued and unpaid interest, if any, to, but excluding, the date of repurchase.

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Convertible Notes

In March 2021, we completed a private offering of $575.0 million aggregate principal amount of 0.000% convertible senior notes due 2026 (the “2026 Notes”) and $345.0 million aggregate principal amount of 1.125% convertible senior notes due 2028 (the “2028 Notes” and, together with the 2026 Notes, the “Convertible Notes,” and the Convertible Notes collectively with the Senior Notes, the "Notes"). The net proceeds from the offering were $895.2 million after deducting initial purchaser discounts and other offering costs and expenses. We used the net proceeds from the offering for general corporate purposes, including to finance a portion of the purchase price for the Hargray Acquisition. The Convertible Notes are senior unsecured obligations of ours and are guaranteed by our wholly owned domestic subsidiaries that guarantee the Senior Credit Facilities or that guarantee certain of our Notes in an aggregate principal amount in excess of $250.0 million. The 2026 Notes do not bear regular interest, and the principal amount of the 2026 Notes do not accrete. The 2028 Notes bear interest at a rate of 1.125% per annum. Interest on the 2028 Notes is payable semiannually in arrears on March 15th and September 15th of each year, beginning on September 15, 2021, unless earlier repurchased, converted or redeemed. The 2026 Notes are scheduled to mature on March 15, 2026, and the 2028 Notes are scheduled to mature on March 15, 2028. The initial conversion rate for each of the 2026 Notes and the 2028 Notes is 0.4394 shares of our common stock per $1,000 principal amount of 2026 Notes and 2028 Notes, as applicable (equivalent to an initial conversion price of $2,275.83 per share of common stock). The initial conversion price of each of the 2026 Notes and the 2028 Notes represents a premium of 25.0% over the last reported sale price of $1,820.83 per share of our common stock on March 2, 2021. The Convertible Notes are convertible at the option of the holders. The method of conversion into cash, shares of our common stock or a combination thereof is at our election.

Other Debt-Related Information

Unamortized debt issuance costs consisted of the following (in thousands):

In connection with the Amendment that was entered into in 2024 and the entry into the New Credit Agreement in 2023, we capitalized $1.6 million and $7.8 million of debt issuance costs in 2024 and 2023, respectively, and wrote-off $3.3 million of existing unamortized debt issuance costs to other expense in 2023. We recorded debt issuance cost amortization of $4.6 million and $4.7 million for 2024 and 2023, respectively, within net interest expense in the consolidated statements of operations and comprehensive income.

The unamortized debt discount associated with the Convertible Notes was $7.7 million and $12.0 million as of December 31, 2024 and 2023, respectively. We recorded debt discount amortization of $4.3 million during both 2024 and 2023 within net interest expense in the consolidated statement of operations and comprehensive income.

We have entered into a letter of credit agreement with MUFG Bank, Ltd. which provides for an additional $75.0 million letter of credit issuing capacity. As of December 31, 2024, $11.6 million of letter of credit issuances were held for the benefit of performance obligations under government grant programs and certain general and liability insurance matters and bore interest at a rate of 1.0% per annum.

We were in compliance with all debt covenants as of December 31, 2024.

We are party to two interest rate swap agreements to convert our interest payment obligations with respect to an aggregate of $1.2 billion of our variable rate SOFR indebtedness to a fixed rate. Under the first swap agreement, with respect to a notional amount of $850.0 million, our monthly payment obligation is determined at a fixed base rate of 2.595%. Under the second swap agreement, with respect to a notional amount of $350.0 million, our monthly payment obligation is determined at a fixed base rate of 2.691%. Both interest rate swap agreements are scheduled to mature in the first quarter of 2029 but each may be terminated prior to the scheduled maturity at our election or that of the financial institution counterparty under the terms provided in each swap agreement. We recognized income of $31.2 million and $29.0 million on interest rate swaps for 2024 and 2023, respectively, which were reflected within net interest expense in the consolidated statements of operations and comprehensive income.

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Refer to notes 10 and 12 to the consolidated financial statements for further details regarding our financing activity, outstanding debt and interest rate swaps.

Capital Expenditures

We have significant ongoing capital expenditure requirements as well as capital enhancements associated with acquired operations and the expansion of our high-capacity network. Capital expenditures are funded primarily by cash on hand and cash flows from operating activities.

Our capital expenditures by category for the years ended December 31, 2024 and 2023 were as follows (in thousands):

(1)Customer premise equipment includes costs incurred at customer locations, including installation costs and customer premise equipment (e.g., modems and set-top boxes).

(2)Commercial includes costs related to securing business services customers and PSUs, including small and medium-sized businesses and enterprise customers.

(3)Scalable infrastructure includes costs not related to customer premise equipment to secure growth of new customers and PSUs or provide service enhancements (e.g., headend equipment).

(4)Line extensions include network costs associated with entering new service areas (e.g., fiber/coaxial cable, amplifiers, electronic equipment, make-ready and design engineering).

(5)Upgrade/rebuild includes costs to modify or replace existing fiber/coaxial cable networks, including betterments.

(6)Support capital includes costs associated with the replacement or enhancement of non-network assets due to technological and physical obsolescence (e.g., non-network equipment, land, buildings and vehicles) and capitalized internal labor costs not associated with customer installation activities.

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Contractual Obligations and Contingent Commitments

The following table summarizes our outstanding contractual obligations as of December 31, 2024 (in thousands):

(1)Programming purchase commitments represent contracts that we have with cable television networks and broadcast stations to provide programming services to our subscribers. The amounts reported represent estimates of the future programming costs for these purchase commitments based on estimated subscriber numbers, tier placements as of December 31, 2024 and the per-subscriber rates contained in the contracts. Actual amounts due under such contracts may differ from the amounts above based on the actual subscriber numbers and tier placements at the time. Programming purchases pursuant to non-binding commitments are not reflected in the amounts shown.

(2)Lease payments include payment obligations related to our outstanding finance and operating lease arrangements as of December 31, 2024.

(3)Debt payments include principal repayment obligations for our outstanding debt instruments as of December 31, 2024, including $313.0 million of current outstanding Revolving Credit Facility borrowings that mature in 2028 (which may be repaid before then).

(4)Other purchase obligations include purchase obligations related to capital projects and other legally binding commitments. Other purchase orders made in the ordinary course of business are excluded from the amounts shown but are included within accounts payable and accrued liabilities in our consolidated balance sheet.

Amounts that would be due upon the exercise of the MBI Call Option or Put Option are not included within the contractual obligations table above because the exercise of such instruments is not guaranteed and the timing of any exercise is at the discretion of each respective instrument holder.

We incur the following costs as part of our operations, however, they are not included within the contractual obligations table above for the reasons discussed below:

•We rent space on utility poles in order to provide our services to certain subscribers. Generally, pole rentals are cancellable on short notice. However, we anticipate that such rentals will recur. Rent expense for pole attachments was $16.8 million and $15.0 million for 2024 and 2023, respectively.

•Fees imposed on us by various governmental authorities, including franchise fees, are passed through monthly to our customers and are periodically remitted to authorities. These fees were $24.1 million and $26.9 million for 2024 and 2023, respectively. As we act as principal in these arrangements, these fees are reported in video and voice revenues on a gross basis with corresponding expenses included within operating expenses in the consolidated statements of operations and comprehensive income.

•We have franchise agreements requiring plant construction and the provision of services to customers within the franchise areas. In connection with these obligations under existing franchise agreements, we obtain surety bonds or letters of credit guaranteeing performance to municipalities and public utilities and payment of insurance premiums. Outstanding surety bonds and letters of credit totaled $38.8 million and $29.8 million as of December 31, 2024 and 2023, respectively. Payments under these arrangements are required only in the remote event of nonperformance. We do not expect that these contingent commitments will result in any amounts being paid.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements or financing arrangements with special-purpose entities.

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Critical Accounting Policies and Estimates

The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates, assumptions and judgments that affect the amounts reported in the consolidated financial statements. On an ongoing basis, we evaluate our estimates and assumptions. We base our estimates on historical experience and other assumptions believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results could differ from these estimates.

An accounting policy is considered to be critical if it is important to our results of operations and financial condition and if it requires management’s most difficult, subjective and complex judgments in its application. For a summary of all our significant accounting policies, see note 2 of the notes to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K.

Long-lived Assets

A long-lived asset or asset group is tested for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. Indicators of impairment may include:

•a significant decrease in the market value of the asset;

•a significant change in the extent or manner in which an asset is used or a significant change in the physical condition of the asset;

•a significant adverse change in legal factors or in the business climate that could affect the value of an asset, including an adverse action or assessment by a regulator;

•an accumulation of costs significantly in excess of the amount originally expected to acquire or construct an asset;

•a current period operating or cash flow loss combined with a history of operating or cash flow losses or a projection or forecast that demonstrates continuing losses associated with an asset; and

•a current expectation that, more likely than not, an asset will be sold or otherwise disposed of significantly before the end of its estimated useful life.

When an indicator of impairment is determined, the first step is to identify the future intent of the asset or asset group: hold for continued use, hold for sale or dispose by a means other than sale. If the asset is held for continued use and the carrying amount exceeds the undiscounted sum of cash flows expected from the use and eventual disposition of the property, the impairment loss is recognized as the difference between the carrying amount and the estimated fair value of the asset or asset group, and the new cost basis is depreciated over the remaining useful life of the asset. If the intent is to hold the asset for sale and certain other criteria are met (e.g., the asset can be disposed of currently, appropriate levels of authority have approved the sale and there is an active program to locate a buyer), the impairment test involves comparing the asset’s carrying value to its estimated fair value less disposal costs. To the extent the carrying value is greater than the asset’s estimated fair value less disposal costs, an impairment charge is recognized for the difference. If the asset is to be disposed by a means other than sale, the depreciation estimates are revised to reflect the use of the asset over its shortened useful life.

Significant judgments in this area involve determining whether an event has occurred, determining the future cash flows for the assets involved and selecting the appropriate discount rate to be applied in determining estimated fair value.

Goodwill and Indefinite-Lived Intangible Assets

We have a significant amount of goodwill and indefinite-lived intangible assets that are reviewed at least annually for impairment. These balances were as follows (dollars in thousands):

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Goodwill Reporting Unit. Goodwill is calculated as the excess of the consideration transferred over the fair value of identifiable net assets acquired in a business combination and represents the future economic benefits expected to arise from anticipated synergies and intangible assets acquired that do not qualify for separate recognition, including an assembled workforce, noncontractual relationships and other agreements. We assess the recoverability of our goodwill as of October 1st of each year, or more frequently whenever events or substantive changes in circumstances indicate that the carrying amount of a reporting unit may exceed its fair value. We test goodwill for impairment at the reporting unit level, for which we have identified a single goodwill reporting unit based on the chief operating decision maker’s performance monitoring and resource allocation process and the similarity of our geographic divisions.

Indefinite-Lived Intangible Asset Unit of Accounting

Our intangible asset with an indefinite life is from franchise agreements that we have with state and local governments. Franchise agreements allow us to contract and operate our business within specified geographic areas. We expect our franchise agreements to provide substantial benefit for a period that extends beyond the foreseeable horizon, and we have historically been able to obtain renewals and extensions of such agreements without material modifications to the agreements for nominal costs. These costs are expensed as incurred.

We assess our indefinite-lived intangible asset for impairment as of October 1st of each year, or more frequently whenever events or substantive changes in circumstances indicate that the asset might be impaired. We have identified a single unit of accounting for our franchise agreements for use in impairment assessments based on our current operations and the use of our assets.

Property, Plant and Equipment

Our industry is capital intensive, and a significant portion of our resources is spent on capital activities associated with extending, rebuilding and upgrading our network. The following tables present certain information regarding our net property, plant and equipment and our cash paid for property, plant and equipment for the periods indicated (dollars in thousands):

Property, plant and equipment represents the costs incurred in the design, construction and implementation of plant, infrastructure and capacity improvements and upgrades. Costs associated with the installation and upgrade of services and the acquiring and deploying of customer premise equipment, including materials, internal and external labor costs and related indirect and overhead costs, are also capitalized.

Capitalized labor costs include the direct costs of engineers and technical personnel involved in the design and implementation of plant and infrastructure; the costs of technicians involved in the installation and upgrades of services and customer premise equipment; and the costs of support personnel directly involved in capitalizable activities, such as project managers and supervisors. These costs are capitalized based on internally developed standards by position, which are updated annually (or more frequently if required). These standards are developed utilizing a combination of actual costs incurred where applicable, operational data and management judgment. Overhead costs are capitalized based on standards developed from historical information. Indirect and overhead costs include payroll taxes; insurance and other benefits; and vehicle, tool and supply expense related to installation activities. Costs for repairs and maintenance, disconnecting service or reconnecting service are expensed as incurred.

The estimated useful lives assigned to our property, plant and equipment are reviewed on an annual basis or more frequently if circumstances warrant and such lives are revised to the extent necessary due to changing facts and circumstances. Any changes in estimated useful lives are reflected prospectively.

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Business Combination Purchase Price Allocation

The application of the acquisition method requires the allocation of the purchase price amongst the acquisition date fair values of identifiable assets acquired and liabilities assumed in a business combination. Fair values are determined using the income approach, market approach and/or cost approach depending on the nature of the asset or liability being valued and the reliability of available information. The income approach estimates fair value by discounting associated lifetime expected future cash flows to their present value and relies on significant assumptions regarding future revenues, expenses, working capital levels and discount rates. The market approach estimates fair value by analyzing recent actual market transactions for similar assets or liabilities. The cost approach estimates fair value based on the expected cost to replace or reproduce the asset or liability and relies on assumptions regarding the occurrence and extent of any physical, functional and/or economic obsolescence.

Recently Adopted and Issued Accounting Pronouncements

Recent accounting pronouncements which may be applicable to us are described in note 2 to our consolidated financial statements.

ITEM 7.    MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our audited consolidated financial statements and accompanying notes included in this Annual Report on Form 10-K, as well as the discussion in the section of this Annual Report on Form 10-K entitled “Business.” This discussion contains forward-looking statements that involve risks and uncertainties. Our actual results may vary materially from those expressed or implied by these forward-looking statements due to a number of factors, including those discussed in the sections of this Annual Report on Form 10-K entitled “Cautionary Statement Regarding Forward-Looking Statements” and “Risk Factors.”

Throughout this “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” all totals, percentages and year-over-year changes are calculated using exact numbers. Minor differences may exist due to rounding.

Overview

We are a leading broadband communications provider committed to connecting customers and communities to what matters most. We strive to deliver an effortless experience by offering solutions that make our customers’ lives easier, and by relating to them personally as our neighbors and local business partners. Powered by our fiber-rich infrastructure, the Cable One family of brands provides residential customers with a wide array of connectivity and entertainment services, including Gigabit speeds, advanced Wi-Fi and video. For businesses ranging from small and mid-market up to enterprise, wholesale and carrier, we offer scalable, cost-effective solutions that enable businesses of all sizes to grow, compete and succeed. We believe the services we provide are critical to the development of new businesses and drive economic growth in the non-metropolitan, secondary and tertiary markets that we serve in 24 Western, Midwestern and Southern states. As of December 31, 2023, approximately 74% of our customers were located in seven states: Arizona, Idaho, Mississippi, Missouri, Oklahoma, South Carolina and Texas. We provided services to approximately 1.1 million residential and business customers out of approximately 2.8 million homes passed as of December 31, 2023. Of these customers, approximately 1,059,000 subscribed to data services, 142,000 subscribed to video services and 119,000 subscribed to voice services as of December 31, 2023.

We generate substantially all of our revenues through three primary product lines. Ranked by share of our total revenues during 2023, they are residential data (58.4%), business services (data, voice and video provided to businesses: 18.1%) and residential video (15.4%). The profit margins, growth rates and/or capital intensity of these three primary product lines vary significantly due to competition, product maturity and relative costs.

In 2023, our Adjusted EBITDA margins for residential data and business services were approximately four and five times greater, respectively, than for residential video. We define Adjusted EBITDA margin for a product line as Adjusted EBITDA attributable to that product line divided by revenue attributable to that product line (see “Use of Adjusted EBITDA” below for the definition of Adjusted EBITDA and a reconciliation of Adjusted EBITDA to net income, which is the most directly comparable GAAP measure). This margin disparity is largely the result of significant programming costs and retransmission fees incurred to deliver residential video services, which in each of the last three years represented between 63% and 65% of total residential video revenues. Neither of our other primary product lines has direct costs representing as substantial a portion of revenues as programming costs and retransmission fees represent for residential video, and indirect costs are generally allocated on a per PSU basis.

We focus on growing our higher margin businesses, namely residential data and business services. Our strategy acknowledges the industry-wide trends of declining profitability of residential video services and declining revenues from residential voice services. The declining profitability of residential video services is due primarily to increasing programming costs and retransmission fees and competition from other streaming content providers, and the declining revenues from residential voice services are due primarily to the increasing use of wireless voice services instead of residential voice services. Separately, we have also historically focused on retaining customers who are likely to produce higher relative value over the life of their service relationships with us, are less attracted by discounting, require less support and churn less. This strategy has focused on increasing Adjusted EBITDA, driving higher margins and delivering attractive levels of Adjusted EBITDA less capital expenditures over the long-term.

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Excluding the effects of recently completed and any potential future acquisitions and divestitures, the trends described above have impacted, and are expected to further impact, our three primary product lines in the following ways:

•Residential data. We have experienced significant growth in residential data customers and revenues since 2013 and we expect growth for this product line to continue over the long-term. We believe upgrades made in our broadband capacity, our ability to offer higher access speeds than many of our competitors, the reliability and flexibility of our data service offerings, our Wi-Fi support service and continuously growing data usage by consumers and their demand for higher speeds will enable us to continue to grow ARPU from our existing customers over the long-term and capture additional market share. Our broadband plant generally consists of a fiber-to-the-premises or HFC network with ample unused capacity, and we offer our data customers internet products at some of the fastest speeds available in our markets. During the fourth quarter of 2023, our average residential data customer used 705 Gigabytes of data per month, with nearly 25% of our customers using over 1 Terabyte of data per month. We believe that the capacity and reliability of our networks exceeds that of our competitors in most of our markets and best positions us to meet the continuously increasing consumption demands of customers. We experienced elevated growth in residential data revenues during the first two years of the COVID-19 pandemic, but have seen more subdued growth in recent quarters due in part to macroeconomic headwinds and continued competition in certain areas of our footprint.

•Business services. We have experienced significant growth in business data customers and revenues since 2013. We attribute this growth to our strategic focus on increasing sales to business customers and our efforts to attract enterprise business customers. We expect to experience continued growth in business data customers and revenues over the long-term. Margins for products sold to business customers have remained attractive, which we expect will continue.

•Residential video. Residential video service is an increasingly fragmented business, with programming costs and retransmission fees continuing to escalate in the face of a proliferation of streaming content alternatives. We intend to continue our strategy of focusing on the higher-margin businesses of residential data and business services while de-emphasizing our residential video business. As a result of our video strategy, we expect that residential video customers and revenues will continue to decline. We now offer Sparklight TV, an IPTV video service that allows customers with our Sparklight TV app to stream our video channels from the cloud. This transition from linear to IPTV video service enables us to reclaim bandwidth, freeing up network capacity to increase data speeds and capacity across our network.

We continue to experience increased competition, particularly from telephone companies; fiber, municipal and cooperative overbuilders; FWA data providers; and OTT video providers. Because of the levels of competition we face, we believe it is important to make investments in our infrastructure. In addition, a key objective of our capital allocation process is to invest in initiatives designed to drive revenue and Adjusted EBITDA expansion. Approximately 69% of our total capital expenditures since 2017 focused on infrastructure improvements intended to grow these measures. We continue to invest capital to, among other things, increase fiber density and coverage, expand our footprint, increase plant and data capacity, enhance network reliability and improve the customer experience. We have rolled out multi-Gigabit download data service to certain markets and currently offer Gigabit download data service to nearly all of our homes passed. We have also deployed DOCSIS 3.1, which, together with Sparklight TV, further increases our network capacity and enables future growth in our residential data and business services product lines.

We expect to continue to devote financial resources to infrastructure improvements in existing and newly acquired markets as well as to expand high-speed data service in areas adjacent to our existing network. We believe these investments are necessary to continually meet our customers’ needs and remain competitive. The capital enhancements associated with acquisitions include rebuilding low-capacity markets; reclaiming bandwidth from analog video services; implementing 32-channel bonding; deploying DOCSIS 4.0; consolidating back-office functions such as billing, accounting and service provisioning; migrating products to Cable One's platforms; and expanding our high-capacity fiber network.

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Our primary goals are to continue growing residential data and business services revenues, to increase profit margins and to deliver strong Adjusted EBITDA and Adjusted EBITDA less capital expenditures over the long-term. To achieve these goals, we intend to continue our disciplined cost management approach, remain focused on customers with expected higher relative value, supplement our growth by targeting a broader scope of incremental customers, including those who are more value-conscious, combat competitive threats in our markets through more targeted pricing and product offerings and follow through with further planned investments in broadband plant upgrades, including the deployment of DOCSIS 4.0 capabilities and new data service offerings for residential and business customers. We also plan to seek broadband-related acquisition and strategic investment opportunities in rural markets in addition to the pursuit of organic growth through market expansion projects. Given our strategic focus on our higher margin residential data and business services product lines, we assess our level of capital expenditures relative to Adjusted EBITDA, unlike others in our industry who may compare their capital expenditures to revenues due to their much larger residential video customer bases.

During the fourth quarter of 2023, we increased our efforts to supplement the growth of our residential data customer base by targeting a broader scope of incremental customers, including those who are more value-conscious, through more targeted pricing and product offerings. These efforts contributed to the growth in our residential data PSUs during the fourth quarter of 2023, as compared to the third quarter of 2023, while also contributing to the reduction in residential data services ARPU for the quarter.

Our business is subject to extensive governmental regulation, which substantially impacts our operational and administrative expenses. Thus, we could be significantly impacted by changes to the existing regulatory framework, whether triggered by legislative, administrative or judicial rulings. The FCC currently is considering several initiatives, including proposed rules regarding net neutrality that could lead to increased regulation of our data and video services. Numerous states, including Arizona, Minnesota and Missouri (where we have subscribers), also have proposed administrative actions and/or legislation in the past or currently are considering such actions, which could lead to increased regulation of our provision of data services. Several states, including Oregon and Washington (where we also have subscribers), have adopted legislation that requires entities providing broadband internet access service in the state to comply with net neutrality requirements or that prohibits state and local government agencies from contracting with internet service providers that engage in certain network management activities based on paid prioritization, content blocking or other discrimination. We cannot predict whether or when any future changes to the regulatory framework will occur at the federal or state level or whether or to what extent those changes may affect our operations or impose additional costs on our business.

We serve our customers through a plant and network with capacity generally measuring 750 megahertz or higher and have DOCSIS 3.1 capabilities throughout our systems. Our technologically advanced fiber-based infrastructure provides for delivery of a full suite of data, video and voice products. Our broadband plant generally consists of a fiber-to-the-premises or HFC network with ample unused capacity, and nearly all of our homes passed have access to Gigabit download speeds, including certain markets that have access to multi-Gigabit download speeds, which we believe meaningfully distinguishes our offerings from certain competitors in our markets. As a result of multi-year investments in our plant and network, we increased broadband capacity and reliability, which has enabled and will continue to enable us to offer even higher download speeds to our customers. In addition, we began the deployment of symmetrical Gigabit speeds over our data network in select markets during 2023 and plan to begin deploying DOCSIS 4.0 by the end of 2024. These upgrades will allow us to further increase plant capacity in support of ongoing increases in consumer demand. We believe these investments will reinforce our competitive strength in this area.

In addition to our organic growth, we have also completed a number of acquisitions in recent years. In 2017, we acquired NewWave for $740.2 million. In 2019, we acquired Clearwave for $358.8 million and Fidelity for $531.4 million. In 2020, we acquired Valu-Net for $38.9 million. In 2020, we contributed the assets of our Anniston System to Hargray in exchange for an approximately 15% equity interest in Hargray and subsequently acquired the remaining approximately 85% equity interest in 2021 for approximately $2.0 billion. We also acquired certain assets and assumed certain liabilities from CableAmerica for $113.1 million in late 2021.

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In recent years, we have made investments in several broadband-centric providers serving non-urban markets that follow various strategies similar to our own. Such strategic investments capitalize on opportunities that may not have existed under a full ownership model, allow us to participate more aggressively in the fiber expansion business and may potentially provide future acquisition or investment opportunities, while allowing our management team to focus on our core business and without burdening our cash flow. In 2020, we invested a combined $634.9 million in CTI, Nextlink, Wisper and MBI and contributed the assets of the Anniston System to Hargray in exchange for an approximately 15% equity interest. In 2021, we invested a combined $95.8 million in Point Broadband, Tristar and Nextlink. In 2022, we contributed certain fiber operations to Clearwave Fiber in exchange for an approximately 58% equity interest in Clearwave Fiber valued at $440.0 million as of the closing date, divested our Tallahassee, Florida system and certain other non-core assets and invested a combined $41.8 million (including the $7.0 million fair value of our Tallahassee, Florida system) in Point Broadband, MetroNet, Visionary and Ziply. In 2023, our strategic investment and divestiture activities consisted of the following:

•We invested an additional $1.6 million in Visionary.

•We invested an additional $27.8 million in Ziply.

•In July 2023, we redeemed our equity investment in Wisper for total cash proceeds of $35.9 million, which resulted in the recognition of a $1.8 million gain.

•In July 2023, we divested our equity investment in Tristar for total cash proceeds of $20.9 million, which resulted in the recognition of a $3.4 million loss.

Refer to our Annual Report on Form 10-K for the year ended December 31, 2022 for discussion and analysis of our financial condition and results of operations for 2022 compared to 2021 contained in “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

Results of Operations

Key Performance Measures Summary

The following table summarizes certain key measures of our results of operations (dollars in thousands):

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PSU and Customer Counts

Selected subscriber data for the periods presented was as follows (in thousands, except percentages):

In recent years, our customer mix has shifted away from double- and triple-play packages combining data, video and/or voice services, which is in line with our strategy of focusing on our higher margin residential data and business services product lines. This is largely because some residential video customers have switched to OTT offerings and households continue to discontinue residential voice services. In addition, we have focused on selling data-only packages to new customers rather than cross-selling video to these customers.

Use of Nonfinancial Metrics and ARPU

We use various nonfinancial metrics to measure, manage and monitor our operating performance on an ongoing basis. Such metrics include homes passed, PSUs and customer relationships. Homes passed represents the number of serviceable and marketable homes and businesses passed by our active plant. A PSU represents a single subscription to a particular service offering. Residential bulk multi-dwelling PSUs are generally classified as residential and are counted at the individual unit level. Business voice customers who have multiple voice lines are counted as a single PSU. A customer relationship represents a single customer who subscribes to one or more PSUs.

We believe homes passed, PSU and customer relationship counts are useful to investors in evaluating our operating performance. Similar measures with similar titles are common measures used by investors, analysts and peers to compare performance in our industry, although our measures of homes passed, PSUs and customer relationships may not be directly comparable to similarly titled measures reported by other companies.

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We use ARPU to evaluate and monitor the amount of revenue generated by each type of service subscribed to by customers and the contribution to total revenues as well as to analyze and compare growth patterns. Residential ARPU values represent the applicable residential service revenues (excluding installation and activation fees) divided by the corresponding average of the number of PSUs at the beginning and end of each period, divided by the number of months in the period, except that for any PSUs added or subtracted as a result of an acquisition or divestiture occurring during the period, the associated ARPU values represent the applicable residential service revenues (excluding installation and activation fees) divided by the pro-rated average number of PSUs during such period. Business services ARPU values represent business services revenues divided by the average of the number of business customer relationships at the beginning and end of each period, divided by the number of months in the period, except that for any business customer relationships added or subtracted as a result of an acquisition or divestiture occurring during the period, the associated ARPU values represent business services revenues divided by the pro-rated average number of business customer relationships during such period.

We believe ARPU is useful to investors in evaluating our operating performance. ARPU and similar measures with similar titles are common measures used by investors, analysts and peers to compare performance in our industry, although our measure of ARPU may not be directly comparable to similarly titled measures reported by other companies.

2023 Compared to 2022

Revenues

Revenues decreased $28.0 million, or 1.6%, due primarily to decreases in residential video and residential voice revenues, partially offset by an increase in residential data revenues.

Revenues by service offering for 2023 and 2022, together with the percentages of total revenues that each item represented for the years presented, were as follows (dollars in thousands):

Residential data service revenues increased $44.7 million, or 4.8%, due primarily to increased customer subscriptions to premium tiers, migration of existing customers to higher tiers and a rate adjustment implemented during the second quarter of 2023.

Residential video service revenues decreased $67.2 million, or 20.7%, due primarily to a decrease in residential video subscribers.

Residential voice service revenues decreased $6.0 million, or 13.9%, due primarily to a decrease in residential voice subscribers.

Business services revenues decreased $0.8 million, or 0.2%, due primarily to the divestiture of certain operations that generated $3.5 million of business service revenues during 2022 and a decrease in business video and voice subscribers, largely offset by an increase in business data subscribers.

Other revenues increased $1.3 million, or 1.3%, due primarily to an increase in regulatory revenues.

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ARPU for the indicated service offerings for 2023 and 2022 were as follows:

Costs and Expenses

Operating expenses (excluding depreciation and amortization) were $440.9 million for 2023 and decreased $30.0 million, or 6.4%, compared to 2022. The decrease in operating expenses was primarily attributable to $49.9 million of lower programming and franchise fees as a result of video customer losses, partially offset by increases of $10.9 million in property taxes, $2.9 million in rent expense, $2.5 million in health insurance costs and $2.0 million in maintenance costs. Operating expenses as a percentage of revenues were 26.3% and 27.6% for 2023 and 2022, respectively.

Selling, general and administrative expenses were $354.7 million for 2023 and increased $4.4 million, or 1.2%, compared to 2022. The increase in selling, general and administrative expenses was primarily attributable to increases of $9.3 million in marketing costs, $5.4 million in labor and other compensation-related costs and $4.2 million in software expense, partially offset by decreases of $9.4 million in property taxes, $4.3 million in health insurance costs and $3.2 million in professional services fees. Selling, general and administrative expenses as a percentage of revenues were 21.1% and 20.5% for 2023 and 2022, respectively.

Depreciation and amortization expense was $342.9 million for 2023 and decreased $7.6 million, or 2.2%, compared to 2022. The decrease in depreciation and amortization expense was primarily due to lower intangible asset amortization expense of $10.4 million driven by the use of accelerated amortization methods for certain customer relationship intangible assets. Depreciation and amortization expense as a percentage of revenues was 20.4% and 20.5% for 2023 and 2022, respectively.

We recognized a net loss on asset sales and disposals of $12.7 million and $9.2 million in 2023 and 2022, respectively.

We recognized a $22.1 million non-cash gain associated with the Clearwave Fiber Contribution and $8.3 million in non-cash losses associated with the dispositions of our Tallahassee, Florida system and certain other non-core assets during 2022.

Interest Expense

Interest expense was $170.1 million for 2023 and increased $32.4 million, or 23.6%, compared to 2022, driven primarily by higher interest rates.

Other Income (Expense), Net

Other income, net, was $54.6 million for 2023 and consisted primarily of a $28.0 million non-cash gain on fair value adjustment associated with the MBI Net Option, $18.6 million of interest and investment income, a $12.3 million non-cash mark-to-market gain on the investment in Point Broadband and a $1.8 million gain on the redemption of the Wisper equity investment, partially offset by a $3.4 million loss on the sale of the Tristar equity investment and $3.3 million of debt issuance costs written off in connection with the entry into the New Credit Agreement. Other expense, net, was $25.9 million for 2022 and consisted primarily of a $40.7 million non-cash loss on fair value adjustment associated with the MBI Net Option, partially offset by $13.7 million of interest and investment income.

Income Tax Provision

Income tax provision was $89.7 million for 2023 and decreased $36.6 million, or 29.0%, compared to 2022. Our effective tax rate was 21.8% and 33.7% for 2023 and 2022, respectively. The decrease in the effective tax rate was due primarily to decreases of $16.5 million in income tax expense related to a change in the valuation allowance associated with the MBI Net Option (as defined and described in note 6 to the consolidated financial statements) and $16.1 million in deferred income tax expense related to state blended rate changes.

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Net Income

Net income was $267.4 million for 2023 compared to $234.1 million for 2022.

Unrealized Gain (Loss) on Cash Flow Hedges and Other, Net of Tax

Unrealized loss on cash flow hedges and other, net of tax was $13.3 million for 2023 compared to an unrealized gain on cash flow hedges and other, net of tax of $132.8 million for 2022. The $146.1 million year-over-year change was due to smaller increases in forward interest rates during 2023 compared to the prior year.

Use of Adjusted EBITDA

We use certain measures that are not defined by GAAP to evaluate various aspects of our business. Adjusted EBITDA is a non-GAAP financial measure and should be considered in addition to, not as superior to, or as a substitute for, net income reported in accordance with GAAP. Adjusted EBITDA is reconciled to net income below, the most directly comparable GAAP financial measure.

Adjusted EBITDA is defined as net income plus interest expense, income tax provision, depreciation and amortization, equity-based compensation, severance and contract termination costs, (gain) loss on deferred compensation, acquisition-related costs, (gain) loss on asset sales and disposals, system conversion costs, (gain) loss on sales of businesses, equity method investment (income) loss, other (income) expense and other unusual items, as provided in the following table. As such, it eliminates the significant non-cash depreciation and amortization expense that results from the capital-intensive nature of our business as well as other non-cash or special items and is unaffected by our capital structure or investment activities. This measure is limited in that it does not reflect the periodic costs of certain capitalized tangible and intangible assets used in generating revenues and our cash cost of debt financing. These costs are evaluated through other financial measures.

We use Adjusted EBITDA to assess our performance. In addition, Adjusted EBITDA generally correlates to the measure used in the leverage ratio calculations under the New Credit Agreement and the Senior Notes Indenture (as defined elsewhere in this Annual Report on Form 10-K) to determine compliance with the covenants contained in the New Credit Agreement and the ability to take certain actions under the Senior Notes Indenture. Adjusted EBITDA is also a significant performance measure that we have used in our incentive compensation programs. Adjusted EBITDA does not take into account cash used for mandatory debt service requirements or other non-discretionary expenditures, and thus does not represent residual funds available for discretionary uses.

NM = Not meaningful.

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We believe that Adjusted EBITDA is useful to investors in evaluating our operating performance. Adjusted EBITDA and similar measures with similar titles are common measures used by investors, analysts and peers to compare performance in our industry, although our measure of Adjusted EBITDA may not be directly comparable to similarly titled measures reported by other companies.

Financial Condition: Liquidity and Capital Resources

Liquidity

Our primary funding requirements are for our ongoing operations, capital expenditures, potential acquisitions and strategic investments, payments of quarterly dividends and share repurchases. We believe that existing cash balances, our Senior Credit Facilities and operating cash flows will provide adequate support for these funding requirements over the next 12 months. However, our ability to fund operations, make capital expenditures, make future acquisitions and strategic investments, pay quarterly dividends and make share repurchases depends on future operating performance and cash flows, which, in turn, are subject to prevailing economic conditions and to financial, business and other factors, some of which are beyond our control.

As part of our 45% minority equity interest in MBI, we acquired the right, but not the obligation, to purchase all but not less than all of the remaining equity interests in MBI that we do not already own between January 1, 2023 and June 30, 2024 (the "Call Option"). Investors affiliated with GTCR LLC, a private equity firm based in Chicago, have the right, but not the obligation, to sell (and to cause all members of MBI other than us to sell) to us and, in such case, we are obligated to purchase all but not less than all of the direct and indirect equity interests in MBI that we do not already own between July 1, 2025 through September 30, 2025 (the "Put Option"). The purchase price payable upon the exercise of the Call Option or the Put Option, as applicable, will be calculated under a formula based on a multiple of MBI’s adjusted EBITDA as specified in the documentation governing our investment in MBI in 2020. We have not yet obtained the capital that we believe will be necessary to pay the purchase price if either the Call Option or the Put Option are exercised. At this time, we do not expect to exercise the Call Option.

The following table shows a summary of our net cash flows for the years indicated (dollars in thousands):

The $74.9 million year-over-year decrease in net cash provided by operating activities was primarily attributable to increases in cash paid for income taxes and interest along with unfavorable changes in the timing of working capital balances compared to the prior year, partially offset by a $5.1 million increase in Adjusted EBITDA

The $106.4 million year-over-year decrease in net cash used in investing activities was due primarily to $56.7 million of proceeds received from sales of equity investments in 2023, a $43.1 million decrease in cash paid for capital expenditures and a $21.0 million decrease in new debt and equity investments, partially offset by $9.2 million of proceeds received from the dispositions of our Tallahassee, Florida system and certain other non-core assets in the prior year.

The $117.3 million year-over-year decrease in net cash used in financing activities from the prior year was due primarily to the receipt of net proceeds of $629.9 million from long-term debt borrowings in 2023 and a $253.7 million reduction in share repurchases, partially offset by $768.8 million of higher debt repayments. Refer to the following section for further information on our financing activity.

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On July 1, 2015, the Board authorized up to $250.0 million of share repurchases (subject to a total cap of 600,000 shares of our common stock). On May 20, 2022, the Board authorized up to $450.0 million of additional share repurchases (with no cap as to the number of shares of common stock). We exhausted the share repurchase authorization under the 2015 authorization during the second quarter of 2022 and had $143.1 million of remaining share repurchase authorization under the Share Repurchase Program as of December 31, 2023. Additional purchases under the Share Repurchase Program may be made from time to time on the open market and in privately negotiated transactions. The size and timing of these purchases are based on a number of factors, including share price and business and market conditions. Since we first became publicly traded in 2015 through the end of 2023, we have repurchased 646,244 shares of our common stock at an aggregate cost of $556.9 million, including 141,551 shares purchased at an aggregate cost of $99.6 million during 2023 under our share repurchase programs. We may, from time to time, continue to opportunistically repurchase shares depending on the trading price of our common stock, market conditions and other factors.

We currently expect to continue to pay comparable quarterly cash dividends on shares of our common stock, subject to approval of the Board. During the fourth quarter of 2023, the Board approved a quarterly dividend of $2.95 per share of common stock, which was paid on December 15, 2023, bringing total dividends distributed during 2023 to $66.3 million. On February 6, 2024, the Board approved a quarterly dividend of $2.95 per share of common stock to be paid on March 8, 2024 to holders of record as of February 20, 2024.

Financing Activity

Senior Credit Facilities

Prior to February 22, 2023, we had in place the third amended and restated credit agreement among us and our lenders, dated as of October 30, 2020 (as amended prior to February 22, 2023, the "Credit Agreement"), that provided for senior secured term loans in original aggregate principal amounts of $700.0 million maturing in 2025 (the “Term Loan A-2”), $250.0 million maturing in 2027 (the “Term Loan B-2”), $625.0 million maturing in 2027 (the “Term Loan B-3”) and $800.0 million maturing in 2028 (the "Term Loan B-4"), as well as a $500.0 million revolving credit facility maturing in 2025 (the “Revolving Credit Facility” and, together with the Term Loan A-2, the Term Loan B-2, the Term Loan B-3 and the Term Loan B-4, the “Senior Credit Facilities”). The Revolving Credit Facility also gives us the ability to issue letters of credit, which reduce the amount available for borrowing under the Revolving Credit Facility.

On February 22, 2023, we entered into the fourth amended and restated credit agreement with our lenders to amend and restate the Credit Agreement (as amended and restated, the "New Credit Agreement") to, among other things, (i) increase the aggregate principal amount of commitments under the Revolving Credit Facility by $500.0 million to $1.0 billion; (ii) extend the scheduled maturity of the Revolving Credit Facility from October 2025 to February 2028; (iii) upsize the Term Loan B-3 by $150.0 million to $757.0 million (the "TLB-3 Upsize"); (iv) extend the scheduled maturities of the Term Loan B-2 and the Term Loan B-3 from October 2027 to October 2029 (subject to adjustment as described in the notes to the table below summarizing our outstanding term loans as of December 31, 2023); (v) increase the fixed spreads on the Term Loan B-2 and the Term Loan B-3 from 2.00% to 2.25%; and (vi) transition the benchmark interest rate for the Revolving Credit Facility, the Term Loan B-2 and the Term Loan B-3 from the London Interbank Offered Rate ("LIBOR") to the Secured Overnight Financing Rate ("SOFR") plus a 10 basis point credit spread adjustment. Except as described above, the New Credit Agreement did not make any material changes to the principal terms of the Term Loan B-2, the Term Loan B-3, the Term Loan B-4 or the Revolving Credit Facility. Upon the effectiveness of the New Credit Agreement, we drew $488.0 million under the Revolving Credit Facility and, together with the net proceeds from the TLB-3 Upsize, repaid all $638.3 million aggregate principal amount of our then outstanding Term Loan A-2. In July 2023, we transitioned the benchmark interest rate for the Term Loan B-4 from LIBOR to SOFR plus a credit spread adjustment that ranges from approximately 11.4 basis points to 42.8 basis points based on the interest period elected.

We repaid $150.0 million of outstanding Revolving Credit Facility borrowings during 2023, reducing the outstanding balance to $338.0 million as of December 31, 2023. In February 2024, we repaid an additional $50.0 million of the outstanding Revolving Credit Facility borrowings.

As of December 31, 2023, the interest margins applicable to the Senior Credit Facilities are, at our option, equal to either SOFR or a base rate, plus an applicable margin equal to, (i) with respect to the Revolving Credit Facility, 1.25% to 1.75% plus a 10 basis point credit spread adjustment for SOFR loans and 0.25% to 0.75% for base rate loans, determined on a quarterly basis by reference to a pricing grid based on our Total Net Leverage Ratio (as defined in the New Credit Agreement), (ii) with respect to the Term Loan B-2 and the Term Loan B-3, 2.25% plus a 10 basis point credit spread adjustment for SOFR loans and 1.25% for base rate loans and (iii) with respect to the Term Loan B-4, 2.0% plus an approximately 11.4 to 42.8 basis point credit spread adjustment based on the interest period elected for SOFR loans and 1.0% for base rate loans.

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The Senior Credit Facilities contain customary representations, warranties and affirmative and negative covenants, including limitations on indebtedness, liens, restricted payments, prepayments of certain indebtedness, investments, dispositions of assets, restrictions on subsidiary distributions and negative pledge clauses, fundamental changes, transactions with affiliates and amendments to organizational documents. The Senior Credit Facilities also require that we maintain specified ratios of total net indebtedness and first lien net indebtedness to consolidated operating cash flow. The Senior Credit Facilities also contain customary events of default, including non-payment of principal, interest, fees or other amounts, material inaccuracy of any representation or warranty, failure to observe or perform any covenant, default in respect of our and our restricted subsidiaries’ other material debt, bankruptcy or insolvency, the entry against us or any of our restricted subsidiaries of a material judgment, the occurrence of certain ERISA events, impairment of the loan documentation and the occurrence of a change of control.

As of December 31, 2023, we had approximately $1.8 billion of aggregate outstanding term loan borrowings and $338.0 million of borrowings and $662.0 million available for borrowing under the Revolving Credit Facility. A summary of the term loans outstanding under the New Credit Agreement as of December 31, 2023 is as follows (dollars in thousands):

(1)Payable in equal quarterly installments (expressed as a percentage of the original principal amount and subject to customary adjustments in the event of any prepayment). All loans may be prepaid at any time without penalty or premium (subject to customary SOFR breakage provisions).

(2)The final maturity date of the Term Loan B-2 and the Term Loan B-3, in each case, will adjust to May 3, 2028 if greater than $150.0 million aggregate principal amount of the Term Loan B-4 (together with any refinancing indebtedness in respect of the Term Loan B-4 with a final maturity date prior to the date that is 91 days after October 30, 2029) remains outstanding on May 3, 2028.

Senior Notes

In November 2020, we completed a private offering of $650.0 million aggregate principal amount of 4.00% senior notes due 2030 (the “Senior Notes”). The Senior Notes bear interest at a rate of 4.00% per annum payable semi-annually in arrears on May 15th and November 15th of each year, beginning on May 15, 2021. The terms of the Senior Notes are governed by an indenture dated as of November 9, 2020 (the “Senior Notes Indenture”), among us, the guarantors party thereto and The Bank of New York Mellon Trust Company, N.A. (“BNY”), as trustee. The Senior Notes are required to be guaranteed on a senior unsecured basis by each of our existing and future wholly owned domestic subsidiaries that guarantees our obligations under the Credit Agreement or that guarantees certain capital markets debt of ours or a guarantor in an aggregate principal amount in excess of $250.0 million.

At any time and from time to time prior to November 15, 2025, we may redeem some or all of the Senior Notes for cash at a redemption price equal to 100% of their principal amount, plus the “make-whole” premium described in the Senior Notes Indenture and accrued and unpaid interest, if any, to, but excluding, the applicable redemption date. Beginning on November 15, 2025, we may redeem some or all of the Senior Notes at any time and from time to time at the applicable redemption prices listed in the Senior Notes Indenture, plus accrued and unpaid interest, if any, to, but excluding, the applicable redemption date. In addition, at any time and from time to time prior to November 15, 2023, we may redeem up to 40% of the aggregate principal amount of Senior Notes with funds in an aggregate amount not exceeding the net cash proceeds from one or more equity offerings at a redemption price equal to 104% of the principal amount thereof, plus accrued and unpaid interest, if any, to, but excluding, the applicable redemption date.

Upon the occurrence of a Change of Control and a Below Investment Grade Rating Event (each as defined in the Senior Notes Indenture), we are required to offer to repurchase the Senior Notes at 101% of the principal amount of such Senior Notes, plus accrued and unpaid interest, if any, to, but excluding, the date of repurchase.

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Convertible Notes

In March 2021, we completed a private offering of $575.0 million aggregate principal amount of 0.000% convertible senior notes due 2026 (the “2026 Notes”) and $345.0 million aggregate principal amount of 1.125% convertible senior notes due 2028 (the “2028 Notes” and, together with the 2026 Notes, the “Convertible Notes,” and the Convertible Notes collectively with the Senior Notes, the "Notes"). The net proceeds from the offering were $895.2 million after deducting initial purchaser discounts and other offering costs and expenses. We used the net proceeds from the offering for general corporate purposes, including to finance a portion of the purchase price for the Hargray Acquisition. The Convertible Notes are senior unsecured obligations of ours and are guaranteed by our wholly owned domestic subsidiaries that guarantee the Senior Credit Facilities or that guarantee certain of our Notes in an aggregate principal amount in excess of $250.0 million. The 2026 Notes do not bear regular interest, and the principal amount of the 2026 Notes do not accrete. The 2028 Notes bear interest at a rate of 1.125% per annum. Interest on the 2028 Notes is payable semiannually in arrears on March 15th and September 15th of each year, beginning on September 15, 2021, unless earlier repurchased, converted or redeemed. The 2026 Notes are scheduled to mature on March 15, 2026, and the 2028 Notes are scheduled to mature on March 15, 2028. The initial conversion rate for each of the 2026 Notes and the 2028 Notes is 0.4394 shares of our common stock per $1,000 principal amount of 2026 Notes and 2028 Notes, as applicable (equivalent to an initial conversion price of $2,275.83 per share of common stock). The initial conversion price of each of the 2026 Notes and the 2028 Notes represents a premium of 25.0% over the last reported sale price of $1,820.83 per share of our common stock on March 2, 2021. The Convertible Notes are convertible at the option of the holders. The method of conversion into cash, shares of our common stock or a combination thereof is at our election.

Other Debt-Related Information

In connection with the refinancing transaction completed during 2023, we capitalized $7.8 million of debt issuance costs and wrote-off to other expense $3.3 million of existing unamortized debt issuance costs. We recorded debt issuance cost amortization of $4.7 million and $5.3 million for 2023 and 2022, respectively, within interest expense in the consolidated statements of operations and comprehensive income.

Unamortized debt issuance costs consisted of the following (in thousands):

Unamortized debt discount associated with the Convertible Notes was $12.0 million and $16.3 million as of December 31, 2023 and 2022, respectively. We recorded debt discount amortization of $4.3 million during both 2023 and 2022 within interest expense in the consolidated statement of operations and comprehensive income.

On May 3, 2022, we entered into a letter of credit agreement with MUFG Bank, Ltd. which provides for an additional $75.0 million letter of credit issuing capacity. As of December 31, 2023, $10.5 million of letter of credit issuances were held for the benefit of performance obligations under government grant programs and certain general and liability insurance matters and bore interest at a rate of 1.0% per annum.

We were in compliance with all debt covenants as of December 31, 2023.

We are party to two interest rate swap agreements to convert our interest payment obligations with respect to an aggregate of $1.2 billion of our variable rate SOFR indebtedness to a fixed rate. Under the first swap agreement, with respect to a notional amount of $850.0 million, our monthly payment obligation is determined at a fixed base rate of 2.595%. Under the second swap agreement, with respect to a notional amount of $350.0 million, our monthly payment obligation is determined at a fixed base rate of 2.691%. Both interest rate swap agreements are scheduled to mature in the first quarter of 2029 but each may be terminated prior to the scheduled maturity at our election or that of the financial institution counterparty under the terms provided in each swap agreement. We recognized income of $29.0 million and expense of $11.9 million on interest rate swaps for 2023 and 2022, respectively, which were reflected within interest expense in the consolidated statements of operations and comprehensive income.

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Refer to notes 10 and 12 to the consolidated financial statements for further details regarding our financing activity, outstanding debt and interest rate swaps.

Capital Expenditures

We have significant ongoing capital expenditure requirements as well as capital enhancements associated with acquired operations and the expansion of our high-capacity fiber network. We are entering the final year of capital enhancements associated with acquired operations, which has been focused on upgrading any remaining low-capacity markets and migrating products and billing systems to Cable One platforms. Capital expenditures are funded primarily by cash on hand and cash flows from operating activities.

Our capital expenditures by category for the years ended December 31, 2023 and 2022 were as follows (in thousands):

(1)Customer premise equipment includes costs incurred at customer locations, including installation costs and customer premise equipment (e.g., modems and set-top boxes).

(2)Commercial includes costs related to securing business services customers and PSUs, including small and medium-sized businesses and enterprise customers.

(3)Scalable infrastructure includes costs not related to customer premise equipment to secure growth of new customers and PSUs or provide service enhancements (e.g., headend equipment).

(4)Line extensions include network costs associated with entering new service areas (e.g., fiber/coaxial cable, amplifiers, electronic equipment, make-ready and design engineering).

(5)Upgrade/rebuild includes costs to modify or replace existing fiber/coaxial cable networks, including betterments.

(6)Support capital includes costs associated with the replacement or enhancement of non-network assets due to technological and physical obsolescence (e.g., non-network equipment, land, buildings and vehicles) and capitalized internal labor costs not associated with customer installation activities.

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Contractual Obligations and Contingent Commitments

The following table summarizes our outstanding contractual obligations as of December 31, 2023 (in thousands):

(1)Programming purchase commitments represent contracts that we have with cable television networks and broadcast stations to provide programming services to our subscribers. The amounts reported represent estimates of the future programming costs for these purchase commitments based on estimated subscriber numbers, tier placements as of December 31, 2023 and the per-subscriber rates contained in the contracts. Actual amounts due under such contracts may differ from the amounts above based on the actual subscriber numbers and tier placements at the time. Programming purchases pursuant to non-binding commitments are not reflected in the amounts shown.

(2)Lease payments include payment obligations related to our outstanding finance and operating lease arrangements as of December 31, 2023.

(3)Debt payments include principal repayment obligations for our outstanding debt instruments as of December 31, 2023, including $338.0 million of current outstanding Revolving Credit Facility borrowings that mature in 2028 (which may be repaid before then).

(4)Other purchase obligations include purchase obligations related to capital projects and other legally binding commitments. Other purchase orders made in the ordinary course of business are excluded from the amounts shown but are included within accounts payable and accrued liabilities in our consolidated balance sheet.

We incur the following costs as part of our operations, however, they are not included within the contractual obligations table above for the reasons discussed below:

•We rent space on utility poles in order to provide our services to certain subscribers. Generally, pole rentals are cancellable on short notice. However, we anticipate that such rentals will recur. Rent expense for pole attachments was $15.0 million and $12.3 million for 2023 and 2022, respectively.

•Fees imposed on us by various governmental authorities, including franchise fees, are passed through monthly to our customers and are periodically remitted to authorities. These fees were $26.9 million and $31.2 million for 2023 and 2022, respectively. As we act as principal in these arrangements, these fees are reported in video and voice revenues on a gross basis with corresponding expenses included within operating expenses in the consolidated statements of operations and comprehensive income.

•We have franchise agreements requiring plant construction and the provision of services to customers within the franchise areas. In connection with these obligations under existing franchise agreements, we obtain surety bonds or letters of credit guaranteeing performance to municipalities and public utilities and payment of insurance premiums. Such surety bonds and letters of credit totaled $29.8 million and $52.1 million as of December 31, 2023 and 2022, respectively. Payments under these arrangements are required only in the remote event of nonperformance. We do not expect that these contingent commitments will result in any amounts being paid.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements or financing arrangements with special-purpose entities.

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Critical Accounting Policies and Estimates

The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates, assumptions and judgments that affect the amounts reported in the consolidated financial statements. On an ongoing basis, we evaluate our estimates and assumptions. We base our estimates on historical experience and other assumptions believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results could differ from these estimates.

An accounting policy is considered to be critical if it is important to our results of operations and financial condition and if it requires management’s most difficult, subjective and complex judgments in its application. For a summary of all our significant accounting policies, see note 2 of the notes to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K.

Long-lived Assets

A long-lived asset or asset group is tested for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. Indicators of impairment may include:

•a significant decrease in the market value of the asset;

•a significant change in the extent or manner in which an asset is used or a significant change in the physical condition of the asset;

•a significant adverse change in legal factors or in the business climate that could affect the value of an asset, including an adverse action or assessment by a regulator;

•an accumulation of costs significantly in excess of the amount originally expected to acquire or construct an asset;

•a current period operating or cash flow loss combined with a history of operating or cash flow losses or a projection or forecast that demonstrates continuing losses associated with an asset; and

•a current expectation that, more likely than not, an asset will be sold or otherwise disposed of significantly before the end of its estimated useful life.

When an indicator of impairment is determined, the first step is to identify the future intent of the asset or asset group: hold for continued use, hold for sale or dispose by a means other than sale. If the asset is held for continued use and the carrying amount exceeds the undiscounted sum of cash flows expected from the use and eventual disposition of the property, the impairment loss is recognized as the difference between the carrying amount and the estimated fair value of the asset or asset group, and the new cost basis is depreciated over the remaining useful life of the asset. If the intent is to hold the asset for sale and certain other criteria are met (e.g., the asset can be disposed of currently, appropriate levels of authority have approved the sale and there is an active program to locate a buyer), the impairment test involves comparing the asset’s carrying value to its estimated fair value less disposal costs. To the extent the carrying value is greater than the asset’s estimated fair value less disposal costs, an impairment charge is recognized for the difference. If the asset is to be disposed by a means other than sale, the depreciation estimates are revised to reflect the use of the asset over its shortened useful life.

Significant judgments in this area involve determining whether an event has occurred, determining the future cash flows for the assets involved and selecting the appropriate discount rate to be applied in determining estimated fair value.

Goodwill and Indefinite-Lived Intangible Assets

We have a significant amount of goodwill and indefinite-lived intangible assets that are reviewed at least annually for impairment. These balances were as follows (dollars in thousands):

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Goodwill Reporting Unit. Goodwill is calculated as the excess of the consideration transferred over the fair value of identifiable net assets acquired in a business combination and represents the future economic benefits expected to arise from anticipated synergies and intangible assets acquired that do not qualify for separate recognition, including an assembled workforce, noncontractual relationships and other agreements. We assess the recoverability of our goodwill as of October 1st of each year, or more frequently whenever events or substantive changes in circumstances indicate that the carrying amount of a reporting unit may exceed its fair value. We test goodwill for impairment at the reporting unit level, for which we have identified a single goodwill reporting unit based on the chief operating decision maker’s performance monitoring and resource allocation process and the similarity of our geographic divisions.

Indefinite-Lived Intangible Asset Unit of Accounting. Our intangible asset with an indefinite life is from franchise agreements that we have with state and local governments. Franchise agreements allow us to contract and operate our business within specified geographic areas. We expect our franchise agreements to provide substantial benefit for a period that extends beyond the foreseeable horizon, and we have historically been able to obtain renewals and extensions of such agreements without material modifications to the agreements for nominal costs. These costs are expensed as incurred.

We assess our indefinite-lived intangible asset for impairment as of October 1st of each year, or more frequently whenever events or substantive changes in circumstances indicate that the asset might be impaired. We have identified a single unit of accounting for our franchise agreements for use in impairment assessments based on our current operations and the use of our assets.

Property, Plant and Equipment

Our industry is capital intensive, and a significant portion of our resources is spent on capital activities associated with extending, rebuilding and upgrading our network. The following tables present certain information regarding our net property, plant and equipment and our cash paid for property, plant and equipment for the periods indicated (dollars in thousands):

Property, plant and equipment represents the costs incurred in the design, construction and implementation of plant, infrastructure and capacity improvements and upgrades. Costs associated with the installation and upgrade of services and the acquiring and deploying of customer premise equipment, including materials, internal and external labor costs and related indirect and overhead costs, are also capitalized.

Capitalized labor costs include the direct costs of engineers and technical personnel involved in the design and implementation of plant and infrastructure; the costs of technicians involved in the installation and upgrades of services and customer premise equipment; and the costs of support personnel directly involved in capitalizable activities, such as project managers and supervisors. These costs are capitalized based on internally developed standards by position, which are updated annually (or more frequently if required). These standards are developed utilizing a combination of actual costs incurred where applicable, operational data and management judgment. Overhead costs are capitalized based on standards developed from historical information. Indirect and overhead costs include payroll taxes; insurance and other benefits; and vehicle, tool and supply expense related to installation activities. Costs for repairs and maintenance, disconnecting service or reconnecting service are expensed as incurred.

The estimated useful lives assigned to our property, plant and equipment are reviewed on an annual basis or more frequently if circumstances warrant and such lives are revised to the extent necessary due to changing facts and circumstances. Any changes in estimated useful lives are reflected prospectively.

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Business Combination Purchase Price Allocation

The application of the acquisition method requires the allocation of the purchase price amongst the acquisition date fair values of identifiable assets acquired and liabilities assumed in a business combination. Fair values are determined using the income approach, market approach and/or cost approach depending on the nature of the asset or liability being valued and the reliability of available information. The income approach estimates fair value by discounting associated lifetime expected future cash flows to their present value and relies on significant assumptions regarding future revenues, expenses, working capital levels and discount rates. The market approach estimates fair value by analyzing recent actual market transactions for similar assets or liabilities. The cost approach estimates fair value based on the expected cost to replace or reproduce the asset or liability and relies on assumptions regarding the occurrence and extent of any physical, functional and/or economic obsolescence.

Recently Adopted and Issued Accounting Pronouncements

Recent accounting pronouncements which may be applicable to us are described in note 2 to our consolidated financial statements.

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our audited consolidated financial statements and accompanying notes included in this Annual Report on Form 10-K, as well as the discussion in the section of this Annual Report on Form 10-K entitled “Business.” This discussion contains forward-looking statements that involve risks and uncertainties. Our actual results may vary materially from those expressed or implied by these forward-looking statements due to a number of factors, including those discussed in the sections of this Annual Report on Form 10-K entitled “Cautionary Statement Regarding Forward-Looking Statements” and “Risk Factors.”

Throughout this “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” all totals, percentages and year-over-year changes are calculated using exact numbers. Minor differences may exist due to rounding.

The results discussed below include Hargray operations for the period since the May 3, 2021 acquisition date and CableAmerica operations for the period since the December 30, 2021 acquisition date, and exclude the operations contributed to Clearwave Fiber for the period since the January 1, 2022 contribution date. Hargray and CableAmerica operations are collectively referred to as the "Acquired Operations" within the following discussion. During the second quarter of 2022, we divested our Tallahassee, Florida system and certain other non-core assets.

Overview

We are a leading broadband communications provider committed to connecting customers and communities to what matters most. We strive to deliver an effortless experience by offering solutions that make our customers’ lives easier, and by relating to them personally as our neighbors and local business partners. Powered by our fiber-rich infrastructure, the Cable One family of brands provides residential customers with a wide array of connectivity and entertainment services, including Gigabit speeds, advanced Wi-Fi and video. For businesses ranging from small and mid-market up to enterprise, wholesale and carrier, we offer scalable, cost-effective solutions that enable businesses of all sizes to grow, compete and succeed. We believe the services we provide are critical to the development of new businesses and drive economic growth in the non-metropolitan, secondary and tertiary markets that we serve in 24 Western, Midwestern and Southern states. As of December 31, 2022, approximately 74% of our customers were located in seven states: Arizona, Idaho, Mississippi, Missouri, Oklahoma, South Carolina and Texas. We provided service to more than 1.1 million residential and business customers out of approximately 2.7 million homes passed as of December 31, 2022. Of these customers, approximately 1,060,000 subscribed to data services, 182,000 subscribed to video services and 132,000 subscribed to voice services as of December 31, 2022.

We generate substantially all of our revenues through three primary product lines. Ranked by share of our total revenues during 2022, they are residential data (54.8%), residential video (19.1%) and business services (data, voice and video provided to businesses: 17.9%). The profit margins, growth rates and/or capital intensity of these three primary product lines vary significantly due to competition, product maturity and relative costs.

In 2022, our Adjusted EBITDA margins for residential data and business services were approximately five and six times greater, respectively, than for residential video, compared to nine and eleven times greater, respectively, in 2021. The year-over-year change was due primarily to the disaggregation of residential bulk video customers and an additional rate adjustment during 2022, resulting in higher overall residential video margins compared to 2021. We define Adjusted EBITDA margin for a product line as Adjusted EBITDA attributable to that product line divided by revenue attributable to that product line (see “Use of Adjusted EBITDA” below for the definition of Adjusted EBITDA and a reconciliation of Adjusted EBITDA to net income, which is the most directly comparable GAAP measure). This margin disparity is largely the result of significant programming costs and retransmission fees incurred to deliver residential video services, which in each of the last three years represented between 64% and 66%of total residential video revenues. Neither of our other primary product lines has direct costs representing as substantial a portion of revenues as programming costs and retransmission fees represent for residential video, and indirect costs are generally allocated on a per PSU basis.

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We focus on growing our higher margin businesses, namely residential data and business services, rather than on growing revenues through maximizing customer PSUs. Our strategy acknowledges the industry-wide trends of declining profitability of residential video services and declining revenues from residential voice services. The declining profitability of residential video services is due primarily to increasing programming costs and retransmission fees and competition from other streaming content providers, and the declining revenues from residential voice services are due primarily to the increasing use of wireless voice services instead of residential voice services. Separately, we have also focused on retaining customers who are likely to produce higher relative value over the life of their service relationships with us, are less attracted by discounting, require less support and churn less. This strategy focuses on increasing Adjusted EBITDA, driving higher margins and delivering attractive levels of Adjusted EBITDA less capital expenditures.

Excluding the effects of recently completed and any potential future acquisitions and divestitures, the trends described above have impacted, and are expected to further impact, our three primary product lines in the following ways:

We continue to experience increased competition, particularly from telephone companies; fiber, municipal and cooperative overbuilders; FWA data providers; OTT video providers; and DBS television providers. Because of the levels of competition we face, we believe it is important to make investments in our infrastructure. In addition, a key objective of our capital allocation process is to invest in initiatives designed to drive revenue and Adjusted EBITDA expansion. Approximately 65% of our total capital expenditures since 2017 were focused on infrastructure improvements that were intended to grow these measures. We continue to invest capital to, among other things, increase fiber density and coverage, expand our footprint, increase plant and data capacity, enhance network reliability and improve the customer experience. We offer Gigabit download data service to nearly all of our homes passed and have deployed DOCSIS 3.1, which, together with Sparklight TV, further increases our network capacity and enables future growth in our residential data and business services product lines.

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We expect to continue devoting financial resources to infrastructure improvements in existing and newly acquired markets as well as to expand high-speed data service in areas adjacent to our existing network. We believe these investments are necessary to continually meet our customers’ needs and to remain competitive. The capital enhancements associated with recent acquisitions include rebuilding low-capacity markets; reclaiming bandwidth from analog video services; implementing 32-channel bonding; deploying DOCSIS 4.0; consolidating back-office functions such as billing, accounting and service provisioning; migrating products to Cable One's platforms; and expanding our high-capacity fiber network.

Our primary goals are to continue growing residential data and business services revenues, to increase profit margins and to deliver strong Adjusted EBITDA and Adjusted EBITDA less capital expenditures. To achieve these goals, we intend to continue our disciplined cost management approach, remain focused on customers with expected higher relative value and follow through with further planned investments in broadband plant upgrades, including the deployment of DOCSIS 4.0 capabilities and new data service offerings for residential and business customers. We also plan to continue seeking broadband-related acquisition and strategic investment opportunities in rural markets in addition to pursuing organic growth through market expansion projects. Given our strategic focus on our higher margin residential data and business services product lines, we assess our level of capital expenditures relative to Adjusted EBITDA, unlike others in our industry who may compare their capital expenditures to revenues due to their much larger residential video customer bases.

Our business is subject to extensive governmental regulation, which substantially impacts our operational and administrative expenses. In addition, we could be significantly impacted by changes to the existing regulatory framework, whether triggered by legislative, administrative or judicial rulings. Congress and numerous states, including Arizona, Minnesota and Missouri (where we have subscribers), have proposed legislation and/or administrative actions in the past or currently are considering such actions, which could lead to increased regulation of our provision of data services, including proposed rules regarding net neutrality. Several states, including Oregon and Washington (where we also have subscribers), have adopted legislation that requires entities providing broadband internet access service in the state to comply with net neutrality requirements or that prohibits state and local government agencies from contracting with internet service providers that engage in certain network management activities based on paid prioritization, content blocking or other discrimination. We cannot predict whether or when any future changes to the regulatory framework will occur at the federal or state level or whether or to what extent those changes may affect our operations or impose additional costs on our business.

We serve our customers through a plant and network with capacity generally measuring 750 megahertz or higher and have DOCSIS 3.1 capabilities throughout our systems. Our technically advanced fiber-based infrastructure provides for delivery of a full suite of data, video and voice products. Our broadband plant generally consists of a fiber-to-the-premises or HFC network with ample unused capacity, and nearly all of our homes passed have access to Gigabit download speeds, which we believe meaningfully distinguishes our offerings from competitors in most of our markets. As a result of multi-year investments in our legacy Cable One plant, we increased broadband capacity and reliability, which has enabled and will continue to enable us to offer even higher download speeds to our customers. In addition, we expect to deploy symmetrical Gigabit speeds over our data network in select markets by the end of 2023 and deploy DOCSIS 4.0 beginning in 2024. These upgrades will allow us to further increase plant capacity in support of ongoing increases in consumer demand. We believe these investments will reinforce our competitive strength in this area.

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In addition to our organic growth, we have also completed a number of acquisitions in recent years. In 2017, we acquired NewWave for $740.2 million. In 2019, we acquired Clearwave for $358.8 million and Fidelity for $531.4 million. In 2020, we acquired Valu-Net for $38.9 million. In 2020, we contributed the assets of our Anniston System to Hargray in exchange for an approximately 15% equity interest in Hargray and subsequently acquired the remaining approximately 85% equity interest in 2021 for approximately $2.0 billion. We also acquired certain assets and assumed certain liabilities from CableAmerica for $113.1 million in late 2021.

In recent years, we have made investments in several broadband-centric providers serving non-urban markets that follow various strategies similar to our own. Such strategic investments capitalize on opportunities that may not have existed under a full ownership model, allow us to participate more aggressively in the fiber expansion business and may potentially provide future acquisition or investment opportunities, while allowing our management team to focus on our core business and without burdening our cash flow. In 2020, we invested a combined $634.9 million in CTI, Nextlink, Wisper and MBI and contributed the assets of the Anniston System to Hargray in exchange for an approximately 15% equity interest. In 2021, we invested a combined $95.8 million in Point Broadband, Tristar and Nextlink. In 2022, our strategic investment and divestiture activities consisted of the following:

Refer to our Annual Report on Form 10-K for the year ended December 31, 2021 for discussion and analysis of our financial condition and results of operations for 2021 compared to 2020 contained in “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

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Results of Operations

Key Performance Measures Summary

The following table summarizes certain key measures of our results of operations (dollars in thousands):

NM = Not meaningful.

PSU and Customer Counts

Selected subscriber data for the periods presented was as follows (in thousands, except percentages):