Cable One, Inc. (CABO) Earnings Call Transcript & Summary

Ladies and gentlemen, Steven Cochran, Cable One's CFO.

Thank you all. We'd like to welcome you all to our very first Investor Day. Before we proceed, I'll start off with a few housekeeping items. Our presentation today will contain forward-looking statements that are subject to risks and uncertainties. Please refer to the cautionary statement disclaimer that we have posted on our IR website for this event for a description of factors that could cause actual results to differ materially from our forward-looking statements. Cable One undertakes no obligation to revise or update its forward-looking statements, except as required by law. Today's presentation will also include certain non-GAAP financial measures. Reconciliations of these non-GAAP financial measures to the most directly comparable GAAP measures can be found on our website at ir.cableone.net. The slides we'll be presenting today will be posted on our Investor Relations website following our webcast, and a replay of the webcast will be made available on our IR website shortly after the conclusion of the event. Our presentation this morning are expected to run through 1:15 Eastern Time, followed by a 10-minute break and then a Q&A session at the end. If joining remotely, please submit your questions using the Chat function at any time. We will review our answers at the end of our formal presentation. Our webcast will conclude after the Q&A. Today, we will take an opportunity to detail Cable One's rich history, describe what makes us so unique and identifying the exciting and significant opportunities that lie ahead. Importantly, you'll hear directly from multiple members of our seasoned management team who are executing against those opportunities. One of the things that differentiates us is our portfolio of strategic investments, and we're pleased to welcome today many of our leaders we partner with, including Michael Gottdenker from Clearway Fiber; Andy Parrott with Mega Broadband; Bill Baker with Nextlink; Todd Holt with Point Broadband; and Dave Bacino with CTI Towers. Later this morning, I'll share the rationale and key components of the significant value-creating potential these investments bring Cable One. In addition to the leaders of our strategic investments, I'd also like to recognize some of our investment partners. We're proud to partner with Stephens Partners, GTCR, the Pritzker Organization and Melody Capital Partners. We believe our investors bring strategic value to our differentiated investment profile and contribute to our ongoing success. Finally, we have a Cable One video that provides insight into the founding and history of Cable One you see today. After the video, you'll hear from Tom Gayner, our Lead Independent Board Director. Tom brings continuity, legacy and world-class capital allocations and financial markets expertise. As a member of the Graham Holdings Board, Tom was instrumental in the decision to spin off Cable One from Graham Holdings, and that resulting value creation unleashed with the transition. And now let's bring up the video. [Presentation]

Thank you. Good morning. Welcome. My name is Tom Gayner, and it was one of the great joys of my life to be able to serve as a Director of Cable One. And I got the privilege of welcoming you. It's so nice to see you all in person. It's a joy to be out there, out on the road again and starting to connect with people over meals and physical conferences and sharing questions and time together. So thank you so much for making the effort to come today. I think you all know, but you'll know, I hope, quite a bit more at the end of this day, the story behind Cable One, truly investing in the community and a company that has a heritage, unlike any -- I mean most any other company that you would find, and it's delightful to be part of that. The film did the job of explaining the heritage to some degree. There's a direct lineage involved here from Eugene Meyer to Katharine Graham, to Don Graham, to Tom Mike and to Julie Laulis that have, over decades, where one baton has been passed to the other, and the company has gone from success to success to success to success. I know as analysts and financial people, it's our duty and our job to pay attention to the details of the numbers, but those numbers are truly driven by culture, by software, by people. The people are the ultimate software that drive this company. And there's one theme that unites each of the people who has had responsibility for leading this organization over the years. And that's the theme that has connected me to the company and has brought such joy to be part of it. And that is the dedication to service to other people. Every action of this company for decades has been guided by trying to figure out how to take care of the customer, how to make them better off. The pandemic and the events of the last couple of years, I think, have brought home in vivid ways, the importance of being able to connect. If we can't connect in person, let's connect through the Internet. And this company makes that happen for so many people and is dedicated to making that a continuously better and more effective experience every single day. With that, at this point, I'd like to bring out Julie Laulis, your CEO, your Chairman of the Board. Julie started out as a customer service rep. But at each and every task she ever faced, she knocked the cover off the ball. Her will, her desire, her competitive spirit, and her complete and utter dedication to everybody as part of her organization makes her a lot of fun to be the leader. And it's been my joy and privilege to know her for decades now. Julie, thank you so much.

Thank you. Good morning, everyone. It is so wonderful to see you. Thank you, Tom, and all of our Board Directors. We are so fortunate to have your diverse viewpoints and experiences committed to our success. For the most part, our Board of Directors have been part of our journey from the Washington Post Company to Cable One, helping us to preserve our core and drive progress. What did you think about that video? It was pretty terrific, wasn't it? That was produced in-house by our ad sales department to help onboard new associates, to give them some look into our history to have an appreciation about where we come from. Special thanks to Tom Gayner to help us connect the dots between our roots in present-day public company, Cable One. That understanding of our history, of our journey starts to inform who we are, how we operate and how we create value for all of our stakeholders, our associates; our customers and communities; and you, our shareholders. Now when some people think about Cable One, they think about our contrarian strategy that early pivot to high-margin, high-growth broadband services. Some people think about our profitability focus. And those things are true. But what you need to know is there is so much more to our story of differences that I'd like to spend some time on today. So with that as a backdrop, I'm excited to have a conversation with you all, and it involve an extended part of our management team to get deeper into decoding Cable One and the value that our differences bring. And before I dive in, as Steven mentioned, this presentation will be posted later today. As such, we are not going to go through all the material on the slide, but instead endeavor to give you a translation that we hope you will find most meaningful. Who we are and how we operate and how we create value make us a different kind of operator. The differences that we have bring about a tight fit between our strategy, our culture, our competencies and the ensuing activities. It brings this tight fit, and this fit makes what we do hard to replicate. Those reinforcing differences, that fit, create at least a part of our competitive advantage. How we think and how we execute uniquely brings value to you, our investors. But part of that differentiation that I've been talking about is that we do not start with our share price in mind. At Cable One, our people, our associates are our focus. Now our shorthand for this is our version of the three-legged stool, which goes something like this: happy associates ensure satisfied customers, which brings about a long-term profitable business, in that order. Our associates' line for this is happy associates make happy customers. And it is the opposite of naivete. It unleashes the power of a caring and committed to our purpose workforce. That means 3,600 associates working towards our goals, not just 10 SVPs. Now business schools teach that you can only be as good as the industry that you're in or that you need scale in order to be successful. Well, I say, the different way that Cable One operates turns those principles on their heads. Our discipline of focus brings us scale like efficiencies. And we position ourselves to be in a different industry than traditional cable companies because of our very different results. Now during the morning, you'll hear more about our differences from our management team and why we think they are important for you to understand the deeper context. So let's dig in. We'll start with safe harbor. Safe harbor is our shorthand for small cities, large town footprint that we operate in. And it has served Cable One well throughout our history. Number one, it drives our purpose, which is to connect customers and communities to the things that matter most. Now we were fulfilling our purpose before the pandemic, but the past 2 years has magnified that, as we are connecting people to their livelihoods through work from home or to their schools or to their doctors with telemedicine or even their family and friends who live down the streets that they couldn't see them in person because of COVID restrictions. Safe harbor also conveys many benefits to us. One relates to competition, as we have a low competitive overlap today and higher ROI burdens likely means slower entrants into our markets in the future. It also means that we have ample growth, both organic and otherwise and in around our markets. And if you notice on the map, our geographic diversity also insulates us. No one natural disaster, no one economic condition, no one competitor in a town or a state is likely to affect us across our entire footprint. Lastly, safe harbor means we are neighbors to our customers. Sparklight, which is our consumer-facing brand, is powered by locals. And that is a strong foundation for customer retention and competitive defense. By contrast, our footprint overlaps with national telcos who have little to no truly local associates. So our early pivot to high-margin services went from hypothesis to proven around 2017, 2018, and we have since continued our journey as a broadband infrastructure company. We not only transformed our base business to look different than those who are considered our peers, but we also outpaced those peers on the metrics that matter most. Our broadband-first strategy has driven a profitable mix shift that's led to industry-leading margins. But I would be remiss if I didn't tell you that our continuous improvement mindset is part of those high margins as well. As Mike will review with you later in our Smarter Together strategy for success. I'd also like to highlight our pricing and packaging for residential HSD. It is very different than our peers and it is quite innovative, as it allows us to monetize data usage while reinforcing customer satisfaction and choice as witnessed by the take rate of our higher-tier products and our very low churn rate. Now if you were ever looking for further proof that the bundle is not needed for stickiness, that's it. Chris is going to review how Sparklight is the disruptor for business services in our markets. We have grown from small to medium business products to full-service enterprise, wholesale and carrier products. Business services currently makes up 19% of our revenues and even more of our adjusted EBITDA. Importantly, it is this connectivity that is helping to sustain economic development and growth in our communities. And Chris has some great stories of our purpose coming to life here. We've spent hundreds of millions of dollars, almost $1 billion in the past 3 years alone on our network. Our broadband-first strategy helped us to start doubling down on fiber placement, on shrinking our nodes, on creating a network with capacity earlier than most others because it was our one focus. Now Ken will talk to you more about our technology road map and how we approach capital spending, you guessed it, a little differently. I will note that our network has been built with a laser focus on capacity and reliability, which should be a comfort to us all as customers' appetite and needs for data grow. Now I'm going to give you a little warning. And if you had a seatbelt, I recommend that you put it on right now, because I can talk for hours on the benefits that our culture brings. Here, you see Sparklight involved in our communities as local associates, our purpose, fuels our daily work. What kind of service do you think you would get from people that you see regularly in the grocery store or at your son's Little League games? We also note that our associates are part of continuous process improvement. They help drive savings. We do this through a continuous feedback loop. I ask, we ask, "What activities are you engaged in that don't bring value to your fellow associates or the customers?" I actually am a little more direct, maybe a little more blunt. For those of you who know me, that doesn't surprise you at all. I simply say, "What stupid things are we asking you to do?" And they tell me. And then we mixed it up with a little bit of industrial engineering, a little bit of business intelligence, and we come up with projects that take unneeded costs out of the business. and Mike will review some of those for you in just a bit. Now what's not on this slide is that our associates are not laid off because of that better process. We shift them to higher-value work or we allow attrition to relieve any surplus over time if they have come up with ways to make the work go away. Can you imagine how much continuous improvement you would get if your workforce understood that kind of loyalty to them. I also note transparent continuous communications in a variety of formats. That is an important reinforcing part of our culture. And I'm going to give you a personal example here. In March of 2020, I started doing videos to our associates every Friday. These videos are 3 to 5 minutes in length. And at the beginning, they focused on physical safety, protocols, updates on the company's benefits that we were improving throughout COVID. And I continue to do them today, although I've backed off, and I'm doing them every other Friday, instead of every Friday. And now my topic seemed to center around mental well-being and self-care, quite honestly. And if I'm honest with you, I don't really enjoy doing these that much. Being on camera isn't my jam. Sometimes, I have to work it in while I'm on vacation or I was actually in Virginia and my father had a heart attack, and I had to stop and go do my Friday video, so everyone would get it. And quite honestly, sometimes, I've just come back from a run and I'm all sweaty and I don't want to go on a camera. But you know what? I do it and I try to do it with a joyful heart because our associates have told me how much it means to them. We have an open comment field in our associate satisfaction survey, where people can write the thing they like the most and the thing they like least about our company. And the overwhelming comments on the thing they like most being the Friday videos mean I need to suck it up and be there for them because this is an important connection for our associates. I'm going to stop talking about this topic now because Megan and Pete are going to talk about our associates and our Stronger Together strategy for success. They will also review the heart of our ESG initiatives. So of course, M&A is an important part of our strategy, too. And we do that a little bit differently at Cable One as well. If I think back to the last slide, how we treat our associates, our culture has actually attracted owners to us, sometimes out of process, sometimes with exclusivity because of who we are, and Steven will share more later. He will review our acquisitions from a value-creation perspective, and he will offer a case study on Fidelity Communications as well. But I am especially excited for Steven to illuminate how our strategic investments strengthen the fabric of Cable One, both now and in the future. The way we attract, close and integrate acquisitions can create exponential opportunity for capital allocation, which we consider a force multiplier of our excellent base business. So our leadership team, you see them here. They represent a diverse mix of tenured Cable One associates and some newer members. Most have deep backgrounds in connectivity and infrastructure services, and all embody our values to the fullest extent. I'm not saying we're perfect, because we have areas to develop, right? But that's where our roots come in, and we lean into our values, and we just do the right thing. Gee, Julie, that's kind of a trite saying. What do you mean by do the right thing? Let me give you just one example. 2020 was a chaotic year. As we entered 2021, we honestly didn't know what to expect. What would revenues do? What expenses come roaring back? So we are very conservative in our wage increases for 2021 across the board. By the time we got to the summer, we had line of sight to where we were going in the results that our associates were producing. So we immediately announced that we were increasing all of our frontline associates' bonuses by 2 points at target. So they went from 3% to 5%. They maxed out at 6.5% of their base pay. It was the right thing to do. They were driving great results. That is an example of just doing the right thing. We lend a hand. We help each other out when times are tough, and we drive progress. At Cable One, those behaviors are almost like a religion. Now as I get ready to turn things over to Mike, I want to leave you with what I believe is a statement of fact. Our roots are in operational excellence. We do what we say we're going to do in an exemplary manner. And this is the team capable of accomplishing just that, with our current assets and those to come. But wait, there's more. We like to measure ourselves in a balanced scorecard manner, and this is not it. But we could not resist showing you the money slide. Different ways of operating lead to different and better results. I thank you. I appreciate the opportunity to build on our relationship with all of you. And next up is Mike Belcher, our Chief Operating Officer. [Presentation]

I just love that video. That was the public reveal of our consumer-facing brand, Sparklight. So I hope you enjoyed it. You're actually going to see several more of our commercials as the day goes on. Thank you, Julie. As she said, I'm Mike Bowker, I'm the COO, and I am very excited to be here with all of you this morning and to share a part of our unique story. As Julie mentioned, we have a purpose-driven culture, and it is one that permeates throughout our company, and it can be seen at every level of the organization. And with clarity of purpose, our associates efficiently operate with a focus on delivering an effortless customer experience. Our rigor around process improvement and disciplined cost containment, they result in a formula of operational excellence. We can then apply that formula to our acquired companies as we bring them into the CABO family. And what I want to share with you this morning is that very formula for operational excellence. It is the secret sauce, if you will, of how we execute upon our strategy with high associate and customer satisfaction that ultimately lead to industry-leading results. It all begins with our purpose or why we do it, connecting our customers and communities to what matters most. And never has this been so important as over the past couple of years. We kept America going through the pandemic. When everybody went home, we kept them connected to work, to school, to their doctors, commerce, entertainment, to each other. We enabled digital connections and closeness when COVID created distance and isolation. Next is how we do it. Our values show up in our associates' behaviors every day. And whether it's donating over 2,000 Chromebooks to promote digital literacy in Title I schools in our communities or supporting local food shelters with more than 9 tons of food donated last year alone, we act like neighbors to those we serve, because we are neighbors to those we serve. And these 3 core values, they are not just words on a screen. This is who we are. Now elements of our strategy, our purpose, our values and our culture can all be found in our ambition statement: to be the most trusted broadband provider for America's small cities and large towns. And I'll pause. I'll let you read the rest of what is on that slide. As you read this, the components of this ambition, I want to point out that there are critical elements of each, and they flow from our strategy into our execution, and they ultimately result in a formula for operational excellence, which takes us to how we succeed. Our strategies for success, they serve as a means of communicating our priorities to our associates in order to ensure alignment and clarity so that they understand their role and their contribution to the company's overall success. These 6 and, I'll call them rallying cries, they are the framework for how we prioritize our work, how we allocate our resources, how we measure and track our KPIs and even how we organize our operating structure. They help to support and ensure ownership, accountability and execution. And of the 6 strategies for success, I will be speaking to Own the Internet, Own the Experience and Smarter Together. Chris will talk about Grow Business Services Together. Ken owns Own the Reliability. And Megan and Peter will talk about our associate-centric plank, Stronger Together. Own the Internet: Now while the wording has evolved over the years, this strategy for success, it has been our focal point since we made the pivot to broadband-first nearly a decade ago. HSD comes first. Of all of our products, this is the one where we control our own destiny, and we treat it as such. Our almost maniacal focus to prioritize high-margin, high-growth HSD, it has delivered strong customer and financial results, the ones that you see here. And as the need for fast, reliable broadband, it grows exponentially in our connected world. Our investment in our network and our unique pricing and packaging, they have allowed customers to self-select into higher speeds, making our 200-megabit tier, it's now our flagship offer, and we do it without steep discounts. Now one of the core tenets of the own the Internet strategic plank is we must fiercely compete to win and keep residential customers. Our rural footprint itself is a competitive advantage. And today, while we compete with an incumbent telco provider everywhere, less than 1/3 of our footprint includes a competitor that can provide 100 megs or higher. And with over 1,000 communities across 24 states, we have a geographic diversity that further mitigates competitive risk. And more importantly, regardless of the competitive overlap, we operate with a grassroot style competitive mindset across our markets. We have been connecting our customers and our communities to highly reliable HSD services and doing things like introducing 1 gig back in 2016, MSO wide, well ahead of what others were doing in urban markets. And we are local, and it is hard to out-local us. Our associates' roots run deep in the communities that we serve. We do not offshore our calls. We deploy technology to virtually connect our call centers. And we employ in the markets we serve. And believe me, we don't take anything for granted. We have built a competitive intelligence practice that helps us to stay vigilant and to take appropriate targeted actions down to the neighborhood level, when needed. And look, competition is growing, but we are not afraid. In fact, competition makes us better. The key point is that we are constantly scanning and preparing, and we are ready for whatever comes our way. Own the Experience: Born from the book, the best services know service from Amazon's bill price. This strategic plank is rooted in providing a customer experience that is so reliable that the customer never needs to reach out, except to buy more, of course. And when the customers do need us, we are there with a superior hyper-local service from our dedicated CSRs and technicians. Our customer experience team is focused on gathering customer insights and working across the organization to systematically design solutions, technology-based or otherwise. The process is continuous as our customers' needs evolve and change over time. Now this slide, this is full of examples of how the team is advancing customer experience. We use a journey-mapping process to look at the various workflows through the customers' lens and identify points of friction that we then need to address. These efforts allow us to empower both customers and associates. We measure, report and adjust. The personal thanks and the kudos that our associates receive are powerful testaments of how they live our values, and they make a difference at every point of customer contact. Smarter Together: Smarter Together is rooted in our core value of drive progress, leading to continuous process improvement. It is a part of who we are, and this has been integral in driving margin expansion. We are unique in the fact that we have operationalized the practice of continuous process improvement. We are so dedicated to CPI. And yes, it has its own acronym, that about 15 years ago, we hired and built a team of industrial engineers to support these efforts. In fact, Tom Might, previous CEO before Julie, he was himself an Industrial Engineer as well as a Harvard MBA. So you can say that industrial engineering and strategy are both in our blood. Today, these IEs partner across the organization with an enterprise view. They're collaborating on various functions to identify the opportunities and streamline processes. And they want to improve the customer experience. And ultimately, they can smartly strip cost out of the business. And as a result, for our focus on continuous process improvement, we've been able to cut our average number of contacts per customer in half over the past 10 years. Customers are more highly satisfied with their experience, and we've been able to lower our costs and improve margin. Continuous process improvement has broad reach across the enterprise. It can be single-mindedly focused on improving a specific task or something that is a larger business transformation, initiatives that would include machine learning and AI. There are so many examples, whether it's truck routing, text messaging, order processing, business services automation, which ultimately result in faster revenue recognition, all the way down to tool-belt configuration and front-counter workflow. The list goes on and on. We are constantly striving for an improved and efficient customer experience. We are always measuring. We are rigorous about measuring our performance. We have built a discipline around business intelligence, and we have a team of data scientists who provide data analytics and modeling to inform our business decisions. Each of our strategies for success that we are sharing with you today, has an executive owner and a multiyear road map, along with a specific set of KPIs that we measure continually and we report out on to the full executive team every month. And those KPIs, they are based on defined competencies. Ultimately, we ask ourselves, "What must be true in order for the strategy to succeed?" And then we organize, we resource and we execute. Holding ourselves accountable to specific performance measures is just another example of how we ensure that we deliver on our commitments. Now while we do not operate to win awards, we are certainly appreciative of the recognition that we have received. In fact, I would say, our people win these awards. The way that our associates show up each and every day, fulfilling our purpose and living our values makes a difference, and it drives our excellent record of operating performance. Now next up, we have Chris Boone. He is our Senior Vice President of Business Services and Emerging Markets, and he is going to walk us through our next strategic plank, Grow Business Services Together. Thank you. [Presentation]

Well, good morning, everyone. Thank you for being here, and a special welcome to our online participants today. I'm going to take some time and walk through our next plank under our strategies for success, Grow Business Services Together. Business services is a key growth engine for Cable One. We very intentionally have called out the fact that we have a diverse set of customers that we serve, from SMB to enterprise and carrier, which is really reflective of the maturation of this business over the last 12 years. I want to point out that this needs the support of all of our associates. We do have groups of associates that are specialized for business services, but we are not a siloed division. We need every customer service rep, every engineer and every technician pitching in to enable our success. Now similar to residential, connectivity is king for us. But we do have a few more flavors of connectivity, and that's reflective of the different segments that we serve within the commercial space. And finally, white-glove service is our internal brand for customer experience. We believe this is a key differentiator for us in these markets. Now I'm going to touch on 5 different areas today: our historical performance and the importance of business services to the Cable One portfolio; the opportunity and the runway that are in front of us; our network profile and why we believe it's a key differentiator; our disciplined growth strategy and our moves upmarket and the methodical manner in which we've approached it; and finally, how we've improved efficiencies within the division. So as Julie mentioned earlier, business services has approached these markets with a disruptor mentality. And you can see that reflected in our PSU growth rate here. That means taking market share from an incumbent provider in the markets that we serve. We've taken a balanced approach to customer growth. And you can see that our PSU growth is just over 60%, represented by mergers and acquisitions during the period. Another increase -- another lever for our growth, I'm sorry, has been our increase to ARPU, and this has been driven by 2 main levers. First is our move upmarket to pursue the enterprise space, and that's been enabled by product development as well as enhancements to our network. And the second growth for ARPU has been through speed tiers at the time of sale as well as customer upgrades post sale, going back and increasing speed tiers. Now we started business services in 2010 from the ground up, no customers, no revenue. Today, we represent 19% of total revenues. Similar to residential, we focus on high-speed data, and we deemphasize video. Our emphasis on simplicity has allowed us to drive strong growth. Simple is not easy, but it does enable focus. And I'll give you a great example of this. Our salespeople each year get a comp plan that's on 1 page. If you've seen other comp plans, some of them have 8 pages of definitions, and you need a tax attorney to understand how these things work, that does not drive focus for a sales team. We believe putting it on 1 page helps them understand what's expected and how they're rewarded for it. Now as important as mergers and acquisitions have been to our growth, I do want to point out our CAGR between 2015 and 2021 of 10% on the organic business. Our ability to focus on the legacy business operate that well, continue the growth and also take care of integrations from acquired companies has allowed us to achieve solid growth over this period. Now roughly $300 million of year-end revenue for 2021 is inclusive of Clearwave fiber, but the TAM that you see reflected here of $1.2 billion does not reflect Clearwave fiber ZIP codes, suggesting we have even more runway in this TAM than what's represented today. When you adjust for Clearwave Fiber, our penetration is just over 20%, again, indicating a long runway in front of us. Small business accounts for roughly 70% of the TAM that you see here. And it just so happens that roughly 70% of our existing revenue also comes from this segment, indicating that we have approached this with the right focus and the right area. And finally, our sales and marketing teams are extremely strong. 60% of our total revenues come from our inside sales teams. This also happens to be our lowest cost of acquisition, and we're focused on making this channel as efficient as possible. Our strategy is simple by design: provide a reliable and consistent network performance in rural markets and you get a premium customer experience. We walk the talk, and we back up our services with SLAs and proactive 24/7 monitoring. We've deployed additional network in core markets as well as new geographies on an opportunistic basis, in line with our overall capital allocation strategy. Now when you double-click on some of these areas of the map, they really come to life, and you can see these different clusters and the squares here. The reach of this network to Tier 2 and Tier 3 markets, with backhaul to major metro colocations with NNIs, with multiple wholesale and large customers, is a big reason that we kept the tower business post-spin from Clearwave Fiber, excuse me. Keeping these market clusters with the CABO carrier team allows us to represent the larger network as one, meaning that we have more on-net and near-net locations to represent. This makes it easier for carriers to do business with us. We're able to use our MSAs and continue driving this piece of the business, allowing Clearwave Fiber to focus on network expansion and network densification. This has got to be one of my favorite slides. I fought the group back here to get this one because I love it so much. Our purpose is really not a gimmicky slogan. This is what we get up, and it's what we do each day. And I think it really is represented here well in these 2 examples. And so I'll touch on the Yavapai County Education Service Agency. That's a mouthful. We were awarded this deal, and we had a kickoff meeting with the group that represents Yavapai County and we sat down with the lead contact and started talking about the project. And he explained to me why it was so important to them. He had served as an Army Ranger in Afghanistan. And he said, "Chris, I can get better Internet connectivity on the side of a mountain in Afghanistan than some of these schools can get in Arizona. We've got to do a better job, and I'm committed to making this happen." I can tell you, this was not an easy build for us. You would think rural Arizona, there's no big shiny buildings to get in your way, how hard could it be to build. There's a tremendous amount of rock. There's forest service permits. There's spotted owl-mating season. There is whatever you can think of that gets thrown at you when you go through these. And as important as it was to partner with these folks from a financial standpoint, the partnership and help we get when we need permits, when we need entrants to a facility has been extremely important to getting these done. I can tell you, the impact is absolutely evident when we finished these builds on the quality of life for students and communities. It really brings a sense of pride to us and to our teams. We're not done with these. When the initial build is done, there's also an opportunity to go back and densify, pick up other locations along the way over time. So we'll see continual growth out of those. As I mentioned, we started business services in 2010, and we now represent over $300 million of annualized revenues. We have a history of leadership in markets that we serve. You may have heard some recent announcements from fiber providers talking about multi-gig services over fiber. We launched 2-gig symmetrical back in 2017. In 2019, we increased that offering to 5 gigs symmetrical. We've been doing this for 5 years longer than our peers and our competitors, meaning we understand these project -- these products, how to engineer them, how to deploy them. And we also have them in a number of markets already. We're already entrenched in these markets with fiber to businesses. Now as big of an opportunity as SMB has been, and continues to be for us, I do want to highlight the $360 million of TAM that exists in mid-market and enterprise. Our approach to this has been very patient and very methodical. We started small with a cable modem and a couple of phone lines. We graduated that offering to a faster speed, to more phone lines, all the while, our NOC was maturing. Our product development team was busy rolling out products like SIP and hosted voice. And then we pursued MEF, MEF 3.0 certification. We were the first North American carrier to achieve that certification, and this really highlights our focus on carrier and wholesale. Now as important as that is, it's also important to recognize that we're not trying to be everything to everyone. For instance, we made a decision and a strategic decision not to pursue SD-WAN. We're one of the few carriers that don't offer this product. And we don't offer it because of the markets we operate in. We're Tier 2 and Tier 3 locations. We don't have headquarters in these markets. We have branches. And so our focus has been on providing the best underlying network and allowing SD-WAN providers to bring those opportunities to us. Now if there's a company that has multiple locations in a market we serve, which is the case, they're not usually spread out amongst multiple states, we have a fantastic Metro-E product to address those, so we're not leaving opportunity on the table by not offering this product. We've seen significant growth in all 3 subsegments: SMB, enterprise and wholesale, indicating that we've taken a very balanced approach to our growth. Now as I mentioned earlier, on the SMB piece, but it's true for all of these, all of these segments have a revenue mix that's very close to the TAM, again, indicating we've placed an appropriate focus versus the opportunities that exist. And we expect these relative revenue contributions to remain mostly consistent for the foreseeable future. Now as important as our top line results have been and continued to be, our focus on continuous process improvement has driven an increase to margins while simultaneously providing a positive customer experience. These suggestions have come from our associates. So when we do things like automate a feed between our CRM and our billing system and eliminate work that creates mistakes, that reduces work for our associates. But we're moving upmarket, and that's a high-touch type of environment. And so associates know that we need them in those areas. Again, they're not afraid to bring suggestions to us. Another thing we've done recently is we have automated our scheduling process. So previously, we're outbound-calling customers to try and schedule them. If you're anything like me, and I think the most of the world today, no one answers their phone for a number they don't recognize. So it took a while to get customers scheduled. Today, it's a simple e-mail that goes out. They choose their time. They get a calendar invite and life goes on. Again, it's improved margins, it's increased our revenue recognition time, and it's also improved the customer experience. Our network reliability and our customer experience have earned us recognition from clients and third-parties at the local and the national level. These are proof points of our -- of the success of our strategy and our ability to scale the business over time. I appreciate you guys coming out today, giving me a few minutes of your time. We're going to take a quick 10-minute break. So if we could be back at 10 -- the very exact time of 10:31, we will pick back up with Ken Johnson, our Senior Vice President of Technology Services. Thank you.

Ladies and gentlemen, if you could be back in your seats at 9:41. This is only a 10-minute break. Please back in your seats at 9:41. This is a 10-minute break. [ Break ] [Presentation]

Good morning. While the battle for speed may be over, the new battle, the battle for reliability and a premium customer experience has really just begun. COVID has changed the way we interact and use technology. We saw this in our customers during COVID. Customers are much more willing to self-support when they had an issue with their service. New customers are willing to self-install their service. It transformed our workplace. They -- we saw more people -- we saw far more people working and schooling from home. As a result, a high-quality, reliable Internet connection took on a whole new level of importance. Reliability has become table stakes in an increasingly competitive environment. It's changing the face of our service provider. In response, we're focused on being the most trusted broadband provider in the markets we serve. We smartly invest to ensure that our network is never a barrier to growth. We have a fiber-first mindset. Our entire nationwide network is built upon fiber. We have over 20,000 route miles of fiber in our network today. We provide gig services to 99% of all of our homes passed, and our utilization at peak is only 20% for both upstream and downstream traffic. Regardless of whether one of our customers is connected to our network via fiber or HFC, we believe they're connected to a future-proof network capable of meeting their needs today and well into the future. We have a clear road map outlining the detailed steps necessary to execute on this commitment of providing multi-gig, highly reliable, symmetrical, low latency services to the home. The investments required to execute on our plan are in line with our overarching capital allocation philosophy and well within our BAU allotment for network improvements. In line with our new strategy for success, Own the Reliability, we have a very aspirational goal of 100% end-to-end network reliability. The way customers view reliability has changed, and we must adapt our view as well. We now have tools that allow us to see the traffic, all the way from its point of origination through our network and ultimately to the device the customer is holding in their hand. In order for us to meet their expectations, we need to shift our lens from the traditional lens of what devices that we monitor and measure in the network, to the lens that the customer sees reliability through. When we say end-to-end reliability, we mean more than simple route redundancy. Reliability is about route redundancy. What good is route redundancy if the virtual services that make the Internet work aren't working? Things like DNS and DHCP. Reliability is about route redundancy, virtualized services. It's about geographically dispersed endpoint. It's about ensuring that we have ubiquitous, high-quality Wi-Fi throughout the home to make sure that the customer's device is attached to our network at all times. As part of this landscape shift, we have moved to an AI-enabled proactive mindset to optimize the customer experience. Rather than a broad focus on macro trends in the network, we're increasingly focusing on discrete, much more targeted measures that look at the individual household or individual customer experience. A great example of this is our node health initiative. We have a ton of tools that look at the network and measure the network performance in various pieces of the network. One of the challenges that we have is that we don't have a good way to roll all this information up and provide an executive dashboard that tells us what the overall health of the network is, what the overall customer experience looks like. Similarly, an engineer at the local level struggles to compile all this information into something that is actionable, and it helps improve the customer experience at a local level. As a result of this, we recognize the need to take all of this data, pull it into our data lake, feed it into an AI and start -- and find a new way to measure the customer experience. We created what we call our node health report. It takes a series of measures, proactive measures like quality of the signal to the home. It takes reactive measures like truck rolls and customer contacts to our support centers, and it takes quantitative measures like our VIAVI quality experience measurement tools that tell us what different segments of the network are doing. It compiles all of that together, and it creates a new composite score that we call node health. Once we develop that, we're able to dig down much further into the data, and we're able to identify in the network, pockets of potential dissatisfaction. We were able to take that, use the system to route calls or tickets into the workflow management system that schedules time with our techs, send tickets out to techs in the field and then track those tickets through completion. We piloted this new technology within our systems last summer. And the result was pretty astonishing. We saw a drop in CPX or customer interactions by more than 30% for both truck rolls and customer contacts in the support center. As a result, we've rolled this out now company-wide, and we expect -- while we don't expect to see 30% improvement across the board, we do expect that we're going to see reduced trouble calls, reduced CPX as a result. These are the kinds of initiatives that will help drive additional cash flow and efficiencies in our workforce. We bring this mindset and methodology to acquired companies in addition to the capital investment that we make to align them with Cable One standards. When you look at mobile networks versus a wireline network, they're really built for different purposes. Wireline network is built to handle massive bits of amounts of information. It simply has more capacity. This is an important consideration when you look at the delta in consumption between a mobile and a wired network. In a mobile network, the average unlimited customer is only consuming 15 gigabits of bandwidth per month. When you compare that to what our customers are doing, our average wireline customer is consuming 547 gigabits of bandwidth per month. That's a 37:1 ratio. Mobile networks are limited by the spectrum and technology they have in place to be able to carry large amounts of information. That's why mobile offload is an important tenet of the design of mobile systems. Mobile offload is simply taking bits that ride the mobile network and offloading them to a wired broadband or wired -- Wi-Fi network in a home or business. That makes sense. When you think about how you use your mobile device, you're likely connected to your Wi-Fi network at home, at work, at the airport when you're traveling. Our wired networks are mission-built to support the combination of speed and consumption required to meet the needs of our customers. Due to limitations in spectrum availability and technology, we do not feel that our fixed wireless networks represent a significant threat to our business, and they cannot scale up to meet the level of demand required through -- by increasing consumption. We believe that capacity management is a key differentiator in our network. When you look back 10 or 12 years, you see that video -- consumption of video content over the Internet was really just getting a toehold. Consumers are discovering it, and they really liked it. As a result, we saw skyrocketing levels of utilization in the network. And as an industry, we're ill-prepared to respond to that. You can see that on the chart here that, in 2014, we're still clawing our way out of that. And we learned from that, and we decided that we needed a better method of managing consumption over time. And we realized as well that a just-in-time methodology for managing consumption wasn't going to work. It simply, it was a result of the same thing we saw before. If we didn't have enough overhead available to adjust to rapidly changing conditions on the network, then we weren't going to be successful in staying ahead of the consumption curve. Capacity upgrades are typically physical upgrades, and they take a lot of time to execute. Ultimately, we decided we need a strategy to ensure that the network is never a barrier to growth or an impact on customer satisfaction. We started a plan of small incremental annual upgrades to keep capacity where we needed it without having to take -- create big initiatives to handle rapid changes in capacity. And you can see that strategy playing out in the chart. So when you look from 2016 to current, our utilization continues to kind of hover. It's pretty flat line. It's moving lateral. At the same time, our average consumer went from consuming 220 gigabits from 2016 to 550 gigabits today. So consumption has increased dramatically, but our annual kind of regular improvements in capacity are keeping us well ahead of that change. And you can see further that, that worked all the way up. You see a small uptick of consumption when COVID hit. And I'm sure that everybody here heard all about network impacts during COVID. There was a lot of media, about 60% increases, 50% increases in consumption. But the reality is consumption doesn't drive network investment. Utilization at peak drives network investment. People can use more bits, but as long as it's in off time periods, it doesn't impact utilization at peak. And you can see that in our chart. The only way that you were impacted by COVID is if you were managing consumption at the upper end of acceptable. In that case, small moves in consumption drove big problems in your network. When you look at the chart, you can see that we had a slight uptick in consumption with that or utilization at peak, but that wasn't even driven by COVID. We added 4x our normal level of customers in 1 year during COVID. That uptick in our customer base is what drove that uptick in consumption. And you can see our strategy further play out in the last year because we've gone back. Consumption hasn't gone down. It's continued to rise year-over-year. But we've gone back. We've made our small incremental changes in consumption, and we pulled utilization back down to kind of that normal level. At this point, we feel we solve for capacity and consumption, and this allows us to shift our focus to value-add drivers like reliability and customer experience. Our well-developed road map -- technical road map is driven by our business strategy. We've got a long history of innovation. You can see the number of -- the large number of firsts on the chart here. But innovation isn't always about bringing out the latest product or the latest technology and bringing it to market. Some of our greatest evolutions took place when we applied existing technology in innovative ways to resolve our unique business needs. Our rural footprint helps us as well. With our rural footprint, we're able to innovate in our markets without the cost and risk associated with being a first technology mover in the industry. You heard Mike and Julie talk earlier today about our shift in strategy in 2013 to be HSD and commercial services focused. That change allowed us to go back and look at the network. What were we doing? What did we expect to happen in the future? It allowed us to simplify our approach. We began at that time pushing fiber much deeper into the network. That helped us improve reliability. We eliminated nodes. We reduced cascades. That helped with performance. We took and we went 1 node per service group, which helped optimize the amount of data that we had available on a home-by-home basis. We are doing all of these things well ahead of our network peers. It's one of the primary reasons we were able to launch gig to the home before most urban markets had it. We were able to launch gig to the home on DOCSIS 3.0 without having to wait for the additional capacity that was brought to market with DOCSIS 3.1. All of these changes were in response to the move away from video, but they have hardened our network, allowed us to have virtually unlimited capacity to serve HSD needs. And the strategy is financially prudent, allows us to stay on the forefront of next-generation technologies and efficiently managing risk to maximize shareholder value. In the same theme, another innovation we're going through now is the transition to IPTV. So when you think about IPTV, IPTV is an investment in HSD. We're not doing this to improve the video product. It's actually a further moving away from video. But when you think about traditional HFC network, a traditional HFC network has limited capacity, typically 870, 750 megahertz. Traditional QAM-delivered linear video can take up to half of that capacity. By shifting to an over-the-top IP delivery system, we're completely freeing up that spectrum for HSD -- to be able to consume that for HSD capacity. But it doesn't stop there. It also vastly improves our regular day-to-day operations. We have -- we no longer have to manage set-top boxes. We clear up inventory. We open up warehouse space, install -- installs go much quicker. We see CPX or customer calls and truck rolls on our IPTV product being 10% to 15% lower than what they were with the traditional video product. All of these changes help make us more efficient and drive cash flow to the bottom line. This is an important step to further distance us from video in a capitally efficient manner and is consistent with our long-term strategy of HSD and commercial services and moving away from video. Finally, there was a time when fiber-based services had a distinct advantage over HFC systems. They brought higher speeds, greater reliability. They brought lower latency and symmetrical service to the market. But times have changed, and so is technology. We talked about the investments we've made in our networks to modernize our plan. As a result of those changes, we can achieve feature parity. We're effectively delivering the same high-speed symmetrical services. We can offer low latency. We can match reliability, redundancy, speed and symmetricity that fiber traditionally had the advantage of it. That doesn't mean we don't believe in fiber. We absolutely believe in fiber. I mentioned we have a fiber-first mindset. All of our greenfield construction is fiber. All of our market expansion is fiber. That's because fiber and HFC costs the same to build when you're building in greenfield opportunities. Plant upgrades are a different story. When you look at a plant upgrade, we spent a great deal of last year looking at HFC upgrades versus -- for DOCSIS 4.0 versus fiber upgrades. And the net of it is that overbuilding ourselves with fiber is 3 to 6x as expensive, as simply going to a DOCSIS 4.0 upgrade, and it gives us the same relative performance. The reason for that is the delta in the initial capital investment for the fiber overbuild is so high that ongoing operational savings can offset it. We have both fiber and HFC networks in our systems today. And when we compare truck rolls, calls into the sports centers, all of those statistics, they're basically the same. That makes sense when you think about it, the majority of issues that a customer calls us about are taking place in the home. And that means that they're independent of the platform that serves the home. We will continue to push fiber deeper in our network as we perform system upgrades, but we do not see the need to upgrade -- overbuild ourselves with fiber to be competitive with the features that fiber brings. Our road map offers a path to those same features. We have a clearly defined road map and adequate funding to execute on it. We have a plan to deliver multi-gig symmetrical service, service to the home that are highly reliable and low latency. Our road maps detail the steps needed to optimize our HSD-focused strategy, align our investments closely with the needs of our local markets, remove legacy video infrastructure and enable a customer experience that is really second to none. Up next, we'll have Megan Detz, our SVP of Human Resources; and Peter Witty, our Senior Vice President and General Counsel, to discuss Stronger Together and our ESG Initiative. Thank you. [Presentation]

Good morning. It's so great to be here today, along with Pete Witty to talk to you about the heart of Cable ONE, our associates. As we've heard throughout the day, the success and growth of Cable ONE is deeply rooted in our people. Our success is driven by engaged and committed associates. They are at the heart of everything we do and the driving force behind our exceptional results. Our rich culture centers on an inclusive approach. We're going to talk a little bit about that today and one in which every associate can bring their best self to work. And while we've been rapidly growing over these last few years, we've more than doubled in size since our spin-off just 6 years ago. How we grow matters. So today, Pete and I are going to talk to you about the highlights of how we operate Stronger Together. We're going to illuminate how our associates show up each and every day and live with purpose. But I want to share that, as Julie touched on this morning, much of what Pete and I will cover is not really a new initiative or a new program, but rather continual enhancements on how we've historically always operated here at Cable ONE. So let's dive in. Mike shared our strategies for success earlier and our Stronger Together pillar is a key driver in our operational success. As Julie mentioned, it's rooted in this concept that happy associates make happy customers. And we know that success is dependent on each and every one of our associates across our 24-state footprint and in the over 1,000 communities that we operate in. So whether associates have joined us from an acquisition, I myself joined the company recently from Hargray or have joined us as a new hire. Each addition serves as a force multiplier for our ability to deliver against our purpose. And our core values at Cable ONE guide the way. It's living these values each and every day that sets us apart and strengthens our culture. So Mike shared our values earlier this morning. You can see them on the slide here. It's doing right by those we serve, driving progress and lending a hand. So I'm going to take a little bit of time to share with you some examples of what that means and how these differentiate us. So more than 75% of our 3,600 associates live and work in the communities we serve. So how do we do right by those we serve? Some great examples. Our Sparklight team in Sherman, Texas recently gave a grant to making dreams real through our charitable giving fund. This grant is going to be used to launch a reboot combat recovery course, which helps veterans and active duty military and their families heal from service-related trauma. And our team in Ardmore, Oklahoma, our system there locally, recently gave a grant to it's from the heart. This is a local organization that will provide heaters to families during the winter months. And it's living in these communities that serves as our guide for us to do right by those we serve. We act like localized teams because we live next door. We are your neighbors at Cable ONE. As we think about our value driving progress, if you take away or exclude our growth through acquisitions in our headcount, over the last couple of years, Cable ONE has not grown. We've remained very, very lean, and this is despite our significant growth and expansion on a year-over-year basis. And the reason is because of our commitment to driving progress and operational efficiency and bringing that value to life. So we seek to improve each and every day the way we deliver. And our associates at Cable ONE sort of come into work each and every day with this in mind. When associates see an opportunity, they take initiative to make things better, and it's safe for them to do so. In early 2011, we consolidated our retail offices into a virtual call center. And our market retail reps noticed that a large amount of time was spent with nonpaying customers. And it was consuming quite a bit of their effort. So they proposed that we stop engaging this way. And as a result, we introduced a fee, a $10 charge for payments that are made with the retail representatives assistants or a CSR's assistants. They also redirected payments to our website so that customers could pay through the website as opposed to into the store. And our customer service reps were then able to shift their focus towards the new sales, towards sales upgrades and service assistance became the priority, and it was their courage and their willingness to reimagine their work and to pivot from being a payment collector to a highly skilled customer service representative that really mattered. It's driving progress and being rewarded for it that builds a culture of trust and opportunity for all. And our associates knew that they have the ability to work themselves out of one job and into another without the fear of job loss. It's an amazing differentiator about our culture at Cable ONE. Finally, I want to talk about our value lending a hand, and this is a value that has witnessed time and time again in our systems. It's acting with expertise, with respect and with empathy. From the Arizona wildfires that took place earlier this summer in Globe, Arizona, to supporting our customers who were impacted by Hurricane Ida in Louisiana and Mississippi or just simply helping to support through the COVID pandemic. Our associates at Cable ONE lend a hand and make a difference in the communities we serve. And honestly, they lend a hand and make a difference in the communities we don't serve. When WOW, Wide Open West, was impacted by Hurricane Michael in the Florida Panhandle, our associates came together and stepped in with donation. And it's that type of spirit that really sets us apart. So we've just covered off some of our values. And what we know for sure at Cable ONE is that a value aligned culture drives engagement. So as many of you saw in the video when Julie stepped on stage this morning, it talked a bit about a 26-year history of associate engagement surveys, starting with Tom Might, I think, in 1996. And we focused over the years on our associates, and it's driven high levels of satisfaction and really resulted in a long-tenured workforce. So our goal is always on continual improvement. How do we get better? How do we make the work environment better? And how do we continue to be an employer of choice. I was reading an article recently from Gallup. I think they have a survey called the State of the Global Workplace survey. And it said something to the extent of only 15% of employees are actually engaged at work. And that is not the case at Cable ONE. Our satisfaction and engagement survey results are very, very strong. They show and the data shows that our associates feel pride. They feel heard, and they have a direct connection to the work they're doing and our purpose at Cable ONE. So equally important to engagement is our consistently high retention of associates. It's something that accelerates our ability to deliver and helps us harness the power of our people. Our attrition remains lower than national averages despite the pandemic and despite the fact that we have a very large number of hourly associates in our workforce. In addition, our average tenure at Cable ONE exceeds 10 years. So we have more than 230 associates that have been with us more than 25 years. You saw a couple of them on stage here earlier this morning. So the takeaway here is that engagement, retention and loyalty are all powerful driving forces in our operational success at Cable ONE. I want to add that we really make it our focus at Cable ONE to ensure that each and every individual feels safe, welcome, celebrated and cherished. Our inclusive culture fosters diversity. And this is achieved through conversations, through celebrations and through efforts led by our Inclusion and Diversity Board. Our focus at Cable ONE is on understanding, valuing, collaborating and supporting and respecting each other. And it's not a new effort, it's in the core DNA of Cable ONE and something we have always invested in. Last year, we're really proud that our team hosted almost 60 hours' worth of brand-new content multiple time through our Inclusion and Diversity Board. This is topics like psychological safety and unconscious bias. And the goal is really for our associates and leaders not just to learn the content, but for us to give them tools to help them facilitate these topics with their teams fueling our inclusion. And this fueling of inclusion is important because input, the input of inclusion drives the output of diversity. And at Cable ONE, we measure the diversity relevant to how diverse are we compared to the markets in which we operate. We've seen year-over-year increased female representation in leadership, increased female representation across the organization in addition to year-over-year increases in our ethnic diversity at Cable ONE. And our associates confirm this consistency of our inclusive behaviors. When we looked at our associate satisfaction results, our diverse associates are as satisfied or actually slightly more satisfied than their counterparts at Cable ONE. And it's because we know that success depends on each and every individual at Cable ONE. And this inclusion reinforces that we are stronger together. So I want to step forward and talk a little bit about social responsibility. And time and time again, you are going to see the heart of Cable ONE through committed action. You're going to see this committed action externally in the communities we serve. We offer every single associate at Cable ONE, a paid day off, it's called an Angel Day, to volunteer in the local communities that they're in. This is a way for them to get back. So some examples, our associates in Sioux City, Iowa use their Angel Day to pack lunches for kids in need in the local community. And our Roswell, New Mexico team invested with some donations to Wings for Life, and this is an organization that helps support a local after-school program with supplies and interactive programs for the kids and certainly healthy snacks for the kids. And associates across the family of brands at Cable ONE are working really, really hard to close the digital divide through a program called Dream Bigger. Dream Bigger helps local schools fund STEM projects for the kids. So it's this type of community impact that is at the heart of what we do at Cable ONE. But I'd be remiss to not share that our efforts internally are as strong as our efforts externally. We're equally committed to workplace health, safety and the welfare of our associates. And this year, we made some really meaningful additions to our benefit program, including a high deductible health care plan. We expanded our paid time off for associates just to name a few. But we've also prioritized flexibility with hybrid and remote work. We call this our #bestworkprogram. And the goal here is to maintain strong performance and strong KPIs from our team, but really fuel our culture at Cable ONE. And as Julie shared in her remarks this morning, we're focused on associate mental health as well. This year, we did our very first Cable ONE Connect Day. It was a single payday off for all associates to spend time connecting with loved ones. As you all know, Mike shared earlier, our purpose is connecting customers and communities to what matters most. And this single day for Cable ONE associates allowed each associate to spend time with their families and essentially do what they do for our customers each and every day on a personal level. And lastly, as we listen to associates, their personal growth and development is deeply valued. And our commitment at Cable ONE to professional development is a core part of how we take care of our team. Each year, we make additional investments and spend much more time in this area. And it's programs like our new Senior Director Development Program. This is a year-long program that builds our future talent at Cable ONE. We're really working to build the utility of the future and readying our associates for advancement. And equally important to leadership development is our effort for our field technicians. We've delivered over 90,000 hours' worth of training to this group alone. So whether it's in the field or to our leadership teams, we're continually investing in the team at Cable ONE. It not only reduces our risk, it helps enhance retention, and it really prepares us for future growth. So last but not least, I want to share our deep, deep commitment to safe operations. And I know that each of you in this room, every single one of you has been touched by the COVID pandemic, whether that's directly or indirectly. Cable ONE is no exception. We've navigated the business, and we've done so with safe operations for the second year of the pandemic. And we're really proud of the team effort led by our IMT, which is our Incident Management Team at Cable ONE. They help deploy increased safety training, health protocols and procedures designed to keep our associates and our customers safe. And our team reinforces the investment we make in safety through our associate satisfaction survey. For the second year in a row, the question, does the company take safety seriously, was one of our highest scoring questions. So what each of you in this room need to know is that whether the impact is in the communities we serve or directed at enhancing our associate experience or targeted at how we approach safety at Cable ONE, it's this continued focus on our people that fuels our purpose and ultimately drives our ESG outputs here at Cable ONE. So I'd now like to pass it over to Pete, and Pete is going to talk a little bit about our Stronger Together approach and how that translates into the environment and how our long-held values at Cable ONE as it pertains to corporate governance. So Pete, I'll turn it over to you.

Thanks, Megan. It's my privilege this morning to spend a few minutes talking with each of you about how Cable ONE looks at environmental and governance issues. Let me start by saying that Cable ONE paid attention to the environment and environmental issues long before it became the cool thing to do. Because at least in large part, as Megan noted, over 3/4 of our associates live where they work. So obviously, it matters to them and to us how we treat those places. I'd like to talk to you about 3 or 4 initiatives that we have undertaken on the environmental side: first, with our vehicle fleet. Cable ONE has more than 1,500 vehicles. And each year, we try to turn over approximately 10% of them, 150 or so. So this in and of by itself is leading to increased fuel and efficiency for the fleet, and we look to maintain that over the years. Electric trucks are now powerful enough for our associates and our technicians to do the work that they need to do. So we're committed to diversifying our fleet to include those vehicles. We've also worked hard on our self-install capability. So that those numbers have increased, and there's an increased percentage of self-installs and that in and of itself helps us to roll less trucks. Indeed, due to a variety of factors brought about by our continuous process improvement culture, we saw truck rolls fall to a 6-year low in 2021 despite the fact that we have a significantly growing customer base. Our corporate headquarters here in Phoenix, beautiful 6-story building, 125,000 square feet, and we've undertaken a variety of initiatives there to try to reduce our electricity consumption. They include LED lighting upgrades, which provide on-demand zone lighting. So there's nobody in that area of the building, the lights aren't on. But most importantly, we've updated our control system, which allows us to turn off our HVAC systems when we're outside working hours. And as you might imagine, in Phoenix in the summer, that can make a big difference. Already, we've seen a 25% reduction in the energy consumption in our Phoenix headquarters since 2019. So let's talk a little bit about the devices, those that we use inside our customers' homes as well as those we use internally to run the business and what we've done to make them greener. As Ken talked to you about just a few minutes ago, we've initiated our Sparklight TV, our app-based platform, video platform, which replaces set-top boxes in the home. Did you know that the average DVR uses as much power as a moderately-sized refrigerator. And this change alone will allow our customers to use 91 million-kilowatt hours less than they had when they had the DVR set-top boxes. This helps our environment and our customers' wallets. We've also seen with the removal of legacy head-end equipment supporting our video. This has reduced Cable ONE's power consumption by 14 million-kilowatt hours each year. This saves us over $1 million each year. Good for the environment as well as Cable ONE's bottom line. And we've seen a migration to LED monitors and virtualized server environments, helping us to reduce electricity consumption. We estimate that Cable ONE can save 135,000 kilowatt hours each year by moving from LCD to LED monitors. And we've already saved 1.5 million kilowatt hours each year by utilizing virtualized server environments. And indeed, the technology there is changing so rapidly that we see further opportunity for savings in this area. Lastly, with respect to devices, we've seen waste reduction of 10 tons in 2021 by recycling 850 computers and monitors. The last environmental initiative I'd like to talk with you about this morning is our paperless billing initiative, and we're very proud of this. Over 50% of our customers now use paperless billing. That's higher than our peers, and that number continues to grow. What this enables us to do is use millions less pieces of paper by not sending monthly bills to those that have chosen the paperless option. And we're very proud to have partnered with the Arbor Day Foundation to plan trees on behalf of those who have switched, 110,000 trees already and we're committed to an additional 10,000 per year. Next, let me talk about governance. And as with almost everything we've talked about this morning, when it comes to governance issues, Cable ONE is continuing a legacy of forward thinking. Simply put, good governance starts at the top. And just as Mrs. Graham was an iconic business leader in her time, Julie carries on that tradition today as our CEO and Chair, leading a majority female Board of Directors. And each Board member, not just the 60% who happened to be women, provides unique experience and expertise to Cable ONE through a diverse set of skills, experiences and backgrounds. Cable ONE also believes that good governance requires listening to our shareholders. And over just the past few years, we've done this and in a variety of ways that I'll talk about here briefly, we've embarked upon declassifying our Board. After we're done with that in 2023, each of our directors will be elected on an annual basis. We'll ask this year that our shareholders approve the removal of a supermajority voting provision in our charter so that our bylaws can now be amended by a simple majority vote of our shareholders. We've recently adopted a proxy access bylaw, and we will conduct a virtual annual meeting this year using an interactive platform, which will allow our shareholders to vote and/or submit questions online. We've also undertaken significant shareholder outreach in the past year. We've reached out to shareholders who own more than approximately 85% of our shares to solicit their feedback on a variety of governance and other topics. We've learned so much from these outreach efforts and have taken this shareholder feedback into account in our approach to both governance and ESG matters. With that, let me hand it over to Steven, who's going to take us through the way of Cable ONE's unique value proposition. Thank you. [Presentation]

Good morning again. I hope you've all enjoyed all that you've heard so far. I'm sure those of you who have been only able to interact with me over the last 3.5 years, still a bit cheated now. But you can at least rest assured know this is the group that's running our business every day. So I'll now talk about how all of this translates into our financial results. Our broadband-centric strategy and focus has led to our historical success. It's still driving our strong performance today, and it positions us well for the future. The Washington Post and Graham Holdings legacy is evident in our capital allocation. It's created investing flexibility that's allowed us to invest in our people, our networks, growth both organically and inorganically, all while protecting our dividend. We also have a distinct capital allocation approach, whereby we focused on investing in other broadband businesses as well. And this allows us to prioritize the Cable ONE operations. Our early pivot to the broadband-centric strategy allowed for a successful transition of the business. As this graph highlights, we've seen a transformation in our HSD customers and revenue both in mix and magnitude, in organic and from -- both organic and M&A activity. And the transformation and growth isn't over. As we increase data penetration and continue the mix shift, we'll continue to have margin and free cash flow growth in the future. But broadband is more than just a residential HSD product. It's a core product in our business services offering as well. And both segments have experienced tremendous growth, both in customers and ARPU. And given the high-margin nature of these businesses, that's a huge contributor. This ARPU lift is a reflection of strategy. On the residential side, it's about moving customers up into higher speed tiers. And on the business services side, it's about us moving upmarket to go after the larger customers. This broadband model allows us to achieve scale when combined with the operating competencies that Mike talked about in our strategic footprint. This combined with our M&A has led to strong revenue, adjusted EBITDA and adjusted EBITDA less CapEx. We've also here tried to isolate our M&A activity, and that's reflected in the numbers that we show as the adjusted, which are also very strong performance. And from an adjusted standpoint, we basically took the acquired company's growth into effect only after it was fully represented in the prior year. We think the appropriate comparison to our peers is on the adjusted numbers. And as you can see here, we've outperformed in the key metrics. And keep in mind, this is inclusive of the impact of our video exit strategy and the impact that's had on revenue. And so we think the future is bright. We operate in growing markets. We have penetration upside. As we get our fair share of the business services addressable market that Chris discussed, we continue to have a number of synergy realization opportunities and as we drive continued efficiencies. So we feel good about our continued ability to be able to outperform. We have the good fortune to have a Board who asks us to think in decades, not quarters. And this leads our capital allocation philosophy. We have a conservative approach to our balance sheet, where we've prioritized flexibility over optimum leverage. We've been both offensive and defensive in our investments, and that allows us to both grow and protect the business. And this flexibility allows us to be creative when trying to maximize our long-term return. And this philosophy led to our joint venture concept that we'll talk a bit more about shortly. Over time, we've had a disciplined capital allocation approach led to our double-digit return on invested capital. And this 12% is inclusive of M&A and minority investment and still compares favorably. This means we've deployed cash like our -- in our mega broadband investment without the benefit being reflected in our financial metrics. From a CapEx standpoint, our framework is well defined and organized. We basically think of our capital in 3 buckets. First, there's business as usual, and that's different than maintenance. That's basically what it takes to run the business to drive reasonable growth. Our baseline has been between 35% and 40% of EBITDA. And that compares to the industry peers. We like this version of capital intensity a little better because we think the cash conversion is what matters most to our shareholders. Then we have integration capital, which is really just tied to our deals. We factored it into the purchase price when we look at valuation and then the timing is just a function of the integration time line. And lastly is our expansion capital, which has been growing, growing pretty steadily over the years, peaking in 2021, which coincided with the Hargray transaction, where they had a similar, if not more aggressive expansion plan. Given the recent closing of Clearwave Fiber, we expect that to normalize back down around $30 million to $40 million with some level of volatility given the success-based nature of that capital. I mentioned our conservative balance sheet. We have relatively low leverage and very low cost of debt. And this gives us flexibility in running the business and investing our balance sheet. We've shown the ability to be able to delever quickly with a nice runway on maturities starting in 2025 with an average life of a little over 6 years. In addition to the low cost, our debt is 80% fixed, which positions us well for the expected rising rate environment. The Graham Holdings spin gave us the opportunity and the responsibility to control our capital allocation. With that, we positioned ourselves as the natural aggregator of rural broadband. Our first focus was on just acquiring other companies that look like Cable ONE and taking our time to integrate them and then thinking about what would come next. And we are very cautious to make sure that we didn't overload our organizational capacity. But we felt there was more to do. And at the time, our balance sheet had more capacity than our organization did. So we tried to find a way to invest in other companies to try and build a pipeline for the future. Cable ONE is a lean organization. Because of that, we could never have the mindset of build it and they will come. We didn't feel that we could go and build an integration organization and hope that we could go find the acquisitions that were justified. Instead, we wanted to try and find a way to create a pipeline and therefore, build the organization knowing when those deals would come along. In addition to that, it also opened us up to a number of deals that would have never been available to us otherwise. We found partners who weren't ready to sell the whole business, but they were interested in a strategic partner or someone who could add some growth capital or someone that would allow them to take a little money off the table that might give them more certainty down the road. In addition to that, we also found the opportunity to leverage other strong management teams. Get the force multiplier effect of having multiple groups out doing the same thing in different parts of the country. And lastly, we had the opportunity to find best practices that worked for all of us. We've been creating functional group forms whereby we're allowing our functional teams to get together with all the different investments. And if all it does is allow one business to get a little better, we all benefit from that. So as we think about acquisitions, and we talk about key characteristics. Obviously, we are broadband-centric. We're in small cities and big towns. But just as importantly, we focus on the culture and the growth that those companies have. In general, we like to buy good companies with good people. We're really not the fixer upper type. We're much more about buying good companies and trying to make them a little bit better. We've proven that we can integrate, synergize and drive further growth. And when we think about the characteristics of our investments, it's basically the same because we wouldn't invest in a business that we didn't want to own someday. Julie mentioned earlier, we thought we would walk through the Fidelity transaction a little bit. Just to give a perspective on something in the rearview mirror and kind of give a glimpse on how a proprietary transaction comes to be. The small, medium-sized operator group in the cable industry is a pretty tight-knit group. As we were actually doing the diligence on Clearwave, we reached out to the CEO of Fidelity who had some insight into that business, and we wanted to get his perspective. And when we met for dinner in St. Louis after a diligence trip, his last question to me was, well, if you get this, does this mean you don't want Fidelity? And at the time, Fidelity was the #1 acquisition target we had on our list. And we said, well, certainly, we want to figure out a way to get that done if we can make it make sense. We spent the next 2 to 3 months talking about structure, talking about valuation, timeline. But when it came to the family that actually owned the business, they were much more worried about legacy. They wanted to know where their business was going to end up and make sure that it was in the right hands. And so we invited their team to Phoenix for a day where we didn't talk about the transaction at all. All we talked about was culture. We talked about how we treat our people, how we develop our people, how we think about integration and synergy realization. We even shown them a bit of a self-deprecating video of leadership that we put together for our associates, and it gave them a good feel for who we were. And they left down and called us back on Monday and said, this is the deal we need to do. And so as we think about great fit, this was obviously a great fit geographically given the nature of where we were with NewWave, but it was an even better fit culturally. And we've seen fantastic growth since we acquired the company. We're now serving over 95,000 HSD customers in that footprint. The 2021 EBITDA for Fidelity was $76 million, which compares to $42 million in 2018 when we were evaluating the deal. So we're well ahead of plan with remaining synergies still to be realized as we had to pause the synergy realization related to COVID and then related to the Hargray transaction. Next, I'd like to talk about the unconsolidated investment portfolio. We've obviously done a variety of transactions in size, in structure and ownership, but we think we've built a great portfolio of assets. As you can see here, on a combined basis, these businesses represents LQA revenue of $600 million, which grew 14% year-over-year, $280 million of EBITDA -- adjusted EBITDA, which grew 30% year-over-year. And are currently planning to build, construct another 390,000 -- sorry, another 600,000 locations over the next 3 years. So allowing us to more aggressively participate in market expansion off of a great base business that already exists. We own 35% of this on a blended basis. And we don't get to do a mark-to-market accounting on these. This is basically the accounting book value, which doesn't move very dramatically from the original investment. But we don't believe our investors are even giving us credit for the book value, let alone the appreciation for the growth we just discussed nor the significant future value creation potential that exists in these businesses. So we have no certainty of ultimately consolidating these businesses. And -- but at the same time, we're investing in a space that we know really well. And we think it creates a great potential opportunity for deals. And if the worst-case scenario is that someone else ends up wanting to pay more than we want to pay for it at the end of the day, and we compound capital, that's something we can live with. So as we are going to go through a couple of the -- we're not going to get through all of them, we're going to go through the 3 largest investments we have today, just to give a little perspective on them as well. So mega broadband, they go by the brand of Vyve now, which is one of the companies that they acquired. They're very similar to Cable ONE in the markets they serve, the technology they use, the broadband focus they have. And there's a strong kind of historical connection there as the NewWave owners, GTCR and the CEO, Phil Spencer, is the same group here. After they sold us NewWave, they basically went and tried to replicate what they had done before. And so they built a business through multiple acquisitions, primarily of businesses that had been undermanaged and underinvested. And so they, too, have been working on their own integrations and efficiencies and synergy realizations. And needless to say, given the long history we had both with the management team and the ownership, we'd always talked about, okay, when is this going to be ready for us to buy? And when is it going to become part of Cable ONE? And it was interesting that it actually took the Hargray investment that we made in 2020 to be the catalyst of a conversation with GTCR about a partnership instead. And we like the idea of a partnership here. It allowed us to participate in the early stage accelerated growth that they're having right now. It created a certain level of ownership in the business. And we found a great partner in GTCR, who we've now done multiple transactions with. The next one on the Nextlink transaction. This, too, is an interesting story. At the time in 2019, we were evaluating fixed wireless really more as how do we think about broadband in the less dense areas outside of all of our smaller communities. And fixed wireless seems like a logical place to go with that. And it was more of a question of buy versus build. And came to the conclusion that we didn't have the core competency to build it, but if we could find people who did, that would be great. And the timing was great as the CEO, Bill Baker, was looking for a strategic partner at that time who had financial capacity as he's getting ready to enter into the spectrum auction and the RDOF auction that was coming. The diligence revealed that they were a great operator. They were scaling quickly. There is geographical alignment because we operated in 6 of the same states that they did. And they had also built an expertise in procuring government funding, which we thought would be very useful going forward. They've grown unbelievably quickly. It's evolved into more of a hybrid fiber and fixed wireless business. So much so that we made a second investment in November at twice the original valuation amount. We added partners giving validation to the valuation, and that was Stephens partners who we've done multiple transactions with together with Freedom 3 Capital. Lastly, we'll talk about Clearwave Fiber. And I know we've talked about this one a bit lately on our calls, but just for a quick refresh. For us, this was an opportunity to partner with a quality known management team. This is almost like the third time together with Michael and David as we were an investor in their business, then we bought their business and then now they're running the next business. And interestingly and just how things work out, that one wouldn't have happened if we hadn't asked them to stick around for 8 months. And the fact that they stuck around for 8 months and helped us with the transition, gave us time to actually put something together that allow them to go do that as their next venture. And so we're excited to have them. It also allowed us to take advantage of private fiber multiples with our contribution. It allowed us to participate more aggressively in market expansion. All while being able to deconsolidate the results, improving our free cash flow and our margin profile, and also, most importantly, allowing our team to stay focused on our core business, which is growing broadband and integrating the acquisitions we have. Outside of the financial piece of M&A, there's also intangible values that come with all these transactions. Clearly, talent is one of them. We've acquired so many good people as part of the deals that we have done, not the least of which is Ken and Megan, who you just heard from both with respect to NewWave and with Hargray. There's a geographical diversity piece about buying a company that opens up other deals. So if we had never done NewWave, we certainly would have done Clearwave than we likely wouldn't have done Fidelity. We did Hargray now opened up a portion of the Southeast, which actually ties really well together with a portion of Mega Broadband's Southeast footprint, but also opens up similar type deals to like a CableAmerica near Fidelity, we can now look for tuck-in acquisitions in the Southeast that we could have never contemplated before. And in every transaction, we learn something. Every company has got a certain level of expertise that can help Cable ONE grow faster. That, combined with being able to leverage the best practices from the partners that we invest with makes the entire portfolio grow more quickly and move along more -- move along better. So in summary, we have a great base business. We've got strong competitive profile. We deliver high margins and robust free cash flow growth. And we have plenty of growth ahead, which will increase the margins and increase the free cash flow and leverage capacity, and we've proven that we have the ability to invest that free cash flow in other businesses that have similar, if not even better growth prospects. All of this leads to a stable long-term ability to generate high return on invested capital for our shareholders. So with that, we'll now take a 10-minute break as we set up for the question-and-answer session. Thank you. [Break]

Welcome back. We're now ready for our Q&A for our virtual attendees. [Operator Instructions] I'll moderate the discussion and we'll attempt to answer as many questions as possible within a reasonable amount of time. And a few questions have already come in through the chat. So [indiscernible], why don't you get us started?

Steven, can you discuss the differences between HFC and Fiber to the Home networks and how you approach those capital investments?

Ken?

Sure. Absolutely. We talked about a little bit in the presentation, we're really focused on being able to offer the same set of services, and we believe that both HSD and fiber do that, the same ability of same speed, reliability, symmetrical service and low latency. We're big believers in fiber. We have a fiber first mentality in all of our new construction and market expansion is fiber-based. When we look at upgrades. We believe in the DOCSIS 4.0 path for upgrades because it's significantly less expensive as we went through in the earlier presentation. So we're very focused on providing us a network that's future-proofed and able to meet the needs of the customer. Customers site their 2 biggest buying or the 3 biggest buying factors as reliability, value and speed, and that's what we're focused on.

Next question. With the Clearwave Fiber spin-off, how do you think about market expansion opportunities left for CABO in terms of total spend and returns?

Chris, that's probably up your alley.

Yes, happy to take that one. So although we've spun off Clearway Fiber and set them on their course for market expansion and densifying that network, I think it's important to note that we still operate in over 20 states, and we've got opportunities to edge out and get to new markets from where we're at. And we target that at $30 million to $40 million a year is what we see going forward, realizing that could change just given the opportunistic nature of that business and some of the government funding that's out there as well. But we look at markets that are similar to markets that we operate in today, right, small cities, large towns, favorable competitive dynamics and something that's fairly close to a market that we operate in today.

And I would just add to that, Chris, with having a $30 million to $40 million bucket, we're probably able to be a little pickier, too, in kind of picking what's going to be the best return. That's not so much like, hey, you got to go get this cash deployed. It's where can we go and do it well and then when we can actually combine that with the subsidies, even better returns on that.

Chris and Steven. Next question. How quickly do you see competition growing in your markets? And how do you win against Fiber to the Home?

I answer this all the time, Mike. But why don't you take this one?

I'll start it and you feel free to jump in. Look, I know that everybody is focused on competition and so are we. We are very focused on competition. And as I said earlier in the presentation, we have a competitive mindset. Part of the -- I think, the formula of what we do, it's where we serve to our markets. As I said earlier, our markets are a competitive advantage themselves because of the safe harbor strategy. Additionally, it's how we operate, right? And there's more than 1 arrow in the quiver other than just price. It's the technology. Is it reliable? It's our service. And then also, there's localism. We talked a lot today already about our people and the fact that we are local. And you saw how ingrained we are in our communities. And all of those things are part of how we compete.

And the only thing I would add to that, too, is that, I mean, if you look over the last 4 to 5 years, what we define as competitive, the awesome 1 offering 100 megs or higher is almost doubled. And if you look at our fiber exposure, it's almost doubled. And you look at our growth that we've had over that time frame, it hasn't been a limiting factor in our ability to continue to grow. And so we expect the numbers increase, and we expect to be able to continue to grow through that. Any -- sure, Steve? All right. [ Things are ] coming.

Steve Cahall from Wells Fargo. I apologize I have a few and they're kind of detailed. Julie, maybe to start, you talked about Cable ONE being lower churn versus your peers. I was wondering if you could maybe just help us quantify that at all. And on the last call, you talked about the pretty low fiber competition that you face in the footprint, and you talked about increase of the 100 megabit tier. So just how do you think about kind of future proofing the network from a competitive basis?

There was a lot, I still can't -- still ready.

I'm guessing he's not done, but.

So I'll start with the easiest one first, which is, can I help you quantify our very low churn? And the simple answer is, no, I will not other than just say that our churn is incredibly low. It's interesting to watch the report outs of other traditional cable companies starting to report this, and we've been talking about it for years. And every time I think we've hit a low point, the next quarter comes around, and it's even lower. So that helps give you some trajectory of what's happening with our churn. It is incredibly low, which indicates to me that our customers are very satisfied. Now remember, we haven't gone after the full marketplace, right? So the people that are taking our services, 4 out of 5 of them are taking 200 megs or higher are very satisfied with the service that we're providing them as evidenced by our very low churn. You said something about low fiber overlap.

So our 17%.

Yes. I don't know what your question is around that, I apologize.

Yes. So I think last week on the call, you just -- you quantified the fiber overlap. And I think the big picture of the industry is encroaching competition seems to be coming everywhere. That's a big theme of today. That's a big theme of what Ken talked about. So how do you think about just the competition, probably picking up but from a lower base than your peers and how you go about addressing that?

Right. I mean part of it is what Steven just outlined, which is there's been growth in competition. I've been in the industry for 30 years. So throughout my lifetime with Cable, there's been competition. And even though there's been competition, specifically in Cable ONE land, we've continued to grow both in units and in ARPU. Our safe harbor strategy does insulate us. That doesn't mean that I don't think competition is coming to our markets. But our flywheel is set up. We are already operating, and we're not just doing a business with a checklist. Yup, we built this. Yup, we built that. We are integrated into those communities. I would be very interested to hear the unique selling proposition of the people that plan on coming into our marketplaces because we've got the network to support our customers. We've got the people living locally there that are neighbors to them to support the network. And as long as we keep our eyes and ears open and take care of them, I think we're going to be fine. Keep in mind, we are so geographically diverse, that even if we have something happening in market X, the rest of our markets, by and large, are more insulated. So do I expect competition in the future? Yes, I do. As Mike said, am I worried about it? I'm not. I'm not. We're planning for the scenarios, and we will take care of our customers and we will run a great business. This is a team that delivers quarter in and quarter out because they're not thinking about the quarter. They're thinking about what the right thing is for our associates and for our customers for the long term. And I know that sounds a little pollyannish, I invite any of you to come on a tour of our markets and see what it's really like. This is alive and well every single day at Cable ONE.

We'll do that on next year.

We actually thought about that.

And if I could follow up then, maybe Ken, you talked about looking [ to pushing ] fiber deeper into the network and ultimately decided which the HFC DOCSIS 4.0 approach, how different was that cost of fiber? And if we saw, let's say, material costs come down, would that change your strategy? Or do you really feel like HFC and DOCSIS 4.0 gets you to the 10-gig journey.

Great question, Steve. When we look at the cost inputs, the cost inputs, materials certainly are a significant input. Labor is the biggest driver, particularly now with labor prices going up. Labor is the biggest driver. So when we look at it, we -- I mentioned that we looked at it in great detail. And what we found is that the incremental initial capital cost is 6x or more the capital cost of what it takes us to go to DOCSIS 4.0 in an extended spectrum DOCSIS integration. And so when we then look at operating costs and pull operating savings in, it's primarily things like power that reduce our cost because, as I mentioned, we don't see a meaningful difference in customer interactions for truck rolls and customer calls into the sports centers between the platforms and we look at our network. And so we're -- the cost is really driven by that initial capital investment, all the material that we have to buy, all the labor we have to do to overbuild the entire network. As a result of pushing fiber deeper into the network, we've covered some of that ground. And on an interim basis, we'll continue to push fiber deep every chance we get. But the initial cost is more than 6x the capital investment for fiber versus what it is for HFC in an upgrade scenario.

And Steve, as part with adding to that, that's because of who we -- didn't mean that applies to everyone. And so we know our numbers and we know what works for us, and that may not be the case for another operator who's more dense or who, through the other processes didn't push fiber deeper. And therefore, the fiber math isn't the same. But because we've made the investments we have, that's why the difference is so great.

And I mean I think, Ken, you can talk to this much better than I. But on average, I believe we have fiber within a few hundred feet of our customers' homes. It's not like there isn't fiber out there.

Yes. We generally were -- again, as we push fiber deeper and deeper, we talked about it last night, Steve, that we're getting very close. We're within hundreds of feet of the customer home now. So that isn't the driver, but density is a huge driver. Our more rural markets, our average density is only about 58 homes per mile. And so when you're looking at a more urban market, you're looking at densities that are often double that. And on a per-passing basis, that pretty dramatically changes the math.

And then last one, Steve, you have the call option on MBI, I think, early next year. I mean if I'm doing the math right, it seems like even your book value of MBI is a very low multiple on EBITDA. So from an investor standpoint, it seems like on book value, we're never going to get the value of it really well reflected. But if you call it, you're bringing it in probably a price or valuation or a level of leverage that's very different. So how do you balance the equity opportunity, which probably necessitates calling it in versus maybe what's best for the business long term, which may not necessarily be that.

Yes. I mean, I think we'll always do what's best for the business long term. I don't think we would ever make the decision because of the impact it might have from a are we getting credit for it or not, we're going to do what's right for the business for the long term. We clearly went into that transaction with a thought that we would own it eventually. We also probably went into it thinking that we'd probably call it at the first call and then Hargray happened. And that wasn't 1 that was kind of built into our pipeline to happen as quickly as it did. But when it did, it was an opportunity we had to take. And so I would not say that while we still think there's good likelihood that we'll exercise the call. My guess is it ends up being later on. And that's the reason we structured it the way we did was things happen, and you never know what's going to be going on at that time. And if you only have one window in time to make that, then that puts a lot of pressure on that one window. We've got an 18-month period of time that will allow us to make sure that our balance -- the balance sheet is in shape to make sure the organization is in shape, and we'll make the decision at that time if it's the right thing to do or not. But that's a level of optionality that's great to have.

Brandon Nispel, KeyBanc. Steven, I guess a question on EBITDA margins. You guys gave sort of the split when you -- as an adjusted metric, EBITDA margin is up 600 basis points over the last 3 years. Is there any reason to believe that, that type of expansion can continue, especially with the mix shift that you have underlying in the business. I'll stop there, and I have a few others.

There is no reason to believe that we shouldn't continue to see nice margin expansion.

And Julie, I guess, on that point, inflation is the top of my concern for I think all investors. You talked about wage increases, can you talk maybe broadly about wage pressure, labor pressure that you guys are seeing on the business? And maybe help us understand what percentage of your operating costs are actually wages and labor?

I'll start that one off and then if Megan wants to jump in, we'll go forward with that. The wage increase that I talked about in my presentation specifically was around a pay-for-performance bonus, which is how our entire team from frontline people to the folks you see sitting here are compensated. We're heavily compensated for performance. So those 2 points were based on bonus potential, which we give to everyone at Cable ONE. So if we do well, they do well. So the opportunity to earn more than what we thought we would do because they live by a budget, even though we are very focused on year-over-year results, it pays for itself by and large. Now that being said, we're in an environment like I've never seen before. But again, I'm feeling really blessed that we are somewhat insulated because our associate satisfaction is so high. And when you think one of the things that folks mentioned on the associate satisfaction survey in the top 3 is they understand how their work links to our strategy. So we haven't seen and I'll knock on a couple of things, the mass exodus that we hear about in the media. But that being said, we are so fortunate to have Megan join our team because she is helping us to look at our human resources in much holistic way, quite honestly, than we've done in the past. So, Megan, I don't know if you want to...

Yes. I would just add, labor pressure is something everybody is a careful student of, and I think our team is studying really, really hard. I think Julie mentioned our great culture, but our attrition rates are low, so we spend less money sort of churning talent very differently -- different than the market in terms of the pandemic being able to keep talent in. I think a lot of us talk today, too, about efficiency of the work for so our ability to drive efficiency through talent. I think I talked a little bit about how our headcount despite acquisitions has really stayed pretty lean. I think that's another protective measure when it comes to cost of labor because we're able to protect that. We had at Cable ONE, our January hiring was at the top that it had been in 2 years. So for us, we've been atypically, I think the others in the market having less pressure to be able to find talent. And I think that's, as Julie mentioned, directly attributed to our culture.

Clearly, programming and payroll are our biggest expenses. But for anyone who's been a part of this journey for any amount of time, that continuous process mindset that we talked about has been shaving at least 5%. There have been years that have been more than that of our head count out of the business by coming up with better ways. And again, associates aren't laid off because of that improved process, either they move to higher value work. I think about like in the business services where we took field techs that we didn't need for installs anymore and trained them up to be able to do higher level business services, installs in a dedicated way. So I think that, that mindset has helped us trim the workforce. But now we're in this place where we've been scaling up because we've got line of sight of what's coming to us. I mean whether it's Hargray, completing integration of Fidelity and then Mega and on and on. So we are scaling the organization at this point in time so that we are ready and capable to take on what's next.

My question is for Tom Gayner because I have spoken to Steve about it many times. When you do acquisitions at the Board level, how do you think about the return that you're trying to underwrite on the acquisitions? And in general, what sort of discussion is around the ROIC and sort of long-term targets on those acquisitions.

Well, thank you. I can assure you that the #1 thing that the Board wants to know is that Steve knows what he's doing. And that's really our job. Our job is not to make the decision or our job is not to be managers, the managers make the decision. And really what the Board's job is, is to make sure that this team, and it starts with Julie and the relationship and confidence that we would have in her and her direct reports. And that is what the Board spends its time on such that when Steve presents numbers to us, it is a given that we have confidence in the numbers, the technical skills and we're done. Now we can talk about the strategy and whether this seems like a good idea or a good way to lean, but we have fundamental confidence in the numbers that are presented to us, and they've worked out.

I think a great example of that, Tom, is my very first Board meeting, there was a fiber transaction that was presented. It was actually my first day on the job and it was fiber transaction that was presented. And it was a fairly large fiber transaction, and we weren't yet in the fiber business. And so it was kind of like, yes, we should probably take a pass on this one. And I think your exact quote was, "The best way to learn is do." And if we could go finding the right bite-sized asset to do, then we could probably open up the universe and not -- uncoincidentally, that afternoon we got a call on Clearwave. And that's just how things extrapolate and like the wisdom we get from the board on maybe not yet, maybe look at this, those kinds of things so.

Genius Board move.

I'm sure you called the bank to call me that afternoon.

[ Paul McGinnis ] from [ Fenway Asset Management ]. I'm curious on your philosophy when you complete an acquisition, what are you doing in terms of integrating those companies? When do you do it? When do you let them operate standalone? And then also on the operating systems, what type of scale can you achieve by putting them on a common operating system? Or do you let them stay on their existing operating systems?

Go ahead, go ahead.

I'll start on the integration piece of it. So any time that we've done any of our acquisitions and really starting with NewWave. NewWave was a fantastic learning opportunity for us. And our approach was to be very methodical about it. We took a 3-year horizon for the full integration of NewWave. And within that window, we're looking at all of their systems, prioritizing them and then ultimately determining what are the key platforms that we need to move first in order to realize later synergies. We've then taken all of those learnings and we apply them to all of the other acquisitions that we've had thereafter. And each time, we get better and better, so much so at this point that I would say that integration has become a core competency. We have organized around it. We're now making it actually an operational efficiency. We have our SVP, Eric Lardy, who is the Senior Vice President of Operations and Integration, as another executive who is the Vice President of Integration. He has a team, including 2 senior directors of integration and a full team below that. So we are scaling up the organization to be able to tackle all of this to make sure that the rest of the organization is managing business as usual and keeping CABO running well that we are building these on-ramps, one after the other for this pipeline that Stephen has created.

And if you think about it now, I mean, at the time we did the NewWave integration, right? And then -- and now we actually at the same time have -- we're finishing up the value net. We still have stuff going on with Fidelity. We're starting the Cable America and Hargray is in full force. And as part of Hargray, there's actually a disintegration of Clearwave fiber. And so the thought of doing that 5 years ago probably would have frightened everyone. And so it's been a time frame and having the whatever the vision into the future of what was coming has allowed us to feel comfortable about making those investments.

When I think about our integration process, I think about -- we set a 3-year window so that we can do it well. And we spend the first year doing a lot of planning and learning. And there are things that we have learned, best practices from every single one of our integrations. I mean the onus to all associates that I talked about this morning came to us from New Wave. We didn't do that prior to that. And we thought they were doing that, we were like we'll just assume, yes, we should do that. I can tell you something that we've learned from every single one of our acquisitions. So best practices, then we put people first, getting them obviously onto our payroll system and our communications platform set up so that they can be hooked into cable and culture right away. And then we worry about the technology, and that's where the synergies do start coming into play, absolutely getting rid of 2 billing systems or 2 provisioning systems, for example, helps us in the long run. In terms of stand-alone, I can't think of anything that we don't plan on having the moniker Sparklight on top of. Now we did not absorb Clearwave into our operations because they were clearly so different as a business services only, fiber-only operations. So quite honestly, we took even more time to study them. But quite honestly, we were to the point before they started spinning out with Clearwave fiber that we were going to integrate and make them be part of Sparklight as well as they've already begun offering residential services on top of business services right now.

And one other thing that happens when we're in these is the upgrade to the network and maybe not true network upgrades, but at least getting them to the same standards that we have. And so while we're trying to move systems around, we're also trying to create consistency across the network on the system side of it, which creates some level of efficiency, but more importantly, in how we run the business so that we get alignment across all the markets, so...

The only thing I would add to that is that we have a particular focus on cybersecurity with any integration. So it's integrated into our diligence process. It's part -- it's one of the very first areas we address to make sure that you are protected there as part of the integration.

Good point.

[ Henry ]?

I know it had taken maybe 24 months to sort of change the pricing structure past acquisitions. Is that going to move forward a little bit faster on some of the newer acquisitions.

I'll take that one. That's a great point. And here's the honest answer. I certainly hope so. I believe that it is an area of opportunity for us. Let's face it, we are studying these in due diligence, and then we're spending time as we start to plan our integration. We know what it is. And I will tell you, it's not that it isn't being done at all. NewWave is exactly at legacy CABO ARPU, for example, Fidelity is getting very close. Hargray will be the next big one to move in. But I -- my answer is, I hope so.

And the one thing I would say to that is, at the same time, we also don't want to try and break something that's working really well just to get the consistency because clearly, Fidelity was a good example of that where, I think, we were having tremendous growth. And the thought of going into make changes that could negatively impact that strong growth. I didn't make a lot of sense either. So it was about finding the right time and not being so stuck in our ways, but we made a bad decision, too. Trish, anything from the chat? I'm sorry. Go ahead, [ Graham ].

Two for me. So one of the slides said that you're technologically agnostic in serving your community and I was just wondering, is there any one that would extend to fixed wireless? Are there any places where that's a good idea? And then second, I also found it really interesting that you commented that you tend not to buy fixer-upper businesses. So if there's a small cable operator that's running their business much worse than you think you can, that's a lot of opportunities. So what's the counterbalance that makes that?

Yes. So I think -- well, on the first question on fixed wireless, I think we certainly have, and that's the reason we made our investments in both Nextlink and Wisper and liked it. We don't think we don't think it's a great technology to compete head-to-head with a gig service. But we think it's a unreliable economical technology as we move outside. We've got over 1,000 small communities that -- I'm a foodie, think of them as donut holes, and we got a lot of donuts around them that need service. And that's a great economical way to do that. And similarly, I would say it's a different business, too. And that's one of the reasons why we partnered with the people we did to make sure that we got that expertise. On the fixer-upper side, clearly, I think a tuck-in is different than a big business like there are people who have gone and bought big pieces of ILEC and they really got to do a turnaround and they buy for a low multiple. They need to invest a lot of capital into it and turn it around. And there's no -- not disparaging that business model because I think there's people who do it and do it really well. That's just not what we do. Compared to a tuck-in, there's a lot of difference in that. If you're buying a relatively small company that's on your -- essentially next to your network and you can plug your network in and change it pretty quickly overnight, that's not the fixer-upper type then. This is going to take 3 years to evolve. So I would say there's a little nuance there in the size of the transaction. Trish, anything on the line?

Yes, thanks, Steven. How should we think about modeling the greater than $1 billion book value?

So there's been a variety of ways that I've talked to many people in this room over time and trying to figure that out. And the way I thought about it when we initially did it was there's 2 forms. One, you could kind of try and think of when they roll into the business, and I think that's the greatest upside piece because not only will we get the business and consolidate it, we'll get to realize synergies and other pieces associated with that. But the more conservative approach, I think, is to look at them much more like you would a private equity investment and think about private equity-type returns on this because most of these businesses are levered at leverage levels higher than where we're at, and they're growing at rates faster than what we're growing. And so in most cases, our private equity firms underwriting a 20% to 30% IRR. And so if you think about that kind of business and the different piece points where the investments came in over time and growing in that fashion, I think that's a lot more reasonable way to think about that bucket growing than just saying, okay, well, you get $1 billion or $2 billion when you add on to the value because I don't think that's giving any credit for the tremendous growth that's in that portfolio right now?

Next question. How do you make up for the set-top box rental fees as customers move to the virtual version you mentioned that saves power?

Well, I think one -- I wasn't sure we would get any video questions, but we always seem to get some. But I think one, it's a business that we're modeling going away in general. So whether it's the set-top piece or the revenue in general, we kind of contemplate that every year when we factor in our rate increases. And we make sure when we pass through the programming costs plus other increased costs that come with that. And so it's just part of the model of it's all going away over time. It's just kind of the evolution and the slow move of it. We've always said that if it all went way overnight, that could be a challenge because we've got a lot of people supporting that business. And if you don't want to do layoffs, you need attrition to be able to let that happen. But from the standpoint of it moving in over time, that's the way we model the business. And so whether it's set-top revenue or just video revenue in general, we're expecting it to go away.

Well, we've already derisked the majority of it since we've been at this since 2013, 2014.

And we did specific to this. We did look at the set-top revenue. And as part of the conversion, customers are receiving a stream fee added to the bill. And so that's one of the few ways we make money on video, and we did protect that because [indiscernible].

Great. Thank you. Next question. How do you guys think about the large government subsidies and their effect on your business over time?

Mike, do you want to...

Sure, I'll take that one and I don't know if Peter, Chris probably want to jump in on this as well. There is so much money. I mean, the billions and billions of dollars that are earmarked for the markets. And our approach on all of this is that the majority of this money is meant to go to unserved or underserved markets. And so within that, that creates both opportunity and some challenges. But when we look at our footprint, we've got a gig service across our entire footprint. So it's hard to characterize any of that as underserved or unserved, right? And so from that, we take it and we have this approach of, all right, so where can we capitalize on this. We know that if there's any of this, the money that comes out that we have to defend our turf, we will absolutely defend our turf. And then it's the opportunity. Where can we go where it smartly makes sense to go and expand with government subsidies? And so Pete and Chris, they're going to be heading up some of this effort internally. But then again, we invested in partners who are out there doing this already, and they're very, very successful with Nextlink, they're already doing this. And they've got great formulas for how to be successful on this. And so we can learn from our partners. You guys want to...

I would say it's about prioritization for us on the offensive side. I mean not every subsidy is created the same. Not everything is funded 100%. So it still needs to pass a good IRR and threshold for us. So we're not out there chasing every single dollar. There's only so much we can do. That's why we have partners in different businesses. It's a force multiplier as we've talked about. So I don't think it causes us to say, hey, we need to go out and spend a bunch of more capital because there's government dollars available. Now if there's something we're already interested in or that's on our radar, it may cause us to pull that forward if we could get some government dollars to assist in that. But I don't think it changes our strategy 180 degrees certainly.

The only thing I would add to that is, at Julie's request, we've taken a holistic approach at it, not just offense, not just defense. We've already put together a team and begun studying it. It's really complex. The rules haven't even been written for many of these programs yet, so we're studying it. We do plan to go at it both offensively. And as Mike said, we will 100% protect all of our turf as best we can.

For those from Baltimore, Under Armour's slogan is "Protect This House."

Could you talk about why the increase in TriStar investments to $77 million? I'm not sure, but I think you might be talking about Nextlink?

Yes. I was going to say I think because TriStar is basically at the book and the Nextlink is the one that moved to 77%, and that was with our incremental investment of $50 million. And that's one where the accounting rules getting the way to, as I mentioned, that actually was a double the valuation of our original dollars. So you would think we would get to change the $25 to $50 million and really have an investment that was closer to $100 million on our books. But because the security that we invested in the second time was slightly different, we get to keep it at $20 million, $27 million instead. But yes, that's a business that's growing unbelievably well, and we feel fortunate to have made our first investment and to get to continue to be along the ride with them.

And by the way, to the earlier question, that's one of the things the board would pay attention to.

Exactly.

How should we think about the MBI dividend? Is there a formal structure in place on the dividend? How should we think about cadence trajectory there?

Yes, I think that was certainly opportunistic. They had delevered quickly and had the opportunity to go take a dividend. If it was just Cable ONE, we probably wouldn't take in a dividend because that's going to -- not necessarily our strategy, but we're also a good partner, and it was good for GTCR. And so we were certainly supportive of it. But when a business performs well and private equity firms that are focused on the cash and IRRs, dividend could be helpful. So I wouldn't expect another one, and it's certainly not something that's kind of built into the cadence and it was one time. But for us, we got 70 -- almost $70 million of that dividend and ended up being cash on the balance sheet in the same quarter that we actually invested in Cable America, Nextlink, Point Broadband and Tristar. So we had a number of outflows, so it wasn't the ore thing in the world to have an inflow come in as well.

Thanks, Stephen. How is your customer experience different from your peers? And how do you measure it?

Let me take that one. So with customer experience, -- the thing that we were doing there again, and this is almost thematic in some of what you've heard is we're operationalizing it. And that starts with organizing. We actually now have a Vice President of Customer Experience. And that person's sole job is to do the journey mapping process and look at everything that we do through the lens of the customer. And that person, Leann Dittman, who is in charge of this, she has a team that is below her who is working on every aspect of where all of our customer contacts come into play. And so take it from that and you turn it into, well, what does that actually mean through behaviors? And there are so many things that we were doing, whether they are self-help, chat bonds, just everything all the way through the customer experience. And then we're actually applying them even into business. And so business is taking the same lens of how we interact. They label it, I think, as Chris said earlier, as white glove service, but it's the same thing of how we are trying to approach every interaction and to make them effortless and neighborly.

And just to clarify because you might be thinking, what do you mean you now have a Customer Experience VP. We had a customer operations, and we still do, but we're separating it out. We're saying, look, customer operation is keeping the trains running on time, whereas customer experience has a unique focus on almost maniacally doubling down on our insights from our customers and making their experience better. That is the feedback we hear from our customers through many, many channels, and we take that information and then we add, again, machine learning, business intelligence, and we come up with the solutions that our customers are asking for from us. I also think that there is a level of empathy that you get with our associates that you wouldn't find from many providers because, again, I'm going to the grocery store, and I'm seeing Steven, who's a customer. And I want to give him good service because I know him and our kids play all together. And yes, our towns are that small that our people know our customers.

I think, Julie, on the people front, too, a lot of work and Eric's out in the audience that on one-on-one coaching, performance management for the team and then really hiring for attitude, behavioral interviewing to hire to make sure we're hiring the right cultural fit to the company that allows us to grow their career with us. And a lot of it starts at our CSR levels in the front lines.

Trish?

Can you discuss the financing of the Hargray deal in particular, it was at a higher valuation given where assets are priced at the time. So I think it made sense to finance it with the convert or equity, but please discuss?

Sure. I think we try to be opportunistic over time and always take advantage of whatever the best market was at the time. So when we did our bond deal, bond markets were unbelievably hot and we were able to get very attractive pricing on that. And we took advantage of -- we've got a great partner in CoBank who thinks about -- who serves basically -- it's a rural co-op that serves companies that operate in small markets, and we weren't taking advantage of that. And so we got into that, it's the cheapest that you can get and we've tried to maximize that. And the converts kind of fall into that same category. We -- when we were working on the deal, we were trading at a higher valuation than when we actually signed the deal. And candidly, we just weren't comfortable selling equity at that price. The convert market at the $22.75 convert and the 0 coupon was something we were comfortable with. And so we were able to put that together. I would also kind of talk about the multiple a little bit. I mean, multiples and ones you pay are all based on historical numbers, and I don't want you to think you are going to do in the future with it. And so you can pay 6x for something that's going the wrong way and it's a bad deal, and you can pay 20x for something that's going the right way and it's a good deal. And so I think there's probably a little too much focus on any given multiple at any given time if you don't understand what the model is to actually drive growth with it. And I think Hargray was one of those for us where we saw a great opportunity both in the footprint and the growth that was happening there and the synergy realization and what it gave us for the future. And at the time we'd already done the Mega Broadband piece. So we saw the additional synergy that would come with that eventually. And so when we thought about financing the deal, we thought of the convert more as equity than we did that and we thought of as selling equity at $22.75, which seemed like a reasonable place to be selling equity at that time. And then we filled the rest of it in with more traditional bank loans.

Thanks, Steven. Are there any CapEx requirements for you in these partnerships? If not, can you help us understand why?

No. I mean they're -- I would look at them as we might potentially have opportunities if the businesses grow quickly to put more capital to work through an investment, but we have no technical CapEx requirements as part of them. These businesses are self-funded. These businesses have their own leverage capacity. I think Clearwave fiber is a good example of that. Our investment partners invested a little over $320 million into that business, and we still haven't put leverage on that business. So there's a great deal of capacity to go do that. We would love nothing more than for them to find so many opportunities that they actually needed us to put more capital to work, but that would be a great opportunity to drive that, but we don't see that happening. And kind of the same thing when we made our second investment in Nextlink, it was an opportunity because the growth has been so tremendous and they had more growth opportunities coming. So it wasn't a CapEx need as much as it was an opportunity for us to be able to participate in a bigger way. So none of them have necessarily requirements, but we hope they all have some level of opportunity.

This is our last question. With 58% ownership of Clearwave, will that become consolidated or below the line?

No, we spent a lot of time making sure that would be not consolidated and probably going to get the deal done a lot quicker if I'd actually knew now -- or knew than what I know now. But nonetheless, it's -- part of that for us is we just don't think that's a business that fits well in the public environment. We think it's a heavy capital intensity business that takes a while to see the returns on those business. And while we love the business, we also know what our shareholders want. And that's partly to be able to have continued free cash flow growth and see margin expansion. And for us, too, it also gave us the ability to let that team just go build their own team instead of thinking about how we're going to build that internally at Cable ONE and what competing resources that might have had with either our integration efforts or our normal growth efforts. So yes, we are certainly deconsolidating that and -- but appreciate the question. So I think that's it.

So with that, thank you for joining Cable -- joining us for our first Investor Day. Throughout the day, we touched on our history, what makes us so unique and the significant opportunities that lie ahead. We hope our team was able to answer any questions you may have had. But if not, please reach out to Stephen or Todd, and we'd be happy to help you. Additionally, the deck that we went through this morning will be uploaded to our Investor Relations site soon. We appreciate your time today, and we look forward to talking to you on our first quarter earnings call in May.