cabo20220930

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

☑	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2022

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _____ to _____

Commission File Number: 001-36863

Cable One, Inc.

(Exact name of registrant as specified in its charter)

Delaware		13-3060083
(State or Other Jurisdiction of Incorporation or Organization)		(I.R.S. Employer Identification No.)

210 E. Earll Drive, Phoenix, Arizona		85012
(Address of Principal Executive Offices)		(Zip Code)

(602) 364-6000

(Registrant’s Telephone Number, Including Area Code)

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class		Trading Symbol(s)		Name of Each Exchange on Which Registered
Common Stock, par value $0.01		CABO		New York Stock Exchange

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☑ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☑ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☑	Accelerated filer	☐

Non-accelerated filer	☐	Smaller reporting company	☐

		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☑

Indicate the number of shares outstanding of each of the issuer’s classes of common stock as of the latest practicable date:

Description of Class	Shares Outstanding as of October 28, 2022
Common stock, par value $0.01	5,809,413

Table of Contents

CABLE ONE, INC.

FORM 10-Q

TABLE OF CONTENTS

PART I: FINANCIAL INFORMATION		1

Item 1.	Condensed Consolidated Financial Statements	1

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	24

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	37

Item 4.	Controls and Procedures	37

PART II: OTHER INFORMATION		38

Item 1.	Legal Proceedings	38

Item 1A.	Risk Factors	38

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	38

Item 3.	Defaults Upon Senior Securities	38

Item 4.	Mine Safety Disclosures	38

Item 5.	Other Information	38

Item 6.	Exhibits	39

SIGNATURES		40

References herein to “Cable One,” “us,” “our,” “we” or the “Company” refer to Cable One, Inc., together with its wholly owned subsidiaries.

Table of Contents

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This document contains “forward-looking statements” that involve risks and uncertainties. These statements can be identified by the fact that they do not relate strictly to historical or current facts, but rather are based on current expectations, estimates, assumptions and projections about our industry, business, strategy, acquisitions and strategic investments, dividend policy, financial results and financial condition. Forward-looking statements often include words such as “will,” “should,” “anticipates,” “estimates,” “expects,” “projects,” “intends,” “plans,” “believes” and words and terms of similar substance in connection with discussions of future operating or financial performance. As with any projection or forecast, forward-looking statements are inherently susceptible to uncertainty and changes in circumstances. Our actual results may vary materially from those expressed or implied in our forward-looking statements. Accordingly, undue reliance should not be placed on any forward-looking statement made by us or on our behalf. Important factors that could cause our actual results to differ materially from those in our forward-looking statements include government regulation, economic, strategic, political and social conditions and the following factors, which are discussed in our Annual Report on Form 10-K for the year ended December 31, 2021 (the “2021 Form 10-K”):

●

the duration and severity of the COVID-19 pandemic and its effects on our business, financial condition, results of operations and cash flows;

●

rising levels of competition from historical and new entrants in our markets;

●

recent and future changes in technology;

●

our ability to continue to grow our business services products;

●

increases in programming costs and retransmission fees;

●

our ability to obtain hardware, software and operational support from vendors;

●

risks that we may fail to realize the benefits anticipated as a result of our purchase of the remaining interests in Hargray Acquisition Holdings, LLC (“Hargray”) that we did not already own (the “Hargray Acquisition”);

●

risks relating to existing or future acquisitions and strategic investments by us;

●

risks that the implementation of our new enterprise resource planning system disrupts business operations;

●

the integrity and security of our network and information systems;

●

the impact of possible security breaches and other disruptions, including cyber-attacks;

●

our failure to obtain necessary intellectual and proprietary rights to operate our business and the risk of intellectual property claims and litigation against us;

●

legislative or regulatory efforts to impose network neutrality and other new requirements on our data services;

●

additional regulation of our video and voice services;

●

our ability to renew cable system franchises;

●

increases in pole attachment costs;

●

changes in local governmental franchising authority and broadcast carriage regulations;

●

the potential adverse effect of our level of indebtedness on our business, financial condition or results of operations and cash flows;

●

the restrictions the terms of our indebtedness place on our business and corporate actions;

	●	the possibility that interest rates will continue to rise, causing our obligations to service our variable rate indebtedness to increase significantly;
	●	the transition away from the London Interbank Offered Rate ("LIBOR") and the adoption of alternative reference rates;

●

risks associated with our convertible indebtedness;

●

our ability to continue to pay dividends;

●

provisions in our charter, by-laws and Delaware law that could discourage takeovers and limit the judicial forum for certain disputes;

	●	adverse economic conditions, labor shortages, supply chain disruptions and changes in rates of inflation;
	●	lower demand for our residential data and business services;

●

fluctuations in our stock price;

●

dilution from equity awards, convertible indebtedness and potential future convertible debt and stock issuances;

●

damage to our reputation or brand image;

●

our ability to retain key employees (whom we refer to as associates);

●

our ability to incur future indebtedness;

●

provisions in our charter that could limit the liabilities for directors; and

●

the other risks and uncertainties detailed from time to time in our filings with the Securities and Exchange Commission (the “SEC”), including but not limited to those described under "Risk Factors" in our 2021 Form 10-K.

Any forward-looking statements made by us in this document speak only as of the date on which they are made. We are under no obligation, and expressly disclaim any obligation, except as required by law, to update or alter our forward-looking statements, whether as a result of new information, subsequent events or otherwise.

Table of Contents

PART I: FINANCIAL INFORMATION

ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

CABLE ONE, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

(dollars in thousands, except par values)	*September 30, 2022*			*December 31, 2021*
Assets
Current Assets:
Cash and cash equivalents	$	255,719		$	388,802
Accounts receivable, net		61,468			56,253
Income taxes receivable		3,139			24,193
Prepaid and other current assets		61,249			31,705
Total Current Assets		381,575			500,953
Equity investments		1,185,936			727,565
Property, plant and equipment, net		1,659,769			1,854,104
Intangible assets, net		2,688,114			2,861,137
Goodwill		928,947			967,913
Other noncurrent assets		87,911			42,322
Total Assets	$	6,932,252		$	6,953,994

Liabilities and Stockholders' Equity
Current Liabilities:
Accounts payable and accrued liabilities	$	193,497		$	203,387
Deferred revenue		23,611			26,851
Current portion of long-term debt		51,659			38,837
Total Current Liabilities		268,767			269,075
Long-term debt		3,767,677			3,799,500
Deferred income taxes		933,653			854,156
Interest rate swap liability		-			81,627
Other noncurrent liabilities		65,023			156,541
Total Liabilities		5,035,120			5,160,899

Commitments and contingencies (refer to note 16)

Stockholders' Equity
Preferred stock ($0.01 par value; 4,000,000 shares authorized; none issued or outstanding)		-			-
Common stock ($0.01 par value; 40,000,000 shares authorized; 6,175,399 shares issued; and 5,827,960 and 6,046,362 shares outstanding as of September 30, 2022 and December 31, 2021, respectively)		62			62
Additional paid-in capital		572,656			555,640
Retained earnings		1,718,120			1,456,543
Accumulated other comprehensive income (loss)		54,506			(82,795	)
Treasury stock, at cost (347,439 and 129,037 shares held as of September 30, 2022 and December 31, 2021, respectively)		(448,212	)		(136,355	)
Total Stockholders' Equity		1,897,132			1,793,095
Total Liabilities and Stockholders' Equity	$	6,932,252		$	6,953,994

See accompanying notes to the condensed consolidated financial statements.

Table of Contents

CABLE ONE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

(Unaudited)

	*Three Months Ended*						*Nine Months Ended*
	*September 30,*						*September 30,*
(dollars in thousands, except per share data)	*2022*			*2021*			*2022*			*2021*
Revenues	$	424,718		$	430,237		$	1,280,528		$	1,173,248
Costs and Expenses:
Operating (excluding depreciation and amortization)		120,487			121,657			358,299			335,473
Selling, general and administrative		86,018			95,103			264,571			252,160
Depreciation and amortization		87,222			92,600			263,564			246,045
(Gain) loss on asset sales and disposals, net		2,952			3,376			7,615			4,314
(Gain) loss on sales of businesses, net		-			-			(13,833	)		-
Total Costs and Expenses		296,679			312,736			880,216			837,992
Income from operations		128,039			117,501			400,312			335,256
Interest expense		(36,389	)		(30,495	)		(98,549	)		(83,023	)
Other income (expense), net		834			(22,833	)		96,960			(2,584	)
Income before income taxes and equity method investment income (loss), net		92,484			64,173			398,723			249,649
Income tax provision		21,891			13,029			86,165			22,129
Income before equity method investment income (loss), net		70,593			51,144			312,558			227,520
Equity method investment income (loss), net		14			1,111			(1,230	)		(531	)
Net income	$	70,607		$	52,255		$	311,328		$	226,989

Net Income per Common Share:
Basic	$	12.10		$	8.68		$	52.47		$	37.73
Diluted	$	11.53		$	8.33		$	49.70		$	36.24
Weighted Average Common Shares Outstanding:
Basic		5,836,731			6,019,517			5,933,372			6,015,450
Diluted		6,261,257			6,460,875			6,357,955			6,362,736

Unrealized gain on cash flow hedges and other, net of tax	$	47,251		$	9,506		$	137,301		$	48,952
Comprehensive income	$	117,858		$	61,761		$	448,629		$	275,941

See accompanying notes to the condensed consolidated financial statements.

Table of Contents

CABLE ONE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(Unaudited)

						*Additional*					*Accumulated Other*		*Treasury*			*Total*
	*Common Stock*					*Paid-In*		*Retained*			*Comprehensive*		*Stock,*			*Stockholders’*
(dollars in thousands, except per share data)	*Shares*			*Amount*		*Capital*		*Earnings*			*Gain*		*at cost*			*Equity*
Balance at June 30, 2022		5,916,571		$	62	$	566,796	$	1,664,176		$	7,255	$	(332,785	)	$	1,905,504
Net income		-			-		-		70,607			-		-			70,607
Unrealized gain on cash flow hedges and other, net of tax		-			-		-		-			47,251		-			47,251
Equity-based compensation		-			-		5,860		-			-		-			5,860
Issuance of equity awards, net of forfeitures		469			-		-		-			-		-			-
Repurchases of common stock		(89,000	)		-		-		-			-		(115,322	)		(115,322	)
Withholding tax for equity awards		(80	)		-		-		-			-		(105	)		(105	)
Dividends paid to stockholders ($2.85 per common share)		-			-		-		(16,663	)		-		-			(16,663	)
Balance at September 30, 2022		5,827,960		$	62	$	572,656	$	1,718,120		$	54,506	$	(448,212	)	$	1,897,132

						*Additional*					*Accumulated Other*			*Treasury*			*Total*
	*Common Stock*					*Paid-In*		*Retained*			*Comprehensive*			*Stock,*			*Stockholders’*
(dollars in thousands, except per share data)	*Shares*			*Amount*		*Capital*		*Earnings*			*Loss*			*at cost*			*Equity*
Balance at June 30, 2021		6,036,582		$	62	$	544,992	$	1,372,724		$	(101,237	)	$	(135,696	)	$	1,680,845
Net income		-			-		-		52,255			-			-			52,255
Unrealized gain on cash flow hedges and other, net of tax		-			-		-		-			9,506			-			9,506
Equity-based compensation		-			-		5,428		-			-			-			5,428
Issuance of equity awards, net of forfeitures		8,443			-		-		-			-			-			-
Withholding tax for equity awards		(93	)		-		-		-			-			(177	)		(177	)
Dividends paid to stockholders ($2.75 per common share)		-			-		-		(16,633	)		-			-			(16,633	)
Balance at September 30, 2021		6,044,932		$	62	$	550,420	$	1,408,346		$	(91,731	)	$	(135,873	)	$	1,731,224

Table of Contents

						*Additional*					*Accumulated Other*			*Treasury*			*Total*
	*Common Stock*					*Paid-In*		*Retained*			*Comprehensive*			*Stock,*			*Stockholders’*
(dollars in thousands, except per share data)	*Shares*			*Amount*		*Capital*		*Earnings*			*Gain (Loss)*			*at cost*			*Equity*
Balance at December 31, 2021		6,046,362		$	62	$	555,640	$	1,456,543		$	(82,795	)	$	(136,355	)	$	1,793,095
Net income		-			-		-		311,328			-			-			311,328
Unrealized gain on cash flow hedges and other, net of tax		-			-		-		-			137,301			-			137,301
Equity-based compensation		-			-		17,016		-			-			-			17,016
Issuance of equity awards, net of forfeitures		17,025			-		-		-			-			-			-
Repurchases of common stock		(232,637	)		-		-		-			-			(307,031	)		(307,031	)
Withholding tax for equity awards		(2,790	)		-		-		-			-			(4,826	)		(4,826	)
Dividends paid to stockholders ($8.35 per common share)		-			-		-		(49,751	)		-			-			(49,751	)
Balance at September 30, 2022		5,827,960		$	62	$	572,656	$	1,718,120		$	54,506		$	(448,212	)	$	1,897,132

						*Additional*					*Accumulated Other*			*Treasury*			*Total*
	*Common Stock*					*Paid-In*		*Retained*			*Comprehensive*			*Stock,*			*Stockholders’*
(dollars in thousands, except per share data)	*Shares*			*Amount*		*Capital*		*Earnings*			*Loss*			*at cost*			*Equity*
Balance at December 31, 2020		6,027,704		$	62	$	535,586	$	1,228,172		$	(140,683	)	$	(127,838	)	$	1,495,299
Net income		-			-		-		226,989			-			-			226,989
Unrealized gain on cash flow hedges and other, net of tax		-			-		-		-			48,952			-			48,952
Equity-based compensation		-			-		14,834		-			-			-			14,834
Issuance of equity awards, net of forfeitures		20,878			-		-		-			-			-			-
Withholding tax for equity awards		(3,650	)		-		-		-			-			(8,035	)		(8,035	)
Dividends paid to stockholders ($7.75 per common share)		-			-		-		(46,815	)		-			-			(46,815	)
Balance at September 30, 2021		6,044,932		$	62	$	550,420	$	1,408,346		$	(91,731	)	$	(135,873	)	$	1,731,224

See accompanying notes to the condensed consolidated financial statements.

Table of Contents

CABLE ONE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

	*Nine Months Ended September 30,*
(in thousands)	*2022*			*2021*
Cash flows from operating activities:
Net income	$	311,328		$	226,989
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		263,564			246,045
Non-cash interest expense, net		7,124			6,730
Equity-based compensation		17,016			14,834
Write-off of debt issuance costs		-			2,131
Change in deferred income taxes		32,472			1,680
(Gain) loss on asset sales and disposals, net		7,615			4,314
(Gain) loss on sales of businesses		(13,833	)		-
Equity method investment (income) loss, net		1,230			531
Fair value adjustments		(88,020	)		41,390
Gain on step acquisition		-			(33,406	)
Changes in operating assets and liabilities:
Accounts receivable, net		(8,544	)		764
Income taxes receivable		21,054			21,019
Prepaid and other current assets		(14,848	)		(7,149	)
Accounts payable and accrued liabilities		25,107			4,216
Deferred revenue		(484	)		2,919
Other		9,012			(2,721	)
Net cash provided by operating activities		569,793			530,286

Cash flows from investing activities:
Purchase of business, net of cash acquired		-			(1,953,643	)
Cash paid for debt and equity investments		(25,075	)		-
Capital expenditures		(307,252	)		(282,024	)
Change in accrued expenses related to capital expenditures		3,985			12,666
Proceeds from sales of property, plant and equipment		3,609			282
Proceeds from sales of operations		9,227			-
Net cash used in investing activities		(315,506	)		(2,222,719	)

Cash flows from financing activities:
Proceeds from long-term debt borrowings		-			1,695,850
Payment of debt issuance costs		-			(13,741	)
Payments on long-term debt		(25,762	)		(21,683	)
Repurchases of common stock		(307,031	)		-
Payment of withholding tax for equity awards		(4,826	)		(8,035	)
Dividends paid to stockholders		(49,751	)		(46,815	)
Deposits received for asset construction		-			1,485
Net cash provided by (used in) financing activities		(387,370	)		1,607,061

Decrease in cash and cash equivalents		(133,083	)		(85,372	)
Cash and cash equivalents, beginning of period		388,802			574,909
Cash and cash equivalents, end of period	$	255,719		$	489,537

Supplemental cash flow disclosures:
Cash paid for interest, net of capitalized interest	$	83,602		$	69,450
Cash paid for income taxes, net of refunds received	$	18,497		$	(1,068	)

See accompanying notes to the condensed consolidated financial statements.

Table of Contents

CABLE ONE, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION

Description of Business. Cable One is a fully integrated provider of data, video and voice services to residential and business customers in 24 Western, Midwestern and Southern U.S. states. Cable One provided service to approximately 1.1 million residential and business customers, of which approximately 1,062,000 subscribed to data services, 202,000 subscribed to video services and 136,000 subscribed to voice services, as of September 30, 2022.

On October 1, 2020, the Company contributed its Anniston, Alabama system (the “Anniston System”) to Hargray in exchange for an approximately 15% equity interest in Hargray on a fully diluted basis. On May 3, 2021, the Company acquired the remaining approximately 85% equity interest in Hargray that it did not already own for an approximately $2.0 billion cash purchase price, which implied a $2.2 billion total enterprise value for Hargray on a cash-free and debt-free basis. The all-cash transaction was funded through a combination of cash on hand and proceeds from new indebtedness. Refer to note 2 for further details on this transaction.

On December 30, 2021, the Company acquired certain assets and assumed certain liabilities from Cable America Missouri, LLC, a data, video and voice services provider in central Missouri ("CableAmerica"), for $113.1 million in cash on a debt-free basis. The all-cash transaction was financed with cash on hand. Refer to note 2 for further details on this transaction.

On January 1, 2022, the Company closed a joint venture transaction in which the Company contributed certain fiber operations (including certain fiber assets of Hargray and a majority of the operations of Delta Communications, L.L.C. ("Clearwave")) (the "Clearwave Fiber Contribution") and certain unaffiliated third-party investors contributed cash to a newly formed entity, Clearwave Fiber LLC ("Clearwave Fiber"). The operations contributed by the Company generated approximately 3% of Cable One's consolidated revenues for the three months ended December 31, 2021. The Company's approximately 58% investment in Clearwave Fiber was valued at $440.0 million as of the closing date. Clearwave Fiber is intended to accelerate deployment of fiber internet to residents and businesses in existing markets and near-adjacent areas, as well as to provide connectivity to unserved and underserved areas in such markets via fiber-to-the-premises service. Clearwave Fiber is reported on Cable One’s balance sheet under the equity method of accounting, with the proportionate share of its net income (loss) each period reflected within Cable One's operating results on a one quarter lag. Refer to note 5 for further details on this transaction and on the Company’s other equity investments.

Basis of Presentation. The condensed consolidated financial statements and accompanying notes thereto have been prepared in accordance with: (i) generally accepted accounting principles in the United States (“GAAP”) for interim financial information; and (ii) the guidance of Rule 10-01 of Regulation S-X under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), for financial statements required to be filed with the SEC. As permitted under such guidance, certain notes and other financial information normally required by GAAP have been omitted. Management believes the condensed consolidated financial statements reflect all normal and recurring adjustments necessary for a fair statement of the Company’s financial position, results of operations and cash flows as of and for the periods presented herein. These condensed consolidated financial statements are unaudited and should be read in conjunction with the Company’s audited consolidated financial statements and the notes thereto included in the 2021 Form 10-K.

The December 31, 2021 year-end balance sheet data presented herein was derived from the Company’s audited consolidated financial statements included in the 2021 Form 10-K, but does not include all disclosures required by GAAP. The Company’s interim results of operations may not be indicative of its future results.

Principles of Consolidation. The accompanying condensed consolidated financial statements include the accounts of the Company, including its subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation.

Segment Reporting. Accounting Standards Codification ("ASC") 280 - Segment Reporting requires the disclosure of factors used to identify an entity’s reportable segments. Based on the Company’s chief operating decision maker’s review and assessment of the Company’s operating performance for purposes of performance monitoring and resource allocation, the Company determined that its operations, including the decisions to allocate resources and deploy capital, are organized and managed on a consolidated basis. Accordingly, management has identified one operating segment, which is its reportable segment, under this organizational and reporting structure.

Use of Estimates. The preparation of the condensed consolidated financial statements in conformity with GAAP requires management to make certain estimates and assumptions that affect the amounts reported herein. Management bases its estimates and assumptions on historical experience and on various other factors that are believed to be reasonable under the circumstances. Due to the inherent uncertainty involved in making estimates, actual results reported in future periods may be affected by changes in those estimates and underlying assumptions.

Table of Contents

Recently Adopted Accounting Pronouncements. In November 2021, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) No. 2021-10, Government Assistance (Topic 832): Disclosures by Business Entities about Government Assistance. ASU 2021-10 requires additional disclosure around the type of any government assistance received and its impact on the consolidated financial statements. The Company adopted the updated guidance in the first quarter of 2022. The adoption did not have a material impact on the Company's consolidated financial statements.

In October 2021, the FASB issued ASU 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers. ASU 2021-08 requires entities to apply existing revenue recognition guidance when recognizing and measuring contract assets acquired and contract liabilities assumed in a business combination. The Company adopted the updated guidance in the first quarter of 2022. The adoption did not have a material impact on the Company's consolidated financial statements.

Recently Issued But Not Yet Adopted Accounting Pronouncements. In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. ASU 2020-04 provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships and other transactions that reference LIBOR and other reference rates that are to be discontinued. The ASU may be adopted at any time through December 31, 2022. The Company currently holds certain debt and interest rate swaps that reference LIBOR. The Company plans to adopt ASU 2020-04 when the contracts underlying such instruments are amended as a result of reference rate reform. The Company is currently evaluating the expected impact of the adoption of this guidance on its consolidated financial statements.

2. ACQUISITIONS

The Company accounts for certain acquisitions as business combinations pursuant to ASC 805 - Business Combinations. In accordance with ASC 805, the Company uses its best estimates and assumptions to assign fair value to the tangible and identifiable intangible assets acquired and liabilities assumed at the acquisition date based on the information that is available as of the acquisition date. The Company believes that the information available provides a reasonable basis for estimating the fair values of assets acquired and liabilities assumed for each acquisition, however, preliminary measurements of fair value for each acquisition are subject to change during the measurement period, and such changes could be material. The Company expects to finalize the valuation after each acquisition as soon as practicable but no later than one year after the acquisition date.

Goodwill is calculated as the excess of the consideration transferred over the fair value of the identifiable net assets acquired in a business combination and represents the future economic benefits expected to arise from anticipated synergies and intangible assets that do not qualify for separate recognition, including an assembled workforce, noncontractual relationships and other agreements. As an indefinite-lived asset, goodwill is not amortized but rather is subject to impairment testing on at least an annual basis.

Acquisition costs incurred by the Company are not included as components of consideration transferred and instead are accounted for as expenses in the period in which the costs are incurred. The Company incurred $0.3 million and $0.8 million of acquisition costs during the three months ended September 30, 2022 and 2021, respectively, and $2.8 million and $10.0 million of acquisition costs during the nine months ended September 30, 2022 and 2021, respectively. These costs are included in selling, general and administrative expenses within the Company’s condensed consolidated statements of operations and comprehensive income.

The following acquisitions occurred during the periods presented:

CableAmerica. On December 30, 2021, the Company acquired certain assets and assumed certain liabilities of CableAmerica, a data, video and voice services provider in central Missouri, for a purchase price of $113.1 million on a cash-free and debt-free basis.

Acquired identifiable intangible assets associated with the CableAmerica acquisition consisted of the following (dollars in thousands):

			Useful Life
	Fair Value		(in years)
Customer relationships	$	15,400		14.0
Trademark and trade name	$	500		3.0
Franchise agreements	$	49,600	Indefinite

Customer relationships and franchise agreements were valued using the multi-period excess earnings method (“MPEEM”) of the income approach. Significant assumptions used in the valuations include projected revenue growth rates, customer attrition rates, future earnings before interest, taxes, depreciation and amortization (“EBITDA” and as adjusted, “Adjusted EBITDA”) margins, future capital expenditures and appropriate discount rates. No residual value was assigned to the acquired customer relationships, trademark and trade name or franchise agreements. The customer relationships are amortized on an accelerated basis commensurate with future anticipated cash flows. The trademark and trade name are amortized on a straight-line basis. The total weighted average amortization period for the acquired finite-lived intangible assets is 13.7 years.

The CableAmerica acquisition resulted in the recognition of $25.6 million of goodwill, which is deductible for tax purposes.

Table of Contents

Hargray. On May 3, 2021, the Company acquired the remaining approximately 85% equity interest in Hargray, a data, video and voice services provider, that it did not already own for an approximately $2.0 billion cash purchase price, which implied a $2.2 billion total enterprise value for Hargray on a cash-free and debt-free basis.

The following table summarizes the allocation of the Hargray purchase price consideration as of the acquisition date, reflecting immaterial measurement period adjustments (in thousands):

	*Initial Purchase Price Allocation*		*Measurement Period Adjustments*			*Purchase Price Allocation*
Assets Acquired
Cash and cash equivalents	$	17,652	$	-		$	17,652
Accounts receivable		17,991		(62	)		17,929
Income taxes receivable		-		720			720
Prepaid and other current assets		8,006		-			8,006
Property, plant and equipment		457,158		(525	)		456,633
Intangible assets		1,592,000		-			1,592,000
Other noncurrent assets		4,636		2,940			7,576
Total Assets Acquired		2,097,443		3,073			2,100,516

Liabilities Assumed
Accounts payable and accrued liabilities		36,457		1,770			38,227
Deferred revenue (short-term portion)		8,462		-			8,462
Current portion of long-term debt		1,375		(1,375	)		-
Long-term debt		2,912		(2,912	)		-
Deferred income taxes		437,725		3,652			441,377
Other noncurrent liabilities		6,974		2,912			9,886
Total Liabilities Assumed		493,905		4,047			497,952

Net assets acquired		1,603,538		(974	)		1,602,564
Purchase price consideration⁽¹⁾		2,117,866		(756	)		2,117,110
Goodwill recognized	$	514,328	$	218		$	514,546

⁽¹⁾

Consists of approximately $2.0 billion of cash for the additional approximately 85% equity interest in Hargray that the Company did not already own and the $146.6 million May 3, 2021 fair value of the Company’s existing approximately 15% equity investment in Hargray. The Company recognized a $33.4 million non-cash gain within other income in the condensed consolidated statement of operations and comprehensive income upon the acquisition, representing the difference between the existing equity investment’s fair value and $113.2 million carrying value. The fair value of the existing investment was calculated as approximately 15% of the fair value of Hargray’s total equity value (determined using the discounted cash flow method of the income approach, less debt), excluding the impact of any synergies or control premium that would be realized by a controlling interest.

Acquired identifiable intangible assets associated with the Hargray Acquisition consisted of the following (dollars in thousands):

			*Useful Life*
	*Fair Value*		*(in years)*
Customer relationships	$	472,000		13.7
Trademark and trade name	$	10,000		4.2
Franchise agreements	$	1,110,000	Indefinite

Customer relationships and franchise agreements were valued using the MPEEM of the income approach. Significant assumptions used in the valuations include projected revenue growth rates, customer attrition rates, future EBITDA margins, future capital expenditures and appropriate discount rates. No residual value was assigned to the acquired customer relationships, trademark and trade name or franchise agreements. The customer relationships are amortized on an accelerated basis commensurate with future anticipated cash flows. The trademark and trade name are amortized on a straight-line basis. The total weighted average amortization period for the acquired finite-lived intangible assets is 13.5 years.

The Hargray Acquisition resulted in the recognition of $514.5 million of goodwill, which is not deductible for tax purposes.

Table of Contents

3. REVENUES

Revenues by product line and other revenue-related disclosures were as follows (in thousands):

	*Three Months Ended*				*Nine Months Ended*
	*September 30,*				*September 30,*
	*2022*		*2021*		*2022*		*2021*
Residential:
Data	$	233,834	$	219,942	$	697,317	$	611,196
Video		80,525		89,507		249,944		252,764
Voice		10,494		12,645		33,105		35,235
Business services		75,847		85,728		228,999		222,706
Other		24,018		22,415		71,163		51,347
Total revenues	$	424,718	$	430,237	$	1,280,528	$	1,173,248

Franchise and other regulatory fees	$	7,796	$	8,683	$	23,852	$	22,945
Deferred commission amortization	$	1,282	$	1,318	$	3,799	$	4,051

Other revenues are comprised primarily of regulatory revenues, advertising sales, late charges and reconnect fees.

Fees imposed on the Company by various governmental authorities, including franchise fees, are passed through on a monthly basis to the Company’s customers and are periodically remitted to authorities. As the Company acts as principal, these fees are reported in video and voice revenues on a gross basis with corresponding expenses included within operating expenses in the condensed consolidated statements of operations and comprehensive income.

Deferred commission amortization expense is included within selling, general and administrative expenses in the condensed consolidated statements of operations and comprehensive income.

Current deferred revenue liabilities consist of refundable customer prepayments, up-front charges and installation fees. As of September 30, 2022, the Company’s remaining performance obligations pertain to the refundable customer prepayments and consist of providing future data, video and voice services to customers. Of the $26.9 million of current deferred revenue at December 31, 2021, $23.9 million was recognized during the nine months ended September 30, 2022. Noncurrent deferred revenue liabilities consist of up-front charges and installation fees from business customers.

4. OPERATING ASSETS AND LIABILITIES

Accounts receivable consisted of the following (in thousands):

	*September 30, 2022*			*December 31, 2021*
Trade receivables	$	47,553		$	41,947
Other receivables		17,148			16,847
Less: Allowance for credit losses		(3,233	)		(2,541	)
Total accounts receivable, net	$	61,468		$	56,253

The changes in the allowance for credit losses were as follows (in thousands):

	*Three Months Ended September 30,*						*Nine Months Ended September 30,*
	*2022*			*2021*				*2022*		2021⁽¹⁾
Beginning balance	$	3,255		$	2,843		$	2,541		$	1,252
Additions - charged to costs and expenses		2,979			2,190			6,774			4,812
Deductions - write-offs		(4,324	)		(3,580	)		(10,216	)		(7,931	)
Recoveries collected		1,323			1,340			4,134			4,660
Ending balance	$	3,233		$	2,793		$	3,233		$	2,793

⁽¹⁾	Additions include $1.4 million of additional reserves assumed in the Hargray Acquisition.

Table of Contents

Prepaid and other current assets consisted of the following (in thousands):

	*September 30, 2022*		*December 31, 2021*
Prepaid repairs and maintenance	$	5,321	$	4,788
Software implementation costs		1,349		1,199
Prepaid insurance		5,045		3,325
Prepaid rent		3,508		2,107
Prepaid software		7,540		6,982
Deferred commissions		4,444		4,295
Interest rate swap asset		18,994		-
Inventory		5,137		-
All other current assets		9,911		9,009
Total prepaid and other current assets	$	61,249	$	31,705

Other noncurrent assets consisted of the following (in thousands):

	*September 30, 2022*		*December 31, 2021*
Operating lease right-of-use assets	$	10,912	$	15,501
Deferred commissions		8,483		8,624
Software implementation costs		6,809		7,782
Debt issuance costs		2,073		2,576
Debt investment		2,072		-
Assets held for sale		1,032		3,819
Interest rate swap asset		54,305		-
All other noncurrent assets		2,225		4,020
Total other noncurrent assets	$	87,911	$	42,322

Accounts payable and accrued liabilities consisted of the following (in thousands):

	*September 30, 2022*		*December 31, 2021*
Accounts payable	$	39,684	$	35,716
Accrued programming costs		22,795		23,703
Accrued compensation and related benefits		31,680		34,731
Accrued sales and other operating taxes		15,826		12,872
Accrued franchise fees		4,039		4,397
Deposits		6,399		6,840
Operating lease liabilities		3,833		5,633
Interest rate swap liability		-		26,662
Accrued insurance costs		6,267		5,542
Cash overdrafts		17,207		11,517
Equity investment payable⁽¹⁾		3,087		13,387
Interest payable		11,001		5,172
Income taxes payable		14,177		-
All other accrued liabilities		17,502		17,215
Total accounts payable and accrued liabilities	$	193,497	$	203,387

⁽¹⁾	Consists of the unfunded portion of the Company’s equity investment in Wisper ISP, LLC (“Wisper”). The Company funded $10.3 million of the then outstanding investment payable to Wisper during the nine months ended September 30, 2022. Refer to note 5 for details on this investment.

Table of Contents

Other noncurrent liabilities consisted of the following (in thousands):

	*September 30, 2022*		*December 31, 2021*
Operating lease liabilities	$	6,352	$	9,098
Accrued compensation and related benefits		9,990		11,010
Deferred revenue		8,126		6,854
MBI Net Option (as defined in note 5)⁽¹⁾		35,520		123,620
All other noncurrent liabilities		5,035		5,959
Total other noncurrent liabilities	$	65,023	$	156,541

⁽¹⁾

Represents the net value of the Company’s call and put options associated with the remaining equity interests in MBI (as defined in note 5), consisting of an asset of $27.0 million and a liability of $62.5 million, respectively, as of September 30, 2022 and a liability of $17.8 million and a liability of $105.8 million, respectively, as of December 31, 2021. Refer to notes 5 and 10 for further information on the MBI Net Option (as defined in note 5).

5. EQUITY INVESTMENTS

On May 4, 2020, the Company made a minority equity investment for a less than 10% ownership interest in AMG Technology Investment Group, LLC, a wireless internet service provider (“Nextlink”), for $27.2 million. On July 10, 2020, the Company acquired a 40.4% minority equity interest in Wisper, a wireless internet service provider, for total consideration of $25.3 million. The Company has funded $22.2 million of the total consideration for Wisper. On October 1, 2020, the Company contributed the Anniston System to Hargray, a data, video and voice services provider, in exchange for an approximately 15% equity interest in Hargray on a fully diluted basis and recognized an $82.6 million non-cash gain. On November 12, 2020, the Company acquired a 45.0% minority equity interest in Mega Broadband Investments Holdings LLC, a data, video and voice services provider (“MBI”), for $574.9 million in cash.

On May 3, 2021, the Company acquired the remaining approximately 85% equity interest in Hargray that it did not already own for an approximately $2.0 billion cash purchase price, which implied a $2.2 billion total enterprise value for Hargray on a cash-free and debt-free basis, and recognized a $33.4 million non-cash gain as a result of the fair value remeasurement of the Company’s existing equity interest on the acquisition date. On October 1, 2021, the Company made a minority equity investment for a less than 10% ownership interest in Point Broadband Holdings, LLC, a fiber internet service provider ("Point Broadband"), for $25.0 million. On October 18, 2021, the Company completed a minority equity investment for a less than 10% ownership interest in Tristar Acquisition I Corp, a special-purpose acquisition company ("Tristar"), for $20.8 million. On November 5, 2021, the Company invested an additional $50.0 million to acquire preferred units in Nextlink, increasing its equity interest to approximately 17%.

On January 1, 2022, the Company closed a joint venture transaction in which the Company contributed certain fiber operations (including certain fiber assets of Hargray and a majority of the operations of Clearwave) and certain unaffiliated third-party investors contributed cash to a newly formed entity, Clearwave Fiber. The operations contributed by the Company generated approximately 3% of Cable One's consolidated revenues for the three months ended December 31, 2021. The Company's approximately 58% investment in Clearwave Fiber was valued at $440.0 million as of the closing date. The Company recognized a non-cash gain of $22.1 million associated with this transaction. On March 24, 2022, the Company invested an additional $5.4 million in Point Broadband, increasing its equity interest to approximately 7%. On April 1, 2022, the Company contributed its Tallahassee, Florida system to MetroNet Systems, LLC, a fiber internet service provider ("MetroNet"), in exchange for cash consideration of $7.0 million and an equity interest of less than 10% in MetroNet valued at $7.0 million. On June 1, 2022, the Company completed a minority equity investment for a less than 10% ownership interest in Visionary Communications, Inc., an internet service provider ("Visionary"), for $7.2 million. On September 6, 2022, the Company entered into a subscription agreement with Northwest Fiber Holdco, LLC, a fiber internet service provider ("Ziply"), under which the Company agreed to invest up to $50.0 million in Ziply for a less than 10% equity interest. The Company had not funded any of this commitment as of September 30, 2022.

Table of Contents

The carrying value of the Company’s equity investments without readily determinable fair values are determined based on fair valuations as of their respective acquisition dates. As Tristar is publicly traded, the carrying value of the Company's Tristar investment is remeasured to fair value on a quarterly basis using market information.

The carrying value of the Company's equity investments consisted of the following (dollars in thousands):

	*Ownership*	*September 30,*		*December 31,*
	*Percentage*	*2022*		*2021*
Cost Method Investments
MetroNet	<10%	$	7,000	$	-
Nextlink	<20%		77,245		77,245
Point Broadband	<10%		30,373		25,000
Tristar	<10%		23,003		23,083
Visionary	<10%		7,190		-
Others	<10%		13,288		13,170
Total cost method investments		$	158,099	$	138,498

Equity Method Investments
Clearwave Fiber	~58%	$	425,525	$	-
MBI⁽¹⁾	45.0%		569,033		557,715
Wisper	40.4%		33,279		31,352
Total equity method investments		$	1,027,837	$	589,067

Total equity investments		$	1,185,936	$	727,565

⁽¹⁾

The Company holds a call option to purchase all but not less than all of the remaining equity interests in MBI that the Company does not already own between January 1, 2023 and June 30, 2024. If the call option is not exercised, certain investors in MBI hold a put option to sell (and to cause all members of MBI other than the Company to sell) to the Company all but not less than all of the remaining equity interests in MBI that the Company does not already own between July 1, 2025 and September 30, 2025. The call and put options (collectively referred to as the “MBI Net Option”) are measured at fair value using Monte Carlo simulations that rely on assumptions around MBI’s equity value, MBI’s and the Company’s equity volatility, MBI’s and the Company’s EBITDA volatility, risk adjusted discount rates and the Company’s cost of debt, among others. The final MBI purchase price allocation resulted in $630.7 million being allocated to the MBI equity investment and $19.7 million and $75.5 million being allocated to the call and put options, respectively. The MBI Net Option is remeasured at fair value on a quarterly basis. The carrying value of the MBI Net Option liability was $35.5 million and $123.6 million as of September 30, 2022 and December 31, 2021, respectively, and was included within other noncurrent liabilities in the condensed consolidated balance sheets. Refer to note 10 for further information on the MBI Net Option.

The carrying value of MBI exceeded the Company’s underlying equity in MBI’s net assets by approximately $499.6 million and $508.3 million as of September 30, 2022 and December 31, 2021, respectively.

Table of Contents

Equity method investment income (losses), which increase (decrease) the carrying value of the respective investment, and which are recorded on a one quarter lag, and the change in fair value of the MBI Net Option were as follows (in thousands):

	*Three Months Ended September 30,*						*Nine Months Ended September 30,*
	*2022*			*2021*			*2022*			*2021*
Equity Method Investment Income (Loss)
Clearwave Fiber	$	(3,550	)	$	-		$	(14,475	)	$	-
MBI⁽¹⁾		3,243			(132	)		11,318			(3,753	)
Wisper		321			1,243			1,927			3,222
Total	$	14		$	1,111		$	(1,230	)	$	(531	)

Other Income (Expense), Net
MBI Net Option change in fair value	$	(2,800	)	$	(25,600	)	$	88,100		$	(41,390	)

⁽¹⁾

The Company identified a $186.6 million difference between the fair values of certain of MBI’s finite-lived intangible assets and the respective carrying values recorded by MBI, of which $84.0 million was attributable to the Company’s 45% pro rata portion. The Company is amortizing its share on an accelerated basis over the lives of the respective assets. For the three months ended September 30, 2022, the Company recognized $6.4 million of its pro rata share of MBI’s net income and $3.2 million of its pro rata share of basis difference amortization. For the three months ended September 30, 2021, the Company recognized $3.8 million of its pro rata share of MBI’s net income and $4.0 million of its pro rata share of basis difference amortization. For the nine months ended September 30, 2022, the Company recognized $21.7 million of its pro rata share of MBI’s net income and $10.3 million of its pro rata share of basis difference amortization. For the nine months ended September 30, 2021, the Company recognized $6.8 million of its pro rata share of MBI’s net income and $10.6 million of its pro rata share of basis difference amortization.

The Company assesses each equity investment for indicators of impairment on a quarterly basis. No impairments were recorded for any of the periods presented.

6. PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment consisted of the following (in thousands):

	*September 30, 2022*			*December 31, 2021*
Cable distribution systems	$	2,391,160		$	2,509,795
Customer premise equipment		334,663			320,937
Other equipment and fixtures		464,562			472,319
Buildings and improvements		136,926			142,754
Capitalized software		96,239			89,662
Construction in progress		212,395			172,706
Land		12,134			12,134
Right-of-use assets		11,310			11,241
Property, plant and equipment, gross		3,659,389			3,731,548
Less: Accumulated depreciation and amortization		(1,999,620	)		(1,877,444	)
Property, plant and equipment, net	$	1,659,769		$	1,854,104

The Company contributed $280.0 million of property, plant and equipment, net, to the Clearwave Fiber joint venture on January 1, 2022 and recognized a $22.1 million non-cash gain on the transaction. The Company divested $6.8 million of property, plant and equipment, net, in the dispositions of our Tallahassee, Florida system and certain other non-core assets during the three months ended June 30, 2022 and recognized an $8.3 million non-cash loss.

The Company classified $1.0 million of property, plant and equipment as held for sale as of September 30, 2022. Such assets are included within other noncurrent assets in the condensed consolidated balance sheet.

Depreciation and amortization expense for property, plant and equipment was $66.4 million and $69.3 million for the three months ended September 30, 2022 and 2021, respectively, and $201.2 million and $193.3 million for the nine months ended September 30, 2022 and 2021, respectively.

7. GOODWILL AND INTANGIBLE ASSETS

The carrying amount of goodwill was $928.9 million at September 30, 2022 and $967.9 million at December 31, 2021, with the decrease attributable to $39.9 million of goodwill divested in the Clearwave Fiber transaction on January 1, 2022 and $1.8 million of goodwill divested in other transactions during the three months ended June 30, 2022, partially offset by a $2.7 million increase in goodwill related to a measurement period adjustment associated with the Hargray Acquisition. The Company has not historically recorded any impairment of goodwill.

Table of Contents

Intangible assets consisted of the following (dollars in thousands):

		*September 30, 2022*						*December 31, 2021*
	*Useful Life*	*Gross*				*Net*		*Gross*				*Net*
	*Range*	*Carrying*		*Accumulated*		*Carrying*		*Carrying*		*Accumulated*		*Carrying*
	*(in years)*	*Amount*		*Amortization*		*Amount*		*Amount*		*Amortization*		*Amount*
Finite-Lived Intangible Assets
Customer relationships	13.5 – 17	$	784,381	$	204,450	$	579,931	$	857,100	$	153,699	$	703,401
Trademarks and trade names	2.7 – 4.2		11,846		6,177		5,669		13,500		3,852		9,648
Wireless licenses	10 – 15		1,418		250		1,168		1,418		142		1,276
Total finite-lived intangible assets		$	797,645	$	210,877	$	586,768	$	872,018	$	157,693	$	714,325

Indefinite-Lived Intangible Assets
Franchise agreements						$	2,100,546					$	2,139,312
Trade names							800						7,500
Total indefinite-lived intangible assets						$	2,101,346					$	2,146,812

Total intangible assets, net						$	2,688,114					$	2,861,137

The $173.0 million decrease in the net carrying amount of intangible assets from December 31, 2021 to September 30, 2022 included $59.7 million of customer relationships, $8.1 million of trademarks and trade names and $27.7 million of franchise agreements divested in the Clearwave Fiber transaction on January 1, 2022 and an additional $4.0 million of customer relationships, $0.2 million of trademarks and trade names and $11.0 million of franchise agreements divested in other transactions during the three months ended June 30, 2022.

Intangible asset amortization expense was $20.8 million and $23.3 million for the three months ended September 30, 2022 and 2021, respectively, and $62.4 million and $52.8 million for the nine months ended September 30, 2022 and 2021, respectively.

The future amortization of existing finite-lived intangible assets as of September 30, 2022 was as follows (in thousands):

Year Ending December 31,	*Amount*
2022 (remaining three months)	$	20,968
2023		72,618
2024		65,828
2025		60,840
2026		55,326
Thereafter		311,188
Total	$	586,768

Actual amortization expense in future periods may differ from the amounts above as a result of intangible asset acquisitions or divestitures, changes in useful life estimates, impairments or other relevant factors.

8. DEBT

The carrying amount of long-term debt consisted of the following (in thousands):

	*September 30, 2022*			*December 31, 2021*
Senior Credit Facilities (as defined below)	$	2,286,592		$	2,311,890
Senior Notes (as defined below)		650,000			650,000
Convertible Notes (as defined below)		920,000			920,000
Finance lease liabilities		5,226			5,621
Total debt		3,861,818			3,887,511
Less: Unamortized debt discount		(17,395	)		(20,602	)
Less: Unamortized debt issuance costs		(25,087	)		(28,572	)
Less: Current portion of long-term debt		(51,659	)		(38,837	)
Total long-term debt	$	3,767,677		$	3,799,500

Senior Credit Facilities. The Company has in place a credit agreement (the "Credit Agreement") that provides for senior secured term loans in original aggregate principal amounts of $700.0 million maturing in 2025 (the “Term Loan A-2”), $250.0 million maturing in 2027 (the “Term Loan B-2”), $625.0 million maturing in 2027 (the “Term Loan B-3”) and $800.0 million maturing in 2028 (the "Term Loan B-4"), as well as a $500.0 million revolving credit facility maturing in 2025 (the “Revolving Credit Facility” and, together with the Term Loan A-2, the Term Loan B-2, the Term Loan B-3 and the Term Loan B-4, the “Senior Credit Facilities”). The Revolving Credit Facility also gives the Company the ability to issue letters of credit, which reduce the amount available for borrowing under the Revolving Credit Facility.

Table of Contents

Refer to the table below summarizing the Company’s outstanding term loans as of September 30, 2022 and note 10 to the Company’s audited consolidated financial statements included in the 2021 Form 10-K for further details on the Senior Credit Facilities.

As of September 30, 2022, the Company had approximately $2.3 billion of aggregate outstanding term loans, $44.1 million of outstanding letters of credit and $455.9 million available for borrowing under the Revolving Credit Facility. A summary of the Company’s outstanding term loans as of September 30, 2022 is as follows (dollars in thousands):

Instrument	*Draw Date(s)*	*Original Principal*		Amortization Per Annum⁽¹⁾	*Outstanding Principal*		*Final Maturity Date*	*Final Scheduled Principal Payment*		*Benchmark Rate*	Applicable Margin⁽²⁾	*Interest Rate*
Term Loan A-2	5/8/2019⁽³⁾ 10/1/2019⁽³⁾	$	700,000	Varies⁽⁴⁾	$	646,823	10/30/2025	$	476,607	LIBOR	1.75%	4.87%
Term Loan B-2	1/7/2019		250,000	1.0%		241,250	10/30/2027		228,750	LIBOR	2.00%	5.12%
Term Loan B-3	6/14/2019⁽⁵⁾ 10/30/2020⁽⁵⁾		625,000	1.0%		608,519	10/30/2027		577,472	LIBOR	2.00%	5.12%
Term Loan B-4	5/3/2021		800,000	1.0%		790,000	5/3/2028		746,000	LIBOR	2.00%	5.12%
Total		$	2,375,000		$	2,286,592		$	2,028,829

⁽¹⁾	Payable in equal quarterly installments (expressed as a percentage of the original principal amount and subject to customary adjustments in the event of any prepayment). All loans may be prepaid at any time without penalty or premium (subject to customary LIBOR breakage provisions).
⁽²⁾	The Term Loan A-2 interest rate spread can vary between 1.25% and 1.75%, determined on a quarterly basis by reference to a pricing grid based on the Company’s Total Net Leverage Ratio (as defined in the Credit Agreement). All other applicable margins are fixed.
⁽³⁾	On May 8, 2019, $250.0 million was drawn. On October 1, 2019, an additional $450.0 million was drawn. On October 30, 2020, the amortization schedule was reset.
⁽⁴⁾	Per annum amortization rates for years one through five following October 30, 2020 are 2.5%, 2.5%, 5.0%, 7.5% and 12.5%, respectively.
⁽⁵⁾	On June 14, 2019, $325.0 million was drawn. On October 30, 2020, an additional $300.0 million was drawn.

Senior Notes. In November 2020, the Company issued $650.0 million aggregate principal amount of 4.00% senior notes due 2030 (the “Senior Notes”). The Senior Notes bear interest at a rate of 4.00% per annum payable semi-annually in arrears on May 15th and November 15th of each year. The terms of the Senior Notes are governed by an indenture dated as of November 9, 2020 (the “Senior Notes Indenture”), among the Company, the guarantors party thereto and The Bank of New York Mellon Trust Company, N.A. (“BNY”), as trustee.

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

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

Convertible Notes. In March 2021, the Company issued $575.0 million aggregate principal amount of 0.000% convertible senior notes due 2026 (the “2026 Notes”) and $345.0 million aggregate principal amount of 1.125% convertible senior notes due 2028 (the “2028 Notes” and, together with the 2026 Notes, the “Convertible Notes,” and the Convertible Notes collectively with the Senior Notes, the “Notes”). The terms of the 2026 Notes and the 2028 Notes are each governed by a separate indenture dated as of March 5, 2021 (collectively, the “Convertible Notes Indentures” and together with the Senior Notes Indenture, the “Indentures”), in each case, among the Company, the guarantors party thereto and BNY, as trustee.

The 2026 Notes do not bear regular interest, and the principal amount of the 2026 Notes does not accrete. The 2028 Notes bear interest at a rate of 1.125% per annum. Interest on the 2028 Notes is payable semiannually in arrears on March 15th and September 15th of each year, unless earlier repurchased, converted or redeemed. The 2026 Notes are scheduled to mature on March 15, 2026, and the 2028 Notes are scheduled to mature on March 15, 2028. The initial conversion rate for each of the 2026 Notes and the 2028 Notes is 0.4394 shares of the Company’s common stock per $1,000 principal amount of 2026 Notes and 2028 Notes, as applicable (equivalent to an initial conversion price of $2,275.83 per share of common stock).

Table of Contents

The Convertible Notes are convertible at the option of the holders. The method of conversion into cash, shares of the Company’s common stock or a combination thereof is at the election of the Company. Prior to the close of business on the business day immediately preceding December 15, 2025, the 2026 Notes will be convertible at the option of the holders only upon the satisfaction of specified conditions and during certain periods. On or after December 15, 2025, holders may convert their 2026 Notes at any time prior to the close of business on the second scheduled trading day immediately preceding the relevant maturity date. Prior to the close of business on the business day immediately preceding December 15, 2027, the 2028 Notes will be convertible at the option of the holders only upon the satisfaction of specified conditions and during certain periods. On or after December 15, 2027, holders may convert their 2028 Notes at any time prior to the close of business on the second scheduled trading day immediately preceding the relevant maturity date. If the Company undergoes a “fundamental change” (as defined in the applicable Convertible Notes Indenture), holders of the applicable series of Convertible Notes may require the Company to repurchase for cash all or part of their Convertible Notes of such series at a purchase price equal to 100% of the principal amount of the Convertible Notes of such series to be repurchased, plus accrued and unpaid interest to, but not including, the fundamental change repurchase date.

The Company may not redeem the 2026 Notes prior to March 20, 2024 and it may not redeem the 2028 Notes prior to March 20, 2025. No “sinking fund” is provided for the Convertible Notes. On or after March 20, 2024 and prior to December 15, 2025, the Company may redeem for cash all or any portion of the 2026 Notes, at its option, and on or after March 20, 2025 and prior to December 15, 2027, the Company may redeem for cash all or any portion of the 2028 Notes, at its option, in each case, if the last reported sale price per share of common stock has been at least 130% of the conversion price for such series of Convertible Notes then in effect for at least 20 trading days (whether or not consecutive), including the trading day immediately preceding the date on which the Company provides notice of redemption, during any 30 consecutive trading day period ending on, and including, the trading day immediately preceding the date on which the Company provides notice of redemption at a redemption price equal to 100% of the principal amount of the Convertible Notes of such series to be redeemed, plus accrued and unpaid interest to, but not including, the redemption date.

In addition, following a “make-whole fundamental change” (as defined in the applicable Convertible Notes Indenture) or if the Company delivers a notice of redemption in respect of any Convertible Notes of a series, in certain circumstances, the conversion rate applicable to such series of Convertible Notes will be increased for a holder who elects to convert any of such Convertible Notes in connection with such a make-whole fundamental change or convert any of such Convertible Notes called (or deemed called) for redemption during the related redemption period, as the case may be.

The carrying amounts of the Convertible Notes consisted of the following (in thousands):

	*September 30, 2022*									*December 31, 2021*
	*2026 Notes*			*2028 Notes*			*Total*			*2026 Notes*			*2028 Notes*			*Total*
Gross carrying amount	$	575,000		$	345,000		$	920,000		$	575,000		$	345,000		$	920,000
Less: Unamortized discount		(10,367	)		(7,028	)		(17,395	)		(12,611	)		(7,991	)		(20,602	)
Less: Unamortized debt issuance costs		(283	)		(198	)		(481	)		(344	)		(226	)		(570	)
Net carrying amount	$	564,350		$	337,774		$	902,124		$	562,045		$	336,783		$	898,828

Interest expense on the Convertible Notes consisted of the following (dollars in thousands):

	*Three Months Ended September 30,*																*Nine Months Ended September 30,*
	*2022*								*2021*								*2022*								*2021*
	*2026 Notes*			*2028 Notes*			*Total*		*2026 Notes*			*2028 Notes*			*Total*		*2026 Notes*			*2028 Notes*			*Total*		*2026 Notes*			*2028 Notes*			*Total*
Contractual interest expense	$	-		$	970		$	970	$	-		$	970		$	970	$	-		$	2,911		$	2,911	$	-		$	2,232		$	2,232
Amortization of discount		756			325			1,081		756			325			1,081		2,244			963			3,207		1,726			741			2,467
Amortization of debt issuance costs		21			9			30		21			9			30		61			28			89		47			21			68
Total interest expense	$	777		$	1,304		$	2,081	$	777		$	1,304		$	2,081	$	2,305		$	3,902		$	6,207	$	1,773		$	2,994		$	4,767

Effective interest rate		0.5	%		1.5	%				0.5	%		1.5	%				0.5	%		1.5	%				0.5	%		1.5	%

General. The Notes are senior unsecured obligations of the Company and are guaranteed by the Company’s wholly owned domestic subsidiaries that guarantee the Senior Credit Facilities or that guarantee certain capital market debt of the Company in an aggregate principal amount in excess of $250.0 million.

Table of Contents

Each Indenture contains covenants that, among other things and subject to certain exceptions, limit (i) the Company’s ability to consolidate or merge with or into another person or sell or otherwise dispose of all or substantially all of the assets of the Company and its subsidiaries (taken as a whole) and (ii) the ability of the guarantors to consolidate with or merge with or into another person. The Senior Notes Indenture also contains a covenant that, subject to certain exceptions, limits the Company’s ability and the ability of its subsidiaries to incur any liens securing indebtedness for borrowed money.

Each Indenture provides for customary events of default which include (subject in certain cases to customary grace and cure periods), among others, default in payment of principal or interest, breach of other agreements or covenants in respect of the relevant Notes by the Company or any guarantors, failure to pay certain other indebtedness at final maturity, acceleration of certain indebtedness prior to final maturity, failure to pay certain final judgments, failure of certain guarantees to be enforceable and certain events of bankruptcy, insolvency or reorganization; and, in the case of each Convertible Notes Indenture, failure to comply with the Company’s obligation to convert the relevant Convertible Notes under the applicable Convertible Notes Indenture and failure to give a fundamental change notice or a notice of a make-whole fundamental change under the applicable Convertible Notes Indenture.

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

	*September 30, 2022*		*December 31, 2021*
Revolving Credit Facility portion:
Other noncurrent assets	$	2,073	$	2,576
Term loans and Notes portion:
Long-term debt (contra account)		25,087		28,572
Total	$	27,160	$	31,148

The Company recorded debt issuance cost amortization of $1.3 million and $1.4 million for the three months ended September 30, 2022 and 2021, respectively, and $4.0 million and $4.3 million for the nine months ended September 30, 2022 and 2021, respectively, within interest expense in the condensed consolidated statements of operations and comprehensive income.

The future maturities of outstanding borrowings as of September 30, 2022 were as follows (in thousands):

Year Ending December 31,	*Amount*
2022 (remaining three months)	$	12,688
2023		55,008
2024		76,285
2025		557,147
2026		591,709
Thereafter		2,563,755
Total	$	3,856,592

The Company has issued letters of credit totaling $44.1 million on behalf of Wisper to guarantee its performance obligations under a Federal Communications Commission (“FCC”) broadband funding program, as of September 30, 2022. The fair value of the letters of credit approximates face value based on the short-term nature of the agreements. The Company would be liable for up to the total amount outstanding under the letters of credit if Wisper were to fail to satisfy all or some of its performance obligations under the FCC program. Wisper has guaranteed and indemnified the Company in connection with such letters of credit. As of September 30, 2022, the Company has assessed the likelihood of non-performance associated with the guarantee to be remote, and therefore, no liability has been accrued within the condensed consolidated balance sheets. Total letter of credit issuances under the Revolving Credit Facility were $44.1 million at September 30, 2022 and accrued fees at a rate of approximately 1.88% per annum.

On May 3, 2022, the Company entered into a letter of credit agreement with MUFG Bank, Ltd. ("MUFG") which provides for an additional $75.0 million letter of credit issuing capacity, of which $62.9 million was utilized as of September 30, 2022.

The Company was in compliance with all debt covenants as of September 30, 2022.

9. INTEREST RATE SWAPS

The Company is party to two interest rate swap agreements, designated as cash flow hedges, to manage the risk of fluctuations in interest rates on its variable rate LIBOR debt. Changes in the fair values of the interest rate swaps are reported through other comprehensive income until the underlying hedged debt’s interest expense impacts net income, at which point the corresponding change in fair value is reclassified from accumulated other comprehensive income to interest expense.

Table of Contents

A summary of the significant terms of the Company’s interest rate swap agreements is as follows (dollars in thousands):

Entry

Effective

Maturity

Notional

Settlement

Fixed

Date

Date⁽¹⁾

Amount

Type

Frequency

Base Rate

Swap A

3/7/2019

3/11/2019

3/11/2029

850,000

Receive one-month LIBOR, pay fixed

Monthly

2.653%

Swap B

3/6/2019

6/15/2020

2/28/2029

350,000

Receive one-month LIBOR, pay fixed

Monthly

2.739%

Total

1,200,000

⁽¹⁾	Each swap may be terminated prior to the scheduled maturity at the election of the Company or the financial institution counterparty under the terms provided in each swap agreement.

The combined fair values of the Company’s interest rate swaps are reflected within the condensed consolidated balance sheets as follows (in thousands):

	*September 30, 2022*		*December 31, 2021*
Assets:
Current portion:
Prepaid and other current assets	$	18,994	$	-
Noncurrent portion:
Other noncurrent assets	$	54,305	$	-

Liabilities:
Current portion:
Accounts payable and accrued liabilities	$	-	$	26,662
Noncurrent portion:
Interest rate swap liability	$	-	$	81,627

Net Asset (Liability)	$	73,299	$	(108,289	)

Stockholders’ Equity:
Accumulated other comprehensive income (loss)	$	55,388	$	(81,873	)

The combined effect of the Company’s interest rate swaps on the condensed consolidated statements of operations and comprehensive income was as follows (in thousands):

	*Three Months Ended September 30,*						*Nine Months Ended September 30,*
	*2022*			*2021*			*2022*			*2021*
Interest expense	$	1,463		$	7,920		$	14,873		$	23,371

Unrealized gain (loss) on cash flow hedges, gross	$	62,517		$	12,867		$	181,588		$	65,436
Less: Tax effect		(15,269	)		(3,364	)		(44,327	)		(16,494	)
Unrealized gain (loss) on cash flow hedges, net of tax	$	47,248		$	9,503		$	137,261		$	48,942

The Company does not hold any derivative instruments for speculative trading purposes.

10. FAIR VALUE MEASUREMENTS

Financial Assets and Liabilities. The Company has estimated the fair values of its financial instruments as of September 30, 2022 using available market information or other appropriate valuation methodologies. Considerable judgment is required in interpreting market data to develop the estimates of fair value. Accordingly, the following fair value estimates are not necessarily indicative of the amounts the Company would realize in an actual market exchange.

Table of Contents

The carrying amounts, fair values and related fair value hierarchy levels of the Company’s financial assets and liabilities as of September 30, 2022 were as follows (in thousands):

	*September 30, 2022*
	*Carrying*		*Fair*		*Fair Value*
	*Amount*		*Value*		*Hierarchy*
Assets:
Cash and cash equivalents:
Money market investments	$	107,718	$	107,718	Level 1
Commercial paper	$	99,495	$	99,346	Level 2
Other noncurrent assets (including current portion):
Interest rate swap asset	$	73,299	$	73,299	Level 2

Liabilities:
Long-term debt (including current portion):
Term loans	$	2,286,592	$	2,252,293	Level 2
Senior Notes	$	650,000	$	503,750	Level 2
Convertible Notes	$	920,000	$	688,804	Level 2
Other noncurrent liabilities:
MBI Net Option	$	35,520	$	35,520	Level 3

Money market investments are held primarily in U.S. Treasury securities and registered money market funds and are valued using a market approach based on quoted market prices (level 1). Commercial paper is primarily held with high-quality companies and is valued using quoted market prices for investments similar to the commercial paper (level 2). Money market investments and commercial paper with original maturities of three months or less are included within cash and cash equivalents in the condensed consolidated balance sheets. Interest rate swaps are measured at fair value within the condensed consolidated balance sheets on a recurring basis, with fair value determined using standard valuation models with assumptions about interest rates being based on those observed in underlying markets (level 2). The fair value of the term loans, Senior Notes and Convertible Notes are estimated based on market prices for similar instruments in active markets (level 2). The fair value of the MBI Net Option is measured using Monte Carlo simulations that use inputs considered unobservable and significant to the fair value measurement (level 3).

The assumptions used to determine the fair value of the MBI Net Option consisted of the following:

	*September 30, 2022*						*December 31, 2021*
	*Cable One*			*MBI*			*Cable One*			*MBI*
Equity volatility		37.0	%		31.0	%		30.0	%		30.0	%
EBITDA volatility		10.0	%		10.0	%		10.0	%		10.0	%
EBITDA risk-adjusted discount rate		8.5	%		10.0	%		5.0	%		6.5	%
Cost of debt		7.5	%					4.0	%

The Company regularly evaluates each of the assumptions used in establishing the fair value of the MBI Net Option. Significant changes in any of these assumptions could result in a significantly lower or higher fair value measurement. A change in one of these assumptions is not necessarily accompanied by a change in another assumption. Refer to note 5 for further information on the MBI Net Option.

The carrying amounts of accounts receivable, accounts payable and other financial assets and liabilities approximate fair value because of the short-term nature of these instruments.

Nonfinancial Assets and Liabilities. The Company’s nonfinancial assets, such as property, plant and equipment, intangible assets and goodwill, are not measured at fair value on a recurring basis. Assets acquired, including identifiable intangible assets and goodwill, and liabilities assumed in acquisitions are recorded at fair value on the respective acquisition dates, subject to potential future measurement period adjustments. Nonfinancial assets are subject to fair value adjustments when there is evidence that impairment may exist. No material impairments were recorded during the nine months ended September 30, 2022 or 2021.

Table of Contents

11. STOCKHOLDERS’ EQUITY

Treasury Stock. Treasury stock is recorded at cost and is presented as a reduction of stockholders’ equity in the condensed consolidated financial statements. Treasury shares of 347,439 held at September 30, 2022 include shares repurchased under the Company’s share repurchase programs and shares withheld for withholding tax, as described below.

Share Repurchase Programs. On July 1, 2015, the Company’s board of directors (the “Board”) authorized up to $250.0 million of share repurchases (subject to a total cap of 600,000 shares of common stock) (the "2015 Program"). On May 20, 2022, the Company's Board authorized up to $450.0 million of additional share repurchases (with no cap as to the number of shares of common stock) (the "2022 Program" and, together with the 2015 Program, the "Share Repurchase Programs"). The Company exhausted the share repurchase authorization under the 2015 Program during the second quarter of 2022 and had $288.1 million of remaining share repurchase authorization under the 2022 Program as of September 30, 2022. Additional purchases under the 2022 Program may be made from time to time on the open market and in privately negotiated transactions. The size and timing of these purchases are based on a number of factors, including share price and business and market conditions. Since the inception of the Share Repurchase Programs through September 30, 2022, the Company had repurchased 443,268 shares of its common stock at an aggregate cost of $411.9 million, including 232,637 shares purchased at an aggregate cost of $307.0 million during the nine months ended September 30, 2022.

Tax Withholding for Equity Awards. At the employee’s option, shares of common stock are withheld by the Company upon the vesting of restricted stock and exercise of stock appreciation rights (“SARs”) to cover the applicable statutory minimum amount of employee withholding taxes, which the Company then pays to the taxing authorities in cash. The amounts remitted during the nine months ended September 30, 2022 and 2021 were $4.8 million and $8.0 million, for which the Company withheld 2,790 and 3,650 shares of common stock, respectively.

12. EQUITY-BASED COMPENSATION

At the Company’s 2022 annual meeting of stockholders held on May 20, 2022, the Company’s stockholders approved the Cable One, Inc. 2022 Omnibus Incentive Compensation Plan (the “2022 Plan”), which had been previously approved, subject to stockholder approval, by the Board on March 28, 2022. The 2022 Plan superseded and replaced the then existing Amended and Restated Cable One, Inc. 2015 Omnibus Incentive Compensation Plan (the “2015 Plan” and, together with the 2022 Plan, the "Incentive Compensation Plans"), provided, however, that any awards previously granted under the 2015 Plan will remain in effect pursuant to their respective terms. No further awards will be granted under the 2015 Plan. The 2015 Plan provided for, and the 2022 Plan provides for, grants of incentive stock options, non-qualified stock options, restricted stock awards, SARs, restricted stock units (“RSUs”), cash-based awards, performance-based awards, dividend equivalent units (“DEUs” and, together with restricted stock awards and RSUs, “Restricted Stock”) and other stock-based awards, including performance stock units and deferred stock units. Directors, officers, employees and consultants of the Company are eligible for grants under the Incentive Compensation Plans as part of the Company’s long-term incentive compensation programs. At September 30, 2022, 471,018 shares were available for issuance under the 2022 Plan.

Compensation expense associated with equity-based awards is recognized on a straight-line basis over the requisite service period, which is generally the vesting period of the award, with forfeitures recognized as incurred. The Company’s equity-based compensation expense, included within selling, general and administrative expenses in the condensed consolidated statements of operations and comprehensive income, was as follows (in thousands):

	*Three Months Ended September 30,*				*Nine Months Ended September 30,*
	*2022*		*2021*		*2022*		*2021*
Restricted Stock	$	5,250	$	4,656	$	15,072	$	12,629
SARs		610		772		1,944		2,205
Total	$	5,860	$	5,428	$	17,016	$	14,834

The Company recognized excess tax benefits of $0.1 million and $3.5 million during the three months ended September 30, 2022 and 2021, respectively, and $0.7 million and $7.9 million during the nine months ended September 30, 2022 and 2021, respectively. The deferred tax asset related to all outstanding equity-based awards was $5.6 million as of September 30, 2022.

Table of Contents

Restricted Stock. A summary of Restricted Stock activity during the nine months ended September 30, 2022 is as follows:

				*Weighted*
				*Average Grant*
	*Restricted*			*Date Fair Value*
	*Stock*			*Per Share*
Outstanding as of December 31, 2021		34,026		$	1,487.02
Granted		18,860		$	1,689.00
Forfeited		(1,493	)	$	1,874.00
Vested and issued		(7,707	)	$	1,196.92
Outstanding as of September 30, 2022		43,686		$	1,612.17

Vested and deferred as of September 30, 2022		6,930		$	889.11

At September 30, 2022, there was $30.9 million of unrecognized compensation expense related to Restricted Stock, which is expected to be recognized over a weighted average period of 1.3 years.

Stock Appreciation Rights. A summary of SARs activity during the nine months ended September 30, 2022 is as follows:

										*Weighted*
						*Weighted*				*Average*
				*Weighted*		*Average*		*Aggregate*		*Remaining*
	*Stock*			*Average*		*Grant*		*Intrinsic*		*Contractual*
	*Appreciation*			*Exercise*		*Date Fair*		*Value*		*Term*
	*Rights*			*Price*		*Value*		*(in thousands)*		*(in years)*
Outstanding as of December 31, 2021		45,740		$	1,075.34	$	263.62	$	32,897		7.1
Granted		-		$	-	$	-	$	-		-
Exercised		(2,500	)	$	707.16	$	164.67	$	1,504		-
Forfeited		(1,750	)	$	1,492.73	$	375.76
Expired		(375	)	$	1,851.23	$	469.52
Outstanding as of September 30, 2022		41,115		$	1,072.88	$	262.99	$	3,087		6.3

Exercisable as of September 30, 2022		26,990		$	856.22	$	204.49	$	2,958		5.7

At September 30, 2022, there was $3.6 million of unrecognized compensation expense related to SARs, which is expected to be recognized over a weighted average period of 0.9 years.

13. INCOME TAXES

The Company’s effective tax rate was 23.7% and 20.3% for the three months ended September 30, 2022 and 2021, respectively, and 21.6% and 8.9% for the nine months ended September 30, 2022 and 2021, respectively.

The increase in the effective tax rate for the three months ended September 30, 2022 compared to the prior year quarter was due primarily to a $4.8 million decrease in state tax benefits related to state tax credits recognized and a $3.4 million decrease in income tax benefit attributable to equity-based compensation awards, partially offset by a $6.2 million valuation allowance increase associated with the MBI Net Option in the prior year quarter that did not recur.

The increase in the effective tax rate for the nine months ended September 30, 2022 compared to the prior year period was due primarily to a $35.4 million income tax benefit from the reversal of a pre-existing deferred tax liability on the Hargray investment in the prior year that did not recur, partially offset by a $16.6 million tax benefit from the release of the valuation allowance associated with the MBI Net Option in the quarter ended March 31, 2022.

Table of Contents

14. OTHER INCOME AND EXPENSE

Other income (expense) consisted of the following (in thousands):

	*Three Months Ended September 30,*						*Nine Months Ended September 30,*
	*2022*			*2021*			*2022*			*2021*
MBI Net Option fair value adjustment	$	(2,800	)	$	(25,600	)	$	88,100		$	(41,390	)
Write-off of debt issuance costs		-			-			-			(2,131	)
Interest and investment income		3,358			2,818			9,843			8,435
Gain on step acquisition		-			-			-			33,406
Mark-to-market adjustments and other		276			(51	)		(983	)		(904	)
Other income (expense), net	$	834		$	(22,833	)	$	96,960		$	(2,584	)

15. NET INCOME PER COMMON SHARE

Basic net income per common share is computed by dividing net income by the weighted average number of common shares outstanding during the period. The denominator used in calculating diluted net income per common share further includes any common shares available to be issued upon vesting or exercise of outstanding equity-based compensation awards if such inclusion would be dilutive, calculated using the treasury stock method, and any common shares to be issued upon conversion of the Convertible Notes, calculated using the if-converted method.

The computation of basic and diluted net income per common share was as follows (dollars in thousands, except per share amounts):

	*Three Months Ended September 30,*				*Nine Months Ended September 30,*
	*2022*		*2021*		*2022*		*2021*
Numerator:
Net income - basic	$	70,607	$	52,255	$	311,328	$	226,989
Add: Convertible Notes interest expense, net of tax		1,561		1,561		4,655		3,575
Net income - diluted	$	72,168	$	53,816	$	315,983	$	230,564

Denominator:
Weighted average common shares outstanding - basic		5,836,731		6,019,517		5,933,372		6,015,450
Effect of dilutive equity-based compensation awards⁽¹⁾		20,278		37,110		20,335		38,257
Effect of dilution from if-converted Convertible Notes⁽²⁾		404,248		404,248		404,248		309,029
Weighted average common shares outstanding - diluted		6,261,257		6,460,875		6,357,955		6,362,736

Net Income per Common Share:
Basic	$	12.10	$	8.68	$	52.47	$	37.73
Diluted	$	11.53	$	8.33	$	49.70	$	36.24

Supplemental Net Income per Common Share Disclosure:
Anti-dilutive shares from equity-based compensation awards⁽¹⁾		13,068		3,119		13,068		3,119

⁽¹⁾	Equity-based compensation awards whose impact is considered to be anti-dilutive under the treasury stock method were excluded from the diluted net income per common share calculation.
⁽²⁾	Based on a conversion rate of 0.4394 shares of common stock per weighted $1,000 principal amount of Convertible Notes outstanding during all periods presented.

Table of Contents

16. COMMITMENTS AND CONTINGENCIES

Contractual Obligations. The Company has obligations to make future payments for goods and services under certain contractual arrangements. These contractual obligations secure the future rights to various goods and services to be used in the normal course of the Company’s operations. In accordance with applicable accounting rules, the future rights and obligations pertaining to firm commitments, such as certain purchase obligations under contracts, are not reflected as assets or liabilities in the condensed consolidated balance sheets. As of September 30, 2022, there have been no material changes to the contractual obligations previously disclosed in the 2021 Form 10-K.

In addition, the Company incurs recurring utility pole rental costs and fees imposed by various governmental authorities, including franchise fees, as part of its operations. However, these costs are not included in the Company’s contractual obligations as they are cancellable on short notice, in the case of pole rental costs, or are passed through on a monthly basis to the Company’s customers and are periodically remitted to authorities, in the case of fees imposed by governmental authorities. The Company also has franchise agreements requiring plant construction and the provision of services to customers within the franchise areas. In connection with these obligations under existing franchise agreements, the Company obtains surety bonds or letters of credit guaranteeing performance to municipalities and public utilities and payment of insurance premiums. Payments under these arrangements are required only in the remote event of nonperformance. The Company issued letters of credit totaling $44.1 million on behalf of Wisper to guarantee its performance obligations under an FCC broadband funding program. As of September 30, 2022, the Company has assessed the likelihood of non-performance associated with the guarantee to be remote, and therefore, no liability has been accrued within the condensed consolidated balance sheet. Refer to note 8 for further details on this transaction.

Litigation and Legal Matters. The Company is subject to complaints and administrative proceedings and has been a defendant in various civil lawsuits that have arisen in the ordinary course of its business. Such matters include contract disputes; actions alleging negligence, invasion of privacy, trademark, copyright and patent infringement, and violations of applicable wage and hour laws; statutory or common law claims involving current and former employees; and other matters. Although the outcomes of any legal claims and proceedings against the Company cannot be predicted with certainty, based on currently available information, the Company believes that there are no existing claims or proceedings that are likely to have a material adverse effect on its business, financial condition, results of operations or cash flows.

Regulation in the Company’s Industry. The Company’s operations are extensively regulated by the FCC, some state governments and most local governments. The FCC has the authority to enforce its regulations through the imposition of substantial fines, the issuance of cease-and-desist orders and/or the imposition of other administrative sanctions, such as the revocation of FCC licenses needed to operate certain transmission facilities used in connection with cable operations. Future legislative and regulatory changes could adversely affect the Company’s operations.

Equity Investments. The Company has certain obligations with respect to certain of its equity investments. Refer to note 5 for further information.

Table of Contents

ITEM 2.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our condensed consolidated financial statements and accompanying notes included in this Quarterly Report on Form 10-Q and the audited consolidated financial statements and notes thereto as of and for the year ended December 31, 2021 and the related “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” both of which are contained in our 2021 Form 10-K. Our results of operations and financial condition discussed herein may not be indicative of our future results and trends.

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

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

Overview

We are a fully integrated provider of data, video and voice services to residential and business customers in 24 Western, Midwestern and Southern states as of September 30, 2022. The markets we serve are primarily non-metropolitan, secondary and tertiary markets, with approximately 73% of our customers located in seven states as of September 30, 2022: Arizona, Idaho, Mississippi, Missouri, Oklahoma, South Carolina and Texas. Our biggest customer concentrations are in the Mississippi Gulf Coast region and in the greater Boise, Idaho region. We provided service to approximately 1.1 million residential and business customers out of approximately 2.7 million homes passed as of September 30, 2022. Of these customers, approximately 1,062,000 subscribed to data services, 202,000 subscribed to video services and 136,000 subscribed to voice services as of September 30, 2022.

We generate substantially all of our revenues through three primary product lines. Ranked by share of our total revenues through the first nine months of 2022, they are residential data (54.5%), residential video (19.5%) and business services (data, voice and video: 17.9%). The profit margins, growth rates and/or capital intensity of these three primary product lines vary significantly due to competition, product maturity and relative costs.

We focus on growing our higher margin businesses, namely residential data and business services. Beginning in 2013, we began our shift away from our prior concentration on growing revenues through subscriber retention and maximizing customer primary service units (“PSUs”). We adapted our strategy to face the industry-wide trends of declining profitability of residential video services and declining revenues from residential voice services. The declining profitability of residential video services is due primarily to increasing programming costs and retransmission fees and competition from other content providers, and the declining revenues from residential voice services are due primarily to the increasing use of wireless voice services instead of residential voice services. Separately, we have also focused on retaining customers who are likely to produce higher relative value over the life of their service relationships with us, are less attracted by discounting, require less support and churn less. This strategy focuses on increasing Adjusted EBITDA, Adjusted EBITDA less capital expenditures and producing higher margins.

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

●

Residential data. We have experienced growth in residential data customers and revenues every year since 2013. We expect growth for this product line to continue over the long-term as we believe upgrades in our broadband capacity, our ability to offer higher access speeds than many of our competitors, the reliability and flexibility of our data service offerings and our WiFi support service will enable us to continue to grow average monthly revenue per unit ("ARPU") from our existing customers and capture additional market share from both data subscribers who use other providers as well as households in our footprint that do not yet subscribe to data services from any provider. We experienced elevated growth rates in residential data customers and revenues during the first two years of the COVID-19 pandemic, but are now seeing a return to more normalized, pre-pandemic growth patterns.

●

Residential video. Residential video service is an increasingly costly and fragmenting business, with programming costs and retransmission fees continuing to escalate in the face of a proliferation of streaming content alternatives. We intend to continue our strategy of focusing on the higher-margin businesses of residential data and business services while de-emphasizing our residential video business. As a result of our video strategy, we expect that residential video customers and revenues will decline further in the future on an accelerating basis. In 2021, we began the launch of Sparklight® TV, an internet protocol-based (“IPTV”) video service that allows customers with our Sparklight TV app to stream our video channels from the cloud. Currently, all of our homes passed in non-Hargray markets have access to Sparklight TV, and we are now working to expand access to the Hargray markets as well. This transition from linear to IPTV video service enables us to reclaim bandwidth, freeing up network capacity to increase data speeds and capacity across our network.

●

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

Table of Contents

We continue to experience increased competition, particularly from telephone companies, fiber and municipal overbuilders, over-the-top (“OTT”) video providers and direct broadcast satellite (“DBS”) television providers. Because of the levels of competition we face, we believe it is important to make investments in our infrastructure. In addition, a key objective of our capital allocation process is to invest in initiatives designed to drive revenue and Adjusted EBITDA expansion. More than 60% of our total capital expenditures since 2017 were focused on infrastructure improvements that were intended to grow these measures. We continue to invest capital to, among other things, increase fiber density and coverage, expand our footprint, increase plant and data capacity, enhance network reliability and improve the customer experience. We offer Gigabit data service to nearly all of our homes passed and have deployed DOCSIS 3.1, which, together with Sparklight TV, further increases our network capacity and enables future growth in our residential data and business services product lines.

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

Our primary goals are to continue growing residential data and business services revenues, to increase profit margins and to deliver strong Adjusted EBITDA and Adjusted EBITDA less capital expenditures. To achieve these goals, we intend to continue our disciplined cost management approach, remain focused on customers with expected higher relative value and follow through with further planned investments in broadband plant upgrades, including the deployment of DOCSIS 4.0 capabilities and new data service offerings for residential and business customers. At the same time, we intend to continue balancing the impact of the COVID-19 pandemic on our business, associates, customers and other stakeholders. We also plan to continue seeking broadband-related acquisition and strategic investment opportunities in rural markets in addition to pursuing organic growth through market expansion projects.

Our recent acquisitions and strategic investments include:

●

On May 3, 2021, we acquired the remaining approximately 85% equity interest in Hargray, a data, video and voice services provider to residential and business customers throughout Alabama, Florida, Georgia and South Carolina, that we did not already own for an approximately $2.0 billion cash purchase price that implied a $2.2 billion total enterprise value for Hargray on a cash-free and debt-free basis.

●

On October 1, 2021, we made a minority equity investment for a less than 10% ownership interest in Point Broadband, a fiber internet service provider, for $25.0 million. On March 24, 2022, we invested an additional $5.4 million in Point Broadband.

●

On October 18, 2021, we completed a minority equity investment for a less than 10% ownership interest in Tristar, a special-purpose acquisition company, for $20.8 million.

●

On November 5, 2021, we invested an additional $50.0 million in Nextlink, a wireless internet service provider, resulting in us owning an approximately 17% equity interest in Nextlink.

●

On December 30, 2021, we acquired certain assets and assumed certain liabilities from CableAmerica, a data, video and voice services provider in central Missouri, for $113.1 million in cash on a debt-free basis.

●

On January 1, 2022, we closed a joint venture transaction in which we contributed certain fiber operations (including certain fiber assets of Hargray and a majority of the operations of Clearwave) and certain unaffiliated third-party investors contributed cash, to a newly formed entity, Clearwave Fiber. The operations we contributed generated approximately 3% of our consolidated revenues for the three months ended December 31, 2021. Our approximately 58% investment in Clearwave Fiber was valued at $440.0 million as of the closing date. We recognized a non-cash gain of $22.1 million associated with this transaction. Clearwave Fiber is intended to accelerate deployment of fiber internet to residents and businesses in existing markets and near-adjacent areas, as well as to provide connectivity to unserved and underserved areas in such markets via fiber-to-the-premises service.

●

On April 1, 2022, we contributed our Tallahassee, Florida system to MetroNet, a fiber internet service provider, in exchange for cash consideration of $7.0 million and an equity interest of less than 10% in MetroNet valued at $7.0 million.

●

On June 1, 2022, we completed a minority equity investment for a less than 10% ownership interest in Visionary, an internet service provider, for $7.2 million.

●

On September 6, 2022, we entered into a subscription agreement with Ziply, a fiber internet service provider, under which we agreed to invest up to $50.0 million in Ziply for a less than 10% equity interest. We had not funded any of this commitment as of September 30, 2022, but we invested $22.2 million in Ziply during November 2022. We currently expect to invest the remaining $27.8 million within twelve months of September 30, 2022.

Table of Contents

Results of Operations

PSU and Customer Counts

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

	As of September 30,				Annual Net Gain (Loss)
	2022		2021		Change			% Change
Residential data PSUs		965		935		30			3.2
Residential video PSUs		190		265		(75	)		(28.2	)
Residential voice PSUs		95		107		(12	)		(11.6	)
Total residential PSUs		1,251		1,308		(57	)		(4.4	)

Business data PSUs		96		95		1			1.1
Business video PSUs		12		14		(2	)		(15.9	)
Business voice PSUs		41		44		(3	)		(6.2	)
Total business services PSUs		149		153		(4	)		(2.5	)

Total data PSUs		1,062		1,030		31			3.0
Total video PSUs		202		279		(77	)		(27.6	)
Total voice PSUs		136		151		(15	)		(10.0	)
Total PSUs		1,400		1,461		(61	)		(4.2	)

Residential customer relationships		1,020		1,041		(21	)		(2.0	)
Business customer relationships		102		104		(2	)		(1.6	)
Total customer relationships		1,122		1,144		(22	)		(1.9	)

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

Use of Nonfinancial Metrics and ARPU

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

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

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

Table of Contents

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

Comparison of Three Months Ended September 30, 2022 to Three Months Ended September 30, 2021

Revenues

Revenues decreased $5.5 million, or 1.3%, due primarily to the contribution of operations to Clearwave Fiber and the disposition of the Divested Operations that collectively generated $16.3 million of revenues in the prior year quarter, predominantly consisting of business services revenues, and decreases in residential video and residential voice revenues. The decrease was partially offset by increases in higher margin residential data and business services revenues from continuing operations and $4.9 million of revenues from CableAmerica operations.

Revenues by service offering for the three months ended September 30, 2022 and 2021, together with the percentages of total revenues that each item represented for the periods presented, were as follows (dollars in thousands):

	Three Months Ended September 30,
	2022				2021				2022 vs. 2021
	Revenues		% of Total		Revenues		% of Total		$ Change			% Change
Residential data	$	233,834		55.1	$	219,942		51.1	$	13,892			6.3
Residential video		80,525		19.0		89,507		20.8		(8,982	)		(10.0	)
Residential voice		10,494		2.5		12,645		2.9		(2,151	)		(17.0	)
Business services		75,847		17.9		85,728		19.9		(9,881	)		(11.5	)
Other		24,018		5.7		22,415		5.2		1,603			7.2
Total revenues	$	424,718		100.0	$	430,237		100.0	$	(5,519	)		(1.3	)

Residential data service revenues increased $13.9 million, or 6.3%, due primarily to subscriber growth, a reduction in package discounting and increased customer subscriptions to premium tiers, including the migration of customers on our 100 Megabits per second ("Mbps") plan to our 200 Mbps plan in March 2022.

Residential video service revenues decreased $9.0 million, or 10.0%, due primarily to a decrease in residential video subscribers, partially offset by a rate adjustment implemented in March 2022.

Residential voice service revenues decreased $2.2 million, or 17.0%, due primarily to a decrease in residential voice subscribers.

Business services revenues decreased $9.9 million, or 11.5%, due primarily to the contribution of operations to Clearwave Fiber and the disposition of the Divested Operations during 2022, partially offset by growth in our business data and voice services to small and medium-sized businesses and enterprise customers.

Table of Contents

ARPU for the indicated service offerings for the three months ended September 30, 2022 and 2021 were as follows:

	Three Months Ended September 30,				2022 vs. 2021
	2022		2021		$ Change			% Change
Residential data	$	80.46	$	78.53	$	1.93			2.5
Residential video	$	134.47	$	110.74	$	23.73			21.4
Residential voice	$	36.08	$	38.72	$	(2.64	)		(6.8	)
Business services⁽¹⁾	$	248.19	$	277.27	$	(29.08	)		(10.5	)

⁽¹⁾	The decrease in business services ARPU was due primarily to a disproportionately large number of higher ARPU enterprise customers being divested in the Clearwave Fiber Contribution.

Costs and Expenses

Operating expenses (excluding depreciation and amortization) were $120.5 million for the three months ended September 30, 2022 and decreased $1.2 million, or 1.0%, compared to the three months ended September 30, 2021. The decrease in operating expenses was primarily attributable to $6.4 million of lower programming expenses as a result of video customer losses, partially offset by increases in labor and other compensation-related costs of $2.1 million, health insurance costs of $1.5 million, fuel costs of $1.1 million and property taxes of $1.1 million. Operating expenses as a percentage of revenues were 28.4% and 28.3% for the three months ended September 30, 2022 and 2021, respectively.

Selling, general and administrative expenses were $86.0 million for the three months ended September 30, 2022 and decreased $9.1 million, or 9.6%, compared to the three months ended September 30, 2021. The decrease in selling, general and administrative expenses was primarily attributable to decreases in labor and other compensation-related costs of $10.7 million, marketing costs of $1.2 million and maintenance costs of $1.2 million, partially offset by higher software costs of $1.7 million, health insurance costs of $1.4 million and property taxes of $1.1 million. Selling, general and administrative expenses as a percentage of revenues were 20.3% and 22.1% for the three months ended September 30, 2022 and 2021, respectively.

Depreciation and amortization expense was $87.2 million for the three months ended September 30, 2022 and decreased $5.4 million, or 5.8%, compared to the three months ended September 30, 2021. The decrease in depreciation and amortization expense was primarily due to lower expenses resulting from the Clearwave Fiber Contribution. Depreciation and amortization expense as a percentage of revenues was 20.5% and 21.5% for the three months ended September 30, 2022 and 2021, respectively.

Interest Expense

Interest expense was $36.4 million for the three months ended September 30, 2022 and increased $5.9 million, or 19.3%, compared to the three months ended September 30, 2021. The increase was driven primarily by higher interest rates.

Other Income (Expense), Net

Other income, net, was $0.8 million for the three months ended September 30, 2022 and consisted primarily of interest and investment income, partially offset by a $2.8 million non-cash loss on fair value adjustment associated with the MBI Net Option. Other expense, net, was $22.8 million for the three months ended September 30, 2021 and consisted primarily of a $25.6 million non-cash loss on fair value adjustment associated with the MBI Net Option, partially offset by interest and investment income.

Table of Contents

Income Tax Provision

Income tax provision was $21.9 million and $13.0 million for the three months ended September 30, 2022 and 2021, respectively, and our effective tax rate was 23.7% and 20.3% for the three months ended September 30, 2022 and 2021, respectively. The increase in the effective tax rate was due primarily to a $4.8 million decrease in state tax benefits related to state tax credits recognized and a $3.4 million decrease in income tax benefit attributable to equity-based compensation awards, partially offset by a $6.2 million valuation allowance increase associated with the MBI Net Option in the prior year quarter that did not recur.

Net Income

Net income was $70.6 million for the three months ended September 30, 2022 compared to $52.3 million for the three months ended September 30, 2021.

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

Unrealized gain on cash flow hedges and other, net of tax was $47.3 million for the three months ended September 30, 2022 compared to $9.5 million for the three months ended September 30, 2021. The $37.7 million increase was due to comparatively larger increases in forward interest rates.

Comparison of Nine Months Ended September 30, 2022 to Nine Months Ended September 30, 2021

Revenues

Revenues increased $107.3 million, or 9.1%, due primarily to $98.6 million of additional revenues from the Acquired Operations as well as an increase in higher margin residential data and business services revenues, partially offset by the contribution of Clearwave operations to Clearwave Fiber that generated $16.7 million of revenues in the prior year period and decreases in residential video and residential voice revenues.

Revenues by service offering for the nine months ended September 30, 2022 and 2021, together with the percentages of total revenues that each item represented for the periods presented, were as follows (dollars in thousands):

	Nine Months Ended September 30,
	2022				2021				2022 vs. 2021
	Revenues		% of Total		Revenues		% of Total		$ Change			% Change
Residential data	$	697,317		54.5	$	611,196		52.1	$	86,121			14.1
Residential video		249,944		19.5		252,764		21.5		(2,820	)		(1.1	)
Residential voice		33,105		2.6		35,235		3.0		(2,130	)		(6.0	)
Business services		228,999		17.9		222,706		19.0		6,293			2.8
Other		71,163		5.6		51,347		4.4		19,816			38.6
Total revenues	$	1,280,528		100.0	$	1,173,248		100.0	$	107,280			9.1

Residential data service revenues increased $86.1 million, or 14.1%, due primarily to $48.1 million of additional revenues from the Acquired Operations, as well as subscriber growth, a reduction in package discounting and increased customer subscriptions to premium tiers, including the migration of customers on our 100 Mbps plan to our 200 Mbps plan in March 2022.

Residential video service revenues decreased $2.8 million, or 1.1%, due primarily to a decrease in residential video subscribers, partially offset by $18.6 million of additional revenues from the Acquired Operations and a rate adjustment implemented in March 2022.

Residential voice service revenues decreased $2.1 million, or 6.0%, due primarily to a decrease in residential voice subscribers, partially offset by $2.9 million of additional revenues from the Acquired Operations.

Business services revenues increased $6.3 million, or 2.8%, due primarily to $11.6 million of additional revenues from the Acquired Operations and growth in our business data and voice services to small and medium-sized businesses and enterprise customers, partially offset by the contribution of Clearwave operations to Clearwave Fiber that generated $16.7 million of business services revenues in the prior year period.

Other revenues increased $19.8 million, or 38.6%, due primarily to $17.5 million of additional revenues from the Acquired Operations, consisting primarily of regulatory revenues.

Table of Contents

ARPU for the indicated service offerings for the nine months ended September 30, 2022 and 2021 were as follows:

	Nine Months Ended September 30,				2022 vs. 2021
	2022		2021		$ Change			% Change
Residential data	$	80.62	$	78.42	$	2.20			2.8
Residential video	$	127.40	$	108.13	$	19.27			17.8
Residential voice	$	36.80	$	39.04	$	(2.24	)		(5.7	)
Business services⁽¹⁾	$	251.61	$	259.94	$	(8.33	)		(3.2	)

⁽¹⁾	The decrease in business services ARPU was due primarily to a disproportionately large number of higher ARPU enterprise customers being divested in the Clearwave Fiber Contribution.

Costs and Expenses

Operating expenses (excluding depreciation and amortization) were $358.3 million for the nine months ended September 30, 2022 and increased $22.8 million, or 6.8%, compared to the nine months ended September 30, 2021. The increase in operating expenses was primarily attributable to $29.0 million of additional expenses related to the Acquired Operations and a $5.2 million increase in labor and other compensation-related costs, partially offset by a $14.6 million reduction in programming expenses as a result of video customer losses. Operating expenses as a percentage of revenues were 28.0% and 28.6% for the nine months ended September 30, 2022 and 2021, respectively.

Selling, general and administrative expenses were $264.6 million for the nine months ended September 30, 2022 and increased $12.4 million, or 4.9%, compared to the nine months ended September 30, 2021. The increase in selling, general and administrative expenses was primarily attributable to $8.5 million of additional expenses related to the Acquired Operations and increases of $4.2 million in professional fees, $3.6 million in health insurance costs, $2.9 million in marketing costs, $2.6 million in bad debt expense and $2.4 million is software costs, partially offset by decreases of $7.2 million in acquisition-related costs and $2.1 million in system conversion costs. Selling, general and administrative expenses as a percentage of revenues were 20.7% and 21.5% for the nine months ended September 30, 2022 and 2021, respectively.

Depreciation and amortization expense was $263.6 million for the nine months ended September 30, 2022 and increased $17.5 million, or 7.1%, compared to the nine months ended September 30, 2021. The increase in depreciation and amortization expense was primarily due to $19.7 million of additional expenses from the Acquired Operations, partially offset by lower expenses resulting from the Clearwave Fiber Contribution. Depreciation and amortization expense as a percentage of revenues was 20.6% and 21.0% for the nine months ended September 30, 2022 and 2021, respectively.

During the nine months ended September 30, 2022, we recognized a non-cash gain of $22.1 million associated with the Clearwave Fiber Contribution and a $8.3 million non-cash loss associated with the dispositions of our Tallahassee, Florida system and certain other non-core assets.

Interest Expense

Interest expense was $98.5 million for the nine months ended September 30, 2022 and increased $15.5 million, or 18.7%, compared to the nine months ended September 30, 2021. The increase was driven primarily by additional outstanding debt throughout the period and higher interest rates.

Other Income (Expense), Net

Other income, net, was $97.0 million for the nine months ended September 30, 2022 and consisted primarily of a $88.1 million non-cash gain on fair value adjustment associated with the MBI Net Option and interest and investment income. Other expense, net, was $2.6 million for the nine months ended September 30, 2021 and consisted primarily of a $41.4 million non-cash loss on fair value adjustment associated with the MBI Net Option, partially offset by a $33.4 million non-cash gain on fair value adjustment associated with our existing investment in Hargray upon the Hargray Acquisition and interest and investment income.

Table of Contents

Income Tax Provision

Income tax provision was $86.2 million and $22.1 million for the nine months ended September 30, 2022 and 2021, respectively, and our effective tax rate was 21.6% and 8.9% for the nine months ended September 30, 2022 and 2021, respectively. The increase in the effective tax rate was due primarily to a $35.4 million income tax benefit from the reversal of a pre-existing deferred tax liability on the Hargray investment in the prior year that did not recur, partially offset by a $16.6 million tax benefit from the release of the valuation allowance associated with the MBI Net Option in the quarter ended March 31, 2022.

Net Income

Net income was $311.3 million for the nine months ended September 30, 2022 compared to $227.0 million for the nine months ended September 30, 2021.

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

Unrealized gain on cash flow hedges and other, net of tax was $137.3 million and $49.0 million for the nine months ended September 30, 2022 and 2021, respectively, and increased $88.3 million, or 180.5%, due to comparatively larger increases in forward interest rates.

Use of Adjusted EBITDA

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

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

Table of Contents

We use Adjusted EBITDA to assess our performance. In addition, Adjusted EBITDA generally correlates to the measure used in the leverage ratio calculations under the Credit Agreement and the Senior Notes Indenture to determine compliance with the covenants contained in the Credit Agreement and the ability to take certain actions under the Senior Notes Indenture. Adjusted EBITDA is also a significant performance measure used by us in connection with our incentive compensation programs. Adjusted EBITDA does not take into account cash used for mandatory debt service requirements or other non-discretionary expenditures, and thus does not represent residual funds available for discretionary uses.

	Three Months Ended September 30,						2022 vs. 2021
(dollars in thousands)	2022			2021			$ Change			% Change
Net income	$	70,607		$	52,255		$	18,352			35.1

Plus: Interest expense		36,389			30,495			5,894			19.3
Income tax provision		21,891			13,029			8,862			68.0
Depreciation and amortization		87,222			92,600			(5,378	)		(5.8	)
Equity-based compensation		5,860			5,428			432			8.0
(Gain) loss on deferred compensation		(45	)		-			(45	)		NM
Acquisition-related costs		281			762			(481	)		(63.1	)
(Gain) loss on asset sales and disposals, net		2,952			3,376			(424	)		(12.6	)
System conversion costs		311			797			(486	)		(61.0	)
Equity method investment (income) loss, net		(14	)		(1,111	)		1,097			(98.7	)
Other (income) expense, net		(834	)		22,833			(23,667	)		(103.7	)

Adjusted EBITDA	$	224,620		$	220,464		$	4,156			1.9

NM = Not meaningful.

	Nine Months Ended September 30,					2022 vs. 2021
(dollars in thousands)	2022			2021		$ Change			% Change
Net income	$	311,328		$	226,989	$	84,339			37.2

Plus: Interest expense		98,549			83,023		15,526			18.7
Income tax provision		86,165			22,129		64,036			NM
Depreciation and amortization		263,564			246,045		17,519			7.1
Equity-based compensation		17,016			14,834		2,182			14.7
(Gain) loss on deferred compensation		(205	)		105		(310	)		NM
Acquisition-related costs		2,784			9,967		(7,183	)		(72.1	)
(Gain) loss on asset sales and disposals, net		7,615			4,314		3,301			76.5
System conversion costs		1,383			3,467		(2,084	)		(60.1	)
Rebranding costs		-			70		(70	)		(100.0	)
(Gain) loss on sales of businesses, net		(13,833	)		-		(13,833	)		NM
Equity method investment (income) loss, net		1,230			531		699			131.6
Other (income) expense, net		(96,960	)		2,584		(99,544	)		NM

Adjusted EBITDA	$	678,636		$	614,058	$	64,578			10.5

NM = Not meaningful.

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

Table of Contents

Financial Condition: Liquidity and Capital Resources

Liquidity

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

As part of our 45% minority equity interest in MBI, we acquired a call option to purchase all but not less than all of the remaining equity interests in MBI that we do not already own, which is exercisable at any time between January 1, 2023 and June 30, 2024. If we do not exercise the call option, then investors affiliated with GTCR LLC, a private equity firm based in Chicago, may exercise a put option under which we are obligated to purchase all but not less than all of the direct and indirect equity interests in MBI that we do not already own from all members of MBI other than us, which is exercisable at any time between July 1, 2025 through September 30, 2025. The purchase price payable upon the exercise of the call option or the put option, as applicable, will be calculated under a formula based on a multiple of MBI’s adjusted EBITDA. We have not yet obtained the capital that we believe will be necessary to pay the purchase price if either the call option or the put option are exercised.

A summary of our net cash flows for the periods indicated was as follows (dollars in thousands):

	Nine Months Ended September 30,						2022 vs. 2021
	2022			2021			$ Change			% Change
Net cash provided by operating activities	$	569,793		$	530,286		$	39,507			7.5
Net cash used in investing activities		(315,506	)		(2,222,719	)		1,907,213			(85.8	)
Net cash provided by (used in) financing activities		(387,370	)		1,607,061			(1,994,431	)		(124.1	)
Decrease in cash and cash equivalents		(133,083	)		(85,372	)		(47,711	)		55.9
Cash and cash equivalents, beginning of period		388,802			574,909			(186,107	)		(32.4	)
Cash and cash equivalents, end of period	$	255,719		$	489,537		$	(233,818	)		(47.8	)

The $39.5 million year-over-year increase in net cash provided by operating activities was primarily attributable to an increase in Adjusted EBITDA of $64.6 million, lower acquisition-related and system conversion costs and a favorable change in accounts payable, partially offset by increases in cash paid for income taxes and interest and an unfavorable change in accounts receivable.

The $1.9 billion decrease in net cash used in investing activities from the prior year period was due primarily to the $2.0 billion paid for the Hargray Acquisition in the prior year and $9.2 million of proceeds received from the dispositions of our Tallahassee, Florida system and certain other non-core assets during 2022, partially offset by a $33.9 million increase in cash paid for capital expenditures and $25.1 million invested in debt and equity investments during 2022 that did not occur in the prior year.

The $2.0 billion change in net cash provided by (used in) financing activities from the prior year period was due primarily to net proceeds of $1.7 billion from debt issuances in the prior year that did not recur, as well as $307.0 million of share repurchases during 2022 that did not occur in the prior year.

On July 1, 2015, the Board authorized up to $250.0 million of share repurchases (subject to a total cap of 600,000 shares of our common stock). On May 20, 2022, the Company's Board authorized up to $450.0 million of additional share repurchases (with no cap as to the number of shares of common stock). We exhausted the share repurchase authorization under the 2015 Program during the second quarter of 2022 and had $288.1 million of remaining share repurchase authorization under the 2022 Program as of September 30, 2022. Additional purchases under the 2022 Program may be made from time to time on the open market and in privately negotiated transactions. The size and timing of these purchases are based on a number of factors, including share price and business and market conditions. Since the inception of the Share Repurchase Programs through September 30, 2022, we have repurchased 443,268 shares of our common stock at an aggregate cost of $411.9 million, including 232,637 shares purchased at an aggregate cost of $307.0 million during the nine months ended September 30, 2022. We may, from time to time, continue to opportunistically repurchase shares depending on the trading price of our common stock, market conditions and other factors.

We currently expect to continue to pay comparable quarterly cash dividends on shares of our common stock, subject to approval of the Board. During the third quarter of 2022, the Board approved a quarterly dividend of $2.85 per share of common stock, a $0.10 increase from the preceding quarter, which was paid on September 16, 2022.

Table of Contents

Financing Activity

Senior Credit Facilities

The Credit Agreement provides for the Term Loan A-2, the Term Loan B-2, the Term Loan B-3, the Term Loan B-4 and the Revolving Credit Facility. The Revolving Credit Facility gives us the ability to issue letters of credit, which reduce the amount available for borrowing under the Revolving Credit Facility.

As of September 30, 2022, we had approximately $2.3 billion of aggregate outstanding term loans, $44.1 million of outstanding letters of credit and $455.9 million available for borrowing under the Revolving Credit Facility. A summary of our outstanding term loans as of September 30, 2022 is as follows (dollars in thousands):

Instrument	Draw Date(s)	Original Principal		Amortization Per Annum⁽¹⁾	Outstanding Principal		Final Maturity Date	Final Scheduled Principal Payment		Benchmark Rate	Applicable Margin⁽²⁾	Interest Rate
Term Loan A-2	5/8/2019⁽³⁾ 10/1/2019⁽³⁾	$	700,000	Varies⁽⁴⁾	$	646,823	10/30/2025	$	476,607	LIBOR	1.75%	4.87%
Term Loan B-2	1/7/2019		250,000	1.0%		241,250	10/30/2027		228,750	LIBOR	2.00%	5.12%
Term Loan B-3	6/14/2019⁽⁵⁾ 10/30/2020⁽⁵⁾		625,000	1.0%		608,519	10/30/2027		577,472	LIBOR	2.00%	5.12%
Term Loan B-4	5/3/2021		800,000	1.0%		790,000	5/3/2028		746,000	LIBOR	2.00%	5.12%
Total		$	2,375,000		$	2,286,592		$	2,028,829

⁽¹⁾	Payable in equal quarterly installments (expressed as a percentage of the original principal amount and subject to customary adjustments in the event of any prepayment). All loans may be prepaid at any time without penalty or premium (subject to customary LIBOR breakage provisions).
⁽²⁾	The Term Loan A-2 interest rate spread can vary between 1.25% and 1.75%, determined on a quarterly basis by reference to a pricing grid based on our Total Net Leverage Ratio (as defined in the Credit Agreement). All other applicable margins are fixed.
⁽³⁾	On May 8, 2019, $250.0 million was drawn. On October 1, 2019, an additional $450.0 million was drawn. On October 30, 2020, the amortization schedule was reset.
⁽⁴⁾	Per annum amortization rates for years one through five following October 30, 2020 are 2.5%, 2.5%, 5.0%, 7.5% and 12.5%, respectively.
⁽⁵⁾	On June 14, 2019, $325.0 million was drawn. On October 30, 2020, an additional $300.0 million was drawn.

Table of Contents

Senior Notes

In November 2020, we completed the offering of $650.0 million aggregate principal amount of Senior Notes due 2030. The Senior Notes bear interest at a rate of 4.00% per annum payable semi-annually in arrears on May 15th and November 15th of each year. The Senior Notes are required to be guaranteed on a senior unsecured basis by each of our existing and future wholly owned domestic subsidiaries that guarantees our obligations under our Senior Credit Facilities or that guarantees certain capital markets debt of ours or a guarantor in an aggregate principal amount in excess of $250.0 million.

Convertible Notes

In March 2021, we completed the Convertible Notes offering of $575.0 million aggregate principal amount of 2026 Notes and $345.0 million aggregate principal amount of 2028 Notes. The Convertible Notes are senior unsecured obligations of ours and are guaranteed by our wholly owned domestic subsidiaries that guarantee the Senior Credit Facilities or that guarantee certain of our Notes in an aggregate principal amount in excess of $250.0 million. The 2026 Notes do not bear regular interest, and the principal amount of the 2026 Notes do not accrete. The 2028 Notes bear interest at a rate of 1.125% per annum. Interest on the 2028 Notes is payable semiannually in arrears on March 15th and September 15th of each year, unless earlier repurchased, converted or redeemed. The 2026 Notes are scheduled to mature on March 15, 2026, and the 2028 Notes are scheduled to mature on March 15, 2028. The initial conversion rate for each of the 2026 Notes and the 2028 Notes is 0.4394 shares of our common stock per $1,000 principal amount of 2026 Notes and 2028 Notes, as applicable (equivalent to an initial conversion price of $2,275.83 per share of common stock). The initial conversion price of each of the 2026 Notes and the 2028 Notes represents a premium of 25.0% over the last reported sale price of $1,820.83 per share of our common stock on March 2, 2021. The Convertible Notes are convertible at the option of the holders. The method of conversion into cash, shares of our common stock or a combination thereof is at our election.

Other Debt-Related Information

On May 3, 2022, we entered into a letter of credit agreement with MUFG which provides for an additional $75.0 million of letter of credit issuing capacity, of which $62.9 million was utilized as of September 30, 2022.

We were in compliance with all debt covenants as of September 30, 2022.

We recorded debt issuance cost amortization of $1.3 million and $1.4 million for the three months ended September 30, 2022 and 2021, respectively, and $4.0 million and $4.3 million for the nine months ended September 30, 2022 and 2021, respectively, within interest expense in the condensed consolidated statements of operations and comprehensive income.

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

	September 30, 2022		December 31, 2021
Revolving Credit Facility portion:
Other noncurrent assets	$	2,073	$	2,576
Term loans and Notes portion:
Long-term debt (contra account)		25,087		28,572
Total	$	27,160	$	31,148

The unamortized debt discount associated with the Convertible Notes was $17.4 million as of September 30, 2022. We recorded debt discount amortization of $1.1 million for both the three months ended September 30, 2022 and 2021, respectively, and $3.2 million and $2.5 million for the nine months ended September 30, 2022 and 2021, respectively, within interest expense in the condensed consolidated statements of operations and comprehensive income.

We are party to two interest rate swap agreements to convert our interest payment obligations with respect to an aggregate of $1.2 billion of our variable rate LIBOR indebtedness to a fixed rate. Under the first swap agreement, with respect to a notional amount of $850.0 million, our monthly payment obligation is determined at a fixed base rate of 2.653%. Under the second swap agreement, with respect to a notional amount of $350.0 million, our monthly payment obligation is determined at a fixed base rate of 2.739%. Both interest rate swap agreements are scheduled to mature in the first quarter of 2029 but each may be terminated prior to the scheduled maturity at our election or that of the financial institution counterparty under the terms provided in each swap agreement. We recognized losses of $1.5 million and $7.9 million on interest rate swaps during the three months ended September 30, 2022 and 2021, respectively, and losses of $14.9 million and $23.4 million for the nine months ended September 30, 2022 and 2021, respectively, which were reflected within interest expense in the condensed consolidated statements of operations and comprehensive income.

Table of Contents

Refer to notes 10 and 12 to our audited consolidated financial statements included in the 2021 Form 10-K and notes 8 and 9 to the condensed consolidated financial statements in this Quarterly Report on Form 10-Q for further details regarding our financing activity, outstanding debt and interest rate swaps.

Capital Expenditures

We have significant ongoing capital expenditure requirements as well as capital enhancements associated with acquired operations, including rebuilding low capacity markets; reclaiming bandwidth from analog video services; implementing 32-channel bonding; deploying DOCSIS 4.0; consolidating back office functions such as billing, accounting and service provisioning; migrating products to legacy Cable One platforms; and expanding our high-capacity fiber network. Capital expenditures are funded primarily by cash on hand and cash flows from operating activities.

Our capital expenditures by category for the nine months ended September 30, 2022 and 2021 were as follows (in thousands):

	Nine Months Ended September 30,
	2022		2021
Customer premise equipment⁽¹⁾	$	77,182	$	59,274
Commercial⁽²⁾		24,954		47,398
Scalable infrastructure⁽³⁾		46,057		46,089
Line extensions⁽⁴⁾		33,570		20,077
Upgrade/rebuild⁽⁵⁾		62,609		57,767
Support capital⁽⁶⁾		62,880		51,419
Total	$	307,252	$	282,024

⁽¹⁾	Customer premise equipment includes costs incurred at customer locations, including installation costs and customer premise equipment (e.g., modems and set-top boxes).
⁽²⁾	Commercial includes costs related to securing business services customers and PSUs, including small and medium-sized businesses and enterprise customers.
⁽³⁾	Scalable infrastructure includes costs not related to customer premise equipment to secure growth of new customers and PSUs or provide service enhancements (e.g., headend equipment).
⁽⁴⁾	Line extensions include network costs associated with entering new service areas (e.g., fiber/coaxial cable, amplifiers, electronic equipment, make-ready and design engineering).
⁽⁵⁾	Upgrade/rebuild includes costs to modify or replace existing fiber/coaxial cable networks, including betterments.
⁽⁶⁾	Support capital includes costs associated with the replacement or enhancement of non-network assets due to technological and physical obsolescence (e.g., non-network equipment, land, buildings and vehicles) and capitalized internal labor costs not associated with customer installation activities.

Contractual Obligations and Contingent Commitments

As of September 30, 2022, there have been no material changes to the contractual obligations and contingent commitments previously disclosed in the 2021 Form 10-K except as disclosed in note 5 to the condensed consolidated financial statements in this Quarterly Report on Form 10-Q.

Off-Balance Sheet Arrangements

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

Critical Accounting Policies and Estimates

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

Table of Contents

An accounting policy is considered to be critical if it is important to our results of operations and financial condition and if it requires management’s most difficult, subjective and complex judgments in its application.

There have been no material changes to our critical accounting policy and estimate disclosures described in our 2021 Form 10-K.

ITEM 3.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Market risk is the potential loss arising from changes in market rates and prices. There have been no material changes to the market risk disclosures described in the 2021 Form 10-K other than as set forth below.

As of September 30, 2022, we had $650.0 million, $575.0 million and $345.0 million aggregate principal amount of the Senior Notes, 2026 Notes and 2028 Notes, respectively, outstanding. Although the Senior Notes and 2028 Notes are based on fixed rates and the 2026 Notes do not bear interest, changes in interest rates could impact the fair market value of such notes. As of September 30, 2022, the fair market values of the Senior Notes, 2026 Notes and 2028 Notes were $503.8 million, $440.0 million and $248.8 million, respectively.

ITEM 4.

CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

The Company’s management is responsible for establishing and maintaining adequate disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act). Disclosure controls and procedures are those controls and procedures that are designed to ensure that information required to be disclosed in the Company’s reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in the Company’s reports filed or submitted under the Exchange Act is accumulated and communicated to management, including the Company’s Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

Under the supervision and with the participation of the Company’s management, including the Company’s Chief Executive Officer and Chief Financial Officer, the Company carried out an evaluation as of September 30, 2022 of the effectiveness of the design and operation of the Company’s disclosure controls and procedures pursuant to Exchange Act Rules 13a-15(b) and 15d-15(b). Based on the Company’s evaluation, the Company’s Chief Executive Officer and Chief Financial Officer have concluded that the Company’s disclosure controls and procedures were effective as of September 30, 2022.

Changes in Internal Control Over Financial Reporting

There has been no change in the Company’s internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the quarter ended September 30, 2022 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

Table of Contents

PART II: OTHER INFORMATION

ITEM 1.

LEGAL PROCEEDINGS

None.

ITEM 1A.

RISK FACTORS

There have been no material changes to the risk factors previously disclosed in the 2021 Form 10-K.

ITEM 2.

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Certain information relating to common stock repurchases by the Company and any affiliated purchasers within the meaning of Rule 10b-18(a)(3) under the Exchange Act during the three months ended September 30, 2022 were as follows (dollars in thousands, except per share data):

							Approximate Dollar
					Total Number of		Value of Shares
					Shares Purchased		that May Yet Be
	Total Number				as Part of Publicly		Purchased Under
	of Shares		Average Price		Announced Plans		the Plans or
Period	Purchased		Paid Per Share		or Programs⁽¹⁾		Programs
July 1 to 31, 2022⁽²⁾		37,330	$	1,348.12		37,250	$	353,150
August 1 to 31, 2022		38,100	$	1,347.33		38,100	$	301,817
September 1 to 30, 2022		13,650	$	1,008.55		13,650	$	288,050
Total		89,080	$	1,295.75		89,000

⁽¹⁾

On July 1, 2015, the Board authorized up to $250.0 million of share repurchases (subject to a total cap of 600,000 shares of common stock), which was announced on August 7, 2015 (the "2015 Program"). On May 20, 2022, the Company's Board authorized up to $450.0 million of additional share repurchases (with no cap as to the number of shares of common stock), which was announced on May 23, 2022 (the "2022 Program"). The 2022 Program was in addition to the repurchase authorization then remaining under the 2015 Program. The authorizations do not have an expiration date. The Company exhausted the share repurchase authorization under the 2015 Program during the second quarter of 2022 and had $288.1 million of remaining share repurchase authorization under the 2022 Program as of September 30, 2022. Additional purchases under the 2022 Program may be made from time to time on the open market and in privately negotiated transactions. The size and timing of these purchases are based on a number of factors, including share price and business and market conditions.

⁽²⁾

Includes shares withheld from associates to satisfy estimated tax withholding obligations in connection with the vesting of restricted stock and/or exercises of SARs under the Incentive Compensation Plans. The average price paid per share for the common stock withheld was based on the closing price of the Company’s common stock on the applicable vesting or exercise measurement date.

ITEM 3.

DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4.

MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5.

OTHER INFORMATION

Not applicable.

Table of Contents

ITEM 6.

EXHIBITS

Exhibit Number	Description

10.1	Steven S. Cochran Transition Agreement dated July 1, 2022.*

31.1	Principal Executive Officer Certification required by Rules 13a-14 and 15d-14 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*

31.2	Principal Financial Officer Certification required by Rules 13a-14 and 15d-14 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*

32	Certification of Principal Executive Officer and Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.**

101.INS	Inline XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document).

101.SCH	Inline XBRL Taxonomy Extension Schema Document.*

101.CAL	Inline XBRL Taxonomy Extension Calculation Linkbase Document.*

101.DEF	Inline XBRL Taxonomy Extension Definition Linkbase Document.*

101.LAB	Inline XBRL Taxonomy Extension Label Linkbase Document.*

101.PRE	Inline XBRL Taxonomy Extension Presentation Linkbase Document.*

104	The cover page of this Quarterly Report on Form 10-Q for the quarter ended September 30, 2022, formatted in Inline XBRL (included within the Exhibit 101 attachments).

__________

* Filed herewith.

** Furnished herewith.

Table of Contents

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Cable One, Inc. (Registrant)

By:	/s/ Julia M. Laulis
	Name:	Julia M. Laulis
	Title:	Chair of the Board, President and Chief Executive Officer

Date: November 3, 2022

By:	/s/ Todd M. Koetje
	Name:	Todd M. Koetje
	Title:	Chief Financial Officer

Date: November 3, 2022