Good morning and welcome to the Cable ONE CABO Earnings Report for the Second Quarter of 2016. All participants will be in a listen-only mode. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Kevin Coyle, Chief Financial Officer. Please go ahead, sir.

Thank you, Gary. Good morning and welcome to Cable ONE's second quarter 2016 earnings call. We're excited to have you with us this morning as we review our results. Before we proceed, I would like to remind you that today's discussion may contain forward-looking statements relating to future events and expectations. You can find factors that could cause Cable ONE's actual results to differ materially from these projections listed in today's press release and in our recent SEC filings. Cable ONE is under no obligation, and in fact expressly disclaims any obligation to update its forward-looking statements whether as a result of new information, future events, or otherwise. Additionally, today's remarks will include a discussion of certain financial measures that are not presented in conformity with U.S. Generally Accepted Accounting Principles. Reconciliations of non-GAAP financial measures discussed on this call to the most directly comparable GAAP measures can be found in our earnings release or on our website at ir.cableone.net. Joining me today on today's call is our Chairman and CEO, Tom Might. And with that, let me turn the call over to Tom.

Thank you, Kevin. Welcome to those of you joining us this morning, we have plenty of good news to share on our first anniversary earnings call as an independent company. And our first year adjusted EBITDA was up $36 million or 12%. Last quarter our adjusted EBITDA margin was up over 500 basis points with healthy 43.5%. All this even though video subscribers are down 15% in the last twelve months. If I think about that for a minute, adjusted EBITDA of 12% while video subs are down 15%, well how can that be? And now you know my answer. There is very little cash flow and little or no free cash flow left in the linear video business model for most small operators. Meanwhile, we have two products of good growth and good margins that deserve to get our focused attention. They are residential internet service or HSD, and business services. After articulating this theory for four years, it is gratifying, finally has strong periodical evidence, so we can move out of the theoretical phase. Our primary task over the last four years has been to make this transition intelligently and profitably, and sooner rather than later. When we started thinking about this five years ago, it seemed like a tall order because HSD and business service revenues were only 30% of total revenues. The last quarter they were the majority of total revenue at 54%, and they contributed the vast majority of our total cash flow. We expect these trajectories to continue into the future. Most analysts believe that cable has a huge fixed cost business thought we operate as virtually all costs are variable. While the product mix change away from video and phone and therefore the triple play has caused several hundred thousand PSUs, we have…

Thanks, Tom. As Tom already mentioned, we are very pleased with the results we have achieved during our first year as a public company, including our strong performance in the second quarter of 2016. Before I discuss the financial results, I wanted to point out some information regarding our operating statistics. As we mentioned before, we converted to a new billing system last year. This caused some distortions in both, our homes past and some business service PSUs. More detail regarding the reasons for these fluctuations are included in both, our press release and in our 10-Q. Now turning to our financial results. First, let me share a few highlights from the quarter. Adjusted EBITDA grew by 14.6% with a margin of 43.5%. Free cash flow increased over 28%, residential data revenues increased 18.7%, business service revenues increased 12%, and now residential data and business service revenues now comprise 54.1% of our total revenues. Now getting into the detailed results, starting with revenues. Total revenues increased $1.9 million or almost 1% due primarily to increases in residential data and business service revenues of $13.6 million and $2.6 million respectively. This was partially offset by decreases in residential video and voice revenues of $12.2 million $1.4 million respectively. The declines in residential video and voice revenues were primarily attributable to residential video customer losses of 15.6% and residential voice customer losses of 13.9%. Residential HSD and business services now comprise, as I mentioned, 54% of our revenues and gains in these growth products are more than offsetting the revenue losses of our video on phone products. Residential data service revenues increased $13.6 million or 18.7%, due primarily to rate increase taken in the fourth quarter of 2015, an increase in residential data customers of 1.8%, a reduction in package discounting, and…

We will now begin the question and answer session. [Operator Instructions] The first question comes from Craig Moffett with MoffettNathanson. Please go ahead.

Thank you. First of all, congratulations to you, Tom, and to all of you for your one-year anniversary of a public company. It's been a very good first year so all to that. I wanted to just ask about the upcoming anniversary of the five-year rate increase when you hit October. Can you help us think through what that looks like? You have a very graphic growth rate in ARPU that will obviously slow down without the price increase going forward, but it looks like some of the subscriber losses at least on a sequential basis have started to moderate somewhat. Can you just look at -- I'm not asking for long-term guidance, but could you just look out a couple of months and talk about what you think October or November start to look like as you anniversary the price increase?

10% price increase on HSD last October -- if I remember correctly, and Kevin might be able to confirm I think that it was effective for half of October. And then put the full month after that for estimating purposes. And you can see our R2 is growing meaningfully higher than that because we're having a number of people take premium tiers. So on a simplistic basis, we should probably deduct that ten percent price increase when we hit the annualization date of that in the ARPU growth, it would be less -- would be presumably something like the remainder trend line. I think we were 16.4%; that is what we reported in total for the past three months, so you might make that mathematical deduction for the HSD.

And then how does that flow through, I guess Kevin for the financials of the business. As you kind of project out to, to the intersection of volumes and prices that you see in the back part of the year?

Well go ahead Tom. As Tom mentioned we're not planning on taking any rate increase through the end of this year. Obviously we're very bullish on where customer growth will be for HSD. We just launched 100MEG product in the fourth quarter of last year. We are launching a GIG product in the large majority of our systems this year. So we're bullish on where customer growth will go over the remainder of this year. We obviously don't know yet, but we're not planning on taking a rate increase this year.

Yes. That's helpful, thank you.

The next question comes from Phil Cusick with JP Morgan. Please go ahead.

Hey guys, thanks. I wondered first if you could talk about what July sub trends look like given the June price increase.

No we'd rather not, too much of this information. We have not done it in past and we're not prepared to start doing that. I mean not to send a negative message but this is something we've not done in the past and we're going to start at this point. Thanks.

Understood and in terms of the HSD rate increase uptake, are we down sort of fully baked with the revenue per user that we saw in the second quarter? Aside from you know people upgrading?

Yes. I think that's true.

Okay. And then as you said a year in now any change in how the board is thinking about leverage and capital return if not more buyback why not take up the dividends?

We are looking at all options. We have played out during the spend process that involves the various things we can do with the debt capacity or being patient methodical or from M&A organic building dividends and buybacks and such so far other than a M&A it's been a blended approach and we'll continue to be.

Maybe pushing my luck a little bit here but also in terms of love using capital, do you feel like there's a pipeline of potential acquisitions out there? Are you evaluating a number of things or is there sort of a dearth of options that you think are attractive?

We've been through today after the spin Kevin & I turned a significant part of our time to M&A marketplace and we have been spending a lot of time in that space for a year now but would be very patient in this article if we're spending that much time there must be something to look at but I am not going to go beyond that.

Understood. Thanks Tom.

[Operator Instructions] The next question comes from Stephan Bisson with Wells Fargo. Please go ahead.

Good morning. Congrats on the one year anniversary and great quarter guys. I had a simple question kind of just longer term. Clearly we're out of the experimental phase in terms of keeping the margins expanding and based on the revenue shaft, where you think they could ultimately go because you're kind of already in new territory as far as cable operators go?

Great question Stephan. I don't want to give a specific number but it's a concept for those of us not followed our -- picking for the last year or more is obviously when the product mix changes towards products that have higher margins, the overall company margins will move towards the margins of those who are profitable products and with 54% of our revenue now in HSD and business services, the margins are now starting to reflect those margins more than the video and phone margins. But everybody has different models about what the real possibility is each of the products and therefore each person want to do their own math based on their assumptions about fixed costs and variable costs.

Got it. Have you noticed like any, has there been an asymptote at some point, any type of slowing in the rate of expense decline?

The letter make any predictions, you've got several years of quarterly data of our expenses and you know the video subscriber change and obviously there is a lot of expenses loaded in the video. So you can do that math on your own to see what the trend line has been. The only caution I would give us last year we had a lot of higher expenses and CapEx to a lot of projects like own digital going on and moving to 100 GIG and now the launching of one GIG. But there was temporarily an extra expense in CapEx which we talked about in press quarters. A lot of that is behind us for right now so but other than that you can look at the long term trends and draw your own conclusions.

Great, thank you.

This concludes the question and answer session. I would like to turn the conference back over to Tom Might for any closing remarks.

Thank you operator. I think that during our first year as an independent public company it is the result of the efforts of our tireless and dedicated associates that I had the pleasure to work with for almost 24 years now so I'd like to thank each of you, every one of you for helping make Cable ONE what it is today. We appreciate all of you on the phone for joining today's call and we look forwards to speaking with you again next quarter. Thank you very much.

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