As one of the top 10 cable providers in the U.S., Cable One (NYSE:CABO) is in the middle of transitioning its core business to more lucrative high-speed data customers in both residential and business segments. The company managed to grow customers in both markets in the third quarter and subsequently increased revenue in those segments as well. Results were reported Nov. 4.

Cable One results: The raw numbers

 Q3 2015 ActualsQ3 2014 ActualsGrowth (YOY)
Sales  $198.2 million  $199.6 million  -0.7%
Net Income From Continuing Operations  $38.9 million  $36.5 million  6.6%
Diluted EPS  $3.30  $11.84  -72.1%

Data source: Cable One. 

What happened with Cable One this quarter?
Let's take a closer look at some of Cable One's figures over the past three months:

  • The year-over-year drop in earnings per share (EPS) comes from the company's higher net income in Q3 2014 from the one-time sale of wireless spectrum licenses.
  • Business services revenues were $22.4 million, an increase of 15.2% year over year.
  • Residential data revenues were $73.1 million, up 10.2% from the year-ago quarter.
  • The number of residential data customers increased 2.1%, and the number of business customers grew by 14.1%, year over year.
  • Cable One managed to increase residential data and business services revenues to 48.2% of total revenues, compared to 43% in the third quarter of 2014.
  • The percentage of non-video customers grew from 31% in Q3 2014 to 42% in Q3 2015.
  • Cable One cut capital expenditures by 39.9% year over year, to $31.4 million. 
  • Adjusted EBITDA margin was 39.1%, up from 36.5% in Q3 2014.

What management had to say
In a press release, Cable One CEO Tom Might said, "Our strategy, driven by higher-margin HSD and business services, continues to unfold." Might's referring to the company's high-speed data customers and its business services, which are the most lucrative of Cable One's customers. 

Cable One has focused on increasing the percentage of revenue that comes from both the HSD and business service customers, saying, "Our third quarter results demonstrate our continuing shift from a video-centric company to an HSD and business services-centric company with the majority of our revenues and customers in business units delivering solid growth and higher margins."

Looking forward
Cable One will launch a new gigabit Internet service at the end of next year. The Giga One offering will be available in about 200 cities across the U.S., with speeds up to 40 times faster than the average Internet connection. The company says that all of its residential customers will eventually have access to the service, which could help boost revenue in that segment.

Investors should continue to look for more customer and revenue growth in both the residential data and business services. With both segments bringing in higher margins, investors will want these categories to grow and become a larger percentage of total revenue. 

Chris Neiger has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Cable One. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.