TDS - Telephone and Data Systems Inc.
11/01/2024 | Press release | Distributed by Public on 11/01/2024 05:43
TDS reports third quarter 2024 results Form 8 K
TDS reports third quarter 2024 results
CHICAGO (November 1, 2024) - Telephone and Data Systems, Inc. (NYSE:TDS) reported total operating revenues of $1,224 million for the third quarter of 2024, versus $1,278 million for the same period one year ago. Net income (loss) attributable to TDS common shareholders and related diluted earnings (loss) per share were $(83) million and $(0.73), respectively, for the third quarter of 2024 compared to $(17) million and $(0.16), respectively, in the same period one year ago.
Net income attributable to TDS common shareholders excluding a UScellular wireless spectrum license impairment (non-GAAP) of $136 million ($102 million, net of tax) and related diluted earnings per share excluding a UScellular wireless spectrum license impairment (non-GAAP) were $2 million and $0.01, respectively, for the third quarter of 2024. The impairment loss was substantially all related to the retained high-band spectrum unit of accounting which includes the 28 GHz, 37 GHz and 39 GHz frequency bands.
Recent Highlights*
UScellular
•Announced sale of select spectrum assets for $1 billion to Verizon in October 2024, and the sale of additional spectrum to two other mobile network operators
•Improved wireless operating results
◦Postpaid handset net losses improved
◦Postpaid ARPU grew 2%; service revenues decreased 2%
◦Prepaid net additions up
◦Both postpaid and prepaid churn improved
•Fixed wireless customers grew 32% to 140,000
TDS Telecom
•Reached a milestone of 50% of service addresses now served with fiber
◦Grew total year-over-year service address footprint 9%
◦Delivered 32,000 marketable fiber services addresses in Q3; 87,000 YTD
•Operating revenues grew 2%; residential revenue growth of 5%
◦Residential broadband connections grew 4% due to broadband investments
◦Strong net income and Adjusted EBITDA growth
◦Good expense discipline
* Comparisons are 3Q'23 to 3Q'24 unless otherwise noted
1
"We continue to strategically optimize our portfolio in order to focus our resources appropriately throughout the enterprise," said LeRoy T. Carlson, Jr., TDS President and CEO. "In the third quarter, TDS completed the sale of its OneNeck operations. In addition, TDS Telecom has entered into agreements to sell certain ILEC and cable properties. In October, as part of its ongoing process to opportunistically monetize its remaining spectrum, UScellular announced that it had entered into agreements to monetize select spectrum assets for $1 billion.
"UScellular's third quarter results show that the company is continuing to balance subscriber growth with financial discipline. And while it had postpaid handset net losses in the quarter, the company saw a notable year-over-year improvement in its subscriber trajectory.
"TDS Telecom is implementing its ongoing fiber expansion strategy and it reached a milestone of 50% of its service addresses passed with fiber."
Announced Transactions and Exploration of Strategic Alternatives for UScellular
On May 28, 2024, Telephone and Data Systems, Inc. (TDS) and UScellular announced that they have entered into a definitive agreement to sell UScellular's wireless operations and select spectrum assets to T-Mobile. The transaction is expected to close in mid-2025, subject to regulatory approvals and the satisfaction of customary closing conditions.
The T-Mobile transaction excluded UScellular's approximately 4,400 owned towers, its equity method investments, and approximately 70% of its spectrum assets.
In October, UScellular announced a sale of select spectrum assets to Verizon for a portion of the remaining spectrum for $1 billion, and the sale of additional spectrum to two other mobile network operators for an undisclosed price. Each transaction is subject to regulatory approvals and the satisfaction of customary closing conditions and contingent upon the close of the proposed T-Mobile transaction. The process to opportunistically monetize the remaining spectrum assets continues.
2
2024 Estimated Results
TDS' current estimates of full-year 2024 results for UScellular and TDS Telecom are shown below. Such estimates represent management's view as of November 1, 2024 and should not be assumed to be current as of any future date. TDS undertakes no duty to update such estimates, whether as a result of new information, future events, or otherwise. There can be no assurance that final results will not differ materially from estimated results.
|
2024 Estimated Results
|
||
| UScellular | Previous | Current |
| (Dollars in millions) | ||
| Service revenues | $2,950-$3,050 | $2,950-$3,000 |
|
Adjusted OIBDA1, 2 (Non-GAAP)
|
$750-$850 | $800-$875 |
|
Adjusted EBITDA1, 2 (Non-GAAP)
|
$920-$1,020 | $970-$1,045 |
| Capital expenditures | $550-$650 | $550-$600 |
| TDS Telecom | Previous | Current |
| (Dollars in millions) | ||
| Total operating revenues | $1,050-$1,080 | Unchanged |
|
Adjusted OIBDA1 (Non-GAAP)
|
$330-$360 | Unchanged |
|
Adjusted EBITDA1(Non-GAAP)
|
$330-$360 | Unchanged |
| Capital expenditures | $310-$340 | Unchanged |
The following tables reconcile EBITDA, Adjusted EBITDA and Adjusted OIBDA to the corresponding GAAP measures, Net income (loss) or Income (loss) before income taxes. In providing 2024 estimated results, TDS has not completed the below reconciliation to Net income (loss) because it does not provide guidance for income taxes. Although potentially significant, TDS believes that the impact of income taxes cannot be reasonably predicted; therefore, TDS is unable to provide such guidance.
|
2024 Estimated Results2
|
||
| UScellular | TDS Telecom | |
| (Dollars in millions) | ||
| Net income (GAAP) | N/A | N/A |
| Add back: | ||
| Income tax expense | N/A | N/A |
| Income (loss) before income taxes (GAAP) | $(35)-$40 | $60-$90 |
| Add back: | ||
| Interest expense | 180 | - |
| Depreciation, amortization and accretion expense | 665 | 270 |
|
EBITDA (Non-GAAP)1
|
$810-$885 | $330-$360 |
| Add back or deduct: | ||
| (Gain) loss on asset disposals, net | 20 | - |
|
Adjusted EBITDA (Non-GAAP)1
|
$970-$1,045 | $330-$360 |
| Deduct: | ||
| Equity in earnings of unconsolidated entities | 160 | - |
| Interest and dividend income | 10 | - |
|
Adjusted OIBDA (Non-GAAP)1
|
$800-$875 | $330-$360 |
3
| Actual Results | ||||||||
|
Nine Months Ended September 30, 2024 |
Year Ended December 31, 2023 |
|||||||
| UScellular |
TDS Telecom |
UScellular |
TDS
Telecom
|
|||||
| (Dollars in millions) | ||||||||
| Net income (loss) (GAAP) | $ | (37) | $ | 51 | $ | 58 | $ | (483) |
| Add back: | ||||||||
| Income tax expense (benefit) | 29 | 15 | 53 | (26) | ||||
| Income (loss) before income taxes (GAAP) | $ | (8) | $ | 66 | $ | 111 | $ | (509) |
| Add back: | ||||||||
| Interest expense | 137 | (4) | 196 | (8) | ||||
| Depreciation, amortization and accretion expense | 499 | 199 | 656 | 245 | ||||
|
EBITDA (Non-GAAP)1
|
$ | 628 | $ | 261 | $ | 963 | $ | (272) |
| Add back or deduct: | ||||||||
| Expenses related to strategic alternatives review | 28 | - | 8 | - | ||||
| Loss on impairment of licenses | 136 | - | - | - | ||||
| Loss on impairment of goodwill | - | - | - | 547 | ||||
| (Gain) loss on asset disposals, net | 14 | 8 | 17 | 10 | ||||
| (Gain) loss on license sales and exchanges, net | 4 | - | (2) | - | ||||
|
Adjusted EBITDA (Non-GAAP)1
|
$ | 810 | $ | 269 | $ | 986 | $ | 285 |
| Deduct: | ||||||||
| Equity in earnings of unconsolidated entities | 123 | - | 158 | - | ||||
| Interest and dividend income | 9 | 4 | 10 | 4 | ||||
| Other, net | - | 3 | - | 2 | ||||
|
Adjusted OIBDA (Non-GAAP)1
|
$ | 678 | $ | 263 | $ | 818 | $ | 279 |
Numbers may not foot due to rounding.
1EBITDA, Adjusted EBITDA and Adjusted OIBDA are defined as net income adjusted for the items set forth in the reconciliation above. EBITDA, Adjusted EBITDA and Adjusted OIBDA are not measures of financial performance under Generally Accepted Accounting Principles in the United States (GAAP) and should not be considered as alternatives to Net income or Cash flows from operating activities, as indicators of cash flows or as measures of liquidity. TDS does not intend to imply that any such items set forth in the reconciliation above are infrequent or unusual; such items may occur in the future. Management uses Adjusted EBITDA and Adjusted OIBDA as measurements of profitability, and therefore reconciliations to Net income are deemed appropriate. Management believes Adjusted EBITDA and Adjusted OIBDA are useful measures of TDS' operating results before significant recurring non-cash charges, nonrecurring expenses, gains and losses, and other items as presented above as they provide additional relevant and useful information to investors and other users of TDS' financial data in evaluating the effectiveness of its operations and underlying business trends in a manner that is consistent with management's evaluation of business performance. Adjusted EBITDA shows adjusted earnings before interest, taxes, depreciation, amortization and accretion, gains and losses, and expenses related to the strategic alternatives review of UScellular while Adjusted OIBDA reduces this measure further to exclude Equity in earnings of unconsolidated entities and Interest and dividend income in order to more effectively show the performance of operating activities excluding investment activities. The table above reconciles EBITDA, Adjusted EBITDA and Adjusted OIBDA to the corresponding GAAP measure, Net income or Income before income taxes. Additional information and reconciliations related to Non-GAAP financial measures for September 30, 2024, can be found on TDS' website at investors.tdsinc.com.
22024 Estimated Results do not reflect any anticipated costs, expenses or results of the strategic alternatives review referenced above.
4
Conference Call Information
TDS will hold a conference call on November 1, 2024 at 9:00 a.m. Central Time.
▪Access the live call on the Events & Presentations page of investors.tdsinc.com or at
https://events.q4inc.com/attendee/666898854
▪Access the call by phone at (888)330-2384, conference ID: 1328528.
Before the call, certain financial and statistical information to be discussed during the call will be posted to investors.tdsinc.com. The call will be archived on the Events & Presentations page of investors.tdsinc.com.
About TDS
Telephone and Data Systems, Inc. (TDS) provides wireless, broadband, video and voice to approximately 6 million connections nationwide through its businesses, UScellular and TDS Telecom. Founded in 1969 and headquartered in Chicago, TDS employed approximately 8,000 associates as of September 30, 2024.
Visit investors.tdsinc.com for comprehensive financial information, including earnings releases, quarterly and annual filings, shareholder information and more.
Contacts
Colleen Thompson, Vice President - Corporate Relations
Julie Mathews, IRC, Director - Investor Relations
Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995:All information set forth in this news release, except historical and factual information, represents forward-looking statements. This includes all statements about the company's plans, beliefs, estimates, and expectations. These statements are based on current estimates, projections, and assumptions, which involve certain risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements. Important factors that may affect these forward-looking statements include, but are not limited to: whether the announced transactions whereby UScellular has agreed to sell its wireless operations and selected spectrum assets will be successfully completed or whether UScellular will be able to find buyers at mutually agreeable prices for its remaining spectrum assets; whether any such strategic alternative will result in additional value for TDS or its shareholders and whether the process will have an adverse impact on TDS' businesses; strategic decisions regarding the tower business; intense competition; the ability to obtain or maintain roaming arrangements with other carriers on acceptable terms and changes in roaming practices; the ability to obtain access to adequate radio spectrum to meet current or anticipated future needs, including participation in FCC auctions; the ability to attract people of outstanding talent throughout all levels of the organization; TDS' smaller scale relative to larger competitors; changes in demand, consumer preferences and perceptions, price competition, or churn rates; advances in technology; impacts of costs, integration problems or other factors associated with acquisitions, divestitures or exchanges of properties or wireless spectrum licenses and/or expansion of TDS' businesses; the ability of the company to successfully construct and manage its networks; difficulties involving third parties with which TDS does business; uncertainties in TDS' future cash flows and liquidity and access to the capital markets; the ability to make payments on TDS and UScellular indebtedness or comply with the terms of debt covenants; the effect on TDS' business if the collateral securing its secured term loan is foreclosed upon; conditions in the U.S. telecommunications industry; the value of assets and investments; the state and federal regulatory environment, including changes in regulatory support received and the ability to pass through certain regulatory fees to customers; pending and future litigation; cyber-attacks or other breaches of network or information technology security; control by the TDS Voting Trust; disruption in credit or other financial markets; deterioration of U.S. or global economic conditions; and the impact, duration and severity of public health emergencies. Investors are encouraged to consider these and other risks and uncertainties that are more fully described under "Risk Factors" in the most recent filing of TDS' Form 10-K, as updated by any TDS Form 10-Q filed subsequent to such Form 10-K.
For more information about TDS and its subsidiaries, visit:
TDS: www.tdsinc.com
UScellular: www.uscellular.com
TDS Telecom: www.tdstelecom.com
5
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UnitedStates Cellular Corporation
|
||||||||||
| Summary Operating Data (Unaudited) | ||||||||||
| As of or for the Quarter Ended | 9/30/2024 | 6/30/2024 | 3/31/2024 | 12/31/2023 | 9/30/2023 | |||||
| Retail Connections | ||||||||||
| Postpaid | ||||||||||
|
Total at end of period1
|
3,999,000 | 4,027,000 | 4,051,000 | 4,106,000 | 4,159,000 | |||||
| Gross additions | 123,000 | 117,000 | 106,000 | 129,000 | 128,000 | |||||
| Handsets | 84,000 | 73,000 | 63,000 | 80,000 | 84,000 | |||||
| Connected devices | 39,000 | 44,000 | 43,000 | 49,000 | 44,000 | |||||
|
Net additions (losses)1
|
(28,000) | (24,000) | (44,000) | (50,000) | (35,000) | |||||
| Handsets | (28,000) | (29,000) | (47,000) | (53,000) | (38,000) | |||||
| Connected devices | - | 5,000 | 3,000 | 3,000 | 3,000 | |||||
|
ARPU2
|
$ | 52.04 | $ | 51.45 | $ | 51.96 | $ | 51.61 | $ | 51.11 |
|
ARPA3
|
$ | 131.81 | $ | 130.41 | $ | 132.00 | $ | 131.63 | $ | 130.91 |
|
Handset upgrade rate4
|
3.5 | % | 4.1 | % | 4.5 | % | 5.8 | % | 4.5 | % |
|
Churn rate5
|
1.25 | % | 1.16 | % | 1.22 | % | 1.44 | % | 1.30 | % |
| Handsets | 1.07 | % | 0.97 | % | 1.03 | % | 1.22 | % | 1.11 | % |
| Connected devices | 2.47 | % | 2.47 | % | 2.52 | % | 3.03 | % | 2.64 | % |
| Prepaid | ||||||||||
|
Total at end of period1
|
452,000 | 439,000 | 436,000 | 451,000 | 462,000 | |||||
| Gross additions | 57,000 | 50,000 | 41,000 | 43,000 | 52,000 | |||||
|
Net additions (losses)1
|
13,000 | 3,000 | (13,000) | (11,000) | - | |||||
|
ARPU2, 6
|
$ | 32.01 | $ | 32.37 | $ | 32.25 | $ | 32.32 | $ | 33.44 |
|
Churn rate5
|
3.30 | % | 3.60 | % | 4.06 | % | 3.87 | % | 3.68 | % |
| Market penetration at end of period | ||||||||||
| Consolidated operating population | 32,550,000 | 32,550,000 | 32,550,000 | 32,350,000 | 32,350,000 | |||||
|
Consolidated operating penetration7
|
15 | % | 15 | % | 14 | % | 15 | % | 15 | % |
| Capital expenditures (millions) | $ | 120 | $ | 165 | $ | 131 | $ | 148 | $ | 111 |
| Total cell sites in service | 7,007 | 6,990 | 6,995 | 7,000 | 6,973 | |||||
| Owned towers | 4,407 | 4,388 | 4,382 | 4,373 | 4,356 | |||||
|
Number of colocations8
|
2,418 | 2,392 | 2,397 | 2,390 | 2,406 | |||||
|
Tower tenancy rate9
|
1.55 | 1.55 | 1.55 | 1.55 | 1.55 |
1First quarter 2024 connections were adjusted to remove subscribers that could no longer access the UScellular network due to the CDMA shutdown. This resulted in 11,000 and 2,000 subscribers removed from the postpaid and prepaid base, respectively, that are not included in Net additions (losses) for the quarter.
2Average Revenue Per User (ARPU) - metric is calculated by dividing a revenue base by an average number of connections and by the number of months in the period. These revenue bases and connection populations are shown below:
•Postpaid ARPU consists of total postpaid service revenues and postpaid connections.
•Prepaid ARPU consists of total prepaid service revenues and prepaid connections.
3Average Revenue Per Account (ARPA) - metric is calculated by dividing total postpaid service revenues by the average number of postpaid accounts and by the number of months in the period.
4Handset upgrade rate calculated as total handset upgrade transactions divided by average postpaid handset connections.
5Churn rate represents the percentage of the connections that disconnect service each month. These rates represent the average monthly churn rate for each respective period.
6Fourth quarter 2023 Prepaid ARPU excludes a $6 million reduction of prepaid revenue related to an adjustment to correct a prior period error recorded in the fourth quarter of 2023.
7Market penetration is calculated by dividing the number of wireless connections at the end of the period by the total estimated population of consolidated operating markets.
8Represents instances where a third-party wireless carrier rents or leases space on a company-owned tower.
9Average number of tenants that lease space on company-owned towers, measured on a per-tower basis.
6
| TDS Telecom | ||||||||||
| Summary Operating Data (Unaudited) | ||||||||||
| As of or for the Quarter Ended | 9/30/2024 | 6/30/2024 | 3/31/2024 | 12/31/2023 | 9/30/2023 | |||||
| Residential connections | ||||||||||
| Broadband | ||||||||||
| Incumbent | 241,500 | 243,700 | 245,100 | 244,800 | 248,800 | |||||
| Expansion | 115,300 | 107,800 | 100,400 | 92,200 | 79,400 | |||||
| Cable | 195,900 | 198,500 | 202,400 | 202,900 | 204,400 | |||||
|
Total Broadband1
|
552,700 | 550,000 | 547,900 | 539,800 | 532,600 | |||||
| Video | 122,100 | 124,800 | 128,800 | 131,500 | 132,400 | |||||
| Voice | 271,300 | 275,600 | 279,400 | 281,600 | 284,000 | |||||
| Total Residential connections | 946,100 | 950,400 | 956,100 | 952,900 | 949,000 | |||||
| Commercial connections | 197,200 | 201,500 | 206,200 | 210,200 | 217,400 | |||||
| Total connections | 1,143,300 | 1,152,000 | 1,162,200 | 1,163,100 | 1,166,400 | |||||
|
Residential revenue per connection2
|
$ | 65.41 | $ | 65.26 | $ | 64.58 | $ | 62.74 | $ | 62.15 |
| Capital expenditures (millions) | $ | 78 | $ | 78 | $ | 87 | $ | 143 | $ | 172 |
Numbers may not foot due to rounding.
1Total residential broadband connections increased by 8,100 during the three months ended March 31, 2024, due primarily to net additions of 6,400 as well as certain other adjustments.
2Total residential revenue per connection is calculated by dividing total residential revenue by the average number of residential connections and by the number of months in the period.
7
| Telephone and Data Systems, Inc. | ||||||||||||
| Consolidated Statement of Operations Highlights | ||||||||||||
| (Unaudited) | ||||||||||||
|
Three Months Ended September 30, |
Nine Months Ended September 30, |
|||||||||||
| 2024 | 2023 |
2024 vs. 2023 |
2024 | 2023 |
2024 vs. 2023 |
|||||||
| (Dollars and shares in millions, except per share amounts) | ||||||||||||
| Operating revenues | ||||||||||||
| UScellular | $ | 922 | $ | 963 | (4) | % | $ | 2,799 | $ | 2,906 | (4) | % |
| TDS Telecom | 263 | 256 | 2 | % | 797 | 767 | 4 | % | ||||
|
All Other1
|
39 | 59 | (33) | % | 128 | 175 | (27) | % | ||||
| 1,224 | 1,278 | (4) | % | 3,724 | 3,848 | (3) | % | |||||
| Operating expenses | ||||||||||||
| UScellular | ||||||||||||
| Expenses excluding depreciation, amortization and accretion | 707 | 746 | (5) | % | 2,149 | 2,285 | (6) | % | ||||
| Depreciation, amortization and accretion | 167 | 159 | 5 | % | 499 | 490 | 2 | % | ||||
| Loss on impairment of licenses | 136 | - | N/M | 136 | - | N/M | ||||||
| (Gain) loss on asset disposals, net | 4 | 1 | N/M | 14 | 14 | 4 | % | |||||
| (Gain) loss on license sales and exchanges, net | (2) | - | N/M | 4 | - | N/M | ||||||
| 1,012 | 906 | 12 | % | 2,802 | 2,789 | - | ||||||
| TDS Telecom | ||||||||||||
| Expenses excluding depreciation, amortization and accretion | 182 | 189 | (4) | % | 533 | 563 | (5) | % | ||||
| Depreciation, amortization and accretion | 68 | 61 | 11 | % | 199 | 180 | 11 | % | ||||
| (Gain) loss on asset disposals, net | 3 | 6 | (52) | % | 8 | 8 | - | |||||
| 252 | 256 | (1) | % | 741 | 752 | (1) | % | |||||
|
All Other1
|
||||||||||||
| Expenses excluding depreciation and amortization | 49 | 64 | (22) | % | 159 | 187 | (14) | % | ||||
| Depreciation and amortization | 3 | 5 | (73) | % | 6 | 11 | (40) | % | ||||
| (Gain) loss on asset disposals, net | (1) | (1) | N/M | 1 | - | N/M | ||||||
| (Gain) loss on sale of business and other exit costs, net | (12) | - | N/M | (12) | - | N/M | ||||||
| 40 | 68 | (43) | % | 154 | 197 | (22) | % | |||||
| Total operating expenses | 1,304 | 1,230 | 6 | % | 3,697 | 3,738 | (1) | % | ||||
| Operating income (loss) | ||||||||||||
| UScellular | (90) | 57 | N/M | (3) | 117 | N/M | ||||||
| TDS Telecom | 10 | - | N/M | 56 | 15 | N/M | ||||||
|
All Other1
|
- | (9) | N/M | (26) | (22) | (18) | % | |||||
| (80) | 48 | N/M | 27 | 110 | (76) | % | ||||||
| Investment and other income (expense) | ||||||||||||
| Equity in earnings of unconsolidated entities | 43 | 40 | 9 | % | 125 | 122 | 3 | % | ||||
| Interest and dividend income | 8 | 5 | 51 | % | 20 | 16 | 25 | % | ||||
| Interest expense | (76) | (62) | (22) | % | (208) | (178) | (17) | % | ||||
| Other, net | 1 | - | N/M | 3 | 1 | N/M | ||||||
| Total investment and other expense | (24) | (17) | (41) | % | (60) | (39) | (52) | % | ||||
| Income (loss) before income taxes | (104) | 31 | N/M | (33) | 71 | N/M | ||||||
| Income tax expense (benefit) | (25) | 27 | N/M | 1 | 55 | (98) | % | |||||
| Net income (loss) | (79) | 4 | N/M | (34) | 16 | N/M | ||||||
| Less: Net income (loss) attributable to noncontrolling interests, net of tax | (13) | 4 | N/M | - | 10 | N/M | ||||||
| Net income (loss) attributable to TDS shareholders | (66) | - | N/M | (34) | 6 | N/M | ||||||
| TDS Preferred Share dividends | 17 | 17 | - | 52 | 52 | - | ||||||
| Net income (loss) attributable to TDS common shareholders | $ | (83) | $ | (17) | N/M | $ | (86) | $ | (46) | (86) | % | |
| Basic weighted average shares outstanding | 114 | 113 | 1 | % | 114 | 113 | 1 | % | ||||
| Basic earnings (loss) per share attributable to TDS common shareholders | $ | (0.73) | $ | (0.16) | N/M | $ | (0.75) | $ | (0.41) | (85) | % | |
| Diluted weighted average shares outstanding | 114 | 113 | 1 | % | 114 | 113 | 1 | % | ||||
| Diluted earnings (loss) per share attributable to TDS common shareholders | $ | (0.73) | $ | (0.16) | N/M | $ | (0.75) | $ | (0.41) | (83) | % |
N/M - Percentage change not meaningful.
Numbers may not foot due to rounding.
1Consists of TDS corporate, intercompany eliminations and all other business operations not included in the UScellular and TDS Telecom segments.
8
| Telephone and Data Systems, Inc. | ||||
| Consolidated Statement of Cash Flows | ||||
| (Unaudited) | ||||
|
Nine Months Ended September 30, |
||||
| 2024 | 2023 | |||
| (Dollars in millions) | ||||
| Cash flows from operating activities | ||||
| Net income (loss) | $ | (34) | $ | 16 |
| Add (deduct) adjustments to reconcile net income (loss) to net cash flows from operating activities | ||||
| Depreciation, amortization and accretion | 704 | 681 | ||
| Bad debts expense | 72 | 77 | ||
| Stock-based compensation expense | 48 | 27 | ||
| Deferred income taxes, net | (15) | 38 | ||
| Equity in earnings of unconsolidated entities | (125) | (122) | ||
| Distributions from unconsolidated entities | 106 | 97 | ||
| Loss on impairment of licenses | 136 | - | ||
| (Gain) loss on asset disposals, net | 23 | 22 | ||
| (Gain) loss on sale of business and other exit costs, net | (12) | - | ||
| (Gain) loss on license sales and exchanges, net | 4 | - | ||
| Other operating activities | 6 | 4 | ||
| Changes in assets and liabilities from operations | ||||
| Accounts receivable | 33 | 11 | ||
| Equipment installment plans receivable | 12 | 20 | ||
| Inventory | 37 | 87 | ||
| Accounts payable | 3 | (36) | ||
| Customer deposits and deferred revenues | (3) | (15) | ||
| Accrued taxes | 16 | 72 | ||
| Accrued interest | 13 | 8 | ||
| Other assets and liabilities | (91) | (64) | ||
| Net cash provided by operating activities | 933 | 923 | ||
| Cash flows from investing activities | ||||
| Cash paid for additions to property, plant and equipment | (655) | (906) | ||
| Cash paid for licenses | (17) | (24) | ||
| Cash received from divestitures | 91 | - | ||
| Other investing activities | 1 | 8 | ||
| Net cash used in investing activities | (580) | (922) | ||
| Cash flows from financing activities | ||||
| Issuance of long-term debt | 440 | 781 | ||
| Repayment of long-term debt | (408) | (664) | ||
| Repayment of short-term debt | - | (60) | ||
| Tax payments for TDS stock-based compensation awards | (10) | (3) | ||
| Tax payments for UScellular stock-based compensation awards | (11) | (6) | ||
| Repurchase of TDS Common Shares | - | (6) | ||
| Repurchase of UScellular Common Shares | (26) | - | ||
| Dividends paid to TDS shareholders | (83) | (114) | ||
| Payment of debt issuance costs | (16) | (4) | ||
| Distributions to noncontrolling interests | (4) | (2) | ||
| Cash paid for software license agreements | (32) | (29) | ||
| Other financing activities | (1) | - | ||
| Net cash used in financing activities | (151) | (107) | ||
| Net increase (decrease) in cash, cash equivalents and restricted cash | 202 | (106) | ||
| Cash, cash equivalents and restricted cash | ||||
| Beginning of period | 270 | 399 | ||
| End of period | $ | 472 | $ | 293 |
9
| Telephone and Data Systems, Inc. | ||||
| Consolidated Balance Sheet Highlights | ||||
| (Unaudited) | ||||
| ASSETS | ||||
| September 30, 2024 | December 31, 2023 | |||
| (Dollars in millions) | ||||
| Current assets | ||||
| Cash and cash equivalents | $ | 451 | $ | 236 |
| Accounts receivable, net | 997 | 1,074 | ||
| Inventory, net | 167 | 208 | ||
| Prepaid expenses | 88 | 86 | ||
| Income taxes receivable | 3 | 4 | ||
| Other current assets | 40 | 52 | ||
| Total current assets | 1,746 | 1,660 | ||
| Assets held for sale | 17 | 15 | ||
| Licenses | 4,586 | 4,702 | ||
| Other intangible assets, net | 168 | 183 | ||
| Investments in unconsolidated entities | 524 | 505 | ||
|
Property, plant andequipment, net
|
4,987 | 5,062 | ||
| Operating lease right-of-use assets | 970 | 987 | ||
| Other assets and deferred charges | 728 | 807 | ||
| Total assets | $ | 13,726 | $ | 13,921 |
10
| Telephone and Data Systems, Inc. | ||||
| Consolidated Balance Sheet Highlights | ||||
| (Unaudited) | ||||
| LIABILITIES AND EQUITY | ||||
| September 30, 2024 | December 31, 2023 | |||
| (Dollars in millions, except per share amounts) | ||||
| Current liabilities | ||||
| Current portion of long-term debt | $ | 29 | $ | 26 |
| Accounts payable | 334 | 360 | ||
| Customer deposits and deferred revenues | 270 | 277 | ||
| Accrued interest | 26 | 12 | ||
| Accrued taxes | 49 | 43 | ||
| Accrued compensation | 107 | 149 | ||
| Short-term operating lease liabilities | 151 | 147 | ||
| Other current liabilities | 132 | 170 | ||
| Total current liabilities | 1,098 | 1,184 | ||
| Liabilities held for sale | 7 | - | ||
| Deferred liabilities and credits | ||||
| Deferred income tax liability, net | 961 | 975 | ||
| Long-term operating lease liabilities | 862 | 890 | ||
| Other deferred liabilities and credits | 812 | 784 | ||
| Long-term debt, net | 4,097 | 4,080 | ||
| Noncontrolling interests with redemption features | 16 | 12 | ||
| Equity | ||||
| TDS shareholders' equity | ||||
| Series A Common and Common Shares, par value $0.01 per share | 1 | 1 | ||
| Capital in excess of par value | 2,557 | 2,558 | ||
| Preferred Shares, par value $0.01 per share | 1,074 | 1,074 | ||
| Treasury shares, at cost | (433) | (465) | ||
| Accumulated other comprehensive income | 11 | 11 | ||
| Retained earnings | 1,865 | 2,023 | ||
| Total TDS shareholders' equity | 5,075 | 5,202 | ||
| Noncontrolling interests | 798 | 794 | ||
| Total equity | 5,873 | 5,996 | ||
| Total liabilities and equity | $ | 13,726 | $ | 13,921 |
11
| Balance Sheet Highlights | ||||||||||
| (Unaudited) | ||||||||||
| September 30, 2024 | ||||||||||
| TDS | TDS Corporate | Intercompany | TDS | |||||||
| UScellular | Telecom | & Other | Eliminations | Consolidated | ||||||
| (Dollars in millions) | ||||||||||
| Cash and cash equivalents | $ | 272 | $ | 83 | $ | 175 | $ | (79) | $ | 451 |
| Licenses and other intangible assets | $ | 4,576 | $ | 173 | $ | 5 | $ | - | $ | 4,754 |
| Investment in unconsolidated entities | 478 | 4 | 50 | (8) | 524 | |||||
| $ | 5,054 | $ | 177 | $ | 55 | $ | (8) | $ | 5,278 | |
| Property, plant and equipment, net | $ | 2,504 | $ | 2,465 | $ | 18 | $ | - | $ | 4,987 |
| Long-term debt, net: | ||||||||||
| Current portion | $ | 20 | $ | - | $ | 9 | $ | - | $ | 29 |
| Non-current portion | 2,882 | 3 | 1,212 | - | 4,097 | |||||
| $ | 2,902 | $ | 3 | $ | 1,221 | $ | - | $ | 4,126 |
12
United States Cellular Corporation
Segment Results
(Unaudited)
|
Three Months Ended September 30, |
Nine Months Ended September 30, |
|||||||||||
| UScellular | 2024 | 2023 |
2024 vs. 2023 |
2024 | 2023 |
2024 vs. 2023 |
||||||
| (Dollars in millions) | ||||||||||||
| Operating Revenues | ||||||||||||
| Wireless | $ | 896 | $ | 938 | (4) | % | $ | 2,722 | $ | 2,831 | (4) | % |
| Towers | 59 | 57 | 2 | % | 175 | 170 | 3 | % | ||||
| Intra-company eliminations | (33) | (32) | (3) | % | (98) | (95) | (3) | % | ||||
| Total operating revenues | 922 | 963 | (4) | % | 2,799 | 2,906 | (4) | % | ||||
| Operating expenses | ||||||||||||
| Wireless | 1,005 | 900 | 12 | % | 2,784 | 2,770 | 1 | % | ||||
| Towers | 40 | 38 | 4 | % | 116 | 114 | 1 | % | ||||
| Intra-company eliminations | (33) | (32) | (3) | % | (98) | (95) | (3) | % | ||||
| Total operating expenses | 1,012 | 906 | 12 | % | 2,802 | 2,789 | - | |||||
| Operating income (loss) | $ | (90) | $ | 57 | N/M | $ | (3) | $ | 117 | N/M | ||
| Adjusted OIBDA (Non-GAAP) | $ | 222 | $ | 220 | 1 | % | $ | 678 | $ | 624 | 9 | % |
| Adjusted EBITDA (Non-GAAP) | $ | 269 | $ | 263 | 3 | % | $ | 810 | $ | 753 | 8 | % |
| Capital expenditures | $ | 120 | $ | 111 | 8 | % | $ | 415 | $ | 462 | (10) | % |
N/M - Percentage change not meaningful
13
United States Cellular Corporation
Segment Results
(Unaudited)
|
Three Months Ended September 30, |
Nine Months Ended September 30, |
|||||||||||
| UScellular Wireless | 2024 | 2023 |
2024 vs. 2023 |
2024 | 2023 |
2024 vs. 2023 |
||||||
| (Dollars in millions) | ||||||||||||
| Retail service | $ | 669 | $ | 687 | (3) | % | $ | 2,014 | $ | 2,065 | (2) | % |
| Other | 52 | 50 | 5 | % | 154 | 149 | 4 | % | ||||
| Service revenues | 721 | 737 | (2) | % | 2,168 | 2,214 | (2) | % | ||||
| Equipment sales | 175 | 201 | (13) | % | 554 | 617 | (10) | % | ||||
| Total operating revenues | 896 | 938 | (4) | % | 2,722 | 2,831 | (4) | % | ||||
| System operations (excluding Depreciation, amortization and accretion reported below) | 193 | 199 | (3) | % | 582 | 597 | (2) | % | ||||
| Cost of equipment sold | 203 | 228 | (11) | % | 630 | 708 | (11) | % | ||||
| Selling, general and administrative | 316 | 324 | (3) | % | 953 | 995 | (4) | % | ||||
| Depreciation, amortization and accretion | 155 | 148 | 5 | % | 466 | 456 | 2 | % | ||||
| Loss on impairment of licenses | 136 | - | N/M | 136 | - | N/M | ||||||
| (Gain) loss on asset disposals, net | 4 | 1 | N/M | 13 | 14 | (1) | % | |||||
| (Gain) loss on license sales and exchanges, net | (2) | - | N/M | 4 | - | N/M | ||||||
| Total operating expenses | 1,005 | 900 | 12 | % | 2,784 | 2,770 | 1 | % | ||||
| Operating income (loss) | $ | (109) | $ | 38 | N/M | $ | (62) | $ | 61 | N/M | ||
| Adjusted OIBDA (Non-GAAP) | $ | 191 | $ | 190 | 1 | % | $ | 583 | $ | 534 | 9 | % |
| Adjusted EBITDA (Non-GAAP) | $ | 191 | $ | 190 | 1 | % | $ | 583 | $ | 534 | 9 | % |
| Capital expenditures | $ | 114 | $ | 106 | 7 | % | $ | 400 | $ | 452 | (12) | % |
|
Three Months Ended September 30, |
Nine Months Ended September 30, |
|||||||||||
| UScellular Towers | 2024 | 2023 |
2024 vs. 2023 |
2024 | 2023 |
2024 vs. 2023 |
||||||
| (Dollars in millions) | ||||||||||||
| Third-party revenues | $ | 26 | $ | 25 | 1 | % | $ | 77 | $ | 75 | 2 | % |
| Intra-company revenues | 33 | 32 | 3 | % | 98 | 95 | 3 | % | ||||
| Total tower revenues | 59 | 57 | 2 | % | 175 | 170 | 3 | % | ||||
| System operations (excluding Depreciation, amortization and accretion reported below) | 20 | 18 | 10 | % | 58 | 55 | 4 | % | ||||
| Selling, general and administrative | 8 | 9 | (14) | % | 24 | 25 | (7) | % | ||||
| Depreciation, amortization and accretion | 12 | 11 | 7 | % | 33 | 34 | (1) | % | ||||
| (Gain) loss on asset disposals, net | - | - | N/M | 1 | - | N/M | ||||||
| Total operating expenses | 40 | 38 | 4 | % | 116 | 114 | 1 | % | ||||
| Operating income | $ | 19 | $ | 19 | (1) | % | $ | 59 | $ | 56 | 7 | % |
| Adjusted OIBDA (Non-GAAP) | $ | 31 | $ | 30 | 3 | % | $ | 95 | $ | 90 | 6 | % |
| Adjusted EBITDA (Non-GAAP) | $ | 31 | $ | 30 | 3 | % | $ | 95 | $ | 90 | 6 | % |
| Capital expenditures | $ | 6 | $ | 5 | 33 | % | $ | 15 | $ | 10 | 61 | % |
N/M - Percentage change not meaningful
14
| TDS Telecom Highlights | ||||||||||||
| (Unaudited) | ||||||||||||
|
Three Months Ended September 30, |
Nine Months Ended September 30, |
|||||||||||
| 2024 | 2023 |
2024 vs. 2023 |
2024 | 2023 |
2024 vs. 2023 |
|||||||
| (Dollars in millions) | ||||||||||||
| Operating revenues | ||||||||||||
| Residential | ||||||||||||
| Incumbent | $ | 90 | $ | 89 | 1 | % | $ | 269 | $ | 264 | 2 | % |
| Expansion | 29 | 20 | 46 | % | 83 | 52 | 58 | % | ||||
| Cable | 67 | 68 | (2) | % | 206 | 204 | 1 | % | ||||
| Total residential | 186 | 177 | 5 | % | 558 | 521 | 7 | % | ||||
| Commercial | 36 | 38 | (4) | % | 110 | 118 | (7) | % | ||||
| Wholesale | 40 | 42 | (3) | % | 128 | 127 | 1 | % | ||||
| Total service revenues | 262 | 256 | 2 | % | 796 | 766 | 4 | % | ||||
| Equipment revenues | - | - | (6) | % | 1 | 1 | (10) | % | ||||
| Total operating revenues | 263 | 256 | 2 | % | 797 | 767 | 4 | % | ||||
| Cost of services | 101 | 107 | (6) | % | 297 | 319 | (7) | % | ||||
| Cost of equipment and products | - | - | 26 | % | 1 | - | 4 | % | ||||
| Selling, general and administrative expenses | 81 | 82 | (1) | % | 236 | 244 | (3) | % | ||||
| Depreciation, amortization and accretion | 68 | 61 | 11 | % | 199 | 180 | 11 | % | ||||
| (Gain) loss on asset disposals, net | 3 | 6 | (52) | % | 8 | 8 | - | |||||
| Total operating expenses | 252 | 256 | (1) | % | 741 | 752 | (1) | % | ||||
| Operating income | $ | 10 | $ | - | N/M | $ | 56 | $ | 15 | N/M |
N/M - Percentage change not meaningful
Numbers may not foot due to rounding.
15
Telephone and Data Systems, Inc.
Financial Measures
(Unaudited)
Free Cash Flow
|
Three Months Ended September 30, |
Nine Months Ended September 30, |
|||||||
| TDS - CONSOLIDATED | 2024 | 2023 | 2024 | 2023 | ||||
| (Dollars in millions) | ||||||||
| Cash flows from operating activities (GAAP) | $ | 306 | $ | 408 | $ | 933 | $ | 923 |
| Cash paid for additions to property, plant and equipment | (203) | (278) | (655) | (906) | ||||
| Cash paid for software license agreements | (11) | (9) | (32) | (29) | ||||
|
Free cash flow (Non-GAAP)1
|
$ | 92 | $ | 121 | $ | 246 | $ | (12) |
|
Three Months Ended September 30, |
Nine Months Ended September 30, |
|||||||
| UScellular | 2024 | 2023 | 2024 | 2023 | ||||
| (Dollars in millions) | ||||||||
| Cash flows from operating activities (GAAP) | $ | 245 | $ | 329 | $ | 761 | $ | 719 |
| Cash paid for additions to property, plant and equipment | (129) | (103) | (399) | (454) | ||||
| Cash paid for software license agreements | (11) | (9) | (31) | (28) | ||||
|
Free cash flow (Non-GAAP)1
|
$ | 105 | $ | 217 | $ | 331 | $ | 237 |
1Free cash flow is a non-GAAP financial measure which TDS believes may be useful to investors and other users of its financial information in evaluating liquidity, specifically, the amount of net cash generated by business operations after deducting Cash paid for additions to property, plant and equipment and Cash paid for software license agreements.
16
Licenses impairment, net of tax
The following non-GAAP financial measure isolates the total effects on net income of the current period Loss on impairment of intangible assets at UScellular, including tax impacts. TDS believes this measure may be useful to investors and other users of its financial information to assist in comparing the current period financial results with periods that were not impacted by such a charge.
|
Three Months Ended September 30, |
Nine Months Ended September 30, |
|||||||
| 2024 | 2023 | 2024 | 2023 | |||||
| (Dollars in millions) | ||||||||
| Net loss attributable to TDS common shareholders (GAAP) | $ | (83) | $ | (17) | $ | (86) | $ | (46) |
| Adjustments: | ||||||||
| Loss on impairment of licenses | 136 | - | 136 | - | ||||
| Deferred tax benefit on the tax-amortizable portion of the impaired licenses | (34) | - | (34) | - | ||||
| UScellular noncontrolling public shareholders' portion of the impaired licenses | (17) | - | (17) | - | ||||
| Subtotal of Non-GAAP adjustments | 85 | - | 85 | - | ||||
| Net income (loss) attributable to TDS common shareholders excluding licenses impairment charge (Non-GAAP) | 2 | (17) | (1) | (46) | ||||
| Noncontrolling interest adjustment to compute diluted earnings (loss) | (1) | (1) | (1) | - | ||||
| Net income (loss) attributable to TDS common shareholders excluding licenses impairment charge used in diluted earnings (loss) per share (Non-GAAP) | $ | 1 | $ | (18) | $ | (2) | $ | (46) |
| Diluted weighted average shares outstanding used for diluted loss per share attributable to TDS common shareholders | 114 | 113 | 114 | 113 | ||||
| Diluted weighted average shares outstanding used for diluted earnings (loss) per share attributable to TDS common shareholders excluding licenses impairment charge | 117 | 113 | 114 | 113 | ||||
| Diluted earnings (loss) per share attributable to TDS common shareholders (GAAP) | $ | (0.73) | $ | (0.16) | $ | (0.75) | $ | (0.41) |
| Adjustments: | ||||||||
| Loss on impairment of licenses | 1.18 | - | 1.19 | - | ||||
| Deferred tax benefit on the tax-amortizable portion of the impaired licenses | (0.29) | - | (0.30) | - | ||||
| UScellular noncontrolling public shareholders' portion of the impaired licenses | (0.15) | - | (0.16) | - | ||||
| Diluted earnings (loss) per share attributable to TDS common shareholders excluding licenses impairment charge (Non-GAAP) | $ | 0.01 | $ | (0.16) | $ | (0.02) | $ | (0.41) |
17
Telephone and Data Systems, Inc.
EBITDA, Adjusted EBITDA and Adjusted OIBDA
(Unaudited)
The following table reconciles EBITDA, Adjusted EBITDA and Adjusted OIBDA to the corresponding GAAP measures, Net income and Income before income taxes.
|
Three Months Ended September 30, |
||||
|
TDS TELECOM
|
2024 | 2023 | ||
|
(Dollars in millions)
|
||||
|
Net income (GAAP)
|
$ | 9 | $ | 4 |
| Add back: | ||||
| Income tax expense | 4 | - | ||
| Income before income taxes (GAAP) | 14 | 4 | ||
| Add back: | ||||
| Interest expense | (1) | (2) | ||
| Depreciation, amortization and accretion | 68 | 61 | ||
| EBITDA (Non-GAAP) | 80 | 63 | ||
| Add back or deduct: | ||||
| (Gain) loss on asset disposals, net | 3 | 6 | ||
| Adjusted EBITDA (Non-GAAP) | 83 | 68 | ||
| Deduct: | ||||
| Interest and dividend income | 1 | 1 | ||
| Other, net | 1 | - | ||
| Adjusted OIBDA (Non-GAAP) | $ | 81 | $ | 67 |
Numbers may not foot due to rounding.
18