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TDS reports third quarter 2022 results

11/03/2022

CHICAGO, Nov. 3, 2022 /PRNewswire/ --

As previously announced, TDS will hold a teleconference on November 4, 2022, at 9:00 a.m. CDT. Listen to the call live via the Events & Presentations page of investors.tdsinc.com.

Telephone and Data Systems, Inc. (NYSE:TDS) reported total operating revenues of $1,392 million for the third quarter of 2022, versus $1,328 million for the same period one year ago. Net income (loss) attributable to TDS common shareholders and related diluted earnings (loss) per share were $(25) million and $(0.22), respectively, for the third quarter of 2022 compared to $28 million and $0.24, respectively, in the same period one year ago.

"While the TDS Family of Companies continued to execute on its long-term strategic priorities, profitability was impacted as we invest in our growth initiatives," said LeRoy T. Carlson, Jr., TDS President and CEO. "UScellular's 5G and network modernization programs are on track, and TDS Telecom is expanding its broadband business.

"And though postpaid subscriber growth remains challenging, UScellular had another strong quarter of ARPU growth. Fixed wireless and our tower portfolio generated positive results and remain two key growth areas of the business.

"TDS Telecom's fiber investments are driving revenue and broadband connection growth. TDS Telecom continues to expand its fiber footprint in new and existing markets with the goal of reaching 1.2 million fiber service addresses by 2026. In the third quarter, we launched the newest expansion markets in Billings, Montana and Green Bay, Wisconsin."

2022  Estimated Results

TDS' current estimates of full-year 2022 results for UScellular and TDS Telecom are shown below. Such estimates represent management's view as of November 3, 2022 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.

2022 Estimated Results



UScellular

Previous

Current

(Dollars in millions)



Service revenues

$3,100-$3,200

$3,100-$3,150

Adjusted OIBDA1

$750-$900

$750-$825

Adjusted EBITDA1

$925-$1,075

$925-$1,000

Capital expenditures

$700-$800

Unchanged

 

TDS Telecom

Previous

Current

(Dollars in millions)



Total operating revenues

$1,010-$1,040

Unchanged

Adjusted OIBDA1

$260-$290

$270-$290

Adjusted EBITDA1

$260-$290

$270-$290

Capital expenditures

$500-$550

Unchanged

The following tables reconcile EBITDA, Adjusted EBITDA and Adjusted OIBDA to the corresponding GAAP measures, Net income or Income before income taxes. In providing 2022 estimated results, TDS has not completed the below reconciliation to Net income 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.


2022 Estimated Results


UScellular


TDS Telecom

(Dollars in millions)




Net income (GAAP)

N/A


N/A

Add back:




Income tax expense

N/A


N/A

Income before income taxes (GAAP)

$45-$120


$50-$70

Add back:




Interest expense

160


Depreciation, amortization and accretion expense

705


220

EBITDA (Non-GAAP)1

$910-$985


$270-$290

Add back or deduct:




(Gain) loss on asset disposals, net

15


Adjusted EBITDA (Non-GAAP)1

$925-$1,000


$270-$290

Deduct:




Equity in earnings of unconsolidated entities

170


Interest and dividend income

5


Adjusted OIBDA (Non-GAAP)1

$750-$825


$270-$290

 


Actual Results


Nine Months Ended

September 30, 2022


Year Ended

December 31, 2021


UScellular


TDS

Telecom


UScellular


TDS

Telecom

(Dollars in millions)








Net income (GAAP)

$             62


$             51


$           160


$             90

Add back:








Income tax expense

46


18


20


24

Income before income taxes (GAAP)

$           108


$             68


$           180


$           114

Add back:








Interest expense

115


(5)


175


(5)

Depreciation, amortization and accretion expense

520


158


678


198

EBITDA (Non-GAAP)1

$           743


$           222


$       1,033


$           308

Add back or deduct:








Loss on impairment of licenses

3




(Gain) loss on asset disposals, net

9


4


23


2

(Gain) loss on sale of business and other exit costs, net

(1)



(2)


Adjusted EBITDA (Non-GAAP)1

$           754


$           226


$       1,054


$           310

Deduct:








Equity in earnings of unconsolidated entities

122



179


Interest and dividend income

5


1


6


1

Other, net


1



(1)

Adjusted OIBDA (Non-GAAP)1

$           627


$           224


$           869


$           310

Numbers may not foot due to rounding.

EBITDA, 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 non-recurring, 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, 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, and gains and losses, 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, 2022, can be found on TDS' website at investors.tdsinc.com.

Stock Repurchase

During the third quarter of 2022, TDS repurchased 375,067 of its Common Shares for $5 million and UScellular repurchased 352,635 of its Common Shares for $10 million.

Conference Call Information

TDS will hold a conference call on November 4, 2022 at 9:00 a.m. Central Time.

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), a Fortune 1000® company, provides wireless; broadband, video and voice; and hosted and managed services to approximately 6 million connections nationwide through its businesses, UScellular, TDS Telecom, and OneNeck IT Solutions. Founded in 1969 and headquartered in Chicago, TDS employed approximately 9,200 associates as of September 30, 2022.

Visit investors.tdsinc.com for comprehensive financial information, including earnings releases, quarterly and annual filings, shareholder information and more.

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: intense competition; the ability to obtain or maintain roaming arrangements with other carriers on acceptable terms; 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; 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; conditions in the U.S. telecommunications industry; the value of assets and investments; the state and federal regulatory environment; pending and future litigation; cyber-attacks or other breaches of network or information technology security; disruption in credit or other financial markets; deterioration of U.S. or global economic conditions; the impact, duration and severity of public health emergencies, such as the COVID-19 pandemic. 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 
OneNeck IT Solutions: www.oneneck.com

 

United States Cellular Corporation

Summary Operating Data (Unaudited)

As of or for the Quarter Ended

9/30/2022


6/30/2022


3/31/2022


12/31/2021


9/30/2021

Retail Connections










Postpaid










Total at end of period

4,264,000


4,296,000


4,335,000


4,380,000


4,391,000

Gross additions

151,000


128,000


126,000


165,000


145,000

Feature phones

5,000


4,000


2,000


3,000


2,000

Smartphones

102,000


90,000


89,000


122,000


103,000

Connected devices

44,000


34,000


35,000


40,000


40,000

Net additions (losses)

(31,000)


(40,000)


(44,000)


(12,000)


(8,000)

Feature phones

(6,000)


(8,000)


(10,000)


(7,000)


(7,000)

Smartphones

(16,000)


(23,000)


(26,000)


5,000


2,000

Connected devices

(9,000)


(9,000)


(8,000)


(10,000)


(3,000)

ARPU1,2

$        50.21


$        50.07


$        49.71


$        48.62


$        48.12

ARPA1,3

$      130.27


$      130.43


$      129.93


$      127.14


$      125.99

Churn rate4

1.42 %


1.30 %


1.30 %


1.35 %


1.15 %

Handsets

1.15 %


1.10 %


1.10 %


1.10 %


0.95 %

Connected devices

3.40 %


2.73 %


2.70 %


3.08 %


2.59 %

Prepaid










Total at end of period

493,000


490,000


495,000


513,000


518,000

Gross additions

62,000


56,000


55,000


63,000


74,000

Net additions (losses)

2,000


(4,000)


(18,000)


(5,000)


11,000

ARPU2

$        35.04


$        35.25


$        34.59


$        34.53


$        35.05

Churn rate4

4.07 %


4.07 %


4.84 %


4.39 %


4.09 %

Market penetration at end of period










Consolidated operating population

32,370,000


32,370,000


32,370,000


32,127,000


31,865,000

Consolidated operating penetration5

15 %


15 %


15 %


15 %


16 %

Capital expenditures (millions)

$           136


$           268


$           137


$           321


$           185

Total cell sites in service

6,933


6,916


6,899


6,898


6,857

Owned towers

4,329


4,323


4,310


4,301


4,274

1

Q3 2021 Postpaid ARPU and ARPA amounts exclude $9 million of postpaid revenue related to an out-of-period error recorded in that quarter.

Average 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.

Average 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.

Churn rate represents the percentage of the connections that disconnect service each month. These rates represent the average monthly churn rate for each respective period.

Market 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.

 

TDS Telecom

Summary Operating Data (Unaudited)

As of or for the Quarter Ended

9/30/2022


6/30/2022


3/31/2022


12/31/2021


9/30/2021

Residential connections










Broadband










Wireline, Incumbent

252,600


252,700


250,100


250,200


252,100

Wireline, Expansion

49,400


44,100


40,600


36,900


32,600

Cable

204,500


204,000


204,600


203,200


202,700

Total Broadband

506,500


500,800


495,200


490,300


487,400

Video

136,600


137,400


140,000


141,500


143,100

Voice

295,500


298,300


301,700


303,700


306,300

Total Residential connections

938,600


936,500


936,900


935,600


936,800

Commercial connections

242,800


250,700


260,000


264,300


269,000

Total connections

1,181,400


1,187,200


1,196,900


1,199,900


1,205,700











Residential revenue per connection1

$           60.32


$           59.67


$           57.95


$           57.86


$           57.75











Capital expenditures (millions)

$               166


$               120


$               105


$               151


$                 91

Numbers may not foot due to rounding.

1   

Total 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. 

 

Telephone and Data Systems, Inc.

Consolidated Statement of Operations Highlights

(Unaudited)


Three Months Ended

September 30,


Nine Months Ended

September 30,


2022


2021


2022

vs. 2021


2022


2021


2022

vs. 2021

(Dollars and shares in millions, except per share amounts)












Operating revenues












UScellular1

$   1,083


$ 1,016


7 %


$   3,120


$ 3,053


2 %

TDS Telecom

256


252


2 %


763


752


1 %

All Other2

53


60


(13) %


173


152


14 %


1,392


1,328


5 %


4,056


3,957


3 %

Operating expenses












UScellular












Expenses excluding depreciation, amortization and accretion

920


803


15 %


2,493


2,364


5 %

Depreciation, amortization and accretion

177


160


10 %


520


510


2 %

Loss on impairment of licenses




3



N/M

(Gain) loss on asset disposals, net

1


8


(89) %


9


15


(43) %

(Gain) loss on sale of business and other exit costs, net



8 %


(1)


(1)


40 %


1,098


971


13 %


3,024


2,888


5 %

TDS Telecom












Expenses excluding depreciation, amortization and accretion

190


175


9 %


539


517


4 %

Depreciation, amortization and accretion

53


49


8 %


158


147


8 %

(Gain) loss on asset disposals, net

3


1


N/M


4


2


N/M


246


224


10 %


702


665


6 %

All Other2












Expenses excluding depreciation and amortization

55


60


(8) %


171


153


12 %

Depreciation and amortization

4


4


(21) %


13


13


(21) %

(Gain) loss on asset disposals, net


(1)


N/M




N/M


59


64


(9) %


183


167


9 %

Total operating expenses

1,403


1,259


11 %


3,909


3,720


5 %

Operating income (loss)












UScellular

(15)


45


N/M


96


165


(42) %

TDS Telecom

10


27


(63) %


61


87


(30) %

All Other2

(6)


(3)


(66) %


(10)


(15)


35 %


(11)


69


N/M


147


237


(38) %

Investment and other income (expense)












Equity in earnings of unconsolidated entities

40


48


(16) %


123


138


(11) %

Interest and dividend income

4


3


39 %


10


9


16 %

Interest expense

(46)


(54)


13 %


(118)


(193)


38 %

Other, net



N/M


1


(1)


N/M

Total investment and other income (expense)

(2)


(3)


17 %


16


(47)


N/M

Income (loss) before income taxes

(13)


66


N/M


163


190


(15) %

Income tax expense (benefit)

(3)


19


N/M


62


38


59 %

Net income (loss)

(10)


47


N/M


101


152


(33) %

Less: Net income (loss) attributable to noncontrolling interests, net of tax

(2)


7


N/M


14


26


(46) %

Net income (loss) attributable to TDS shareholders

(8)


40


N/M


87


126


(30) %

TDS Preferred Share dividends

17


12


44 %


52


21


N/M

Net income (loss) attributable to TDS common shareholders

$      (25)


$      28


N/M


$        35


$    105


(66) %













Basic weighted average shares outstanding

114


115


(1) %


114


115


Basic earnings (loss) per share attributable to TDS common shareholders

$    (0.22)


$   0.24


N/M


$     0.31


$   0.91


(66) %













Diluted weighted average shares outstanding

114


116


(2) %


115


116


Diluted earnings (loss) per share attributable to TDS common shareholders

$    (0.22)


$   0.24


N/M


$     0.30


$   0.89


(66) %

N/M - Percentage change not meaningful.

Numbers may not foot due to rounding.

1

During the three months ended September 30, 2021, UScellular recorded a $9 million out-of-period error, which increased Service revenue by $9 million for the three and nine months ended September 30, 2021.

Consists of TDS corporate, intercompany eliminations and all other business operations not included in the UScellular and TDS Telecom segments.

 

Telephone and Data Systems, Inc.

Consolidated Statement of Cash Flows

(Unaudited)


Nine Months Ended

September 30,


2022


2021

(Dollars in millions)




Cash flows from operating activities




Net income

$               101


$               152

Add (deduct) adjustments to reconcile net income to net cash flows from operating activities




Depreciation, amortization and accretion

691


670

Bad debts expense

98


36

Stock-based compensation expense

32


35

Deferred income taxes, net

48


55

Equity in earnings of unconsolidated entities

(123)


(138)

Distributions from unconsolidated entities

100


107

Loss on impairment of licenses

3


(Gain) loss on asset disposals, net

13


17

(Gain) loss on sale of business and other exit costs, net

(1)


(1)

Other operating activities

7


51

Changes in assets and liabilities from operations




Accounts receivable

(59)


26

Equipment installment plans receivable

(131)


(44)

Inventory

(74)


12

Accounts payable

16


(56)

Customer deposits and deferred revenues

30


13

Accrued taxes

136


(43)

Accrued interest

10


4

Other assets and liabilities

4


(33)

Net cash provided by operating activities

901


863





Cash flows from investing activities




Cash paid for additions to property, plant and equipment

(794)


(726)

Cash paid for intangible assets

(603)


(1,268)

Cash received from investments


3

Cash received from divestitures and exchanges

8


2

Advance payments for license acquisitions


(20)

Other investing activities

(19)


3

Net cash used in investing activities

(1,408)


(2,006)





Cash flows from financing activities




Issuance of long-term debt

1,027


1,418

Repayment of long-term debt

(330)


(1,884)

Issuance of short-term debt

110


Repayment of short-term debt

(50)


Issuance of TDS Preferred Shares


1,110

TDS Common Shares reissued for benefit plans, net of tax payments

(4)


(5)

UScellular Common Shares reissued for benefit plans, net of tax payments

(5)


(16)

Repurchase of TDS Common Shares

(25)


(4)

Repurchase of UScellular Common Shares

(28)


(21)

Dividends paid to TDS shareholders

(114)


(81)

Payment of debt and equity issuance costs

(2)


(59)

Distributions to noncontrolling interests

(3)


(2)

Other financing activities

(2)


(4)

Net cash provided by financing activities

574


452





Net increase (decrease) in cash, cash equivalents and restricted cash

67


(691)





Cash, cash equivalents and restricted cash




Beginning of period

414


1,452

End of period

$               481


$               761

 

Telephone and Data Systems, Inc.

Consolidated Balance Sheet Highlights

(Unaudited)


ASSETS






September 30, 2022


December 31, 2021

(Dollars in millions)




Current assets




Cash and cash equivalents

$                                442


$                                367

Accounts receivable, net

1,181


1,151

Inventory, net

252


178

Prepaid expenses

94


103

Income taxes receivable

60


184

Other current assets

57


61

Total current assets

2,086


2,044





Assets held for sale

29


18





Licenses

4,689


4,097





Goodwill

547


547





Other intangible assets, net

210


197





Investments in unconsolidated entities

503


479





Property, plant and equipment, net

4,647


4,361





Operating lease right-of-use assets

1,010


1,040





Other assets and deferred charges

758


710





Total assets

$                          14,479


$                          13,493

 

Telephone and Data Systems, Inc.

Consolidated Balance Sheet Highlights

(Unaudited)


LIABILITIES AND EQUITY






September 30, 2022


December 31, 2021

(Dollars in millions, except per share amounts)




Current liabilities




Current portion of long-term debt

$                                  16


$                                    6

Accounts payable

506


481

Customer deposits and deferred revenues

266


236

Accrued interest

20


10

Accrued taxes

48


45

Accrued compensation

107


137

Short-term operating lease liabilities

146


141

Other current liabilities

300


124

Total current liabilities

1,409


1,180





Deferred liabilities and credits




Deferred income tax liability, net

967


921

Long-term operating lease liabilities

926


960

Other deferred liabilities and credits

867


759





Long-term debt, net

3,608


2,928





Noncontrolling interests with redemption features

12


11





Equity




TDS shareholders' equity




Series A Common and Common Shares, par value $0.01 per share

1


1

Capital in excess of par value

2,527


2,496

Preferred Shares, par value $0.01 per share

1,074


1,074

Treasury shares, at cost

(468)


(461)

Accumulated other comprehensive income

7


5

Retained earnings

2,763


2,812

Total TDS shareholders' equity

5,904


5,927





Noncontrolling interests

786


807





Total equity

6,690


6,734





Total liabilities and equity

$                          14,479


$                          13,493

 

Balance Sheet Highlights

(Unaudited)




September 30, 2022




TDS


TDS Corporate


Intercompany


TDS


UScellular


Telecom


& Other


Eliminations


Consolidated

(Dollars in millions)










Cash and cash equivalents

$                  254


$                 157


$                  196


$                (165)


$                  442











Licenses, goodwill and other intangible assets

$              4,680


$                  760


$                      6


$                    —


$              5,446

Investment in unconsolidated entities

461


4


46


(8)


503


$              5,141


$                  764


$                    52


$                     (8)


$              5,949











Property, plant and equipment, net

$              2,631


$              1,932


$                    84


$                    —


$              4,647











Long-term debt, net:










Current portion

$                    11


$                    —


$                      5


$                    —


$                    16

Non-current portion

3,115


3


490



3,608


$              3,126


$                      3


$                  495


$                    —


$              3,624

 

TDS Telecom Highlights

(Unaudited)














Three Months Ended

September 30,


Nine Months Ended

September 30,


2022


2021


2022

vs. 2021


2022


2021


2022

vs. 2021

(Dollars in millions)












Operating revenues












Residential












Wireline, Incumbent

$         89


$         87


2 %


$       262


$       258


2 %

Wireline, Expansion

13


9


43 %


35


24


48 %

Cable

68


66


3 %


203


197


3 %

Total residential

170


162


5 %


500


479


4 %

Commercial

43


45


(5) %


130


138


(6) %

Wholesale

43


44


(2) %


132


135


(2) %

Total service revenues

256


251


2 %


763


751


1 %

Equipment revenues



(13) %


1


1


(8) %

Total operating revenues

256


252


2 %


763


752


1 %













Cost of services

109


102


7 %


308


301


2 %

Cost of equipment and products



49 %


1



21 %

Selling, general and administrative expenses

81


72


12 %


231


216


7 %

Depreciation, amortization and accretion

53


49


8 %


158


147


8 %

(Gain) loss on asset disposals, net

3


1


N/M


4


2


N/M

Total operating expenses

246


224


10 %


702


665


6 %













Operating income

$         10


$         27


(63) %


$         61


$         87


(30) %

Numbers may not foot due to rounding.

 

Telephone and Data Systems, Inc.

Financial Measures and Reconciliations

(Unaudited)

Free Cash Flow



Three Months Ended

September 30,


Nine Months Ended

September 30,


2022


2021


2022


2021

(Dollars in millions)








Cash flows from operating activities (GAAP)

$                 167


$                 384


$                 901


$                 863

Less: Cash paid for additions to property, plant and equipment

268


270


794


726

Free cash flow (Non-GAAP)1

$               (101)


$                 114


$                 107


$                 137

Free 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.

 

Cision View original content:https://www.prnewswire.com/news-releases/tds-reports-third-quarter-2022-results-301668270.html

SOURCE Telephone and Data Systems

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