TDS reports first quarter 2021 results

UScellular raises 2021 guidance with strong first quarter performance;

TDS Telecom hits 500,000 broadband connections

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May 06, 2021, 16:05 ET

CHICAGO, May 6, 2021 /PRNewswire/ --

As previously announced, TDS will hold a teleconference May 7, 2021, 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 $1,318 million for the first quarter of 2021, versus $1,261 million for the same period one year ago. Net income attributable to TDS common shareholders and related diluted earnings per share were $57 million and $0.48, respectively, for the first quarter of 2021 compared to $69 million and $0.59, respectively, in the same period one year ago.

"The TDS Family of Businesses made a strong start to 2021 and are well-positioned to achieve their strategic priorities," said LeRoy T. Carlson, Jr., TDS President and CEO. "UScellular and TDS Telecom produced impressive financial results and continued to provide essential communications, including high-quality data, video and voice services to our customers and communities. We are implementing our financing strategies to maintain a strong, yet flexible, financial foundation to fund our attractive investment opportunities, while also working to lower the cost of our balance sheet.

"UScellular increased service revenues, showing the positive effect of higher ARPU. Operational and cost discipline throughout the quarter also contributed to strong financial performance. Our attractive promotions are resonating with customers, and postpaid and prepaid handset additions strengthened compared to the same period a year ago. Investments in 5G and network modernization programs are on track reflecting UScellular's commitment to continue to meet customers' expectations for speed and reliability.

"TDS Telecom achieved excellent growth in residential customer connections and strong financial performance, driven by higher operating revenue in the first quarter. With the acceleration of its broadband strategy, 500,000 total customers are now taking broadband services, and more than half of all our customers now have 1Gig service available to them. This year, TDS Telecom has plans to double the number of service addresses that it built fiber to last year, building on the success of the program to-date."

2021 Estimated Results

TDS' current estimates of full-year 2021 results for UScellular and TDS Telecom are shown below. Such estimates represent management's view as of May 6, 2021 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.

2021 Estimated Results

UScellular	Previous	Current
(Dollars in millions)
Service revenues	$3,025-$3,125	$3,050-$3,150
Adjusted OIBDA¹	$800-$950	$850-$950
Adjusted EBITDA¹	$975-$1,125	$1,025-$1,125
Capital expenditures	$775-$875	Unchanged

TDS Telecom	Previous	Current
(Dollars in millions)
Total operating revenues	$975-$1,025	Unchanged
Adjusted OIBDA¹	$290-$320	Unchanged
Adjusted EBITDA¹	$290-$320	Unchanged
Capital expenditures	$425-$475	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 2021 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.

	2021 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)	$175-$275	$80-$110
Add back:
Interest expense	150	—
Depreciation, amortization and accretion expense	680	210
EBITDA (Non-GAAP)¹	$1,005-$1,105	$290-$320
Add back or deduct:
(Gain) loss on asset disposals, net	20	—
Adjusted EBITDA (Non-GAAP)¹	$1,025-$1,125	$290-$320
Deduct:
Equity in earnings of unconsolidated entities	170	—
Interest and dividend income	5	—
Adjusted OIBDA (Non-GAAP)¹	$850-$950	$290-$320

	Actual Results
	Three Months Ended March 31, 2021				Year Ended December 31, 2020
	UScellular		TDS Telecom		UScellular		TDS Telecom
(Dollars in millions)
Net income (GAAP)	$	62	$	24	$	233	$	100
Add back:
Income tax expense	27		8		17		18
Income before income taxes (GAAP)	$	89	$	33	$	250	$	117
Add back:
Interest expense	39		(1)		112		(4)
Depreciation, amortization and accretion expense	170		49		683		203
EBITDA (Non-GAAP)¹	$	298	$	80	$	1,045	$	316
Add back or deduct:
(Gain) loss on asset disposals, net	5		—		25		1
(Gain) loss on sale of business and other exit costs, net	(1)		—		—		—
(Gain) loss on license sales and exchanges, net	—		—		(5)		—
(Gain) loss on investments	—		—		(2)		—
Adjusted EBITDA (Non-GAAP)¹	$	302	$	81	$	1,063	$	317
Deduct:
Equity in earnings of unconsolidated entities	42		—		179		—
Interest and dividend income	2		—		8		5
Other, net	—		—		—		(1)
Adjusted OIBDA (Non-GAAP)¹	$	258	$	81	$	876	$	314


Numbers may not foot due to rounding.

¹	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 March 31, 2021, can be found on TDS' website at investors.tdsinc.com.

Stock Repurchase
During the first quarter of 2021, TDS repurchased 162,500 Common Shares for $3 million and UScellular repurchased 54,900 Common Shares for $2 million.

Conference Call Information
TDS will hold a conference call on May 7, 2021 at 9:00 a.m. Central Time.

Access the live call on the Events & Presentations page of investors.tdsinc.com or at https://event.on24.com/wcc/r/3155155/0CD2FBCBA421B063439060A77D169D23
Access the call by phone at (833) 968-2187, conference ID: 2661419.

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 9,100 associates as of March 31, 2021.

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; difficulties involving third parties; 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	3/31/2021			12/31/2020			9/30/2020			6/30/2020			3/31/2020
Retail Connections
Postpaid
Total at end of period	4,406,000			4,412,000			4,401,000			4,372,000			4,359,000
Gross additions	143,000			171,000			168,000			129,000			132,000
Feature phones	3,000			2,000			4,000			3,000			2,000
Smartphones	101,000			117,000			98,000			82,000			88,000
Connected devices	39,000			52,000			66,000			44,000			42,000
Net additions (losses)	(6,000)			11,000			28,000			12,000			(26,000)
Feature phones	(9,000)			(9,000)			(8,000)			(8,000)			(10,000)
Smartphones	6,000			12,000			8,000			11,000			(10,000)
Connected devices	(3,000)			8,000			28,000			9,000			(6,000)
ARPU¹	$	47.65		$	47.51		$	47.10		$	46.24		$	47.23
ARPA²	$	125.25		$	124.87		$	123.27		$	120.70		$	122.92
Churn rate³	1.12		%	1.21		%	1.06		%	0.89		%	1.21		%
Handsets	0.92		%	1.01		%	0.88		%	0.71		%	0.95		%
Connected devices	2.53		%	2.64		%	2.35		%	2.24		%	3.11		%
Prepaid
Total at end of period	496,000			499,000			506,000			496,000			494,000
Gross additions	62,000			56,000			65,000			62,000			57,000
Net additions (losses)	(3,000)			(8,000)			11,000			2,000			(12,000)
ARPU¹	$	35.25		$	35.15		$	35.45		$	34.89		$	34.07
Churn rate³	4.37		%	4.24		%	3.59		%	4.05		%	4.67		%
Total connections at end of period⁴	4,961,000			4,968,000			4,962,000			4,919,000			4,903,000
Market penetration at end of period
Consolidated operating population	31,493,000			31,314,000			31,314,000			31,292,000			31,292,000
Consolidated operating penetration⁵	16		%	16		%	16		%	16		%	16		%
Capital expenditures (millions)	$	125		$	320		$	216		$	168		$	236
Total cell sites in service	6,802			6,797			6,758			6,673			6,629
Owned towers	4,270			4,271			4,246			4,208			4,184


¹	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.

²	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.

³	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.

⁴	Includes reseller and other connections.

⁵	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	3/31/2021		12/31/2020		9/30/2020		6/30/2020		3/31/2020
Residential connections
Broadband¹
Wireline, Incumbent	243,700		242,500		243,400		240,400		230,400
Wireline, Expansion	24,100		20,400		17,300		14,700		12,300
Cable	199,500		196,400		193,300		191,000		184,100
Total Broadband	467,300		459,300		454,000		446,000		426,800
Video²
Wireline	63,000		63,000		62,300		61,400		59,000
Cable	79,600		81,400		82,300		83,200		84,600
Total Video	142,700		144,400		144,500		144,600		143,600
Voice³
Wireline	255,000		256,900		260,000		261,800		259,100
Cable	53,700		53,900		54,400		55,300		54,800
Total Voice	308,700		310,800		314,400		317,100		313,900
Total Residential connections	918,700		914,400		913,000		907,800		884,300
Commercial connections
Broadband¹	34,400		34,000		33,700		33,400		33,200
Video²	19,400		19,700		19,700		20,300		20,600
Voice³	116,500		119,700		122,700		126,100		128,600
ManagedIP⁴	108,500		113,300		116,700		117,300		119,800
Total Commercial connections	278,800		286,700		292,900		297,200		302,200
Total connections	1,197,400		1,201,100		1,205,900		1,205,000		1,186,400

Residential revenue per connection⁵	$	56.97	$	55.66	$	55.66	$	53.82	$	54.30

Capital expenditures (millions)	$	70	$	147	$	92	$	75	$	54


Numbers may not foot due to rounding.

¹	The individual customers provided high-speed internet access through various transmission technologies, including fiber, DSL, dedicated internet circuit technologies or cable modem service.

²	The individual customers provided video services.

³	The individual circuits connecting a customer to TDS' central office facilities that provide voice services or the billable number of lines into a building for voice services.

⁴	The number of telephone handsets, data lines and IP trunks providing communications using IP networking technology.

⁵	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 March 31,
	2021		2020		2021 vs. 2020
(Dollars and shares in millions, except per share amounts)
Operating revenues
UScellular	$	1,023	$	963	6	%
TDS Telecom	249		240		4	%
All Other¹	46		58		(21)	%
	1,318		1,261		4	%
Operating expenses
UScellular
Expenses excluding depreciation, amortization and accretion	765		732		5	%
Depreciation, amortization and accretion	170		177		(4)	%
(Gain) loss on asset disposals, net	5		4		39	%
(Gain) loss on sale of business and other exit costs, net	(1)		—		N/M
	939		913		3	%
TDS Telecom
Expenses excluding depreciation, amortization and accretion	168		160		5	%
Depreciation, amortization and accretion	49		52		(5)	%
	217		212		2	%
All Other¹
Expenses excluding depreciation and amortization	47		58		(19)	%
Depreciation and amortization	5		6		(17)	%
	52		64		(19)	%
Total operating expenses	1,208		1,189		2	%
Operating income (loss)
UScellular	84		50		67	%
TDS Telecom	32		28		12	%
All Other¹	(6)		(6)		3	%
	110		72		52	%
Investment and other income (expense)
Equity in earnings of unconsolidated entities	42		45		(7)	%
Interest and dividend income	3		6		(44)	%
Interest expense	(53)		(37)		(45)	%
Total investment and other income	(8)		14		N/M
Income before income taxes	102		86		18	%
Income tax expense	31		3		N/M
Net income	71		83		(14)	%
Less: Net income attributable to noncontrolling interests, net of tax	12		14		(9)	%
Net income attributable to TDS shareholders	59		69		(15)	%
TDS Preferred dividend requirement	2		—		N/M
Net income attributable to TDS common shareholders	$	57	$	69	(18)	%

Basic weighted average shares outstanding	114		115		–
Basic earnings per share attributable to TDS common shareholders	$	0.49	$	0.60	(18)	%

Diluted weighted average shares outstanding	116		116		–
Diluted earnings per share attributable to TDS common shareholders	$	0.48	$	0.59	(18)	%


N/M - Percentage change not meaningful.

Numbers may not foot due to rounding.

¹	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)

	Three Months Ended March 31,
	2021		2020
(Dollars in millions)
Cash flows from operating activities
Net income	$	71	$	83
Add (deduct) adjustments to reconcile net income to net cash flows from operating activities
Depreciation, amortization and accretion	224		235
Bad debts expense	8		34
Stock-based compensation expense	10		11
Deferred income taxes, net	27		75
Equity in earnings of unconsolidated entities	(42)		(45)
Distributions from unconsolidated entities	23		25
(Gain) loss on asset disposals, net	5		4
(Gain) loss on sale of business and other exit costs, net	(1)		—
Other operating activities	(1)		—
Changes in assets and liabilities from operations
Accounts receivable	17		43
Equipment installment plans receivable	(18)		23
Inventory	8		(52)
Accounts payable	(115)		87
Customer deposits and deferred revenues	9		(9)
Accrued taxes	—		(74)
Accrued interest	9		9
Other assets and liabilities	(69)		(82)
Net cash provided by operating activities	165		367

Cash flows from investing activities
Cash paid for additions to property, plant and equipment	(220)		(377)
Cash paid for intangible assets	(1,261)		(26)
Cash paid for investments	—		(1)
Cash received from divestitures and exchanges	1		—
Net cash used in investing activities	(1,480)		(404)

Cash flows from financing activities
Issuance of long-term debt	567		50
Repayment of long-term debt	—		(2)
Issuance of TDS Preferred Shares	420		—
TDS Common Shares reissued for benefit plans, net of tax payments	(1)		(1)
UScellular Common Shares reissued for benefit plans, net of tax payments	(1)		—
Repurchase of TDS Common Shares	(3)		(6)
Repurchase of UScellular Common Shares	(2)		(21)
Dividends paid to TDS shareholders	(20)		(19)
Payment of debt and equity issuance costs	(14)		(3)
Distributions to noncontrolling interests	(1)		(1)
Other financing activities	(3)		—
Net cash provided by (used in) financing activities	942		(3)

Net decrease in cash, cash equivalents and restricted cash	(373)		(40)

Cash, cash equivalents and restricted cash
Beginning of period	1,452		474
End of period	$	1,079	$	434




Telephone and Data Systems, Inc.
Consolidated Balance Sheet Highlights
(Unaudited)

ASSETS

	March 31, 2021		December 31, 2020
(Dollars in millions)
Current assets
Cash and cash equivalents	$	1,042	$	1,429
Short-term investments	3		3
Accounts receivable, net	1,097		1,112
Inventory, net	145		154
Prepaid expenses	114		105
Income taxes receivable	188		187
Other current assets	53		36
Total current assets	2,642		3,026

Assets held for sale	1		2

Licenses	3,924		2,638

Goodwill	547		547

Other intangible assets, net	213		213

Investments in unconsolidated entities	497		477

Property, plant and equipment, net	3,951		3,972

Operating lease right-of-use assets	1,005		998

Other assets and deferred charges	627		652

Total assets	$	13,407	$	12,525




Telephone and Data Systems, Inc.
Consolidated Balance Sheet Highlights
(Unaudited)

LIABILITIES AND EQUITY

	March 31, 2021		December 31, 2020
(Dollars in millions, except per share amounts)
Current liabilities
Current portion of long-term debt	$	6	$	5
Accounts payable	360		508
Customer deposits and deferred revenues	202		193
Accrued interest	25		16
Accrued taxes	67		69
Accrued compensation	73		132
Short-term operating lease liabilities	134		129
Other current liabilities	96		101
Total current liabilities	963		1,153

Liabilities held for sale	—		1

Deferred liabilities and credits
Deferred income tax liability, net	890		863
Long-term operating lease liabilities	941		940
Other deferred liabilities and credits	558		541

Long-term debt, net	3,991		3,424

Noncontrolling interests with redemption features	10		10

Equity
TDS shareholders' equity
Series A Common and Common Shares, par value $0.01 per share	1		1
Capital in excess of par value	2,488		2,482
Preferred Shares, par value $0.01 per share	408		—
Treasury shares, at cost	(472)		(477)
Accumulated other comprehensive loss	(3)		(4)
Retained earnings	2,830		2,802
Total TDS shareholders' equity	5,252		4,804

Noncontrolling interests	802		789

Total equity	6,054		5,593

Total liabilities and equity	$	13,407	$	12,525




Balance Sheet Highlights
(Unaudited)

	March 31, 2021
			TDS		TDS Corporate		Intercompany		TDS
	UScellular		Telecom		& Other		Eliminations		Consolidated
(Dollars in millions)
Cash and cash equivalents	$	479	$	177	$	564	$	(178)	$	1,042

Licenses, goodwill and other intangible assets	$	3,915	$	761	$	8	$	—	$	4,684
Investment in unconsolidated entities	455		4		45		(7)		497
	$	4,370	$	765	$	53	$	(7)	$	5,181

Property, plant and equipment, net	$	2,419	$	1,435	$	97	$	—	$	3,951

Long-term debt, net:
Current portion	$	2	$	—	$	4	$	—	$	6
Non-current portion	2,981		4		1,006		—		3,991
	$	2,983	$	4	$	1,010	$	—	$	3,997




TDS Telecom Highlights
(Unaudited)

	Three Months Ended March 31,
	2021		2020		2021 vs. 2020
(Dollars in millions)
Operating revenues
Residential
Wireline, Incumbent	$	85	$	81	6	%
Wireline, Expansion	7		4		80	%
Cable	65		60		9	%
Total residential	157		144		9	%
Commercial	47		49		(6)	%
Wholesale	45		47		(3)	%
Total service revenues	249		240		4	%
Equipment revenues	—		—		9	%
Total operating revenues	249		240		4	%

Cost of services	97		95		2	%
Cost of equipment and products	—		—		(1)	%
Selling, general and administrative expenses	70		65		9	%
Depreciation, amortization and accretion	49		52		(5)	%
(Gain) loss on asset disposals, net	—		—		N/M
Total operating expenses	217		212		2	%

Operating income	$	32	$	28	12	%

N/M - Percentage change not meaningful

Numbers may not foot due to rounding.

Telephone and Data Systems, Inc.
Financial Measures and Reconciliations
(Unaudited)
Free Cash Flow

	Three Months Ended March 31,
	2021		2020
(Dollars in millions)
Cash flows from operating activities (GAAP)	$	165	$	367
Less: Cash paid for additions to property, plant and equipment	220		377
Free cash flow (Non-GAAP)¹	$	(55)	$	(10)


¹	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.

SOURCE Telephone and Data Systems, Inc.

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