TDS reports first quarter 2023 results

News provided by

Telephone and Data Systems

May 04, 2023, 16:05 ET

2023 guidance reaffirmed

CHICAGO, May 4, 2023 /PRNewswire/ --

As previously announced, TDS will hold a teleconference on May 5, 2023, 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 $1,303 million for the first quarter of 2023, versus $1,315 million for the same period one year ago. Net income (loss) attributable to TDS common shareholders and related diluted earnings (loss) per share were $(9) million and $(0.08), respectively, for the first quarter of 2023 compared to $44 million and $0.37, respectively, in the same period one year ago.

"The TDS Family of Companies is committed to achieving its long-term strategic goals," said LeRoy T. Carlson, Jr., TDS President and CEO. "UScellular is making significant investments in advancing its network, and TDS Telecom is executing on its strategy to deploy fiber in expansion markets, with approximately 100 communities in various stages of development.

"At UScellular, postpaid subscriber trends improved year over year as we made progress toward stabilizing our customer base, but we still had net subscriber losses during the quarter and have more work to do. We continued execution of our multi-year cost optimization program seeking efficiencies in both operating costs and capital expenditures.

"TDS Telecom increased residential broadband connections and residential revenue per connection. TDS Telecom is also expanding its footprint, deploying 25,000 marketable fiber service addresses in the first quarter and is on track to meet its full year 2023 fiber service address goal."

2023 Estimated Results

TDS' current estimates of full-year 2023 results for UScellular and TDS Telecom are shown below. Such estimates represent management's view as of May 4, 2023 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.

2023 Estimated Results



UScellular

Previous

Current

(Dollars in millions)



Service revenues

$3,050-$3,150

Unchanged

Adjusted OIBDA1

$725-$875

Unchanged

Adjusted EBITDA1

$875-$1,025

Unchanged

Capital expenditures

$600-$700

Unchanged







TDS Telecom

Previous

Current

(Dollars in millions)



Total operating revenues

$1,030-$1,060

Unchanged

Adjusted OIBDA1

$260-$290

Unchanged

Adjusted EBITDA1

$260-$290

Unchanged

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 2023 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.


2023 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)

$10-$160


$40-$70

Add back:




Interest expense

205


—

Depreciation, amortization and accretion expense

645


220

EBITDA (Non-GAAP)1

$860-$1,010


$260-$290

Add back or deduct:




(Gain) loss on asset disposals, net

15


—

Adjusted EBITDA (Non-GAAP)1

$875-$1,025


$260-$290

Deduct:




Equity in earnings of unconsolidated entities

145


—

Interest and dividend income

5


—

Adjusted OIBDA (Non-GAAP)1

$725-$875


$260-$290


Actual Results


Three Months Ended

March 31, 2023


Year Ended

December 31, 2022


UScellular


TDS

Telecom


UScellular


TDS

Telecom

(Dollars in millions)








Net income (GAAP)

$             14


$                8


$             35


$             53

Add back:








Income tax expense

11


3


37


23

Income before income taxes (GAAP)

$             25


$             11


$             72


$             76

Add back:








Interest expense

47


(2)


163


(7)

Depreciation, amortization and accretion expense

170


59


700


215

EBITDA (Non-GAAP)1

$           242


$             68


$           935


$           284

Add back or deduct:








Loss on impairment of licenses

—


—


3


—

(Gain) loss on asset disposals, net

10


1


19


7

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

—


—


(1)


—

Adjusted EBITDA (Non-GAAP)1

$           252


$             69


$           956


$           291

Deduct:








Equity in earnings of unconsolidated entities

44


—


158


—

Interest and dividend income

2


1


8


2

Other, net

—


—


—


1

Adjusted OIBDA (Non-GAAP)1

$           206


$             68


$           790


$           288

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, 2023, can be found on TDS' website at investors.tdsinc.com.

Stock Repurchase

During the first quarter of 2023, TDS repurchased 290,900 of its Common Shares for $3 million.

Conference Call Information

TDS will hold a conference call on May 5, 2023 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 9,300 associates as of March 31, 2023.

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 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; 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. 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

3/31/2023


12/31/2022


9/30/2022


6/30/2022


3/31/2022

Retail Connections










Postpaid










Total at end of period

4,223,000


4,247,000


4,264,000


4,296,000


4,335,000

Gross additions

137,000


154,000


151,000


128,000


126,000

Feature phones

7,000


6,000


5,000


4,000


2,000

Smartphones

86,000


99,000


102,000


90,000


89,000

Connected devices

44,000


49,000


44,000


34,000


35,000

Net additions (losses)

(24,000)


(17,000)


(31,000)


(40,000)


(44,000)

Feature phones

(4,000)


(6,000)


(6,000)


(8,000)


(10,000)

Smartphones

(21,000)


(14,000)


(16,000)


(23,000)


(26,000)

Connected devices

1,000


3,000


(9,000)


(9,000)


(8,000)

ARPU1

$        50.66


$        50.60


$        50.21


$        50.07


$        49.71

ARPA2

$      130.77


$      130.97


$      130.27


$      130.43


$      129.93

Handset upgrade rate3

4.9 %


7.0 %


8.1 %


6.0 %


5.0 %

Churn rate4

1.27 %


1.35 %


1.42 %


1.30 %


1.30 %

Handsets

1.06 %


1.12 %


1.15 %


1.10 %


1.10 %

Connected devices

2.78 %


2.99 %


3.40 %


2.73 %


2.70 %

Prepaid










Total at end of period

470,000


493,000


493,000


490,000


495,000

Gross additions

43,000


61,000


62,000


56,000


55,000

Net additions (losses)

(23,000)


—


2,000


(4,000)


(18,000)

ARPU1

$        33.19


$        33.34


$        35.04


$        35.25


$        34.59

Churn rate4

4.63 %


4.11 %


4.07 %


4.07 %


4.84 %

Market penetration at end of period










Consolidated operating population

32,350,000


32,370,000


32,370,000


32,370,000


32,370,000

Consolidated operating penetration5

15 %


15 %


15 %


15 %


15 %

Capital expenditures (millions)

$           208


$           176


$           136


$           268


$           137

Total cell sites in service

6,950


6,945


6,933


6,916


6,899

Owned towers

4,338


4,336


4,329


4,323


4,310

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

Handset upgrade rate calculated as total handset upgrade transactions divided by average postpaid handset connections.

4

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.

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

3/31/2023


12/31/2022


9/30/2022


6/30/2022


3/31/2022

Residential connections










Broadband










Wireline, Incumbent

247,900


249,100


252,600


252,700


250,100

Wireline, Expansion

62,800


56,100


49,400


44,100


40,600

Cable

204,700


204,800


204,500


204,000


204,600

Total Broadband

515,400


510,000


506,500


500,800


495,200

Video

132,600


135,300


136,600


137,400


140,000

Voice

289,200


291,600


295,500


298,300


301,700

Total Residential connections

937,200


936,900


938,600


936,500


936,900

Commercial connections

229,800


236,000


242,800


250,700


260,000

Total connections

1,167,000


1,173,000


1,181,400


1,187,200


1,196,900











Residential revenue per connection1

$           60.24


$           59.91


$           60.32


$           59.67


$           57.95











Capital expenditures (millions)

$               130


$               165


$               166


$               120


$               105

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

March 31,


2023


2022


2023

vs. 2022

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






Operating revenues






UScellular

$      986


$ 1,010


(2) %

TDS Telecom

253


251


1 %

All Other1

64


54


20 %


1,303


1,315


(1) %

Operating expenses






UScellular






Expenses excluding depreciation, amortization and accretion

780


767


2 %

Depreciation, amortization and accretion

170


171


(1) %

(Gain) loss on asset disposals, net

10


2


N/M

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

—


(1)


N/M


960


939


2 %

TDS Telecom






Expenses excluding depreciation, amortization and accretion

185


169


10 %

Depreciation, amortization and accretion

59


54


9 %

(Gain) loss on asset disposals, net

1


—


N/M


245


223


10 %

All Other1






Expenses excluding depreciation and amortization

66


54


22 %

Depreciation and amortization

3


4


(6) %


69


58


20 %

Total operating expenses

1,274


1,220


4 %

Operating income (loss)






UScellular

26


71


(63) %

TDS Telecom

8


28


(72) %

All Other1

(5)


(4)


(18) %


29


95


(70) %

Investment and other income (expense)






Equity in earnings of unconsolidated entities

44


45


(3) %

Interest and dividend income

5


2


N/M

Interest expense

(53)


(33)


(65) %

Total investment and other income (expense)

(4)


14


N/M

Income before income taxes

25


109


(78) %

Income tax expense

13


37


(66) %

Net income

12


72


(84) %

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

4


11


(68) %

Net income attributable to TDS shareholders

8


61


(87) %

TDS Preferred Share dividends

17


17


—

Net income (loss) attributable to TDS common shareholders

$        (9)


$      44


N/M







Basic weighted average shares outstanding

113


115


(2) %

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

$   (0.08)


$   0.38


N/M







Diluted weighted average shares outstanding

113


116


(3) %

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

$   (0.08)


$   0.37


N/M

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,


2023


2022

(Dollars in millions)




Cash flows from operating activities




Net income

$                 12


$                 72

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




Depreciation, amortization and accretion

232


229

Bad debts expense

27


26

Stock-based compensation expense

3


12

Deferred income taxes, net

9


29

Equity in earnings of unconsolidated entities

(44)


(45)

Distributions from unconsolidated entities

20


19

(Gain) loss on asset disposals, net

11


2

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

—


(1)

Other operating activities

2


—

Changes in assets and liabilities from operations




Accounts receivable

22


14

Equipment installment plans receivable

1


—

Inventory

—


(5)

Accounts payable

(162)


(60)

Customer deposits and deferred revenues

(9)


9

Accrued taxes

1


129

Accrued interest

9


10

Other assets and liabilities

(88)


(59)

Net cash provided by operating activities

46


381





Cash flows from investing activities




Cash paid for additions to property, plant and equipment

(331)


(271)

Cash paid for intangible assets

(5)


(568)

Other investing activities

2


(9)

Net cash used in investing activities

(334)


(848)





Cash flows from financing activities




Issuance of long-term debt

316


776

Repayment of long-term debt

(5)


(127)

Issuance of short-term debt

—


60

Repayment of short-term debt

(60)


—

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

(2)


(2)

Repurchase of TDS Common Shares

(3)


(4)

Repurchase of UScellular Common Shares

—


(10)

Dividends paid to TDS shareholders

(38)


(38)

Distributions to noncontrolling interests

(1)


(1)

Cash paid for software license agreements

(8)


(2)

Other financing activities

(1)


(3)

Net cash provided by financing activities

198


649





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

(90)


182





Cash, cash equivalents and restricted cash




Beginning of period

399


414

End of period

$               309


$               596

Telephone and Data Systems, Inc.

Consolidated Balance Sheet Highlights

(Unaudited)


ASSETS






March 31, 2023


December 31, 2022

(Dollars in millions)




Current assets




Cash and cash equivalents

$                                259


$                                360

Accounts receivable, net

1,131


1,181

Inventory, net

269


268

Prepaid expenses

113


102

Income taxes receivable

60


59

Other current assets

71


58

Total current assets

1,903


2,028





Assets held for sale

18


26





Licenses

4,702


4,699





Goodwill

547


547





Other intangible assets, net

199


204





Investments in unconsolidated entities

519


495





Property, plant and equipment, net

4,872


4,760





Operating lease right-of-use assets

986


995





Other assets and deferred charges

793


796





Total assets

$                          14,539


$                          14,550

Telephone and Data Systems, Inc.

Consolidated Balance Sheet Highlights

(Unaudited)


LIABILITIES AND EQUITY






March 31, 2023


December 31, 2022

(Dollars in millions, except per share amounts)




Current liabilities




Current portion of long-term debt

$                                  20


$                                  19

Accounts payable

344


506

Customer deposits and deferred revenues

277


285

Accrued interest

21


12

Accrued taxes

45


46

Accrued compensation

78


144

Short-term operating lease liabilities

145


146

Other current liabilities

295


356

Total current liabilities

1,225


1,514





Deferred liabilities and credits




Deferred income tax liability, net

974


969

Long-term operating lease liabilities

900


908

Other deferred liabilities and credits

813


813





Long-term debt, net

4,040


3,731





Noncontrolling interests with redemption features

12


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

2,552


2,551

Preferred Shares, par value $0.01 per share

1,074


1,074

Treasury shares, at cost

(474)


(481)

Accumulated other comprehensive income

5


5

Retained earnings

2,658


2,699

Total TDS shareholders' equity

5,816


5,849





Noncontrolling interests

759


754





Total equity

6,575


6,603





Total liabilities and equity

$                          14,539


$                          14,550

Balance Sheet Highlights

(Unaudited)




March 31, 2023




TDS


TDS Corporate


Intercompany


TDS


UScellular


Telecom


& Other


Eliminations


Consolidated

(Dollars in millions)










Cash and cash equivalents

$                  154


$                    94


$                  111


$                (100)


$                 259











Licenses, goodwill and other intangible assets

$               4,692


$                  750


$                      6


$                    —


$              5,448

Investment in unconsolidated entities

477


4


46


(8)


519


$               5,169


$                  754


$                    52


$                    (8)


$              5,967











Property, plant and equipment, net

$               2,658


$               2,125


$                    89


$                    —


$              4,872











Long-term debt, net:










Current portion

$                    15


$                    —


$                      5


$                    —


$                   20

Non-current portion

3,297


3


740


—


4,040


$               3,312


$                      3


$                  745


$                    —


$              4,060

TDS Telecom Highlights

(Unaudited)








Three Months Ended

March 31,


2023


2022


2023

vs. 2022

(Dollars in millions)






Operating revenues






Residential






Wireline, Incumbent

$         86


$         85


1 %

Wireline, Expansion

15


10


44 %

Cable

68


67


1 %

Total residential

169


163


4 %

Commercial

41


44


(7) %

Wholesale

43


44


(4) %

Total service revenues

253


251


1 %

Equipment revenues

—


—


(24) %

Total operating revenues

253


251


1 %







Cost of services

104


96


9 %

Cost of equipment and products

—


—


(31) %

Selling, general and administrative expenses

80


72


11 %

Depreciation, amortization and accretion

59


54


9 %

(Gain) loss on asset disposals, net

1


—


N/M

Total operating expenses

245


223


10 %







Operating income

$           8


$         28


(72) %

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,


2023


2022

(Dollars in millions)




Cash flows from operating activities (GAAP)

$                   46


$                 381

Cash paid for additions to property, plant and equipment

(331)


(271)

Cash paid for software license agreements

(8)


(2)

Free cash flow (Non-GAAP)1

$               (293)


$                 108

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 and Cash paid for software license agreements.

SOURCE Telephone and Data Systems