TDS reports fourth quarter and full year 2022 results

News provided by

Telephone and Data Systems

Feb 16, 2023, 16:05 ET

Investing in our networks; Provides 2023 guidance

CHICAGO, Feb. 16, 2023 /PRNewswire/ --

As previously announced, TDS will hold a teleconference on February 17, 2023 at 9:00 a.m. CST. 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 $1,357 million for the fourth quarter of 2022, versus $1,372 million for the same period one year ago. Net income (loss) attributable to TDS common shareholders and related diluted earnings (loss) per share were $(43) million and $(0.38), respectively, for the fourth quarter of 2022 compared to $14 million and $0.11, respectively, in the same period one year ago.

TDS reported total operating revenues of $5,413 million and $5,329 million for the years ended 2022 and 2021, respectively. Net income (loss) attributable to TDS common shareholders and related diluted earnings (loss) per share were $(7) million and $(0.07), respectively, for the year ended 2022 compared to $117 million and $1.00, respectively, for the year ended 2021.

"The TDS Family of Companies made significant investments in its businesses in 2022, as we looked to strengthen our customer base, expand into new territories, and enhance our network technologies," said LeRoy T. Carlson, Jr., TDS President and CEO. "Many of these investments have had a short-term impact on profitability yet are intended to strengthen our competitiveness and improve returns. 

"In 2022, UScellular focused on expanding ARPU, improving customer results, and a number of related growth opportunities. We saw success in many areas yet were challenged in customer additions. Looking forward, as UScellular celebrates its 40th anniversary in 2023, it will continue to focus on customer growth, cost optimization, and investing in its network.

"TDS Telecom grew its footprint by 9% and delivered 133,000 new marketable fiber service addresses in 2022—its best year yet in terms of fiber service addresses—bringing our total to 582,000. Going forward, TDS Telecom will continue working toward its long-term fiber investment goal of reaching 1.2 million fiber service addresses by 2026."

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 February 16, 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.





UScellular

2023 Estimated
Results

`

Actual Results for

the Year Ended

December 31, 2022

(Dollars in millions)




Service revenues

$3,050-$3,150


$3,125

Adjusted OIBDA1

$725-$875


$790

Adjusted EBITDA1

$875-$1,025


$956

Capital expenditures

$600-$700


$717





TDS Telecom

2023 Estimated
Results


Actual Results for
the Year Ended
December 31, 2022

(Dollars in millions)




Total operating revenues

$1,030-$1,060


$1,020

Adjusted OIBDA1

$260-$290


$288

Adjusted EBITDA1

$260-$290


$291

Capital expenditures

$500-$550


$556

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.


UScellular


TDS Telecom


2023 Estimated
Results


Actual Results for

the Year Ended

December 31, 2022


2023 Estimated
Results


Actual Results for

the Year Ended

December 31, 2022

(Dollars in millions)








Net income (GAAP)

N/A


$35


N/A


$53

Add back:








Income tax expense

N/A


37


N/A


23

Income before income taxes (GAAP)

$10-$160


$72


$40-$70


$76

Add back:








Interest expense

205


163


—


(7)

Depreciation, amortization and accretion expense

645


700


220


215

EBITDA (Non-GAAP)1

$860-$1,010


$935


$260-$290


$284

Add back or deduct:








Loss on impairment of licenses

—


3


—


—

(Gain) loss on asset disposals, net

15


19


—


7

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

—


(1)


—


—

Adjusted EBITDA (Non-GAAP)1

$875-$1,025


$956


$260-$290


$291

Deduct:








Equity in earnings of unconsolidated entities

145


158


—


—

Interest and dividend income

5


8


—


2

Other, net

—


—


—


1

Adjusted OIBDA (Non-GAAP)1

$725-$875


$790


$260-$290


$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 December 31, 2022, can be found on TDS' website at investors.tdsinc.com.

Stock Repurchase

During the fourth quarter of 2022, TDS repurchased 1,159,046 of its Common Shares for $14 million and UScellular repurchased 578,607 of its Common Shares for $14 million.

Conference Call Information

TDS will hold a conference call on February 17, 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 9,300 people as of December 31, 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 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.

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

12/31/2022


9/30/2022


6/30/2022


3/31/2022


12/31/2021

Retail Connections










Postpaid










Total at end of period

4,247,000


4,264,000


4,296,000


4,335,000


4,380,000

Gross additions

154,000


151,000


128,000


126,000


165,000

Feature phones

6,000


5,000


4,000


2,000


3,000

Smartphones

99,000


102,000


90,000


89,000


122,000

Connected devices

49,000


44,000


34,000


35,000


40,000

Net additions (losses)

(17,000)


(31,000)


(40,000)


(44,000)


(12,000)

Feature phones

(6,000)


(6,000)


(8,000)


(10,000)


(7,000)

Smartphones

(14,000)


(16,000)


(23,000)


(26,000)


5,000

Connected devices

3,000


(9,000)


(9,000)


(8,000)


(10,000)

ARPU1

$        50.60


$        50.21


$        50.07


$        49.71


$        48.62

ARPA2

$      130.97


$      130.27


$      130.43


$      129.93


$      127.14

Churn rate3

1.35 %


1.42 %


1.30 %


1.30 %


1.35 %

Handsets

1.12 %


1.15 %


1.10 %


1.10 %


1.10 %

Connected devices

2.99 %


3.40 %


2.73 %


2.70 %


3.08 %

Prepaid










Total at end of period

493,000


493,000


490,000


495,000


513,000

Gross additions

61,000


62,000


56,000


55,000


63,000

Net additions (losses)

—


2,000


(4,000)


(18,000)


(5,000)

ARPU1

$        33.34


$        35.04


$        35.25


$        34.59


$        34.53

Churn rate3

4.11 %


4.07 %


4.07 %


4.84 %


4.39 %

Market penetration at end of period










Consolidated operating population

32,370,000


32,370,000


32,370,000


32,370,000


32,127,000

Consolidated operating penetration4

15 %


15 %


15 %


15 %


15 %

Capital expenditures (millions)

$           176


$           136


$           268


$           137


$           321

Total cell sites in service

6,945


6,933


6,916


6,899


6,898

Owned towers

4,336


4,329


4,323


4,310


4,301


Due to rounding, the sum of quarterly results may not equal the total for the year.

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

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

12/31/2022


9/30/2022


6/30/2022


3/31/2022


12/31/2021

Residential connections










Broadband










Wireline, Incumbent

249,100


252,600


252,700


250,100


250,200

Wireline, Expansion

56,100


49,400


44,100


40,600


36,900

Cable

204,800


204,500


204,000


204,600


203,200

Total Broadband

510,000


506,500


500,800


495,200


490,300

Video

135,300


136,600


137,400


140,000


141,500

Voice

291,600


295,500


298,300


301,700


303,700

Total Residential connections

936,900


938,600


936,500


936,900


935,600

Commercial connections

236,000


242,800


250,700


260,000


264,300

Total connections

1,173,000


1,181,400


1,187,200


1,196,900


1,199,900











Residential revenue per connection1

$           59.91


$           60.32


$           59.67


$           57.95


$           57.86











Capital expenditures (millions)

$               165


$               166


$               120


$               105


$               151


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

December 31,


Year Ended

December 31,


2022


2021


2022

vs. 2021


2022


2021


2022

vs. 2021

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












Operating revenues












UScellular

$ 1,048


$  1,068


(2) %


$ 4,169


$  4,122


1 %

TDS Telecom

257


254


1 %


1,020


1,006


1 %

All Other1

52


50


4 %


224


201


11 %


1,357


1,372


(1) %


5,413


5,329


2 %

Operating expenses












UScellular












Expenses excluding depreciation, amortization and accretion

885


887


—


3,379


3,253


4 %

Depreciation, amortization and accretion

179


169


7 %


700


678


3 %

Loss on impairment of licenses

—


—


—


3


—


N/M

(Gain) loss on asset disposals, net

11


8


28 %


19


23


(18) %

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

—


(1)


78 %


(1)


(2)


52 %


1,075


1,063


1 %


4,100


3,952


4 %

TDS Telecom












Expenses excluding depreciation, amortization and accretion

192


179


8 %


732


696


5 %

Depreciation, amortization and accretion

56


52


8 %


215


198


8 %

(Gain) loss on asset disposals, net

3


1


N/M


7


2


N/M


252


231


9 %


954


896


6 %

All Other1












Expenses excluding depreciation and amortization

52


49


7 %


222


200


11 %

Depreciation and amortization

3


5


(25) %


14


19


(22) %

(Gain) loss on asset disposals, net

—


—


N/M


1


1


N/M


56


54


4 %


237


220


8 %

Total operating expenses

1,383


1,348


3 %


5,291


5,068


4 %

Operating income (loss)












UScellular

(27)


5


N/M


69


170


(59) %

TDS Telecom

5


23


(78) %


66


110


(40) %

All Other1

(4)


(4)


(7) %


(13)


(19)


27 %


(26)


24


N/M


122


261


(53) %

Investment and other income (expense)












Equity in earnings of unconsolidated entities

36


43


(16) %


159


182


(12) %

Interest and dividend income

7


3


N/M


17


11


45 %

Interest expense

(55)


(39)


(41) %


(174)


(232)


25 %

Other, net

—


—


N/M


1


(1)


N/M

Total investment and other income (expense)

(12)


7


N/M


3


(40)


N/M

Income (loss) before income taxes

(38)


31


N/M


125


221


(44) %

Income tax expense (benefit)

(8)


(5)


(54) %


53


33


59 %

Net income (loss)

(30)


36


N/M


72


188


(62) %

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

(4)


5


N/M


10


32


(69) %

Net income (loss) attributable to TDS shareholders

(26)


31


N/M


62


156


(61) %

TDS Preferred Share dividends

17


17


—


69


39


79 %

Net income (loss) attributable to TDS common shareholders

$     (43)


$     14


N/M


$       (7)


$   117


N/M













Basic weighted average shares outstanding

113


115


(1) %


114


115


(1) %

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

$  (0.38)


$  0.12


N/M


$  (0.07)


$  1.03


N/M













Diluted weighted average shares outstanding

113


116


(2) %


114


116


(1) %

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

$  (0.38)


$  0.11


N/M


$  (0.07)


$  1.00


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)


Year Ended December 31,

2022


2021

(Dollars in millions)




Cash flows from operating activities




Net income

$                 72


$               188

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




Depreciation, amortization and accretion

929


895

Bad debts expense

138


60

Stock-based compensation expense

42


49

Deferred income taxes, net

47


52

Equity in earnings of unconsolidated entities

(159)


(182)

Distributions from unconsolidated entities

145


180

Loss on impairment of licenses

3


—

(Gain) loss on asset disposals, net

27


26

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

(1)


(2)

Other operating activities

10


61

Changes in assets and liabilities from operations




Accounts receivable

(69)


(22)

Equipment installment plans receivable

(199)


(116)

Inventory

(90)


(25)

Accounts payable

32


(69)

Customer deposits and deferred revenues

48


43

Accrued taxes

127


(49)

Other assets and liabilities

53


14

Net cash provided by operating activities

1,155


1,103





Cash flows from investing activities




Cash paid for additions to property, plant and equipment

(1,161)


(1,131)

Cash paid for licenses and other intangible assets

(614)


(1,308)

Cash received from divestitures and exchanges

8


3

Advance payments for license acquisitions

—


(20)

Other investing activities

(16)


(6)

Net cash used in investing activities

(1,783)


(2,462)





Cash flows from financing activities




Issuance of long-term debt

1,154


1,543

Repayment of long-term debt

(332)


(2,081)

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

(40)


(8)

Repurchase of UScellular Common Shares

(43)


(31)

Dividends paid to TDS shareholders

(151)


(119)

Payment of debt and equity issuance costs

(2)


(62)

Distributions to noncontrolling interests

(3)


(3)

Cash paid for software license agreements

(23)


(9)

Other financing activities

2


2

Net cash provided by financing activities

613


321





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

(15)


(1,038)





Cash, cash equivalents and restricted cash




Beginning of period

414


1,452

End of period

$               399


$               414

Telephone and Data Systems, Inc.

Consolidated Balance Sheet Highlights

(Unaudited)


ASSETS

December 31,

2022


2021

(Dollars in millions)




Current assets




Cash and cash equivalents

$                   360


$                   367

Accounts receivable, net

1,181


1,151

Inventory, net

268


178

Prepaid expenses

102


103

Income taxes receivable

59


184

Other current assets

58


61

Total current assets

2,028


2,044





Assets held for sale

26


18





Licenses

4,699


4,097





Goodwill

547


547





Other intangible assets, net

204


197





Investments in unconsolidated entities

495


479





Property, plant and equipment, net

4,760


4,361





Operating lease right-of-use assets

995


1,040





Other assets and deferred charges

796


710





Total assets

$              14,550


$              13,493

Telephone and Data Systems, Inc.

Consolidated Balance Sheet Highlights

(Unaudited)


LIABILITIES AND EQUITY

December 31,

2022


2021

(Dollars in millions, except per share amounts)




Current liabilities




Current portion of long-term debt

$                     19


$                        6

Accounts payable

506


481

Customer deposits and deferred revenues

285


236

Accrued interest

12


10

Accrued taxes

46


45

Accrued compensation

144


137

Short-term operating lease liabilities

146


141

Other current liabilities

356


124

Total current liabilities

1,514


1,180





Deferred liabilities and credits




Deferred income tax liability, net

969


921

Long-term operating lease liabilities

908


960

Other deferred liabilities and credits

813


759





Long-term debt, net

3,731


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

2,551


2,496

Preferred Shares, par value $0.01 per share

1,074


1,074

Treasury shares, at cost

(481)


(461)

Accumulated other comprehensive income

5


5

Retained earnings

2,699


2,812

Total TDS shareholders' equity

5,849


5,927





Noncontrolling interests

754


807





Total equity

6,603


6,734





Total liabilities and equity

$              14,550


$              13,493

Balance Sheet Highlights

(Unaudited)



December 31, 2022


UScellular


TDS

Telecom


TDS Corporate

& Other


Intercompany

Eliminations


TDS

Consolidated

(Dollars in millions)










Cash and cash equivalents

$                  273


$                  104


$                    95


$                (112)


$                  360











Licenses, goodwill and other intangible assets

$              4,690


$                  755


$                      5


$                    —


$              5,450

Investment in unconsolidated entities

452


4


46


(7)


495


$              5,142


$                  759


$                    51


$                    (7)


$              5,945











Property, plant and equipment, net

$              2,624


$              2,047


$                    89


$                    —


$              4,760











Long-term debt, net:










Current portion

$                    13


$                    —


$                      6


$                    —


$                    19

Non-current portion

3,187


3


541


—


3,731


$              3,200


$                      3


$                  547


$                    —


$              3,750

TDS Telecom Highlights

(Unaudited)



Three Months Ended

December 31,


Year Ended

December 31,


2022


2021


2022 vs.
2021


2022


2021


2022 vs.
2021

(Dollars in millions)












Operating revenues












Residential












Wireline, Incumbent

$         87


$         86


1 %


$       350


$       345


1 %

Wireline, Expansion

14


10


42 %


49


34


46 %

Cable

67


66


1 %


270


263


3 %

Total residential

168


162


4 %


669


641


4 %

Commercial

43


45


(5) %


173


183


(5) %

Wholesale

45


46


(2) %


177


181


(2) %

Total service revenues

256


254


1 %


1,019


1,005


1 %

Equipment revenues

—


—


5 %


1


1


(5) %

Total operating revenues

257


254


1 %


1,020


1,006


1 %













Cost of services

110


103


6 %


418


404


3 %

Cost of equipment and products

—


—


(58) %


1


1


(2) %

Selling, general and administrative expenses

83


75


10 %


313


291


8 %

Depreciation, amortization and accretion

56


52


8 %


215


198


8 %

(Gain) loss on asset disposals, net

3


1


N/M


7


2


N/M

Total operating expenses

252


231


9 %


954


896


6 %













Operating income

$           5


$         23


(78) %


$         66


$       110


(40) %


N/M - Percentage change not meaningful.

Numbers may not foot due to rounding.

Telephone and Data Systems, Inc.

Financial Measures and Reconciliations


Free Cash Flow


Three Months Ended

December 31,


Year Ended

December 31,


2022


2021


2022


2021

(Dollars in millions)








Cash flows from operating activities (GAAP)

$                 255


$                 239


$              1,155


$              1,103

Cash paid for additions to property, plant and equipment

(367)


(404)


(1,161)


(1,131)

Cash paid for software license agreements

(18)


(5)


(23)


(9)

Free cash flow (Non-GAAP)1

$               (130)


$               (170)


$                  (29)


$                  (37)



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