TDS reports second quarter 2022 results

News provided by

Telephone and Data Systems

Aug 04, 2022, 16:05 ET

2022 guidance reaffirmed

CHICAGO, Aug. 4, 2022 /PRNewswire/ -- 

As previously announced, TDS will hold a teleconference on August 5, 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 $1,349 million for the second quarter of 2022, versus $1,311 million for the same period one year ago. Net income attributable to TDS common shareholders and related diluted earnings per share were $18 million and $0.15, respectively, for the second quarter of 2022 compared to $20 million and $0.17, respectively, in the same period one year ago.

"The TDS Family of Companies achieved a solid position halfway through the year," said LeRoy T. Carlson, Jr., TDS President and CEO. "UScellular is vigorously enhancing its network, and TDS Telecom is executing on its strategy to drive residential broadband growth.

"At UScellular, higher ARPU contributed to service revenue growth for the second quarter. We are generating momentum in several of our growth areas, including fixed wireless and our tower portfolio.

"TDS Telecom continues to actively deploy fiber in expansion communities and inside our incumbent markets which, combined with higher revenue per connection, generated strong growth in residential broadband revenue in the quarter."

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 August 4, 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

Unchanged

Adjusted OIBDA1

$750-$900

Unchanged

Adjusted EBITDA1

$925-$1,075

Unchanged

Capital expenditures

$700-$800

Unchanged




TDS Telecom

Previous

Current

(Dollars in millions)



Total operating revenues

$1,010-$1,040

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 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-$195


$40-$70

Add back:




Interest expense

160


—

Depreciation, amortization and accretion expense

705


220

EBITDA (Non-GAAP)1

$910-$1,060


$260-$290

Add back or deduct:




(Gain) loss on asset disposals, net

15


—

Adjusted EBITDA (Non-GAAP)1

$925-$1,075


$260-$290

Deduct:




Equity in earnings of unconsolidated entities

170


—

Interest and dividend income

5


—

Adjusted OIBDA (Non-GAAP)1

$750-$900


$260-$290


Actual Results


Six Months Ended

June 30, 2022


Year Ended

December 31, 2021


UScellular


TDS

Telecom


UScellular


TDS

Telecom

(Dollars in millions)








Net income (GAAP)

$             74


$             41


$           160


$             90

Add back:








Income tax expense

50


14


20


24

Income before income taxes (GAAP)

$           124


$             56


$           180


$           114

Add back:








Interest expense

73


(4)


175


(5)

Depreciation, amortization and accretion expense

342


106


678


198

EBITDA (Non-GAAP)1

$           539


$           158


$       1,033


$           308

Add back or deduct:








Loss on impairment of licenses

3


—


—


—

(Gain) loss on asset disposals, net

8


1


23


2

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

—


—


(2)


—

Adjusted EBITDA (Non-GAAP)1

$           550


$           159


$       1,054


$           310

Deduct:








Equity in earnings of unconsolidated entities

82


—


179


—

Interest and dividend income

4


—


6


1

Other, net

—


—


—


(1)

Adjusted OIBDA (Non-GAAP)1

$           464


$           158


$           869


$           310



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 June 30, 2022, can be found on TDS' website at investors.tdsinc.com.

Stock Repurchase
During the second quarter of 2022, TDS repurchased 966,124 of its Common Shares for $16 million and UScellular repurchased 294,721 of its Common Shares for $9 million.

Conference Call Information
TDS will hold a conference call on August 5, 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 8,900 associates as of June 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

6/30/2022


3/31/2022


12/31/2021


9/30/2021


6/30/2021

Retail Connections










Postpaid










Total at end of period

4,296,000


4,335,000


4,380,000


4,391,000


4,399,000

Gross additions

128,000


126,000


165,000


145,000


141,000

Feature phones

4,000


2,000


3,000


2,000


3,000

Smartphones

90,000


89,000


122,000


103,000


98,000

Connected devices

34,000


35,000


40,000


40,000


40,000

Net additions (losses)

(40,000)


(44,000)


(12,000)


(8,000)


(6,000)

Feature phones

(8,000)


(10,000)


(7,000)


(7,000)


(7,000)

Smartphones

(23,000)


(26,000)


5,000


2,000


6,000

Connected devices

(9,000)


(8,000)


(10,000)


(3,000)


(5,000)

ARPU1,2

$        50.07


$        49.71


$        48.62


$        48.12


$        47.74

ARPA1,3

$      130.43


$      129.93


$      127.14


$      125.99


$      125.25

Churn rate4

1.30 %


1.30 %


1.35 %


1.15 %


1.11 %

Handsets

1.10 %


1.10 %


1.10 %


0.95 %


0.88 %

Connected devices

2.73 %


2.70 %


3.08 %


2.59 %


2.69 %

Prepaid










Total at end of period

490,000


495,000


513,000


518,000


507,000

Gross additions

56,000


55,000


63,000


74,000


65,000

Net additions (losses)

(4,000)


(18,000)


(5,000)


11,000


10,000

ARPU2

$        35.25


$        34.59


$        34.53


$        35.05


$        35.64

Churn rate4

4.07 %


4.84 %


4.39 %


4.09 %


3.66 %

Market penetration at end of period










Consolidated operating population

32,370,000


32,370,000


32,127,000


31,865,000


31,493,000

Consolidated operating penetration5

15 %


15 %


15 %


16 %


16 %

Capital expenditures (millions)

$           268


$           137


$           321


$           185


$           148

Total cell sites in service

6,916


6,899


6,898


6,857


6,819

Owned towers

4,323


4,310


4,301


4,274


4,278




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.

2

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.

3

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.

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

6/30/2022


3/31/2022


12/31/2021


9/30/2021


6/30/2021

Residential connections










Broadband










Wireline, Incumbent

252,700


250,100


250,200


252,100


249,200

Wireline, Expansion

44,100


40,600


36,900


32,600


28,300

Cable

204,000


204,600


203,200


202,700


201,200

Total Broadband

500,800


495,200


490,300


487,400


478,700

Video

137,400


140,000


141,500


143,100


143,200

Voice

298,300


301,700


303,700


306,300


308,100

Total Residential connections

936,500


936,900


935,600


936,800


930,100

Commercial connections

250,700


260,000


264,300


269,000


274,400

Total connections

1,187,200


1,196,900


1,199,900


1,205,700


1,204,500











Residential revenue per connection1

$           59.67


$           57.95


$           57.86


$           57.75


$           57.66











Capital expenditures (millions)

$               120


$               105


$               151


$                 91


$                 99



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

June 30,


Six Months Ended

June 30,


2022


2021


2022

vs. 2021


2022


2021


2022

vs. 2021

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












Operating revenues












UScellular

$   1,027


$ 1,014


1 %


$   2,037


$ 2,037


–

TDS Telecom

256


252


2 %


507


501


1 %

All Other2

66


45


47 %


120


91


32 %


1,349


1,311


3 %


2,664


2,629


1 %

Operating expenses












UScellular












Expenses excluding depreciation, amortization and accretion

806


796


1 %


1,573


1,561


1 %

Depreciation, amortization and accretion

172


180


(4) %


342


350


(2) %

Loss on impairment of licenses

3


—


N/M


3


—


N/M

(Gain) loss on asset disposals, net

6


2


N/M


8


7


7 %

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

—


—


N/M


—


(1)


52 %


987


978


1 %


1,926


1,917


–

TDS Telecom












Expenses excluding depreciation, amortization and accretion

180


174


4 %


349


342


2 %

Depreciation, amortization and accretion

52


49


6 %


106


98


8 %

(Gain) loss on asset disposals, net

1


1


8 %


1


1


6 %


233


224


4 %


456


441


3 %

All Other1












Expenses excluding depreciation and amortization

61


46


35 %


116


94


25 %

Depreciation and amortization

5


5


(24) %


8


9


(20) %


66


51


29 %


124


103


21 %

Total operating expenses

1,286


1,253


3 %


2,506


2,461


2 %

Operating income (loss)












UScellular

40


36


10 %


111


120


(8) %

TDS Telecom

23


28


(18) %


51


60


(14) %

All Other2

—


(6)


N/M


(4)


(12)


65 %


63


58


8 %


158


168


(6) %

Investment and other income (expense)












Equity in earnings of unconsolidated entities

38


48


(21) %


83


90


(8) %

Interest and dividend income

5


3


77 %


7


6


7 %

Interest expense

(40)


(86)


53 %


(72)


(138)


48 %

Other, net

—


—


N/M


—


(1)


N/M

Total investment and other income (expense)

3


(35)


N/M


18


(43)


N/M

Income before income taxes

66


23


N/M


176


125


41 %

Income tax expense (benefit)

27


(11)


N/M


65


20


N/M

Net income

39


34


15 %


111


105


6 %

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

4


7


(35) %


15


19


(20) %

Net income attributable to TDS shareholders

35


27


28 %


96


86


11 %

TDS Preferred Share dividends

17


7


N/M


35


9


N/M

Net income attributable to TDS common shareholders

$        18


$      20


(13) %


$        61


$      77


(20) %













Basic weighted average shares outstanding

115


115


–


115


115


–

Basic earnings per share attributable to TDS common shareholders

$     0.15


$   0.18


(13) %


$     0.53


$   0.67


(21) %













Diluted weighted average shares outstanding

116


116


–


116


116


–

Diluted earnings per share attributable to TDS common shareholders

$     0.15


$   0.17


(12) %


$     0.52


$   0.65


(20) %



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)



Six Months Ended

June 30,


2022


2021

(Dollars in millions)




Cash flows from operating activities




Net income

$               111


$               105

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




Depreciation, amortization and accretion

456


457

Bad debts expense

54


22

Stock-based compensation expense

23


24

Deferred income taxes, net

52


40

Equity in earnings of unconsolidated entities

(83)


(90)

Distributions from unconsolidated entities

80


80

Loss on impairment of licenses

3


—

(Gain) loss on asset disposals, net

9


8

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

—


(1)

Other operating activities

3


37

Changes in assets and liabilities from operations




Accounts receivable

(25)


37

Equipment installment plans receivable

(25)


(32)

Inventory

(35)


(35)

Accounts payable

(6)


(106)

Customer deposits and deferred revenues

7


6

Accrued taxes

131


(25)

Accrued interest

1


(3)

Other assets and liabilities

(22)


(43)

Net cash provided by operating activities

734


481





Cash flows from investing activities




Cash paid for additions to property, plant and equipment

(526)


(457)

Cash paid for intangible assets

(585)


(1,264)

Cash received from investments

—


3

Cash received from divestitures and exchanges

1


1

Advance payments for license acquisitions

(1)


—

Other investing activities

(11)


2

Net cash used in investing activities

(1,122)


(1,715)





Cash flows from financing activities




Issuance of long-term debt

776


1,192

Repayment of long-term debt

(228)


(1,301)

Issuance of short-term debt

60


—

Issuance of TDS Preferred Shares

—


420

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)


(13)

Repurchase of TDS Common Shares

(20)


(3)

Repurchase of UScellular Common Shares

(18)


(2)

Dividends paid to TDS shareholders

(76)


(49)

Payment of debt and equity issuance costs

(2)


(30)

Distributions to noncontrolling interests

(2)


(2)

Other financing activities

(2)


(6)

Net cash provided by financing activities

479


201





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

91


(1,033)





Cash, cash equivalents and restricted cash




Beginning of period

414


1,452

End of period

$               505


$               419

Telephone and Data Systems, Inc.

Consolidated Balance Sheet Highlights

(Unaudited)


ASSETS






June 30, 2022


December 31, 2021

(Dollars in millions)




Current assets




Cash and cash equivalents

$                                466


$                                367

Accounts receivable, net

1,154


1,151

Inventory, net

213


178

Prepaid expenses

106


103

Income taxes receivable

58


184

Other current assets

54


61

Total current assets

2,051


2,044





Assets held for sale

17


18





Licenses

4,686


4,097





Goodwill

547


547





Other intangible assets, net

208


197





Investments in unconsolidated entities

483


479





Property, plant and equipment, net

4,553


4,361





Operating lease right-of-use assets

1,022


1,040





Other assets and deferred charges

675


710





Total assets

$                          14,242


$                          13,493

Telephone and Data Systems, Inc.

Consolidated Balance Sheet Highlights

(Unaudited)


LIABILITIES AND EQUITY






June 30, 2022


December 31, 2021

(Dollars in millions, except per share amounts)




Current liabilities




Current portion of long-term debt

$                                  11


$                                    6

Accounts payable

443


481

Customer deposits and deferred revenues

243


236

Accrued interest

11


10

Accrued taxes

42


45

Accrued compensation

98


137

Short-term operating lease liabilities

146


141

Other current liabilities

240


124

Total current liabilities

1,234


1,180





Deferred liabilities and credits




Deferred income tax liability, net

971


921

Long-term operating lease liabilities

940


960

Other deferred liabilities and credits

879


759





Long-term debt, net

3,463


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

2,511


2,496

Preferred Shares, par value $0.01 per share

1,074


1,074

Treasury shares, at cost

(463)


(461)

Accumulated other comprehensive income

6


5

Retained earnings

2,810


2,812

Total TDS shareholders' equity

5,939


5,927





Noncontrolling interests

804


807





Total equity

6,743


6,734





Total liabilities and equity

$                          14,242


$                          13,493

Balance Sheet Highlights

(Unaudited)




June 30, 2022




TDS


TDS
Corporate


Intercompany


TDS


UScellular


Telecom


& Other


Eliminations


Consolidated

(Dollars in millions)










Cash and cash equivalents

$                  320


$                  130


$                  149


$                (133)


$                  466











Licenses, goodwill and other intangible assets

$              4,677


$                  758


$                      6


$                    —


$              5,441

Investment in unconsolidated entities

441


4


46


(8)


483


$              5,118


$                  762


$                    52


$                     (8)


$              5,924











Property, plant and equipment, net

$              2,671


$              1,797


$                    85


$                    —


$              4,553











Long-term debt, net:










Current portion

$                      8


$                    —


$                      3


$                    —


$                    11

Non-current portion

3,118


3


342


—


3,463


$              3,126


$                      3


$                  345


$                    —


$              3,474

TDS Telecom Highlights

(Unaudited)














Three Months Ended

June 30,


Six Months Ended

June 30,


2022


2021


2022

vs. 2021


2022


2021


2022

vs. 2021

(Dollars in millions)












Operating revenues












Residential












Wireline, Incumbent

$         88


$         86


2 %


$       173


$       171


1 %

Wireline, Expansion

12


8


48 %


22


15


51 %

Cable

68


66


3 %


135


131


3 %

Total residential

168


160


5 %


330


317


4 %

Commercial

44


46


(6) %


87


93


(6) %

Wholesale

45


45


(1) %


89


91


(2) %

Total service revenues

256


251


2 %


507


500


1 %

Equipment revenues

—


—


(34) %


1


1


(6) %

Total operating revenues

256


252


2 %


507


501


1 %













Cost of services

103


101


2 %


199


199


–

Cost of equipment and products

—


—


(9) %


—


—


11 %

Selling, general and administrative expenses

77


73


6 %


150


143


4 %

Depreciation, amortization and accretion

52


49


6 %


106


98


8 %

(Gain) loss on asset disposals, net

1


1


8 %


1


1


6 %

Total operating expenses

233


224


4 %


456


441


3 %













Operating income

$         23


$         28


(18) %


$         51


$         60


(14) %


Numbers may not foot due to rounding.

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

Free Cash Flow



Three Months Ended

June 30,


Six Months Ended

June 30,


2022


2021


2022


2021

(Dollars in millions)








Cash flows from operating activities (GAAP)

$                 352


$                 315


$                 734


$                 481

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

256


236


526


457

Free cash flow (Non-GAAP)1

$                   96


$                   79


$                 208


$                   24



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