UScellular reports third quarter 2021 results

Executing on strategic priorities

News provided by

United States Cellular Corporation

Nov 04, 2021, 16:05 ET

CHICAGO, Nov. 4, 2021 /PRNewswire/ --

As previously announced, UScellular will hold a teleconference November 4, 2021, at 4:00 p.m. CDT. Listen to the call live via the Events & Presentations page of investors.uscellular.com.

United States Cellular Corporation (NYSE:USM) reported total operating revenues of $1,016 million for the third quarter of 2021, versus $1,027 million for the same period one year ago. Service revenues totaled $788 million, versus $775 million for the same period a year ago. Net income attributable to UScellular shareholders and related diluted earnings per share were $34 million and $0.38, respectively, for the third quarter of 2021 compared to $85 million and $0.97, respectively, in the same period one year ago.

"UScellular's third quarter results show continued growth in retail service revenue, driven in part by the positive impact of postpaid ARPU," said Laurent Therivel, UScellular President and CEO. "Prepaid results have also continued to improve as we have progressed through the year.

"Our business and government and tower operations are gaining momentum towards the growth we believe is achievable in their respective areas. Leveraging our regional strategy, we are optimizing promotions that balance subscriber growth and profitability as we head into the upcoming holiday season.

"Network performance is a hallmark of our value proposition. Our 5G and network modernization programs are on track, and we are optimistic on the use of millimeter wave spectrum for fixed wireless access and its potential to serve rural customers. We are continuing trials to validate network performance and customer experience as we look to bring this high-speed product to market.

"I am constantly impressed with our team at UScellular and the resilience that they are displaying through the pandemic. As workforce shortages become an increasing concern, UScellular's associate retention rates remain very high, evidence of our strong associate engagement."

2021 Estimated Results

UScellular's current estimates of full-year 2021 results are shown below. Such estimates represent management's view as of November 4, 2021 and should not be assumed to be current as of any future date. UScellular 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


Previous

Current

(Dollars in millions)



Service revenues

$3,050-$3,150

$3,075-$3,125

Adjusted OIBDA1

$850-$950

Unchanged

Adjusted EBITDA1

$1,025-$1,125

Unchanged

Capital expenditures

$775-$875

$700-$800

The following table reconciles EBITDA, Adjusted EBITDA and Adjusted OIBDA to the corresponding GAAP measures, Net income or Income before income taxes. In providing 2021 estimated results, UScellular has not completed the below reconciliation to Net income because it does not provide guidance for income taxes. Although potentially significant, UScellular believes that the impact of income taxes cannot be reasonably predicted; therefore, UScellular is unable to provide such guidance.




Actual Results


2021 Estimated
Results


Nine Months Ended
September 30, 2021


Year Ended
December 31, 2020

(Dollars in millions)






Net income (GAAP)

N/A


$

132


$

233

Add back:






Income tax expense

N/A


31


17

Income before income taxes (GAAP)

$155-$255


$

163


$

250

Add back:






Interest expense

180


144


112

Depreciation, amortization and accretion expense

675


510


683

EBITDA (Non-GAAP)1

$1,010-$1,110


$

817


$

1,045

Add back or deduct:






(Gain) loss on asset disposals, net

15


15


25

(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

$1,025-$1,125


$

831


$

1,063

Deduct:






Equity in earnings of unconsolidated entities

170


137


179

Interest and dividend income

5


5


8

Adjusted OIBDA (Non-GAAP)1

$850-$950


$

689


$

876


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. UScellular 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 UScellular's 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 UScellular's financial data in evaluating the effectiveness of its operations and underlying business trends in a manner that is consistent with management's evaluation of business performance. Adjusted EBITDA shows adjusted earnings before interest, taxes, depreciation, amortization and accretion, and gains and losses, while Adjusted OIBDA reduces this measure further to exclude Equity in earnings of unconsolidated entities and Interest and dividend income in order to more effectively show the performance of operating activities excluding investment activities. The table above reconciles EBITDA, Adjusted EBITDA and Adjusted OIBDA to the corresponding GAAP measure, Net income or Income before income taxes. Additional information and reconciliations related to Non-GAAP financial measures for September 30, 2021, can be found on UScellular's website at investors.uscellular.com.

Stock Repurchase
During the third quarter of 2021, UScellular repurchased 626,410 Common Shares for $20 million.

Conference Call Information
UScellular will hold a conference call on November 4, 2021 at 4:00 p.m. Central Time.

Before the call, certain financial and statistical information to be discussed during the call will be posted to investors.uscellular.com. The call will be archived on the Events & Presentations page of investors.uscellular.com.

About UScellular
United States Cellular Corporation provides a comprehensive range of wireless products and services, excellent customer support, and a high-quality network to customers with 5.0 million connections in 21 states. The Chicago-based company employed approximately 4,900 associates as of September 30, 2021. At the end of the third quarter of 2021, Telephone and Data Systems, Inc. owned 82 percent of UScellular. For more information about UScellular, visit uscellular.com.

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; UScellular's 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 UScellular's businesses; the ability of the company to successfully construct and manage its networks; difficulties involving third parties; uncertainties in UScellular's future cash flows and liquidity and access to the capital markets; the ability to make payments on 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; potential conflicts of interests between TDS and UScellular; 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 UScellular's Form 10-K, as updated by any UScellular Form 10-Q filed subsequent to such Form 10-K.

For more information about UScellular, visit: www.uscellular.com

United States Cellular Corporation

Summary Operating Data (Unaudited)

As of or for the Quarter Ended

9/30/2021


6/30/2021


3/31/2021


12/31/2020


9/30/2020

Retail Connections










Postpaid










Total at end of period

4,391,000



4,399,000



4,406,000



4,412,000



4,401,000


Gross additions

145,000



141,000



143,000



171,000



168,000


Feature phones

2,000



3,000



3,000



2,000



4,000


Smartphones

103,000



98,000



101,000



117,000



98,000


Connected devices

40,000



40,000



39,000



52,000



66,000


Net additions (losses)

(8,000)



(6,000)



(6,000)



11,000



28,000


Feature phones

(7,000)



(7,000)



(9,000)



(9,000)



(8,000)


Smartphones

2,000



6,000



6,000



12,000



8,000


Connected devices

(3,000)



(5,000)



(3,000)



8,000



28,000


ARPU1,2

$

48.12



$

47.74



$

47.65



$

47.51



$

47.10


ARPA1,3

$

125.99



$

125.25



$

125.25



$

124.87



$

123.27


Churn rate4

1.15

%


1.11

%


1.12

%


1.21

%


1.06

%

Handsets

0.95

%


0.88

%


0.92

%


1.01

%


0.88

%

Connected devices

2.59

%


2.69

%


2.53

%


2.64

%


2.35

%

Prepaid










Total at end of period

518,000



507,000



496,000



499,000



506,000


Gross additions

74,000



65,000



62,000



56,000



65,000


Net additions (losses)

11,000



10,000



(3,000)



(8,000)



11,000


ARPU2

$

35.05



$

35.64



$

35.25



$

35.15



$

35.45


Churn rate4

4.09

%


3.66

%


4.37

%


4.24

%


3.59

%

Total connections at end of period5

4,972,000



4,967,000



4,961,000



4,968,000



4,962,000


Market penetration at end of period










Consolidated operating population

31,865,000



31,493,000



31,493,000



31,314,000



31,314,000


Consolidated operating penetration6

16

%


16

%


16

%


16

%


16

%

Capital expenditures (millions)

$

185



$

148



$

125



$

320



$

216


Total cell sites in service

6,857



6,819



6,802



6,797



6,758


Owned towers

4,274



4,278



4,270



4,271



4,246



1

Q3 2021 Postpaid ARPU and ARPA amounts exclude $9 million of postpaid revenue related to a third quarter out-of-period error.

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

Includes reseller and other connections.

6

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.

United States Cellular Corporation

Consolidated Statement of Operations Highlights

(Unaudited)






Three Months Ended
September 30,


Nine Months Ended
September 30,


2021


2020


2021
vs. 2020


2021


2020


2021
vs. 2020

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












Operating revenues












Service1

$

788



$

775



2

%


$

2,333



$

2,290



2

%

Equipment sales

228



252



(10)

%


720



674



7

%

Total operating revenues

1,016



1,027



(1)

%


3,053



2,964



3

%













Operating expenses












System operations (excluding Depreciation, amortization and
accretion reported below)

205



203



1

%


594



580



2

%

Cost of equipment sold

252



257



(2)

%


786



692



14

%

Selling, general and administrative

346



335



3

%


984



994



(1)

%

Depreciation, amortization and accretion

160



161



–


510



516



(1)

%

(Gain) loss on asset disposals, net

8



6



29

%


15



14



7

%

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

—



—



N/M


(1)



—



N/M

Total operating expenses

971



962



1

%


2,888



2,796



3

%













Operating income

45



65



(31)

%


165



168



(2)

%













Investment and other income (expense)












Equity in earnings of unconsolidated entities

48



48



–


137



137



–

Interest and dividend income

1



2



(23)

%


5



6



(28)

%

Gain (loss) on investments

—



3



N/M


—



3



N/M

Interest expense

(45)



(29)



(56)

%


(144)



(76)



(86)

%

Total investment and other income (expense)

4



24



(82)

%


(2)



70



N/M













Income before income taxes

49



89



(44)

%


163



238



(31)

%

Income tax expense

14



4



N/M


31



11



N/M

Net income

35



85



(59)

%


132



227



(42)

%

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

1



—



33

%


4



3



21

%

Net income attributable to UScellular shareholders

$

34



$

85



(60)

%


$

128



$

224



(43)

%













Basic weighted average shares outstanding

86



86



1

%


87



86



1

%

Basic earnings per share attributable to UScellular
shareholders

$

0.39



$

0.98



(61)

%


$

1.48



$

2.60



(43)

%













Diluted weighted average shares outstanding

87



88



–


88



87



–

Diluted earnings per share attributable to UScellular
shareholders

$

0.38



$

0.97



(60)

%


$

1.46



$

2.56



(43)

%



N/M - Percentage change not meaningful



1      

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

United States Cellular Corporation

Consolidated Statement of Cash Flows

(Unaudited)


Nine Months Ended
September 30,


2021


2020

(Dollars in millions)




Cash flows from operating activities




Net income

$

132



$

227


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




Depreciation, amortization and accretion

510



516


Bad debts expense

34



52


Stock-based compensation expense

20



25


Deferred income taxes, net

47



158


Equity in earnings of unconsolidated entities

(137)



(137)


Distributions from unconsolidated entities

106



118


(Gain) loss on asset disposals, net

15



14


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

(1)



—


(Gain) loss on investments

—



(3)


Other operating activities

31



1


Changes in assets and liabilities from operations




Accounts receivable

19



31


Equipment installment plans receivable

(44)



13


Inventory

10



5


Accounts payable

(33)



77


Customer deposits and deferred revenues

10



(23)


Accrued taxes

(36)



(102)


Accrued interest

7



14


Other assets and liabilities

(23)



(36)


Net cash provided by operating activities

667



950






Cash flows from investing activities




Cash paid for additions to property, plant and equipment

(456)



(690)


Cash paid for licenses

(1,263)



(169)


Cash received from investments

3



1


Cash paid for investments

—



(1)


Cash received from divestitures and exchanges

2



1


Advance payments for license acquisitions

(20)



—


Other investing activities

2



3


Net cash used in investing activities

(1,732)



(855)






Cash flows from financing activities




Issuance of long-term debt

1,217



625


Repayment of long-term debt

(1,117)



(6)


Common Shares reissued for benefit plans, net of tax payments

(16)



(12)


Repurchase of Common Shares

(21)



(23)


Payment of debt issuance costs

(20)



(20)


Distributions to noncontrolling interests

(2)



(2)


Other financing activities

(4)



—


Net cash provided by financing activities

37



562






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

(1,028)



657






Cash, cash equivalents and restricted cash




Beginning of period

1,291



291


End of period

$

263



$

948


United States Cellular Corporation

Consolidated Balance Sheet Highlights

(Unaudited)


ASSETS






September 30, 2021


December 31, 2020

(Dollars in millions)




Current assets




Cash and cash equivalents

$

231



$

1,271


Short-term investments

—



3


Accounts receivable, net

978



998


Inventory, net

136



146


Prepaid expenses

59



51


Income taxes receivable

125



125


Other current assets

42



29


Total current assets

1,571



2,623






Assets held for sale

3



2






Licenses

4,102



2,629






Investments in unconsolidated entities

466



435






Property, plant and equipment, net

2,457



2,466






Operating lease right-of-use assets

953



924






Other assets and deferred charges

592



602






Total assets

$

10,144



$

9,681


United States Cellular Corporation

Consolidated Balance Sheet Highlights

(Unaudited)


LIABILITIES AND EQUITY






September 30, 2021


December 31, 2020

(Dollars in millions, except per share amounts)




Current liabilities




Current portion of long-term debt

$

3



$

2


Accounts payable

372



387


Customer deposits and deferred revenues

161



151


Accrued taxes

32



48


Accrued compensation

69



82


Short-term operating lease liabilities

126



116


Other current liabilities

93



85


Total current liabilities

856



871






Liabilities held for sale

—



1






Deferred liabilities and credits




Deferred income tax liability, net

680



633


Long-term operating lease liabilities

890



875


Other deferred liabilities and credits

565



376






Long-term debt, net

2,604



2,489






Noncontrolling interests with redemption features

10



10






Equity




UScellular shareholders' equity




Series A Common and Common Shares, par value $1.00 per share

88



88


Additional paid-in capital

1,671



1,651


Treasury shares

(58)



(67)


Retained earnings

2,822



2,739


Total UScellular shareholders' equity

4,523



4,411






Noncontrolling interests

16



15






Total equity

4,539



4,426






Total liabilities and equity

$

10,144



$

9,681


United States Cellular Corporation

Financial Measures and Reconciliations

(Unaudited)


Free Cash Flow



Three Months Ended
September 30,


Nine Months Ended
September 30,


2021


2020


2021


2020

(Dollars in millions)








Cash flows from operating activities (GAAP)

$

304



$

257



$

667



$

950


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

175



219



456



690


Free cash flow (Non-GAAP)1

$

129



$

38



$

211



$

260



1         

Free cash flow is a non-GAAP financial measure which UScellular 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 United States Cellular Corporation