TDS reports third quarter 2023 results

2023 Estimated Results

UScellular

Previous

Current

(Dollars in millions)

Service revenues

$3,025-$3,075

Unchanged

Adjusted OIBDA1

$750-$850

$770-$830

Adjusted EBITDA1

$925-$1,025

$945-$1,005

Capital expenditures

$600-$700

Unchanged

TDS Telecom

Previous

Current

(Dollars in millions)

Total operating revenues

$1,030-$1,060

Unchanged

Adjusted OIBDA1

$270-$300

Unchanged

Adjusted EBITDA1

$270-$300

Unchanged

Capital expenditures

$475-$525

        Approx. $550

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)

$75-$135

$40-$70

Add back:

Interest expense

195

—

Depreciation, amortization and accretion expense

655

230

EBITDA (Non-GAAP)1

$925-$985

$270-$300

Add back or deduct:

(Gain) loss on asset disposals, net

20

—

Adjusted EBITDA (Non-GAAP)1

$945-$1,005

$270-$300

Deduct:

Equity in earnings of unconsolidated entities

160

—

Interest and dividend income

15

—

Adjusted OIBDA (Non-GAAP)1

$770-$830

$270-$300

Actual Results

Nine Months Ended

September 30, 2023

Year Ended

December 31, 2022

UScellular

TDS

Telecom

UScellular

TDS

Telecom

(Dollars in millions)

Net income (GAAP)

$             43

$             19

$             35

$             53

Add back:

Income tax expense

56

6

37

23

Income before income taxes (GAAP)

$             99

$             25

$             72

$             76

Add back:

Interest expense

147

(6)

163

(7)

Depreciation, amortization and accretion expense

490

180

700

215

EBITDA (Non-GAAP)1

$           736

$           199

$           935

$           284

Add back or deduct:

Expenses related to strategic alternatives review

3

—

—

—

Loss on impairment of licenses

—

—

3

—

(Gain) loss on asset disposals, net

14

8

19

7

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

—

—

(1)

—

Adjusted EBITDA (Non-GAAP)1

$           753

$           207

$           956

$           291

Deduct:

Equity in earnings of unconsolidated entities

121

—

158

—

Interest and dividend income

8

3

8

2

Other, net

—

1

—

1

Adjusted OIBDA (Non-GAAP)1

$           624

$           203

$           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 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, nonrecurring expenses, 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, gains and losses, and expenses related to the strategic alternatives review of UScellular 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, 2023, can be found on TDS’ website at investors.tdsinc.com.

United States Cellular Corporation

Summary Operating Data (Unaudited)

As of or for the Quarter Ended

9/30/2023

6/30/2023

3/31/2023

12/31/2022

9/30/2022

Retail Connections

Postpaid

Total at end of period

4,159,000

4,194,000

4,223,000

4,247,000

4,264,000

Gross additions

128,000

125,000

137,000

154,000

151,000

Handsets

84,000

83,000

93,000

105,000

107,000

Connected devices

44,000

42,000

44,000

49,000

44,000

Net additions (losses)

(35,000)

(28,000)

(24,000)

(17,000)

(31,000)

Handsets

(38,000)

(29,000)

(25,000)

(20,000)

(22,000)

Connected devices

3,000

1,000

1,000

3,000

(9,000)

ARPU1

$        51.11

$        50.64

$        50.66

$        50.60

$        50.21

ARPA2

$      130.91

$      130.19

$      130.77

$      130.97

$      130.27

Handset upgrade rate3

4.5 %

4.8 %

4.9 %

7.0 %

8.1 %

Churn rate4

1.30 %

1.21 %

1.27 %

1.35 %

1.42 %

Handsets

1.11 %

1.01 %

1.06 %

1.12 %

1.15 %

Connected devices

2.64 %

2.65 %

2.78 %

2.99 %

3.40 %

Prepaid

Total at end of period

462,000

462,000

470,000

493,000

493,000

Gross additions

52,000

50,000

43,000

61,000

62,000

Net additions (losses)

—

(8,000)

(23,000)

—

2,000

ARPU1

$        33.44

$        33.86

$        33.19

$        33.34

$        35.04

Churn rate4

3.68 %

4.18 %

4.63 %

4.11 %

4.07 %

Market penetration at end of period

Consolidated operating population

32,350,000

32,350,000

32,350,000

32,370,000

32,370,000

Consolidated operating penetration5

15 %

15 %

15 %

15 %

15 %

Capital expenditures (millions)

$           111

$           143

$           208

$           176

$           136

Total cell sites in service

6,973

6,952

6,950

6,945

6,933

Owned towers

4,356

4,341

4,338

4,336

4,329

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

9/30/2023

6/30/2023

3/31/2023

12/31/2022

9/30/2022

Residential connections

Broadband

Wireline, Incumbent

248,800

249,200

247,900

249,100

252,600

Wireline, Expansion

79,400

70,200

62,800

56,100

49,400

Cable

204,400

204,200

204,700

204,800

204,500

Total Broadband

532,600

523,600

515,400

510,000

506,500

Video

132,400

132,300

132,600

135,300

136,600

Voice

284,000

288,200

289,200

291,600

295,500

Total Residential connections

949,000

944,100

937,200

936,900

938,600

Commercial connections

217,400

223,300

229,800

236,000

242,800

Total connections

1,166,400

1,167,400

1,167,000

1,173,000

1,181,400

Residential revenue per connection1

$            62.15

$           61.97

$            60.24

$            59.91

$            60.32

Capital expenditures (millions)

$               172

$               132

$               130

$               165

$               166

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

September 30,

Nine Months Ended

September 30,

2023

2022

2023

vs. 2022

2023

2022

2023

vs. 2022

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

Operating revenues

UScellular

$      963

$ 1,083

(11) %

$   2,906

$ 3,120

(7) %

TDS Telecom

256

256

—

767

763

—

All Other1

59

53

10 %

175

173

2 %

1,278

1,392

(8) %

3,848

4,056

(5) %

Operating expenses

UScellular

Expenses excluding depreciation, amortization and accretion

746

920

(19) %

2,285

2,493

(8) %

Depreciation, amortization and accretion

159

177

(10) %

490

520

(6) %

Loss on impairment of licenses

—

—

—

—

3

N/M

(Gain) loss on asset disposals, net

1

1

(33) %

14

9

62 %

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

—

—

85 %

—

(1)

N/M

906

1,098

(17) %

2,789

3,024

(8) %

TDS Telecom

Expenses excluding depreciation, amortization and accretion

189

190

(1) %

563

539

4 %

Depreciation, amortization and accretion

61

53

16 %

180

158

14 %

(Gain) loss on asset disposals, net

6

3

87 %

8

4

100 %

256

246

4 %

752

702

7 %

All Other1

Expenses excluding depreciation and amortization

64

55

16 %

187

171

9 %

Depreciation and amortization

5

4

3 %

11

13

—

(Gain) loss on asset disposals, net

(1)

—

(60) %

—

—

(79) %

68

59

15 %

197

183

9 %

Total operating expenses

1,230

1,403

(12) %

3,738

3,909

(4) %

Operating income (loss)

UScellular

57

(15)

N/M

117

96

22 %

TDS Telecom

—

10

(98) %

15

61

(76) %

All Other1

(9)

(6)

(52) %

(22)

(10)

N/M

48

(11)

N/M

110

147

(26) %

Investment and other income (expense)

Equity in earnings of unconsolidated entities

40

40

(1) %

122

123

(1) %

Interest and dividend income

5

4

50 %

16

10

57 %

Interest expense

(62)

(46)

(35) %

(178)

(118)

(49) %

Other, net

—

—

23 %

1

1

25 %

Total investment and other income (expense)

(17)

(2)

N/M

(39)

16

N/M

Income (loss) before income taxes

31

(13)

N/M

71

163

(57) %

Income tax expense (benefit)

27

(3)

N/M

55

62

(11) %

Net income (loss)

4

(10)

N/M

16

101

(84) %

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

4

(2)

N/M

10

14

(29) %

Net income (loss) attributable to TDS shareholders

—

(8)

94 %

6

87

(93) %

TDS Preferred Share dividends

17

17

—

52

52

—

Net income (loss) attributable to TDS common shareholders

$      (17)

$    (25)

30 %

$      (46)

$      35

N/M

Basic weighted average shares outstanding

113

114

(1) %

113

114

(1) %

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

$   (0.16)

$ (0.22)

30 %

$   (0.41)

$   0.31

N/M

Diluted weighted average shares outstanding

113

114

(1) %

113

115

(2) %

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

$   (0.16)

$ (0.22)

29 %

$   (0.41)

$   0.30

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)

Nine Months Ended

September 30,

2023

2022

(Dollars in millions)

Cash flows from operating activities

Net income

$                 16

$               101

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

Depreciation, amortization and accretion

681

691

Bad debts expense

77

98

Stock-based compensation expense

27

32

Deferred income taxes, net

38

48

Equity in earnings of unconsolidated entities

(122)

(123)

Distributions from unconsolidated entities

97

100

Loss on impairment of licenses

—

3

(Gain) loss on asset disposals, net

22

13

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

—

(1)

Other operating activities

4

7

Changes in assets and liabilities from operations

Accounts receivable

11

(59)

Equipment installment plans receivable

20

(131)

Inventory

87

(74)

Accounts payable

(36)

16

Customer deposits and deferred revenues

(15)

30

Accrued taxes

72

136

Accrued interest

8

10

Other assets and liabilities

(64)

4

Net cash provided by operating activities

923

901

Cash flows from investing activities

Cash paid for additions to property, plant and equipment

(906)

(794)

Cash paid for intangible assets

(24)

(603)

Other investing activities

8

(11)

Net cash used in investing activities

(922)

(1,408)

Cash flows from financing activities

Issuance of long-term debt

781

1,027

Repayment of long-term debt

(664)

(330)

Issuance of short-term debt

—

110

Repayment of short-term debt

(60)

(50)

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

(3)

(4)

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

(6)

(5)

Repurchase of TDS Common Shares

(6)

(25)

Repurchase of UScellular Common Shares

—

(28)

Dividends paid to TDS shareholders

(114)

(114)

Distributions to noncontrolling interests

(2)

(3)

Cash paid for software license agreements

(29)

(5)

Other financing activities

(4)

1

Net cash provided by (used in) financing activities

(107)

574

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

(106)

67

Cash, cash equivalents and restricted cash

Beginning of period

399

414

End of period

$               293

$               481

Telephone and Data Systems, Inc.

Consolidated Balance Sheet Highlights

(Unaudited)

ASSETS

September 30, 2023

December 31, 2022

(Dollars in millions)

Current assets

Cash and cash equivalents

$                                256

$                                360

Accounts receivable, net

1,081

1,181

Inventory, net

181

268

Prepaid expenses

99

102

Income taxes receivable

3

59

Other current assets

60

58

Total current assets

1,680

2,028

Assets held for sale

16

26

Licenses

4,700

4,699

Goodwill

547

547

Other intangible assets, net

188

204

Investments in unconsolidated entities

520

495

Property, plant and equipment, net

4,998

4,760

Operating lease right-of-use assets

988

995

Other assets and deferred charges

777

796

Total assets

$                          14,414

$                          14,550

Telephone and Data Systems, Inc.

Consolidated Balance Sheet Highlights

(Unaudited)

LIABILITIES AND EQUITY

September 30, 2023

December 31, 2022

(Dollars in millions, except per share amounts)

Current liabilities

Current portion of long-term debt

$                                  24

$                                  19

Accounts payable

550

506

Customer deposits and deferred revenues

270

285

Accrued interest

20

12

Accrued taxes

51

46

Accrued compensation

110

144

Short-term operating lease liabilities

147

146

Other current liabilities

155

356

Total current liabilities

1,327

1,514

Deferred liabilities and credits

Deferred income tax liability, net

1,003

969

Long-term operating lease liabilities

896

908

Other deferred liabilities and credits

819

813

Long-term debt, net

3,840

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

2,544

2,551

Preferred Shares, par value $0.01 per share

1,074

1,074

Treasury shares, at cost

(465)

(481)

Accumulated other comprehensive income

5

5

Retained earnings

2,567

2,699

Total TDS shareholders’ equity

5,726

5,849

Noncontrolling interests

791

754

Total equity

6,517

6,603

Total liabilities and equity

$                          14,414

$                          14,550

Balance Sheet Highlights

(Unaudited)

September 30, 2023

TDS

TDS
Corporate

Intercompany

TDS

UScellular

Telecom

& Other

Eliminations

Consolidated

(Dollars in millions)

Cash and cash equivalents

$                  153

$                    59

$                  115

$                  (71)

$                  256

Licenses, goodwill and other intangible assets

$              4,690

$                  739

$                      6

$                    —

$              5,435

Investment in unconsolidated entities

477

4

47

(8)

520

$              5,167

$                  743

$                    53

$                    (8)

$              5,955

Property, plant and equipment, net

$              2,593

$              2,318

$                    87

$                    —

$              4,998

Long-term debt, net:

Current portion

$                    18

$                    —

$                      6

$                    —

$                    24

Non-current portion

2,903

3

934

—

3,840

$              2,921

$                      3

$                  940

$                    —

$              3,864

TDS Telecom Highlights

(Unaudited)

Three Months Ended

September 30,

Nine Months Ended

September 30,

2023

2022

2023

vs. 2022

2023

2022

2023

vs. 2022

(Dollars in millions)

Operating revenues

Residential

Wireline, Incumbent

$         89

$         89

—

$       264

$       262

1 %

Wireline, Expansion

20

13

56 %

52

35

50 %

Cable

68

68

—

204

203

1 %

Total residential

177

170

4 %

521

500

4 %

Commercial

38

43

(12) %

118

130

(10) %

Wholesale

42

43

(3) %

127

132

(4) %

Total service revenues

256

256

—

766

763

—

Equipment revenues

—

—

12 %

1

1

(9) %

Total operating revenues

256

256

—

767

763

—

Cost of services

107

109

(2) %

319

308

4 %

Cost of equipment and products

—

—

(7) %

—

1

(9) %

Selling, general and administrative expenses

82

81

1 %

244

231

6 %

Depreciation, amortization and accretion

61

53

16 %

180

158

14 %

(Gain) loss on asset disposals, net

6

3

87 %

8

4

100 %

Total operating expenses

256

246

4 %

752

702

7 %

Operating income

$         —

$         10

(98) %

$         15

$         61

(76) %

Numbers may not foot due to rounding. 

Telephone and Data Systems, Inc.

Financial Measures and Reconciliations

(Unaudited)

Free Cash Flow

Three Months Ended

September 30,

Nine Months Ended

September 30,

TDS – CONSOLIDATED

2023

2022

2023

2022

(Dollars in millions)

Cash flows from operating activities (GAAP)

$                 408

$                 167

$                 923

$                 901

Cash paid for additions to property, plant and equipment

(278)

(268)

(906)

(794)

Cash paid for software license agreements

(9)

(3)

(29)

(5)

Free cash flow (Non-GAAP)1

$                 121

$               (104)

$                  (12)

$                 102

Three Months Ended

September 30,

Nine Months Ended

September 30,

UScellular

2023

2022

2023

2022

(Dollars in millions)

Cash flows from operating activities (GAAP)

$                 329

$                   73

$                 719

$                 652

Cash paid for additions to property, plant and equipment

(103)

(121)

(454)

(409)

Cash paid for software license agreements

(9)

(2)

(28)

(5)

Free cash flow (Non-GAAP)1

$                 217

$                  (50)

$                 237

$                 238

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.

EBITDA, Adjusted EBITDA and Adjusted OIBDA

The following table reconciles EBITDA, Adjusted EBITDA and Adjusted OIBDA to the corresponding GAAP measures, Net income
(loss) and Income (loss) before income taxes.

Three Months Ended

September 30,

UScellular

2023

2022

(Dollars in millions)

Net income (loss) (GAAP)

$                  23

$               (12)

Add back:

Income tax expense (benefit)

27

(3)

Income (loss) before income taxes (GAAP)

50

(15)

Add back:

Interest expense

50

42

Depreciation, amortization and accretion

159

177

EBITDA (Non-GAAP)

259

204

Add back or deduct:

Expenses related to strategic alternatives review

3

—

(Gain) loss on asset disposals, net

1

1

Adjusted EBITDA (Non-GAAP)

263

205

Deduct:

Equity in earnings of unconsolidated entities

40

40

Interest and dividend income

3

2

Adjusted OIBDA (Non-GAAP)

$                220

$               163