UScellular reports second quarter 2022 results
08/04/2022 - 04:05 PM
2022 guidance reaffirmed
CHICAGO , Aug. 4, 2022 /PRNewswire/ --
As previously announced, UScellular 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.uscellular.com.
United States Cellular Corporation (NYSE: USM) reported total operating revenues of $1,027 million for the second quarter of 2022, versus $1,014 million for the same period one year ago. Service revenues totaled $783 million , versus $774 million for the same period one year ago. Net income attributable to UScellular shareholders and related diluted earnings per share were $21 million and $0.25 , respectively, for the second quarter of 2022 compared to $35 million and $0.39 , respectively, in the same period one year ago.
"UScellular is continuing to execute on its growth strategy, resulting in increased retail service revenues and ARPU in the quarter," said Laurent Therivel , UScellular President and CEO. "We are seeing nice momentum in a number of the growth areas of the business, including fixed wireless and our tower portfolio. Additionally, we are seeing promising early results from our recent moves in the marketplace, including our rate plan guarantee and our existing-same-as-new offers.
"Halfway through the year, I believe UScellular is well-positioned, and I thank all of our associates for their hard work."
2022 Estimated Results
UScellular's current estimates of full-year 2022 results 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. 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.
2022 Estimated Results
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
The following table reconciles EBITDA, Adjusted EBITDA and Adjusted OIBDA to the corresponding GAAP measures, Net income or Income before income taxes. In providing 2022 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
2022 Estimated Results
Six Months Ended
June 30, 2022
Year Ended December 31, 2021
(Dollars in millions)
Net income (GAAP)
N/A
$ 74
$ 160
Add back:
Income tax expense
N/A
50
20
Income before income taxes (GAAP)
$45 -$195
$ 124
$ 180
Add back:
Interest expense
160
73
175
Depreciation, amortization and accretion expense
705
342
678
EBITDA (Non-GAAP)1
$910 -$1,060
$ 539
$ 1,033
Add back or deduct:
Loss on impairment of licenses
—
3
—
(Gain) loss on asset disposals, net
15
8
23
(Gain) loss on sale of business and other exit costs, net
—
—
(2)
Adjusted EBITDA (Non-GAAP)1
$925 -$1,075
$ 550
$ 1,054
Deduct:
Equity in earnings of unconsolidated entities
170
82
179
Interest and dividend income
5
4
6
Adjusted OIBDA (Non-GAAP)1
$750 -$900
$ 464
$ 869
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 June 30, 2022, can be found on UScellular's website at investors.uscellular.com.
Stock Repurchase
During the second quarter of 2022, UScellular repurchased 294,721 of its Common Shares for $9 million .
Conference Call Information
UScellular will hold a conference call on August 5, 2022 at 9:00 a.m. Central Time .
Access the live call on the Events & Presentations page of investors.uscellular.com or athttps://events.q4inc.com /attendee/249925609 Access the call by phone at (888)330-2384 conference ID: 1328528. 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 4.8 million retail connections in 21 states. The Chicago -based company had 4,700 full- and part-time associates as of June 30, 2022 . At the end of the second quarter of 2022, Telephone and Data Systems, Inc. owned 83 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 attract people of outstanding talent throughout all levels of the organization; USM's smaller scale relative to larger competitors; 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; 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; 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; cyber-attacks or other breaches of network or information technology security; potential conflicts of interests between TDS and UScellular; 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
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.
United States Cellular Corporation
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
Service
$ 783
$ 774
1 %
$ 1,570
$ 1,545
2 %
Equipment sales
244
240
2 %
467
492
(5) %
Total operating revenues
1,027
1,014
1 %
2,037
2,037
–
Operating expenses
System operations (excluding Depreciation, amortization and accretion reported below)
192
204
(6) %
377
389
(3) %
Cost of equipment sold
275
258
7 %
533
533
–
Selling, general and administrative
339
334
2 %
663
639
4 %
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 %
Total operating expenses
987
978
1 %
1,926
1,917
–
Operating income
40
36
10 %
111
120
(8) %
Investment and other income (expense)
Equity in earnings of unconsolidated entities
37
47
(21) %
82
88
(8) %
Interest and dividend income
3
2
59 %
4
3
3 %
Interest expense
(40)
(60)
34 %
(73)
(97)
26 %
Total investment and other income (expense)
—
(11)
N/M
13
(6)
N/M
Income before income taxes
40
25
60 %
124
114
9 %
Income tax expense (benefit)
18
(10)
N/M
50
17
N/M
Net income
22
35
(37) %
74
97
(24) %
Less: Net income attributable to noncontrolling interests, net of tax
1
—
1 %
3
2
33 %
Net income attributable to UScellular shareholders
$ 21
$ 35
(38) %
$ 71
$ 95
(25) %
Basic weighted average shares outstanding
86
87
(1) %
86
87
(1) %
Basic earnings per share attributable to UScellular shareholders
$ 0.25
$ 0.40
(37) %
$ 0.82
$ 1.10
(25) %
Diluted weighted average shares outstanding
87
88
(1) %
87
88
(1) %
Diluted earnings per share attributable to UScellular shareholders
$ 0.25
$ 0.39
(37) %
$ 0.82
$ 1.08
(25) %
N/M - Percentage change not meaningful
United States Cellular Corporation
Consolidated Statement of Cash Flows
(Unaudited)
Six Months Ended
June 30,
2022
2021
(Dollars in millions)
Cash flows from operating activities
Net income
$ 74
$ 97
Add (deduct) adjustments to reconcile net income to net cash flows from operating activities
Depreciation, amortization and accretion
342
350
Bad debts expense
51
21
Stock-based compensation expense
14
12
Deferred income taxes, net
31
35
Equity in earnings of unconsolidated entities
(82)
(88)
Distributions from unconsolidated entities
80
79
Loss on impairment of licenses
3
—
(Gain) loss on asset disposals, net
8
7
(Gain) loss on sale of business and other exit costs, net
—
(1)
Other operating activities
3
19
Changes in assets and liabilities from operations
Accounts receivable
(17)
23
Equipment installment plans receivable
(25)
(32)
Inventory
(33)
(37)
Accounts payable
(8)
(72)
Customer deposits and deferred revenues
6
2
Accrued taxes
135
(23)
Accrued interest
1
—
Other assets and liabilities
(5)
(29)
Net cash provided by operating activities
578
363
Cash flows from investing activities
Cash paid for additions to property, plant and equipment
(288)
(281)
Cash paid for licenses
(563)
(1,259)
Cash received from investments
—
3
Cash received from divestitures and exchanges
1
1
Advance payments for license acquisitions
(1)
—
Other investing activities
—
2
Net cash used in investing activities
(851)
(1,534)
Cash flows from financing activities
Issuance of long-term debt
625
992
Repayment of long-term debt
(227)
(775)
Issuance of short-term debt
60
—
Common Shares reissued for benefit plans, net of tax payments
(5)
(13)
Repurchase of Common Shares
(18)
(2)
Payment of debt issuance costs
(1)
(16)
Distributions to noncontrolling interests
(2)
(2)
Other financing activities
(3)
(7)
Net cash provided by financing activities
429
177
Net increase (decrease) in cash, cash equivalents and restricted cash
156
(994)
Cash, cash equivalents and restricted cash
Beginning of period
199
1,291
End of period
$ 355
$ 297
United States Cellular Corporation
Consolidated Balance Sheet Highlights
(Unaudited)
ASSETS
June 30, 2022
December 31, 2021
(Dollars in millions)
Current assets
Cash and cash equivalents
$ 320
$ 156
Accounts receivable, net
1,044
1,046
Inventory, net
206
173
Prepaid expenses
62
58
Income taxes receivable
—
123
Other current assets
41
49
Total current assets
1,673
1,605
Assets held for sale
15
18
Licenses
4,677
4,088
Investments in unconsolidated entities
441
439
Property, plant and equipment, net
2,671
2,606
Operating lease right-of-use assets
944
959
Other assets and deferred charges
582
626
Total assets
$ 11,003
$ 10,341
United States Cellular Corporation
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
$ 8
$ 3
Accounts payable
328
360
Customer deposits and deferred revenues
197
191
Accrued taxes
37
33
Accrued compensation
56
83
Short-term operating lease liabilities
133
129
Other current liabilities
223
104
Total current liabilities
982
903
Deferred liabilities and credits
Deferred income tax liability, net
705
674
Long-term operating lease liabilities
872
889
Other deferred liabilities and credits
690
573
Long-term debt, net
3,118
2,728
Noncontrolling interests with redemption features
12
11
Equity
UScellular shareholders' equity
Series A Common and Common Shares, par value $1.00 per share
88
88
Additional paid-in capital
1,692
1,678
Treasury shares
(75)
(68)
Retained earnings
2,903
2,849
Total UScellular shareholders' equity
4,608
4,547
Noncontrolling interests
16
16
Total equity
4,624
4,563
Total liabilities and equity
$ 11,003
$ 10,341
United States Cellular Corporation
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)
$ 267
$ 239
$ 578
$ 363
Less: Cash paid for additions to property, plant and equipment
138
148
288
281
Free cash flow (Non-GAAP)1
$ 129
$ 91
$ 290
$ 82
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.
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SOURCE United States Cellular Corporation