Sprint Reports Highest Retail Net Additions In Nearly Three Years And Raises Adjusted Free Cash Flow* Guidance With Fiscal 2017 Third Quarter Results
OVERLAND PARK, Kan., Feb. 2, 2018 /PRNewswire/ --
-- Postpaid net additions of 256,000, including 184,000 phone net additions
-- Tenth consecutive quarter of postpaid phone net additions
-- Prepaid net additions of 63,000 compared to net losses of 460,000 in the
prior year
-- Fourth consecutive quarter of net additions and improved by 523,000
year-over-year
-- Prepaid churn improved year-over-year for the sixth consecutive
quarter
-- Net income of $7.2 billion, operating income of $727 million, and
adjusted EBITDA* of $2.7 billion
-- Net income includes approximately $7.1 billion of favorable impact
from tax reform
-- Eighth consecutive quarter of operating income
-- Highest fiscal third quarter adjusted EBITDA* in 11 years
-- Net cash provided by operating activities of $1.2 billion and adjusted
free cash flow* of $397 million
-- Adjusted free cash flow* improved by more than $1 billion
year-over-year
-- Raising fiscal year 2017 adjusted free cash flow* guidance from
around break-even to a range of $500 million to $700 million
-- Sprint Next-Gen Network to drive further network improvements and
provide path to 5G
Sprint Corporation (NYSE: S) today reported operating results for the third quarter of fiscal year 2017, including its highest retail net additions in nearly three years with postpaid net additions of 256,000 and prepaid net additions of 63,000. The company also reported its eighth consecutive quarter of operating income and the highest fiscal third quarter adjusted EBITDA* in 11 years.
Net cash provided by operating activities of $1.2 billion improved by more than $500 million year-over-year. Adjusted free cash flow* of $397 million improved by more than $1 billion year-over-year and the company is raising its fiscal year 2017 expectation from around break-even to a range of $500 million to $700 million.
"Sprint has now added postpaid phone customers for 10 consecutive quarters and added prepaid customers for four consecutive quarters," said Sprint CEO Marcelo Claure. "This momentum, along with a continued focus on the cost structure, is driving improvements in profitability metrics and adjusted free cash flow*."
Customer Growth Continues in Both Postpaid and Prepaid Businesses
Sprint's execution in both its postpaid and prepaid businesses resulted in the highest retail net additions in nearly three years. Postpaid net additions of 256,000 in the quarter included 184,000 phone net additions, the tenth consecutive quarter of postpaid phone net additions.
Sprint's prepaid business also continued to add customers with 63,000 net additions, its fourth consecutive quarter of net additions and a 523,000 improvement compared to the prior year. Prepaid churn improved year-over-year for the sixth consecutive quarter and prepaid gross additions grew year-over-year for the second consecutive quarter. The sustained improvement in prepaid customer trends has translated into better financial results, as prepaid wireless service revenue grew year-over-year for the first time in nearly three years.
More Progress on Cost Reduction Program
Sprint continued to make progress on its multi-year plan to improve its cost structure. Excluding approximately $100 million of hurricane-related and other non-recurring charges in the quarter, the company reported approximately $260 million of combined year-over-year reductions in cost of services and selling, general and administrative expenses, bringing the year-to-date total reduction to more than $1 billion. The year-to-date reductions were primarily driven by changes to the device insurance program, as well as lower network expenses.
Net income of $7.2 billion included $7.1 billion of non-cash benefit from tax reform, resulting from a re-measurement of our deferred tax assets and liabilities under provisions contained in the new tax law.
The company also reported the following financial results:
(Millions,
except per
share data) Fiscal 3Q17 Fiscal 3Q16 Change
------------ ----------- ----------- ------
Net income
(loss) $7,162 ($479) $7,641
---------- ------ ----- ------
Basic income
(loss) per
share $1.79 ($0.12) $1.91
------------ ----- ------ -----
Operating income $727 $311 $416
---------------- ---- ---- ----
Adjusted EBITDA* $2,719 $2,450 $269
--------------- ------ ------ ----
Net cash
provided by
operating
activities $1,166 $650 $516
------------ ------ ---- ----
Adjusted free
cash flow* $397 ($646) $1,043
------------- ---- ----- ------
Sprint Next-Gen Network to Drive Further Network Improvements and Provide Path to 5G
Sprint is unlocking the value of the largest mobile broadband spectrum holdings in the U.S. and its Next-Gen Network is designed to drive significant improvements to network performance and the customer experience by investing in four main areas.
-- Upgrade existing towers to leverage all three of the company's spectrum
bands - 800 MHz, 1.9 GHz and 2.5 GHz - for faster, more reliable
service.
-- Build thousands of new cell sites to expand its coverage footprint and
extend coverage to more popular customer destinations.
-- Add more small cells -- including Sprint Magic Boxes, mini-macros and
strand mounts to densify every major market and significantly boost
capacity and data speeds - and leverage the recent strategic agreements
with Altice and Cox. The company has already deployed more than 80,000
Sprint Magic Boxes in approximately 200 cities across the country and
plans to deploy more than 1 million as part of its multi-year roadmap.
-- Deploy game-changing 64T64R Massive MIMO 2.5 GHz radios to increase
capacity up to 10 times that of current LTE systems and increase data
speeds for more customers in high-traffic locations. Massive MIMO, a key
enabler for 5G, will allow the company to support both LTE and 5G NR
(New Radio) modes simultaneously without additional tower climbs.
Sprint's network has already seen significant improvements. According to Ookla Speedtest Intelligence data, Sprint was the most improved operator in 2017 with a 60 percent year-over-year increase in its national average download speed.(1)
Fiscal Year 2017 Outlook
-- The company is raising its expectation for operating income to $2.5
billion to $2.7 billion. Its previous expectation was $2.1 billion to
$2.5 billion.
-- The company expects adjusted EBITDA* to be around the mid-point of its
prior expectation of $10.8 billion to $11.2 billion.
-- The company expects cash capital expenditures, excluding devices leased
through indirect channels, to be at the low end of its prior expectation
of $3.5 billion to $4 billion.
-- The company is raising its expectation for adjusted free cash flow* to
$500 million to $700 million. Its previous expectation was around
break-even.
Conference Call and Webcast
-- Date/Time: 8:30 a.m. (ET) Friday, Feb. 2, 2018
-- Call-in Information
-- U.S./Canada: 866-360-1063 (ID: 6374738)
-- International: 443-961-0242 (ID: 6374738)
-- Webcast available at www.sprint.com/investors
-- Additional information about results is available on our Investor
Relations website
(1) Average download speed increase based on Ookla's analysis of Speedtest Intelligence data comparing December 2016 to December 2017 for all mobile results.
Wireless Operating Statistics (Unaudited)
Quarter To Date Year To Date
--------------- ------------
12/31/17 9/30/17 12/31/16 12/31/17 12/31/16
-------- ------- -------- -------- --------
Net additions (losses) (in thousands)
Postpaid 256 168 405 385 929
Postpaid phone 184 279 368 551 888
Prepaid (f) 63 95 (460) 193 (1,215)
Wholesale and affiliate(f) 66 115 619 246 2,051
------------------------- --- --- --- --- -----
Total wireless net additions 385 378 564 824 1,765
---------------------------- --- --- --- --- -----
End of period connections (in thousands)
Postpaid (d) (e) 31,942 31,686 31,694 31,942 31,694
Postpaid phone(d) 26,616 26,432 26,037 26,616 26,037
Prepaid(d) (f) (g) (h) (i) 8,997 8,765 8,493 8,997 8,493
Wholesale and affiliate (d) (f) (h) 13,642 13,576 13,084 13,642 13,084
---------------------------------- ------ ------ ------ ------ ------
Total end of period connections 54,581 54,027 53,271 54,581 53,271
------------------------------- ------ ------ ------ ------ ------
Churn
Postpaid 1.80% 1.72% 1.67% 1.73% 1.58%
Postpaid phone 1.71% 1.59% 1.57% 1.60% 1.44%
Prepaid (h) 4.63% 4.83% 5.74% 4.68% 5.57%
Supplemental data - connected devices
End of period connections (in thousands)
Retail postpaid 2,259 2,158 1,960 2,259 1,960
Wholesale and affiliate 11,272 11,221 10,594 11,272 10,594
----------------------- ------ ------ ------ ------ ------
Total 13,531 13,379 12,554 13,531 12,554
----- ------ ------ ------ ------ ------
ARPU(a)
Postpaid $45.13 $46.00 $49.70 $46.14 $50.59
Postpaid phone $51.26 $52.34 $57.12 $52.50 $58.11
Prepaid(h) $37.46 $37.83 $33.97 $37.84 $33.35
NON-GAAP RECONCILIATION - ABPA* AND ABPU* (Unaudited)
(Millions, except accounts, connections, ABPA*, and ABPU*)
Quarter To Date Year To Date
--------------- ------------
12/31/17 9/30/17 12/31/16 12/31/17 12/31/16
-------- ------- -------- -------- --------
ABPA*
Postpaid service revenue $4,297 $4,363 $4,686 $13,126 $14,184
Add: Installment plan and non-operating lease billings 379 397 291 1,144 829
Add: Lease revenue - operating 1,047 966 887 2,912 2,453
------------------------------ ----- --- --- ----- -----
Total for postpaid connections $5,723 $5,726 $5,864 $17,182 $17,466
------------------------------ ------ ------ ------ ------- -------
Average postpaid accounts (in thousands) 11,193 11,277 11,413 11,261 11,368
Postpaid ABPA*(b) $170.39 $169.25 $171.28 $169.53 $170.71
Quarter To Date Year To Date
--------------- ------------
12/31/17 9/30/17 12/31/16 12/31/17 12/31/16
-------- ------- -------- -------- --------
Postpaid phone ABPU*
Postpaid phone service revenue $4,069 $4,132 $4,420 $12,415 $13,350
Add: Installment plan and non-operating lease billings 335 358 261 1,025 752
Add: Lease revenue - operating 1,037 953 873 2,877 2,411
------------------------------ ----- --- --- ----- -----
Total for postpaid phone connections $5,441 $5,443 $5,554 $16,317 $16,513
------------------------------------ ------ ------ ------ ------- -------
Postpaid average phone connections (in thousands) 26,461 26,312 25,795 26,275 25,528
Postpaid phone ABPU* (c) $68.54 $68.95 $71.77 $69.00 $71.87
(a) ARPU is calculated by dividing
service revenue by the sum of the
monthly average number of connections
in the applicable service category.
Changes in average monthly service
revenue reflect connections for either
the postpaid or prepaid service
category who change rate plans, the
level of voice and data usage, the
amount of service credits which are
offered to connections, plus the net
effect of average monthly revenue
generated by new connections and
deactivating connections. Postpaid
phone ARPU represents revenues related
to our postpaid phone connections.
(b) Postpaid ABPA* is calculated by
dividing service revenue earned from
connections plus billings from
installment plans and non-operating
leases, as well as, operating lease
revenue by the sum of the monthly
average number of accounts during the
period. Installment plan billings
represent the substantial majority of
the total billings in the table above
for all periods presented.
(c) Postpaid phone ABPU* is calculated
by dividing postpaid phone service
revenue earned from postpaid phone
connections plus billings from
installment plans and non-operating
leases, as well as, operating lease
revenue by the sum of the monthly
average number of postpaid phone
connections during the period.
Installment plan billings represent the
substantial majority of the total
billings in the table above for all
periods presented.
(d) As part of the Shentel transaction,
186,000 and 92,000 subscribers were
transferred from postpaid and prepaid,
respectively, to affiliates, of which
18,000 prepaid subscribers were
subsequently excluded from our customer
base as a result of the Lifeline
regulatory change as noted in (f)
below. An additional 270,000 of nTelos'
subscribers are now part of our
affiliate relationship with Shentel and
were reported in wholesale and
affiliate subscribers beginning with
the quarter ended June 30, 2016. In
addition, during the three-month
period ended June 30, 2017, 17,000 and
4,000 subscribers were transferred from
postpaid and prepaid, respectively, to
affiliates as a result of a the
transfer of additional subscribers to
Shentel.
(e) During the three-month period
ended June 30, 2017, 2,000 Wi-Fi
connections were adjusted from the
postpaid subscriber base.
(f)Sprint is no longer reporting
Lifeline subscribers due to recent
regulatory changes resulting in tighter
program restrictions. We have excluded
them from our customer base for all
periods presented, including our
Assurance Wireless prepaid brand and
subscribers through our wholesale
MVNO's.
(g)During the three-month period ended
September 30, 2017, the Prepaid Data
Share platform It's On was
decommissioned as the Company continues
to focus on higher value contribution
offerings resulting in the reduction of
49,000 to prepaid end of period
subscribers.
(h)As a result of aligning all prepaid
brands, including prepaid affiliate
subscribers, under one churn and
retention program as of December 31,
2016, end of period prepaid and
affiliate subscribers were reduced by
1,234,000 and 21,000, respectively.
(i)During the three-month period ended
December 31, 2017, prepaid end of
period subscribers increased by 169,000
in conjunction with the PRWireless
HoldCo, LLC joint venture.
Wireless Device Financing Summary (Unaudited)
(Millions, except sales, connections, and leased devices in property, plant and equipment)
Quarter To Date Year To Date
--------------- ------------
12/31/17 9/30/17 12/31/16 12/31/17 12/31/16
-------- ------- -------- -------- --------
Postpaid activations (in thousands) 4,874 3,917 4,812 12,459 11,827
Postpaid activations financed 84% 85% 80% 85% 75%
Postpaid activations - operating leases 72% 68% 43% 66% 42%
Installment plans
Installment sales financed $276 $268 $1,036 $1,097 $2,188
Installment billings $353 $373 $291 $1,094 $829
Installment receivables, net $1,383 $1,583 $ - $1,383 $ -
Leasing revenue and depreciation
Lease revenue - operating $1,047 $966 $887 $2,912 $2,453
Lease depreciation $990 $888 $837 $2,732 $2,205
Leased device additions
Cash paid for capital expenditures - leased devices $682 $608 $767 $1,787 $1,530
Transfers from inventory - leased devices $1,761 $1,060 $1,095 $3,671 $2,281
Leased devices
Leased devices in property, plant and equipment, net $5,683 $4,709 $4,454 $5,683 $4,454
Leased device units
Leased devices in property, plant and equipment (units in thousands) 14,002 13,019 11,981 14,002 11,981
Leased device and receivables financings net proceeds
Proceeds $1,125 $789 $ - $2,679 $1,055
Repayments (598) (1,148) (231) (2,019) (655)
---------- ---- ------ ---- ------ ----
Net proceeds (repayments) of financings related to devices and receivables $527 $(359) $(231) $660 $400
-------------------------------------------------------------------------- ---- ----- ----- ---- ----
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
(Millions, except per share data)
Quarter To Date Year To Date
--------------- ------------
12/31/17 9/30/17 12/31/16 12/31/17 12/31/16
-------- ------- -------- -------- --------
Net operating revenues
Service revenue $5,930 $5,967 $6,323 $17,968 $19,252
Equipment revenue 2,309 1,960 2,226 6,355 5,556
----------------- ----- ----- ----- ----- -----
Total net operating revenues 8,239 7,927 8,549 24,323 24,808
---------------------------- ----- ----- ----- ------ ------
Net operating expenses
Cost of services (exclusive of depreciation and amortization below) 1,733 1,698 1,925 5,140 6,125
Cost of products (exclusive of depreciation and amortization below) 1,673 1,404 1,985 4,622 5,097
Selling, general and administrative 2,108 2,013 2,080 6,059 5,992
Depreciation - network and other 987 997 1,000 2,961 3,022
Depreciation - leased devices 990 888 837 2,732 2,205
Amortization 196 209 255 628 813
Other, net (175) 117 156 (310) 260
---------- ---- --- --- ---- ---
Total net operating expenses 7,512 7,326 8,238 21,832 23,514
---------------------------- ----- ----- ----- ------ ------
Operating income 727 601 311 2,491 1,294
---------------- --- --- --- ----- -----
Interest expense (581) (595) (619) (1,789) (1,864)
Other (expense) income, net (42) 44 (60) (50) (67)
--------------------------- --- --- --- --- ---
Income (loss) before income taxes 104 50 (368) 652 (637)
Income tax benefit (expense) 7,052 (98) (111) 6,662 (286)
--------------------------- ----- --- ---- ----- ----
Net income (loss) 7,156 (48) (479) 7,314 (923)
---------------- ----- --- ---- ----- ----
Less: Net loss attributable to noncontrolling interests 6 - - 6 -
------------------------------------------------------- --- --- --- --- ---
Net income (loss) attributable to Sprint Corporation $7,162 $(48) $(479) $7,320 $(923)
---------------------------------------------------- ------ ---- ----- ------ -----
Basic net income (loss) per common share $1.79 $(0.01) $(0.12) $1.83 $(0.23)
---------------------------------------- ----- ------ ------ ----- ------
Diluted net income (loss) per common share $1.76 $(0.01) $(0.12) $1.79 $(0.23)
------------------------------------------ ----- ------ ------ ----- ------
Weighted average common shares outstanding 4,001 3,998 3,983 3,998 3,979
------------------------------------------ ----- ----- ----- ----- -----
Diluted weighted average common shares outstanding 4,061 3,998 3,983 4,080 3,979
-------------------------------------------------- ----- ----- ----- ----- -----
Effective tax rate -6,780.8% 196.0% -30.2% -1,021.8% -44.9%
------------------ -------- ----- ----- -------- -----
NON-GAAP RECONCILIATION - NET INCOME (LOSS) TO ADJUSTED EBITDA* (Unaudited)
(Millions)
Quarter To Date Year To Date
--------------- ------------
12/31/17 9/30/17 12/31/16 12/31/17 12/31/16
-------- ------- -------- -------- --------
Net income (loss) $7,156 $(48) $(479) $7,314 $(923)
---------------- ------ ---- ----- ------ -----
Income tax (benefit) expense (7,052) 98 111 (6,662) 286
---------------------------- ------ --- --- ------ ---
Income (loss) before income taxes 104 50 (368) 652 (637)
Other expense (income), net 42 (44) 60 50 67
Interest expense 581 595 619 1,789 1,864
---------------- --- --- --- ----- -----
Operating income 727 601 311 2,491 1,294
---------------- --- --- --- ----- -----
Depreciation - network and other 987 997 1,000 2,961 3,022
Depreciation - leased devices 990 888 837 2,732 2,205
Amortization 196 209 255 628 813
------------ --- --- --- --- ---
EBITDA*(1) 2,900 2,695 2,403 8,812 7,334
--------- ----- ----- ----- ----- -----
Loss (gain) from asset dispositions, exchanges, and other, net(2) - - 28 (304) (326)
Severance and exit costs (3) 13 - 19 13 30
Contract terminations (4) - - - (5) 113
Litigation and other contingencies(5) (260) - - (315) 103
Hurricanes (6) 66 34 - 100 -
------------- --- --- --- --- ---
Adjusted EBITDA*(1) $2,719 $2,729 $2,450 $8,301 $7,254
------------------ ------ ------ ------ ------ ------
Adjusted EBITDA margin* 45.9% 45.7% 38.7% 46.2% 37.7%
Selected items:
Cash paid for capital expenditures - network and other $696 $682 $478 $2,499 $1,421
Cash paid for capital expenditures - leased devices $682 $608 $767 $1,787 $1,530
WIRELESS STATEMENTS OF OPERATIONS (Unaudited)
(Millions)
Quarter To Date Year To Date
--------------- ------------
12/31/17 9/30/17 12/31/16 12/31/17 12/31/16
-------- ------- -------- -------- --------
Net operating revenues
Service revenue
Postpaid $4,297 $4,363 $4,686 $13,126 $14,184
Prepaid (7) 993 990 985 2,982 3,096
Wholesale, affiliate and other(7) 329 296 275 884 784
-------------------------------- --- --- --- --- ---
Total service revenue 5,619 5,649 5,946 16,992 18,064
Equipment revenue 2,309 1,960 2,226 6,355 5,556
Total net operating revenues 7,928 7,609 8,172 23,347 23,620
---------------------------- ----- ----- ----- ------ ------
Net operating expenses
Cost of services (exclusive of depreciation and amortization below) 1,466 1,422 1,649 4,300 5,226
Cost of products (exclusive of depreciation and amortization below) 1,673 1,404 1,985 4,622 5,097
Selling, general and administrative 2,024 1,936 2,032 5,835 5,797
Depreciation - network and other 931 944 947 2,800 2,868
Depreciation - leased devices 990 888 837 2,732 2,205
Amortization 196 209 255 628 813
Other, net 139 117 150 54 248
----------
Total net operating expenses 7,419 6,920 7,855 20,971 22,254
---------------------------- ----- ----- ----- ------ ------
Operating income $509 $689 $317 $2,376 $1,366
---------------- ---- ---- ---- ------ ------
WIRELESS NON-GAAP RECONCILIATION (Unaudited)
(Millions)
Quarter To Date Year To Date
--------------- ------------
12/31/17 9/30/17 12/31/16 12/31/17 12/31/16
-------- ------- -------- -------- --------
Operating income $509 $689 $317 $2,376 $1,366
Loss (gain) from asset dispositions, exchanges, and other, net(2) - - 28 (304) (326)
Severance and exit costs (3) 4 - 13 (1) 18
Contract terminations (4) - - - (5) 113
Litigation and other contingencies (5) 63 - - 63 103
Hurricanes (6) 66 34 - 100 -
Depreciation - network and other 931 944 947 2,800 2,868
Depreciation - leased devices 990 888 837 2,732 2,205
Amortization 196 209 255 628 813
Adjusted EBITDA*(1) $2,759 $2,764 $2,397 $8,389 $7,160
------------------ ------ ------ ------ ------ ------
Adjusted EBITDA margin* 49.1% 48.9% 40.3% 49.4% 39.6%
Selected items:
Cash paid for capital expenditures - network and other $565 $539 $389 $2,042 $1,123
Cash paid for capital expenditures - leased devices $682 $608 $767 $1,787 $1,530
WIRELINE STATEMENTS OF OPERATIONS (Unaudited)
(Millions)
Quarter To Date Year To Date
--------------- ------------
12/31/17 9/30/17 12/31/16 12/31/17 12/31/16
-------- ------- -------- -------- --------
Net operating revenues
Voice $94 $109 $153 $327 $506
Data 29 33 41 96 127
Internet 254 256 281 765 871
Other 16 11 22 47 59
-----
Total net operating revenues 393 409 497 1,235 1,563
---------------------------- --- --- --- ----- -----
Net operating expenses
Cost of services (exclusive of depreciation and amortization below) 352 372 400 1,111 1,284
Selling, general and administrative 71 66 49 194 189
Depreciation and amortization 55 49 51 155 148
Other, net (314) - 6 (309) 13
----------
Total net operating expenses 164 487 506 1,151 1,634
---------------------------- --- --- --- ----- -----
Operating income (loss) $229 $(78) $(9) $84 $(71)
---------------------- ---- ---- --- --- ----
WIRELINE NON-GAAP RECONCILIATION (Unaudited)
(Millions)
Quarter To Date Year To Date
--------------- ------------
12/31/17 9/30/17 12/31/16 12/31/17 12/31/16
-------- ------- -------- -------- --------
Operating income (loss) $229 $(78) $(9) $84 $(71)
Severance and exit costs (3) 9 - 6 14 13
Litigation and other contingencies (5) (323) - - (323) -
Depreciation and amortization 55 49 51 155 148
-----------------------------
Adjusted EBITDA* $(30) $(29) $48 $(70) $90
--------------- ---- ---- --- ---- ---
Adjusted EBITDA margin* -7.6% -7.1% 9.7% -5.7% 5.8%
Selected items:
Cash paid for capital expenditures - network and other $30 $40 $24 $132 $75
CONDENSED CONSOLIDATED CASH FLOW INFORMATION (Unaudited)
(Millions)
Year To Date
------------
12/31/17 12/31/16
-------- --------
Operating activities
Net income (loss) $7,314 $(923)
Depreciation and amortization 6,321 6,040
Provision for losses on accounts receivable 312 406
Share-based and long-term incentive compensation expense 137 57
Deferred income tax (benefit) expense (6,707) 276
Gains from asset dispositions and exchanges (479) (354)
Call premiums paid on debt redemptions (129) -
Loss on early extinguishment of debt 65 -
Amortization of long-term debt premiums, net (125) (234)
Loss on disposal of property, plant and equipment 533 368
Contract terminations (5) 96
Other changes in assets and liabilities:
Accounts and notes receivable (74) (542)
Inventories and other current assets (3,216) (2,254)
Deferred purchase price from sale of receivables - (220)
Accounts payable and other current liabilities (104) (97)
Non-current assets and liabilities, net 260 (313)
Other, net 302 594
---------- --- ---
Net cash provided by operating activities 4,405 2,900
----------------------------------------- ----- -----
Investing activities
Capital expenditures - network and other (2,499) (1,421)
Capital expenditures - leased devices (1,787) (1,530)
Expenditures relating to FCC licenses (92) (46)
Change in short-term investments, net 5,271 (2,349)
Proceeds from sales of assets and FCC licenses 367 126
Other, net 16 26
Net cash provided by (used in) investing activities 1,276 (5,194)
--------------------------------------------------- ----- ------
Financing activities
Proceeds from debt and financings 3,073 6,830
Repayments of debt, financing and capital lease obligations (7,159) (3,266)
Debt financing costs (19) (272)
Other, net (6) 68
Net cash (used in) provided by financing activities (4,111) 3,360
--------------------------------------------------- ------ -----
Net increase in cash and cash equivalents 1,570 1,066
Cash and cash equivalents, beginning of period 2,870 2,641
---------------------------------------------- ----- -----
Cash and cash equivalents, end of period $4,440 $3,707
---------------------------------------- ------ ------
RECONCILIATION TO CONSOLIDATED FREE CASH FLOW* (NON-GAAP) (Unaudited)
(Millions)
Quarter To Date Year To Date
--------------- ------------
12/31/17 9/30/17 12/31/16 12/31/17 12/31/16
-------- ------- -------- -------- --------
Net cash provided by operating activities $1,166 $1,959 $650 $4,405 $2,900
Capital expenditures - network and other (696) (682) (478) (2,499) (1,421)
Capital expenditures - leased devices (682) (608) (767) (1,787) (1,530)
Expenditures relating to FCC licenses, net (73) (6) (14) (92) (46)
Proceeds from sales of assets and FCC licenses 149 117 60 367 126
Other investing activities, net 6 (1) 134 2 98
---
Free cash flow* $(130) $779 $(415) $396 $127
-------------- ----- ---- ----- ---- ----
Net proceeds (repayments) of financings related to devices and receivables 527 (359) (231) 660 400
Adjusted free cash flow* $397 $420 $(646) $1,056 $527
----------------------- ---- ---- ----- ------ ----
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
(Millions)
12/31/17 3/31/17
-------- -------
ASSETS
Current assets
Cash and cash equivalents $4,440 $2,870
Short-term investments 173 5,444
Accounts and notes receivable, net 3,917 4,138
Device and accessory inventory 1,009 1,064
Prepaid expenses and other current assets 626 601
----------------------------------------- --- ---
Total current assets 10,165 14,117
Property, plant and equipment, net 19,712 19,209
Goodwill 6,586 6,579
FCC licenses and other 41,222 40,585
Definite-lived intangible assets, net 2,667 3,320
Other assets 1,067 1,313
------------ ----- -----
Total assets $81,419 $85,123
------------ ------- -------
LIABILITIES AND EQUITY
Current liabilities
Accounts payable $3,176 $3,281
Accrued expenses and other current liabilities 3,859 4,141
Current portion of long-term debt, financing and capital lease obligations 4,036 5,036
-------------------------------------------------------------------------- ----- -----
Total current liabilities 11,071 12,458
Long-term debt, financing and capital lease obligations 32,825 35,878
Deferred tax liabilities 7,709 14,416
Other liabilities 3,509 3,563
Total liabilities 55,114 66,315
----------------- ------ ------
Stockholders' equity
Common stock 40 40
Paid-in capital 27,825 27,756
Accumulated deficit (1,264) (8,584)
Accumulated other comprehensive loss (366) (404)
Total stockholders' equity 26,235 18,808
-------------------------- ------ ------
Noncontrolling interests 70 -
Total equity 26,305 18,808
------------ ------ ------
Total liabilities and equity $81,419 $85,123
---------------------------- ------- -------
NET DEBT* (NON-GAAP) (Unaudited)
(Millions)
12/31/17 3/31/17
-------- -------
Total debt $36,861 $40,914
Less: Cash and cash equivalents (4,440) (2,870)
Less: Short-term investments (173) (5,444)
Net debt* $32,248 $32,600
-------- ------- -------
SCHEDULE OF DEBT (Unaudited)
(Millions)
12/31/17
--------
ISSUER MATURITY PRINCIPAL
------ -------- ---------
Sprint Corporation
7.25% Senior notes due 2021 09/15/2021 $2,250
7.875% Senior notes due 2023 09/15/2023 4,250
7.125% Senior notes due 2024 06/15/2024 2,500
7.625% Senior notes due 2025 02/15/2025 1,500
Sprint Corporation 10,500
------------------ ------
Sprint Spectrum Co LLC, Sprint Spectrum Co II LLC, and Sprint Spectrum Co III
LLC
3.36% Senior secured notes due 2021 09/20/2021 3,281
Sprint Spectrum Co LLC, Sprint Spectrum Co II LLC, and Sprint Spectrum Co III
LLC 3,281
----------------------------------------------------------------------------- -----
Sprint Communications, Inc.
Export Development Canada secured loan 12/17/2019 300
9% Guaranteed notes due 2018 11/15/2018 1,800
7% Guaranteed notes due 2020 03/01/2020 1,000
7% Senior notes due 2020 08/15/2020 1,500
11.5% Senior notes due 2021 11/15/2021 1,000
9.25% Secured debentures due 2022 04/15/2022 200
6% Senior notes due 2022 11/15/2022 2,280
Sprint Communications, Inc. 8,080
--------------------------- -----
Sprint Capital Corporation
6.9% Senior notes due 2019 05/01/2019 1,729
6.875% Senior notes due 2028 11/15/2028 2,475
8.75% Senior notes due 2032 03/15/2032 2,000
--------------------------- ----------
Sprint Capital Corporation 6,204
-------------------------- -----
Credit facilities
PRWireless secured term loan 06/28/2020 183
Secured equipment credit facilities 2020 - 2021 555
Secured term loan 02/03/2024 3,970
----------------- ----------
Credit facilities 4,708
----------------- -----
Accounts receivable facility 11/18/2019 2,966
Financing obligations 2018 - 2021 614
Capital leases and other obligations 2018 - 2026 532
Total principal 36,885
--------------- ------
Net premiums and debt financing costs (24)
Total debt $36,861
---------- -------
NOTES TO THE FINANCIAL INFORMATION (Unaudited)
(1) As more of our customers elect to
lease a device rather than
purchasing one under our subsidized
program, there is a significant
positive impact to EBITDA* and
Adjusted EBITDA* from direct
channel sales primarily due to the
fact the cost of the device is not
recorded as cost of products but
rather is depreciated over the
customer lease term. Under our
device leasing program for the
direct channel, devices are
transferred from inventory to
property and equipment and the cost
of the leased device is recognized
as depreciation expense over the
customer lease term to an estimated
residual value. The customer
payments are recognized as revenue
over the term of the lease. Under
our subsidized program, the cash
received from the customer for the
device is recognized as equipment
revenue at the point of sale and
the cost of the device is
recognized as cost of products.
During the three and nine-month
periods ended December 31, 2017, we
leased devices through our Sprint
direct channels totaling
approximately $1,761 million and
$3,671 million, respectively, which
would have increased cost of
products and reduced EBITDA* if
they had been purchased under our
subsidized program.
The impact to EBITDA* and Adjusted
EBITDA* resulting from the sale of
devices under our installment
billing program is generally
neutral except for the impact from
the time value of money element
related to the imputed interest on
the installment receivable.
(2) During the first quarter of fiscal
year 2017, the company recorded
losses on dispositions of assets
primarily related to cell site
construction and network
development costs that are no
longer relevant as a result of
changes in the company's network
plans. Additionally, the company
recorded a pre-tax non-cash gain
related to spectrum swaps with
other carriers. During the third
quarter of fiscal year 2016, the
company recorded losses on
dispositions of assets primarily
related to cell site construction
and network development costs that
are no longer relevant as a result
of changes in the company's network
plans. During the second quarter of
fiscal year 2016 the company
recorded a pre-tax non-cash gain
of $354 million related to spectrum
swaps with other carriers.
(3) Severance and exit costs consist of
lease exit costs primarily
associated with tower and cell
sites, access exit costs related to
payments that will continue to be
made under the company's backhaul
access contracts for which the
company will no longer be receiving
any economic benefit, and severance
costs associated with reduction in
its work force.
(4) During the first quarter of fiscal
year 2017, we recorded a $5 million
gain due to reversal of a liability
recorded in relation to the
termination of our relationship
with General Wireless Operations,
Inc. (Radio Shack). During the
first quarter of fiscal year 2016,
contract terminations primarily
relate to the termination of our
pre-existing wholesale arrangement
with NTELOS Holding Corp.
(5) During the third and first quarters
of fiscal year 2017, litigation and
other contingencies consist of
reductions associated with legal
settlements or favorable
developments in pending legal
proceedings as well as non-
recurring charges of $51 million
related to a regulatory fee matter.
During the second quarter of fiscal
year 2016, litigation and other
contingencies consist of
unfavorable developments associated
with legal matters as well as
federal and state matters such as
sales, use or property taxes.
(6) During the third and second quarters
of fiscal year 2017 we recorded
estimated hurricane-related
charges of $66 million and $34
million, respectively, consisting
of customer service credits,
incremental roaming costs, network
repairs and replacements.
(7) Sprint is no longer reporting
Lifeline subscribers due to recent
regulatory changes resulting in
tighter program restrictions. We
have excluded them from our
customer base for all periods
presented, including our Assurance
Wireless prepaid brand and
subscribers through our wholesale
Lifeline mobile virtual network
operators (MVNO). The table
reflects the reclassification of
the related Assurance Wireless
prepaid revenue from Prepaid
service revenue to Wholesale,
affiliate and other revenue of $92
million and $275 million for the
three and nine-month periods ended
December 31, 2016, respectively.
Revenue associated with subscribers
through our wholesale Lifeline
MVNO's continue to remain in
Wholesale, affiliate and other
revenue following this change.
*FINANCIAL MEASURES
Sprint provides financial measures determined in accordance with GAAP and adjusted GAAP (non-GAAP). The non-GAAP financial measures reflect industry conventions, or standard measures of liquidity, profitability or performance commonly used by the investment community for comparability purposes. These measurements should be considered in addition to, but not as a substitute for, financial information prepared in accordance with GAAP. We have defined below each of the non-GAAP measures we use, but these measures may not be synonymous to similar measurement terms used by other companies.
Sprint provides reconciliations of these non-GAAP measures in its financial reporting. Because Sprint does not predict special items that might occur in the future, and our forecasts are developed at a level of detail different than that used to prepare GAAP-based financial measures, Sprint does not provide reconciliations to GAAP of its forward-looking financial measures.
The measures used in this release include the following:
EBITDA is operating income/(loss) before depreciation and amortization. Adjusted EBITDA is EBITDA excluding severance, exit costs, and other special items. Adjusted EBITDA Margin represents Adjusted EBITDA divided by non-equipment net operating revenues for Wireless and Adjusted EBITDA divided by net operating revenues for Wireline. We believe that Adjusted EBITDA and Adjusted EBITDA Margin provide useful information to investors because they are an indicator of the strength and performance of our ongoing business operations. While depreciation and amortization are considered operating costs under GAAP, these expenses primarily represent non-cash current period costs associated with the use of long-lived tangible and definite-lived intangible assets. Adjusted EBITDA and Adjusted EBITDA Margin are calculations commonly used as a basis for investors, analysts and credit rating agencies to evaluate and compare the periodic and future operating performance and value of companies within the telecommunications industry.
Postpaid ABPA is average billings per account and calculated by dividing postpaid service revenue earned from postpaid customers plus billings from installment plans and non-operating leases, as well as, operating lease revenue by the sum of the monthly average number of postpaid accounts during the period. We believe that ABPA provides useful information to investors, analysts and our management to evaluate average postpaid customer billings per account as it approximates the expected cash collections, including billings from installment plans and non-operating leases, as well as, operating lease revenue, per postpaid account each month.
Postpaid Phone ABPU is average billings per postpaid phone user and calculated by dividing service revenue earned from postpaid phone customers plus billings from installment plans and non-operating leases, as well as, operating lease revenue by the sum of the monthly average number of postpaid phone connections during the period. We believe that ABPU provides useful information to investors, analysts and our management to evaluate average postpaid phone customer billings as it approximates the expected cash collections, including billings from installment plans and non-operating leases, as well as, operating lease revenue, per postpaid phone user each month.
Free Cash Flow is the cash provided by operating activities less the cash used in investing activities other than short-term investments, including changes in restricted cash, if any, and excluding the sale-leaseback of devices and equity method investments. Adjusted Free Cash Flow is Free Cash Flow plus the proceeds from device financings and sales of receivables, net of repayments. We believe that Free Cash Flow and Adjusted Free Cash Flow provide useful information to investors, analysts and our management about the cash generated by our core operations and net proceeds obtained to fund certain leased devices, respectively, after interest and dividends, if any, and our ability to fund scheduled debt maturities and other financing activities, including discretionary refinancing and retirement of debt and purchase or sale of investments.
Net Debt is consolidated debt, including current maturities, less cash and cash equivalents, short-term investments and, if any, restricted cash. We believe that Net Debt provides useful information to investors, analysts and credit rating agencies about the capacity of the company to reduce the debt load and improve its capital structure.
SAFE HARBOR
This release includes "forward-looking statements" within the meaning of the securities laws. The words "may," "could," "should," "estimate," "project," "forecast," "intend," "expect," "anticipate," "believe," "target," "plan", "outlook," "providing guidance," and similar expressions are intended to identify information that is not historical in nature. All statements that address operating performance, events or developments that we expect or anticipate will occur in the future -- including statements relating to our network, cost reductions, connections growth, and liquidity; and statements expressing general views about future operating results -- are forward-looking statements. Forward-looking statements are estimates and projections reflecting management's judgment based on currently available information and involve a number of risks and uncertainties that could cause actual results to differ materially from those suggested by the forward-looking statements. With respect to these forward-looking statements, management has made assumptions regarding, among other things, the development and deployment of new technologies and services; efficiencies and cost savings of new technologies and services; customer and network usage; connection growth and retention; service, speed, coverage and quality; availability of devices; availability of various financings, including any leasing transactions; the timing of various events and the economic environment. Sprint believes these forward-looking statements are reasonable; however, you should not place undue reliance on forward-looking statements, which are based on current expectations and speak only as of the date when made. Sprint undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law. In addition, forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from our company's historical experience and our present expectations or projections. Factors that might cause such differences include, but are not limited to, those discussed in Sprint Corporation's Annual Report on Form 10-K for the fiscal year ended March 31, 2017. You should understand that it is not possible to predict or identify all such factors. Consequently, you should not consider any such list to be a complete set of all potential risks or uncertainties.
About Sprint:
Sprint (NYSE: S) is a communications services company that creates more and better ways to connect its customers to the things they care about most. Sprint served 54.6 million connections as of December 31, 2017 and is widely recognized for developing, engineering and deploying innovative technologies, including the first wireless 4G service from a national carrier in the United States; leading no-contract brands including Virgin Mobile USA, Boost Mobile, and Assurance Wireless; instant national and international push-to-talk capabilities; and a global Tier 1 Internet backbone. Sprint has been named to the Dow Jones Sustainability Index (DJSI) North America for the past five years. You can learn more and visit Sprint at www.sprint.com or www.facebook.com/sprint and www.twitter.com/sprint.
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