Sprint Reports Fiscal Year 2019 First Quarter Results
OVERLAND PARK, Kan., Aug. 2, 2019 /PRNewswire/ --
-- Wireless service revenue of $5.3 billion
-- Postpaid wireless service revenue of $4.2 billion grew
year-over-year
-- Postpaid average revenue per account (ARPA) of $124.89 stabilized
year-over-year
-- Net loss of $111 million, operating income of $455 million, and adjusted
EBITDA* of $3 billion
-- Postpaid net additions of 134,000
-- Data device net additions of 262,000 were partially offset by phone
net losses of 128,000
-- Average postpaid accounts were stable year-over-year
-- Continued momentum on Next-Gen Network deployment
-- True Mobile 5G network launched in parts of five major metro areas
with more to come
-- Network investments of $1.2 billion grew year-over-year for the
fourth consecutive quarter
-- Further progress on digitalization initiatives
-- Postpaid gross additions in digital channels increased approximately
50 percent year-over-year
Sprint Corporation (NYSE: S) today reported results for the fiscal year 2019 first quarter, including year-over-year growth in postpaid wireless service revenue and postpaid net additions. The company also reported a net loss of $111 million, operating income of $455 million, and adjusted EBITDA* of $3 billion.
"While we delivered good results in the first quarter relative to expectations, the business still faces several structural headwinds and I remain convinced the merger with T-Mobile is the best outcome for our customers, employees, industry and all stakeholders," said Sprint CEO Michel Combes. "With the recent clearance of our merger by the Department of Justice, and the anticipated approval from the FCC, we are moving one step closer to building one of the world's most advanced 5G networks and providing American consumers a better network and overall experience at New T-Mobile."
Stable Wireless Service Revenue
Sprint has focused on growing revenue per customer account by selling additional devices and value-added services, including promoting its feature-rich Unlimited Plus and Unlimited Premium rate plans. This strategy delivered year-over-year growth in postpaid wireless service revenue and postpaid net additions of 134,000, driven by growth in data devices and partially offset by postpaid phone customer losses. The company also reported a stabilization of postpaid ARPA and average postpaid accounts.
Total wireless service revenue of $5.3 billion declined 3 percent year-over-year, largely because of the continued amortization of prepaid contract balances as a result of adopting the new revenue standard last year. Excluding this non-operational impact, total wireless service revenue would have been relatively flat year-over-year.
The company also reported the following financial results.
(Millions, except per
share data) Fiscal 1Q19 Fiscal 1Q18 Change
---
Net (loss) income
attributable to
Sprint ($111) $176 ($287)
---
Basic (loss) income
per share ($0.03) $0.04 ($0.07)
---
Operating income $455 $815 ($360)
---
Adjusted EBITDA* $3,042 $3,280 ($238)
---
Net cash provided by
operating activities $2,244 $2,430 ($186)
---
Adjusted free cash
flow* ($58) $8 ($66)
---
Network Investments Continued as Sprint Launches True Mobile 5G Network
Sprint's quarterly network investments, or cash capital expenditures excluding leased devices, of $1.2 billion grew year-over-year for the fourth consecutive quarter as the company made continued progress on executing its Next-Gen Network plan. Sprint nearly doubled the number of Massive MIMO radios on-air during the quarter and currently has about 3,000 units deployed.
Massive MIMO is a breakthrough technology that improves network capacity and is at the foundation of Sprint's True Mobile 5G network. The company is using 64T64R (64 transmitters 64 receivers) Massive MIMO radios that support a feature called split-mode, which enables Sprint to simultaneously deliver LTE and 5G New Radio (NR) service.
True Mobile 5G from Sprint is available in areas of Atlanta, Chicago, Dallas-Fort Worth, Houston and Kansas City, and the company expects to launch service in areas of Los Angeles, New York City, Phoenix and Washington, D.C., in the coming weeks. Once all nine metro areas are launched, Sprint's mobile 5G network will cover approximately 2,100 square miles and 11 million people, giving Sprint the largest initial 5G coverage footprint in the U.S. The company is offering 5G capable smartphones from LG and Samsung, along with a hotspot device from HTC.
As Sprint launches True Mobile 5G, the company continues to believe that a merger with T-Mobile is critical to accelerate the deployment of a ubiquitous, nationwide 5G network - one that includes coverage in rural locations. The combined company is expected to have the resources and technology to build a 5G network that fuels innovation across every industry, dramatically increasing competition, unleashing new economic growth, and creating thousands of jobs and billions of dollars in U.S. economic value. Together, the combined company is expected to lead the world in next-generation technology services and applications, bringing 5G service to nearly all Americans.
Building a Digital Disruptor
Sprint continued to leverage digital capabilities to transform the way it engages with customers.
-- Postpaid gross additions in digital channels increased approximately 50
percent year-over-year.
-- Approximately 30 percent of all Sprint customer care chats are now
performed by virtual agents using artificial intelligence.
-- The company launched voice-to-digital tools that allow customers calling
with specific issues to use a digital self-service option.
-- Web conversions improved and orders from digital media more than doubled
year-over-year.
Additional Information
-- Additional information about results, including a message from
management, is available on our Investor Relations website at
www.sprint.com/investors.
Wireless
Operating
Statistics
(Unaudited)
Quarter To Date
6/30/19
3/31/19
6/30/18
Net
additions
(losses)
(in
thousands)
Postpaid(a) 134 169 123
Postpaid
phone (128) (189) 87
Prepaid(a) (169) (30) 3
Wholesale
and
affiliate (140) (147) (69)
---
Total
wireless
net
(losses)
additions (175) (8) 57
---
End of
period
connections
(in
thousands)
Postpaid(a)
(b)(c)(d) 33,075 32,774 32,187
Postpaid
phone(b)
(c) 26,470 26,598 26,847
Prepaid(a)
(b) (c) 8,647 8,816 9,033
Wholesale
and
affiliate
(c) (d)
(e) 12,590 12,897 13,347
---
Total end
of period
connections 54,312 54,487 54,567
---
Churn
Postpaid 1.74% 1.81% 1.63%
Postpaid
phone 1.78% 1.82% 1.55%
Prepaid 4.23% 4.37% 4.17%
Supplemental
data -
connected
devices
End of
period
connections
(in
thousands)
Retail
postpaid 3,453 3,121 2,429
Wholesale
and
affiliate 9,968 10,384 10,963
---
Total 13,421 13,505 13,392
---
ARPU(f)
Postpaid $42.57 $43.25 $43.55
Postpaid
phone $49.87 $50.18 $49.57
Prepaid $32.15 $33.67 $36.27
ARPA(g)
Average
postpaid
accounts
(in
thousands) 11,208 11,184 11,176
Postpaid
ARPA $124.89 $126.12 $124.93
(a)During the three-month period
ended June 30, 2019, net
subscriber additions and end of
period subscribers under the non-
Sprint branded postpaid plan
offering were 116,000 and 670,000,
respectively, and are included in
total retail postpaid subscribers
above.
(b)During the three-month period
ended June 30, 2018, we ceased
selling devices in our installment
billing program under one of our
brands and as a result, 45,000
subscribers were migrated back to
prepaid from postpaid.
(c) As a result of our affiliate
agreement with Shentel, certain
subscribers have been transferred
from postpaid and prepaid to
affiliates. During the three-
month period ended June 30, 2018,
10,000 and 4,000 subscribers were
transferred from postpaid and
prepaid, respectively, to
affiliates.
(d) During the three-month period
ended June 30, 2019, one of our
postpaid customers purchased a
wholesale MVNO and as a result,
167,000 subscribers were
transferred from the wholesale to
postpaid subscriber base.
(e) On April 1, 2018,
approximately 115,000 wholesale
subscribers were removed from the
subscriber base with no impact to
revenue.
(f) 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.
(g) ARPA is calculated by dividing
postpaid service revenue by the
sum of the monthly average number
of retail postpaid accounts.
Wireless Device Financing Summary (Unaudited)
(Millions, except sales, connections, and leased devices in property, plant
and equipment)
Quarter To Date
6/30/19
3/31/19
6/30/18
Postpaid activations (in thousands) 3,475 3,730 3,473
Postpaid activations financed 79% 79% 83%
Postpaid activations - operating leases 59% 58% 70%
Installment plans
Installment sales financed $417 $368 $213
Installment billings $209 $219 $325
Installment receivables, net $1,024 $926 $983
Equipment rentals and depreciation -equipment rentals
Equipment rentals $1,359 $1,359 $1,212
Depreciation - equipment rentals $1,029 $1,084 $1,136
Leased device additions
Cash paid for capital expenditures - leased devices $1,516 $1,702 $1,817
Leased devices
Leased devices in property, plant and equipment, net $6,424 $6,612 $6,213
Leased device units
Leased devices in property, plant and equipment (units in thousands) 15,762 15,889 15,169
Leased device and receivables financings net proceeds
Proceeds $1,120 $1,783 $1,356
Repayments (890) (2,500) (1,070)
Net proceeds (repayments) of financings related to devices and receivables $230 $(717) $286
---
CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS
(Unaudited)
(Millions, except per share
data)
Quarter To Date
6/30/19
3/31/19
6/30/18
Net operating revenues
Service revenue $5,563 $5,656 $5,740
Equipment sales 1,220 1,426 1,173
Equipment rentals 1,359 1,359 1,212
---
Total net operating revenues 8,142 8,441 8,125
---
Net operating expenses
Cost of services (exclusive of
depreciation and amortization
below) 1,710 1,645 1,677
Cost of equipment sales 1,341 1,561 1,270
Cost of equipment rentals
(exclusive of depreciation
below) 225 186 124
Selling, general and
administrative 1,907 2,043 1,867
Depreciation -network and
other 1,120 1,113 1,023
Depreciation -equipment
rentals 1,029 1,084 1,136
Amortization 118 133 171
Goodwill impairment (1) 2,000
Other, net 237 350 42
---
Total net operating expenses 7,687 10,115 7,310
---
Operating income (loss) 455 (1,674) 815
---
Interest expense (619) (629) (637)
Other income, net 28 34 42
---
(Loss) income before income
taxes (136) (2,269) 220
Income tax benefit (expense) 22 91 (47)
---
Net (loss) income (114) (2,178) 173
Less: Net loss attributable to
noncontrolling interests 3 4 3
---
Net (loss) income attributable
to Sprint Corporation $(111) $(2,174) $176
---
Basic net (loss) income per
common share attributable to
Sprint Corporation $(0.03) $(0.53) $0.04
---
Diluted net (loss) income per
common share attributable to
Sprint Corporation $(0.03) $(0.53) $0.04
---
Basic weighted average common
shares outstanding 4,087 4,080 4,010
---
Diluted weighted average common
shares outstanding 4,087 4,080 4,061
---
Effective tax rate 16.2% 4.0% 21.4%
---
NON-GAAP RECONCILIATION - NET
(LOSS) INCOME TO ADJUSTED
EBITDA* (Unaudited)
(Millions)
Quarter To Date
6/30/19
3/31/19
6/30/18
Net (loss) income $(114) $(2,178) $173
---
Income tax (benefit) expense (22) (91) 47
---
(Loss) income before income
taxes (136) (2,269) 220
Other income, net (28) (34) (42)
Interest expense 619 629 637
---
Operating income (loss) 455 (1,674) 815
---
Depreciation -network and
other 1,120 1,113 1,023
Depreciation -equipment
rentals 1,029 1,084 1,136
Amortization 118 133 171
---
EBITDA*(2) 2,722 656 3,145
---
Asset impairments (3) 210
Loss from asset dispositions,
exchanges, and other, net(4) 304
Severance and exit costs (5) 27 22 8
Contract terminations costs (6) 34
Merger costs (7) 83 130 93
Litigation expenses and other
contingencies(8) 24
Goodwill impairment (1) 2,000
---
Adjusted EBITDA*(2) $3,042 $3,136 $3,280
---
Adjusted EBITDA margin* 54.7% 55.4% 57.1%
Selected items:
Cash paid for capital
expenditures -network and
other $1,189 $1,149 $1,132
Cash paid for capital
expenditures -leased devices $1,516 $1,702 $1,817
WIRELESS STATEMENTS OF
OPERATIONS (Unaudited)
(Millions)
Quarter To Date
6/30/19
3/31/19
6/30/18
Net operating revenues
Service revenue
Postpaid $4,199 $4,231 $4,188
Prepaid 843 886 982
Wholesale, affiliate and other 280 292 290
---
Total service revenue 5,322 5,409 5,460
Equipment sales 1,220 1,426 1,173
Equipment rentals 1,359 1,359 1,212
Total net operating revenues 7,901 8,194 7,845
---
Net operating expenses
Cost of services (exclusive of
depreciation and amortization
below) 1,519 1,462 1,429
Cost of equipment sales 1,341 1,561 1,270
Cost of equipment rentals
(exclusive of depreciation
below) 225 186 124
Selling, general and
administrative 1,779 1,854 1,704
Depreciation -network and
other 1,070 1,064 972
Depreciation -equipment
rentals 1,029 1,084 1,136
Amortization 118 133 171
Other, net 230 349 37
---
Total net operating expenses 7,311 7,693 6,843
---
Operating income $590 $501 $1,002
---
WIRELESS NON-GAAP
RECONCILIATION (Unaudited)
(Millions)
Quarter To Date
6/30/19
3/31/19
6/30/18
Operating income $590 $501 $1,002
Asset impairments (3) 203
Loss from asset dispositions,
exchanges, and other, net(4) 304
Severance and exit costs (5) 27 21 3
Contract terminations costs (6) 34
Litigation expenses and other
contingencies (8) 24
Depreciation -network and
other 1,070 1,064 972
Depreciation -equipment
rentals 1,029 1,084 1,136
Amortization 118 133 171
Adjusted EBITDA*(2) $3,037 $3,131 $3,318
---
Adjusted EBITDA margin* 57.1% 57.9% 60.8%
Selected items:
Cash paid for capital
expenditures -network and
other $1,027 $973 $1,019
Cash paid for capital
expenditures -leased devices $1,516 $1,702 $1,817
WIRELINE STATEMENTS OF
OPERATIONS (Unaudited)
(Millions)
Quarter To Date
6/30/19
3/31/19
6/30/18
Net operating revenues $307 $314 $338
---
Net operating expenses
Cost of services (exclusive of
depreciation and amortization
below) 262 255 311
Selling, general and
administrative 45 50 69
Depreciation and amortization 47 46 49
Other, net 7 1 5
---
Total net operating expenses 361 352 434
---
Operating loss $(54) $(38) $(96)
---
WIRELINE NON-GAAP
RECONCILIATION (Unaudited)
(Millions)
Quarter To Date
6/30/19
3/31/19
6/30/18
Operating loss $(54) $(38) $(96)
Asset impairments (3) 7
Severance and exit costs (5) 1 5
Depreciation and amortization 47 46 49
---
Adjusted EBITDA*
$ - $9 $(42)
---
Adjusted EBITDA margin* 0.0% 2.9% -12.4%
Selected items:
Cash paid for capital
expenditures -network and
other $28 $72 $51
CONDENSED CONSOLIDATED CASH
FLOW INFORMATION (Unaudited)
(Millions)
Quarter To Date
6/30/19
3/31/19
6/30/18
Operating activities
Net (loss) income $(114) $(2,178) $173
Goodwill impairment (1) 2,000
Asset impairments (3) 210
Depreciation and amortization 2,267 2,330 2,330
Provision for losses on
accounts receivable 117 116 57
Share-based and long-term
incentive compensation expense 35 31 40
Deferred income tax (expense)
benefit (33) (110) 39
Amortization of long-term debt
premiums, net (16) (18) (33)
Loss on disposal of property,
plant and equipment 225 493 124
Litigation and other
contingencies 24
Deferred purchase price from
sale of receivables (170)
Other changes in assets and
liabilities:
Accounts and notes receivable (121) (215) 273
Inventories and other current
assets 456 31 421
Operating lease right-of-use
assets 414
Accounts payable and other
current liabilities (660) 388 (766)
Current and long-term
operating lease liabilities (460)
Non-current assets and
liabilities, net (136) (127) (197)
Other, net 60 82 139
Net cash provided by operating
activities 2,244 2,847 2,430
---
Investing activities
Capital expenditures -network
and other (1,189) (1,149) (1,132)
Capital expenditures -leased
devices (1,516) (1,702) (1,817)
Expenditures relating to FCC
licenses (9) (18) (59)
Change in short-term
investments, net 67 565 (1,654)
Proceeds from sales of assets
and FCC licenses 182 175 133
Proceeds from deferred purchase
price from sale of receivables 170
Other, net (3) 17 (10)
Net cash used in investing
activities (2,468) (2,112) (4,369)
---
Financing activities
Proceeds from debt and
financings 1,061 2,891 1,370
Repayments of debt, financing
and finance lease obligations (2,919) (2,827) (1,415)
Debt financing costs (12) (35) (248)
Proceeds from issuance of
common stock, net (17) 10 (2)
Other, net 4
Net cash (used in) provided by
financing activities (1,887) 43 (295)
---
Net (decrease) increase in
cash, cash equivalents and
restricted cash (2,111) 778 (2,234)
Cash, cash equivalents and
restricted cash, beginning of
period 7,063 6,285 6,659
---
Cash, cash equivalents and
restricted cash, end of period $4,952 $7,063 $4,425
---
RECONCILIATION TO CONSOLIDATED
FREE CASH FLOW* (NON-GAAP)
(Unaudited)
(Millions)
Quarter To Date
6/30/19
3/31/19
6/30/18
Net cash provided by operating
activities $2,244 $2,847 $2,430
Capital expenditures -network
and other (1,189) (1,149) (1,132)
Capital expenditures -leased
devices (1,516) (1,702) (1,817)
Expenditures relating to FCC
licenses, net (9) (18) (59)
Proceeds from sales of assets
and FCC licenses 182 175 133
Proceeds from deferred purchase
price from sale of receivables 170
Other investing activities, net 25 (3)
Free cash flow* $(288) $178 $(278)
---
Net proceeds (repayments) of
financings related to devices
and receivables 230 (717) 286
Adjusted free cash flow* $(58) $(539) $8
---
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
(Millions)
6/30/19
3/31/19
ASSETS
Current assets
Cash and cash equivalents $4,869 $6,982
Short-term investments 67
Accounts and notes receivable, net 3,558 3,554
Device and accessory inventory 726 999
Prepaid expenses and other current assets 1,436 1,289
---
Total current assets 10,589 12,891
Property, plant and equipment, net 20,556 21,201
Costs to acquire a customer contract 1,631 1,559
Operating lease right-of-use assets 7,054
Goodwill 4,598 4,598
FCC licenses and other 41,474 41,465
Definite-lived intangible assets, net 1,525 1,769
Other assets 1,119 1,118
---
Total assets $88,546 $84,601
---
LIABILITIES AND EQUITY
Current liabilities
Accounts payable $3,672 $3,961
Accrued expenses and other current liabilities 3,048 3,597
Current operating lease liabilities 1,680
Current portion of long-term debt, financing and finance lease obligations 2,889 4,557
---
Total current liabilities 11,289 12,115
Long-term debt, financing and finance lease obligations 35,073 35,366
Long-term operating lease liabilities 5,913
Deferred tax liabilities 7,563 7,556
Other liabilities 2,540 3,437
Total liabilities 62,378 58,474
---
Stockholders' equity
Common stock 41 41
Treasury shares, at cost (2)
Paid-in capital 28,323 28,306
Accumulated deficit (1,832) (1,883)
Accumulated other comprehensive loss (414) (392)
Total stockholders' equity 26,116 26,072
---
Noncontrolling interests 52 55
Total equity 26,168 26,127
---
Total liabilities and equity $88,546 $84,601
---
NET DEBT* (NON-GAAP) (Unaudited)
(Millions)
6/30/19
3/31/19
Total debt $37,962 $39,923
Less: Cash and cash equivalents (4,869) (6,982)
Less: Short-term investments (67)
Net debt* $33,093 $32,874
---
SCHEDULE OF DEBT (Unaudited)
(Millions)
6/30/19
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
7.625% Senior notes due 2026
03/01/2026 1,500
Sprint Corporation 12,000
---
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 1,968
4.738% Senior secured notes due 2025
03/20/2025 2,100
5.152% Senior secured notes due 2028
03/20/2028 1,838
Sprint Spectrum Co LLC, Sprint Spectrum Co II LLC, and Sprint Spectrum Co III
LLC 5,906
---
Sprint Communications, Inc.
Export Development Canada secured loan
12/17/2019 300
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
6% Senior notes due 2022
11/15/2022 2,280
Sprint Communications, Inc. 6,080
---
Sprint Capital Corporation
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 4,475
---
Credit facilities
PRWireless secured term loan
06/28/2020 200
Secured equipment credit facilities
2020 - 2022 556
Secured term loans due 2024
02/03/2024 5,900
Credit facilities 6,656
---
Accounts receivable facility 2021 2,837
Finance leases and other obligations
2019 - 2026 407
Total principal 38,361
---
Net premiums and debt financing costs (399)
Total debt $37,962
---
NOTES TO THE FINANCIAL INFORMATION (Unaudited)
(1) As a result of our annual goodwill
impairment assessment, we recorded
a non-cash goodwill impairment
charge of $2 billion during the
fourth quarter of fiscal year
2018. The substantial portion of
this impairment charge is not
taxable as goodwill is generally
not separately deductible for tax
purposes.
(2) 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
equipment sales 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 subsidy model, we
recognize revenue from the sale of
devices as equipment sales at the
point of sale and the cost of the
device is recognized as cost of
equipment sales. During the three
month period ended June 30, 2019,
we leased devices through our
Sprint direct channels totaling
approximately $1,020 million,
which would have increased cost of
equipment sales 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 in
our indirect channels from the
time value of money element
related to the imputed interest on
the installment receivable.
(3) During the first quarter of fiscal
year 2019, the company recorded
non-cash asset impairments
primarily related to the sale and
leaseback of our Overland Park,
Kansas campus.
(4) During the fourth quarter of fiscal
year 2018, 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.
(5) During the first quarter of fiscal
year 2019 and fourth and first
quarters of fiscal year 2018,
severance and exit costs consist
of 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.
(6) During the first quarter of fiscal
year 2018, contract termination
costs are primarily due to the
purchase of certain leased
spectrum assets, which upon
termination of the spectrum leases
resulted in the accelerated
recognition of the unamortized
favorable lease balances.
(7) During the first quarter of fiscal
year 2019 and fourth and first
quarters of fiscal year 2018, we
recorded merger costs of $83
million, $130 million and $93
million, respectively, due to the
proposed Business Combination
Agreement with T-Mobile.
(8) During the fourth quarter of fiscal
year 2018, litigation expenses and
other contingencies consist of
unfavorable developments
associated with legal matters.
*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.
Free Cash Flow is the cash provided by operating activities less the cash used in investing activities other than short-term investments 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 and short-term investments. 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, subscriber 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 such as 5G; efficiencies and cost savings of new technologies and services; customer and network usage; subscriber additions and churn rates; service, speed, capacity, coverage and quality; availability of devices; availability of various financings; and 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, 2019. 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 54.3 million connections as of June 30, 2019 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. Today, Sprint's legacy of innovation and service continues with an increased investment to dramatically improve coverage, reliability, and speed across its nationwide network and commitment to launching a 5G mobile network in the U.S. 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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