UScellular reports first quarter 2024 results
2024 guidance reaffirmed
CHICAGO, May 3, 2024 /PRNewswire/ --
As previously announced, UScellular will hold a teleconference on May 3, 2024, 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 $950 million for the first quarter of 2024, versus $986 million for the same period one year ago. Service revenues totaled $754 million, versus $767 million for the same period one year ago. Net income attributable to UScellular shareholders and related diluted earnings per share were $18 million and $0.20, respectively, for the first quarter of 2024 compared to $13 million and $0.15, respectively, in the same period one year ago.
1Q 2024 Highlights*
-- Financial results
-- Service revenues decreased 2%
-- Postpaid ARPU grew 3%
-- Net income, Adjusted OIBDA and Adjusted EBITDA up significantly
-- Postpaid churn rate reduced 4%
-- Fixed wireless customers grew 42% to 124,000
* Comparisons are 1Q'23 to 1Q'24 unless otherwise noted
"We delivered strong bottom-line results during the quarter, driven by postpaid ARPU growth and our ongoing focus on expense discipline. We also drove year-over-year improvements in postpaid churn, and fixed wireless continued its strong customer growth trajectory," said Laurent C. Therivel, UScellular President and CEO. "Although we experienced some month-to-month improvement in postpaid net additions in the first quarter, postpaid handset gross additions continue to be a challenge, and this drove the postpaid net addition decline in the quarter. We have made recent promotional changes in order to drive improvement in postpaid handset subscriber momentum, while keeping us financially disciplined."
Exploration of Strategic Alternatives for UScellular
On August 4, 2023, Telephone and Data Systems, Inc. (TDS) and UScellular announced that the Boards of Directors of both companies decided to initiate a process to explore a range of strategic alternatives for UScellular. The review remains active and on-going.
2024 Estimated Results
UScellular's current estimates of full-year 2024 results are shown below. Such estimates represent management's view as of May 3, 2024 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.
2024 Estimated Results
Previous Current
(Dollars in millions)
Service revenues
$2,950-$3,050 Unchanged
Adjusted OIBDA1, 2
$750-$850 Unchanged
Adjusted EBITDA1, 2
$920-$1,020 Unchanged
Capital expenditures
$550-$650 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 2024 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
2024 Estimated Three Months Ended Year Ended
Results(2) December 31, 2023
March 31, 2024
(Dollars in millions)
Net income (GAAP) N/A $24 $58
Add back:
Income tax expense N/A 28 53
Income before income taxes (GAAP)
$60-$160 $52 $111
Add back:
Interest expense 185 43 196
Depreciation, amortization and accretion expense 660 165 656
EBITDA (Non-GAAP)(1)
$905-$1,005 $260 $963
Add back or deduct:
Expenses related to strategic alternatives review 7 8
(Gain) loss on asset disposals, net 15 6 17
(Gain) loss on license sales and exchanges, net (1) (2)
Adjusted EBITDA (Non-GAAP)(1)
$920-$1,020 $272 $986
Deduct:
Equity in earnings of unconsolidated entities 155 42 158
Interest and dividend income 15 2 10
Adjusted OIBDA (Non-GAAP)(1)
$750-$850 $228 $818
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
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, 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
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, 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 March 31, 2024, can be found on
UScellular's website at investors.uscellular.com.
2
2024 Estimated Results do not reflect any anticipated costs, expenses or results of the strategic alternatives review referenced above.
Conference Call Information
UScellular will hold a conference call on May 3, 2024 at 9:00 a.m. Central Time.
-- Access the live call on the Events & Presentations page of
investors.uscellular.com or at
https://events.q4inc.com/attendee/316610586
-- 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 4.5 million retail connections in 21 states. The Chicago-based company had 4,300 full- and part-time associates as of March 31, 2024. At the end of the first quarter of 2024, Telephone and Data Systems, Inc. owned approximately 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: whether any strategic alternatives for UScellular will be successfully identified or completed; whether any such strategic alternative will result in additional value for UScellular and its shareholders and whether the process will have an adverse impact on UScellular's business; intense competition; the ability to attract people of outstanding talent throughout all levels of the organization; UScellular's smaller scale relative to larger competitors; the ability to obtain or maintain roaming arrangements with other carriers on acceptable terms and changes in roaming practices; 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; difficulties involving third parties with which UScellular does business; 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; and the impact, duration and severity of public health emergencies. 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 3/31/2024 12/31/2023 9/30/2023 6/30/2023 3/31/2023
Retail Connections
Postpaid
Total at end of period(1) 4,051,000 4,106,000 4,159,000 4,194,000 4,223,000
Gross additions 106,000 129,000 128,000 125,000 137,000
Handsets 63,000 80,000 84,000 83,000 93,000
Connected devices 43,000 49,000 44,000 42,000 44,000
Net additions (losses)(1) (44,000) (50,000) (35,000) (28,000) (24,000)
Handsets (47,000) (53,000) (38,000) (29,000) (25,000)
Connected devices 3,000 3,000 3,000 1,000 1,000
ARPU(2) $51.96 $51.61 $51.11 $50.64 $50.66
ARPA(3) $132.00 $131.63 $130.91 $130.19 $130.77
Handset upgrade rate4 4.5 % 5.8 % 4.5 % 4.8 % 4.9 %
Churn rate5 1.22 % 1.44 % 1.30 % 1.21 % 1.27 %
Handsets 1.03 % 1.22 % 1.11 % 1.01 % 1.06 %
Connected devices 2.52 % 3.03 % 2.64 % 2.65 % 2.78 %
Prepaid
Total at end of period(1) 436,000 451,000 462,000 462,000 470,000
Gross additions 41,000 43,000 52,000 50,000 43,000
Net additions (losses)(1) (13,000) (11,000) (8,000) (23,000)
ARPU2, 6 $32.25 $32.32 $33.44 $33.86 $33.19
Churn rate5 4.06 % 3.87 % 3.68 % 4.18 % 4.63 %
Market penetration at end of period
Consolidated operating population 32,550,000 32,350,000 32,350,000 32,350,000 32,350,000
Consolidated operating penetration7 14 % 15 % 15 % 15 % 15 %
Capital expenditures (millions) $131 $148 $111 $143 $208
Total cell sites in service 6,995 7,000 6,973 6,952 6,950
Owned towers 4,382 4,373 4,356 4,341 4,338
1 First quarter 2024 connections were adjusted to remove subscribers that could no longer access the UScellular network due to the CDMA shutdown. This resulted in 11,000 and 2,000
subscribers removed from the postpaid and prepaid base, respectively, that are not included in Net additions (losses) for the 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
Handset upgrade rate calculated as total handset upgrade transactions divided by average postpaid handset connections.
5
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.
6 Fourth quarter 2023 Prepaid ARPU excludes a $6 million reduction of prepaid revenue related to an adjustment to correct a prior period error recorded in the fourth quarter of 2023.
7
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
March 31,
2024 2023 2024
vs.
2023
(Dollars and shares in millions, except per share amounts)
Operating revenues
Service $754 $767 (2) %
Equipment sales 196 219 (10) %
Total operating revenues 950 986 (4) %
Operating expenses
System operations (excluding Depreciation, amortization and accretion reported below) 182 182
Cost of equipment sold 216 253 (14) %
Selling, general and administrative 331 345 (4) %
Depreciation, amortization and accretion 165 170 (2) %
(Gain) loss on asset disposals, net 6 10 (43) %
(Gain) loss on license sales and exchanges, net (1) N/M
Total operating expenses 899 960 (6) %
Operating income 51 26 94 %
Investment and other income (expense)
Equity in earnings of unconsolidated entities 42 44 (5) %
Interest and dividend income 2 2 2 %
Interest expense (43) (47) 8 %
Total investment and other income (expense) 1 (1) N/M
Income before income taxes 52 25 N/M
Income tax expense 28 11 N/M
Net income 24 14 64 %
Less: Net income attributable to noncontrolling interests, net of tax 6 1 N/M
Net income attributable to UScellular shareholders $18 $13 36 %
Basic weighted average shares outstanding 85 85 1 %
Basic earnings per share attributable to UScellular shareholders $0.21 $0.15 35 %
Diluted weighted average shares outstanding 88 86 2 %
Diluted earnings per share attributable to UScellular shareholders $0.20 $0.15 33 %
N/M - Percentage change not meaningful
United States Cellular Corporation
Consolidated Statement of Cash Flows
(Unaudited)
Three Months Ended
March 31,
2024 2023
(Dollars in millions)
Cash flows from operating activities
Net income $24 $14
Add (deduct) adjustments to reconcile net income to net cash flows from operating activities
Depreciation, amortization and accretion 165 170
Bad debts expense 29 26
Stock-based compensation expense 13
Deferred income taxes, net 4 7
Equity in earnings of unconsolidated entities (42) (44)
Distributions from unconsolidated entities 22 20
(Gain) loss on asset disposals, net 6 10
(Gain) loss on license sales and exchanges, net (1)
Other operating activities 1 2
Changes in assets and liabilities from operations
Accounts receivable 16 37
Equipment installment plans receivable 2 1
Inventory 24 (1)
Accounts payable (15) (149)
Customer deposits and deferred revenues 5 (10)
Accrued taxes 23 1
Accrued interest 9 9
Other assets and liabilities (82) (52)
Net cash provided by operating activities 203 41
Cash flows from investing activities
Cash paid for additions to property, plant and equipment (133) (196)
Cash paid for licenses (11) (5)
Other investing activities - 9
Net cash used in investing activities (144) (192)
Cash flows from financing activities
Issuance of long-term debt 40 115
Repayment of long-term debt (55) (3)
Repayment of short-term debt - (60)
Distributions to noncontrolling interests (2) (1)
Cash paid for software license agreements (9) (7)
Other financing activities (2) (1)
Net cash provided by (used in) financing activities (28) 43
Net increase (decrease) in cash, cash equivalents and restricted cash 31 (108)
Cash, cash equivalents and restricted cash
Beginning of period 179 308
End of period $210 $200
United States Cellular Corporation
Consolidated Balance Sheet Highlights
(Unaudited)
ASSETS
March 31, 2024 December 31, 2023
(Dollars in millions)
Current assets
Cash and cash equivalents $185 $150
Accounts receivable, net 932 957
Inventory, net 175 199
Prepaid expenses 71 57
Income taxes receivable - 1
Other current assets 32 36
Total current assets 1,395 1,400
Assets held for sale - 15
Licenses 4,711 4,693
Investments in unconsolidated entities 482 461
Property, plant and equipment, net 2,540 2,576
Operating lease right-of-use assets 910 915
Other assets and deferred charges 666 690
Total assets $10,704 $10,750
United States Cellular Corporation
Consolidated Balance Sheet Highlights
(Unaudited)
LIABILITIES AND EQUITY
March 31, 2024 December 31, 2023
(Dollars in millions, except per share amounts)
Current liabilities
Current portion of long-term debt $20 $20
Accounts payable 229 248
Customer deposits and deferred revenues 235 229
Accrued taxes 49 32
Accrued compensation 32 83
Short-term operating lease liabilities 134 135
Other current liabilities 138 154
Total current liabilities 837 901
Deferred liabilities and credits
Deferred income tax liability, net 758 755
Long-term operating lease liabilities 827 831
Other deferred liabilities and credits 564 565
Long-term debt, net 3,029 3,044
Noncontrolling interests with redemption features 16 12
Equity
UScellular shareholders' equity
Series A Common and Common Shares, par value $1.00 per share 88 88
Additional paid-in capital 1,740 1,726
Treasury shares (80) (80)
Retained earnings 2,910 2,892
Total UScellular shareholders' equity 4,658 4,626
Noncontrolling interests 15 16
Total equity 4,673 4,642
Total liabilities and equity $10,704 $10,750
United States Cellular Corporation
Financial Measures and Reconciliations
(Unaudited)
Free Cash Flow
Three Months Ended
March 31,
2024 2023
(Dollars in millions)
Cash flows from operating activities (GAAP) $203 $41
Cash paid for additions to property, plant and equipment (133) (196)
Cash paid for software license agreements (9) (7)
Free cash flow (Non-GAAP)(1) $61 $(162)
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 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 and Income before income taxes.
Three Months Ended
March 31,
2024 2023
(Dollars in millions)
Net income (GAAP) $24 $14
Add back:
Income tax expense 28 11
Income before income taxes (GAAP) 52 25
Add back:
Interest expense 43 47
Depreciation, amortization and accretion 165 170
EBITDA (Non-GAAP) 260 242
Add back or deduct:
Expenses related to strategic alternatives review 7
(Gain) loss on asset disposals, net 6 10
(Gain) loss on license sales and exchanges, net (1)
Adjusted EBITDA (Non-GAAP) 272 252
Deduct:
Equity in earnings of unconsolidated entities 42 44
Interest and dividend income 2 2
Adjusted OIBDA (Non-GAAP) $228 $206
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SOURCE United States Cellular Corporation
