TDS reports second quarter 2021 results

UScellular and TDS Telecom executing on strategic priorities; guidance reaffirmed

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Aug 05, 2021, 17:27 ET

CHICAGO, Aug. 5, 2021 /PRNewswire/ --

As previously announced, TDS will hold a teleconference August 6, 2021, at 9:00 a.m. CDT. Listen to the call live via the Events & Presentations page of investors.tdsinc.com.

Telephone and Data Systems, Inc. (NYSE:TDS) reported total operating revenues of $1,311 million for the second quarter of 2021, versus $1,263 million for the same period one year ago. Net income attributable to TDS common shareholders and related diluted earnings per share were $20 million and $0.17, respectively, for the second quarter of 2021 compared to $65 million and $0.56, respectively, in the same period one year ago.

"The TDS family of companies produced solid revenue growth for the second quarter of 2021 and made good progress on achieving our long-term strategic goals," said LeRoy T. Carlson, Jr., TDS President and CEO. "Also, our commitment to maintaining financial flexibility has allowed us to take actions to lower the average cost of financing for our growth initiatives.

"At UScellular, higher postpaid ARPU helped drive service revenue growth as customers chose higher-value plans. Our efforts to build market share in our prepaid business are starting to generate positive results, and our business and government initiatives are laying the foundation for future growth. UScellular's 5G and network modernization programs are on track. We continue to be very optimistic on the performance capabilities of mmWave spectrum. Additionally, the 5G fixed wireless access tests of market demand have seen early, encouraging results and will provide valuable learnings as we look to bring this high-speed service to market.

"At TDS Telecom, increased broadband connections and customers choosing higher speeds contributed to higher operating revenues for the quarter. 1Gig speeds are available to more than half of all service addresses, and the TDS Telecom fiber footprint is expanding inside as well as outside of our traditional markets. Performance of our launched fiber expansion markets continues to meet expectations. To take advantage of the fiber opportunities, we are accelerating and upsizing our fiber expansion in the years ahead."

2021 Estimated Results

TDS' current estimates of full-year 2021 results for UScellular and TDS Telecom are shown below. Such estimates represent management's view as of August 5, 2021 and should not be assumed to be current as of any future date. TDS 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.

2021 Estimated Results

UScellular	Previous	Current
(Dollars in millions)
Service revenues	$3,050-$3,150	Unchanged
Adjusted OIBDA¹	$850-$950	Unchanged
Adjusted EBITDA¹	$1,025-$1,125	Unchanged
Capital expenditures	$775-$875	Unchanged


TDS Telecom	Previous	Current
(Dollars in millions)
Total operating revenues	$975-$1,025	Unchanged
Adjusted OIBDA¹	$290-$320	Unchanged
Adjusted EBITDA¹	$290-$320	Unchanged
Capital expenditures	$425-$475	Unchanged

The following tables reconcile EBITDA, Adjusted EBITDA and Adjusted OIBDA to the corresponding GAAP measures, Net income or Income before income taxes. In providing 2021 estimated results, TDS has not completed the below reconciliation to Net income because it does not provide guidance for income taxes. Although potentially significant, TDS believes that the impact of income taxes cannot be reasonably predicted; therefore, TDS is unable to provide such guidance.

	2021 Estimated Results
	UScellular	TDS Telecom
(Dollars in millions)
Net income (GAAP)	N/A	N/A
Add back:
Income tax expense	N/A	N/A
Income before income taxes (GAAP)	$125-$225	$80-$110
Add back:
Interest expense	180	—
Depreciation, amortization and accretion expense	700	210
EBITDA (Non-GAAP)¹	$1,005-$1,105	$290-$320
Add back or deduct:
(Gain) loss on asset disposals, net	20	—
Adjusted EBITDA (Non-GAAP)¹	$1,025-$1,125	$290-$320
Deduct:
Equity in earnings of unconsolidated entities	170	—
Interest and dividend income	5	—
Adjusted OIBDA (Non-GAAP)¹	$850-$950	$290-$320

	Actual Results
	Six Months Ended June 30, 2021				Year Ended December 31, 2020
	UScellular		TDS Telecom		UScellular		TDS Telecom
(Dollars in millions)
Net income (GAAP)	$	97	$	46	$	233	$	100
Add back:
Income tax expense	17		15		17		18
Income before income taxes (GAAP)	$	114	$	62	$	250	$	117
Add back:
Interest expense	97		(2)		112		(4)
Depreciation, amortization and accretion expense	350		98		683		203
EBITDA (Non-GAAP)¹	$	561	$	157	$	1,045	$	316
Add back or deduct:
(Gain) loss on asset disposals, net	7		1		25		1
(Gain) loss on sale of business and other exit costs, net	(1)		—		—		—
(Gain) loss on license sales and exchanges, net	—		—		(5)		—
(Gain) loss on investments	—		—		(2)		—
Adjusted EBITDA (Non-GAAP)¹	$	567	$	158	$	1,063	$	317
Deduct:
Equity in earnings of unconsolidated entities	88		—		179		—
Interest and dividend income	3		—		8		5
Other, net	—		—		—		(1)
Adjusted OIBDA (Non-GAAP)¹	$	476	$	159	$	876	$	314


Numbers may not foot due to rounding.
¹	EBITDA, Adjusted EBITDA and Adjusted OIBDA are defined as net income adjusted for the items set forth in the reconciliation above. EBITDA, Adjusted EBITDA and Adjusted OIBDA are not measures of financial performance under Generally Accepted Accounting Principles in the United States (GAAP) and should not be considered as alternatives to Net income or Cash flows from operating activities, as indicators of cash flows or as measures of liquidity. TDS does not intend to imply that any such items set forth in the reconciliation above are non-recurring, infrequent or unusual; such items may occur in the future. Management uses Adjusted EBITDA and Adjusted OIBDA as measurements of profitability, and therefore reconciliations to Net income are deemed appropriate. Management believes Adjusted EBITDA and Adjusted OIBDA are useful measures of TDS' operating results before significant recurring non-cash charges, gains and losses, and other items as presented above as they provide additional relevant and useful information to investors and other users of TDS' financial data in evaluating the effectiveness of its operations and underlying business trends in a manner that is consistent with management's evaluation of business performance. Adjusted EBITDA shows adjusted earnings before interest, taxes, depreciation, amortization and accretion, and gains and losses, while Adjusted OIBDA reduces this measure further to exclude Equity in earnings of unconsolidated entities and Interest and dividend income in order to more effectively show the performance of operating activities excluding investment activities. The table above reconciles EBITDA, Adjusted EBITDA and Adjusted OIBDA to the corresponding GAAP measure, Net income or Income before income taxes. Additional information and reconciliations related to Non-GAAP financial measures for June 30, 2021, can be found on TDS' website at investors.tdsinc.com.

Conference Call Information

TDS will hold a conference call on August 6, 2021 at 9:00 a.m. Central Time.

Access the live call on the Events & Presentations page of investors.tdsinc.com or at https://event.on24.com/wcc/r/3332389/4AA81608B2125409E9D3E06EB6B1A284
Access the call by phone at (833) 968-2187, conference ID: 2249545.

Before the call, certain financial and statistical information to be discussed during the call will be posted to investors.tdsinc.com. The call will be archived on the Events & Presentations page of investors.tdsinc.com.

About TDS

Telephone and Data Systems, Inc. (TDS), a Fortune 1000^® company, provides wireless; broadband, video and voice; and hosted and managed services to approximately 6 million connections nationwide through its businesses, UScellular, TDS Telecom, and OneNeck IT Solutions. Founded in 1969 and headquartered in Chicago, TDS employed approximately 8,900 associates as of June 30, 2021.

Visit investors.tdsinc.com for comprehensive financial information, including earnings releases, quarterly and annual filings, shareholder information and more.

Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995: All information set forth in this news release, except historical and factual information, represents forward-looking statements. This includes all statements about the company's plans, beliefs, estimates, and expectations. These statements are based on current estimates, projections, and assumptions, which involve certain risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements. Important factors that may affect these forward-looking statements include, but are not limited to: intense competition; the ability to obtain or maintain roaming arrangements with other carriers on acceptable terms; the ability to obtain access to adequate radio spectrum to meet current or anticipated future needs, including participation in FCC auctions; the ability to attract people of outstanding talent throughout all levels of the organization; TDS' smaller scale relative to larger competitors; 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 TDS' businesses; the ability of the company to successfully construct and manage its networks; difficulties involving third parties; uncertainties in TDS' future cash flows and liquidity and access to the capital markets; the ability to make payments on TDS and 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; disruption in credit or other financial markets; deterioration of U.S. or global economic conditions; the impact, duration and severity of public health emergencies, such as the COVID-19 pandemic. Investors are encouraged to consider these and other risks and uncertainties that are more fully described under "Risk Factors" in the most recent filing of TDS' Form 10-K, as updated by any TDS Form 10-Q filed subsequent to such Form 10-K.

For more information about TDS and its subsidiaries, visit:

TDS: www.tdsinc.com
UScellular: www.uscellular.com
TDS Telecom: www.tdstelecom.com
OneNeck IT Solutions: www.oneneck.com

United States Cellular Corporation
Summary Operating Data (Unaudited)
As of or for the Quarter Ended	6/30/2021			3/31/2021			12/31/2020			9/30/2020			6/30/2020
Retail Connections
Postpaid
Total at end of period	4,399,000			4,406,000			4,412,000			4,401,000			4,372,000
Gross additions	141,000			143,000			171,000			168,000			129,000
Feature phones	3,000			3,000			2,000			4,000			3,000
Smartphones	98,000			101,000			117,000			98,000			82,000
Connected devices	40,000			39,000			52,000			66,000			44,000
Net additions (losses)	(6,000)			(6,000)			11,000			28,000			12,000
Feature phones	(7,000)			(9,000)			(9,000)			(8,000)			(8,000)
Smartphones	6,000			6,000			12,000			8,000			11,000
Connected devices	(5,000)			(3,000)			8,000			28,000			9,000
ARPU¹	$	47.74		$	47.65		$	47.51		$	47.10		$	46.24
ARPA²	$	125.25		$	125.25		$	124.87		$	123.27		$	120.70
Churn rate³	1.11		%	1.12		%	1.21		%	1.06		%	0.89		%
Handsets	0.88		%	0.92		%	1.01		%	0.88		%	0.71		%
Connected devices	2.69		%	2.53		%	2.64		%	2.35		%	2.24		%
Prepaid
Total at end of period	507,000			496,000			499,000			506,000			496,000
Gross additions	65,000			62,000			56,000			65,000			62,000
Net additions (losses)	10,000			(3,000)			(8,000)			11,000			2,000
ARPU¹	$	35.64		$	35.25		$	35.15		$	35.45		$	34.89
Churn rate³	3.66		%	4.37		%	4.24		%	3.59		%	4.05		%
Total connections at end of period⁴	4,967,000			4,961,000			4,968,000			4,962,000			4,919,000
Market penetration at end of period
Consolidated operating population	31,493,000			31,493,000			31,314,000			31,314,000			31,292,000
Consolidated operating penetration⁵	16		%	16		%	16		%	16		%	16		%
Capital expenditures (millions)	$	148		$	125		$	320		$	216		$	168
Total cell sites in service	6,819			6,802			6,797			6,758			6,673
Owned towers	4,278			4,270			4,271			4,246			4,208


¹	Average Revenue Per User (ARPU) - metric is calculated by dividing a revenue base by an average number of connections and by the number of months in the period. These revenue bases and connection populations are shown below:
	•	Postpaid ARPU consists of total postpaid service revenues and postpaid connections.
	•	Prepaid ARPU consists of total prepaid service revenues and prepaid connections.
²	Average Revenue Per Account (ARPA) - metric is calculated by dividing total postpaid service revenues by the average number of postpaid accounts and by the number of months in the period.
³	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.
⁴	Includes reseller and other connections.
⁵	Market penetration is calculated by dividing the number of wireless connections at the end of the period by the total estimated population of consolidated operating markets.

TDS Telecom
Summary Operating Data (Unaudited)
As of or for the Quarter Ended	6/30/2021		3/31/2021		12/31/2020		9/30/2020		6/30/2020
Residential connections
Broadband¹
Wireline, Incumbent	249,200		243,700		242,500		243,400		240,400
Wireline, Expansion	28,300		24,100		20,400		17,300		14,700
Cable	201,200		199,500		196,400		193,300		191,000
Total Broadband	478,700		467,300		459,300		454,000		446,000
Video²
Wireline	64,800		63,000		63,000		62,300		61,400
Cable	78,400		79,600		81,400		82,300		83,200
Total Video	143,200		142,700		144,400		144,500		144,600
Voice³
Wireline	254,200		255,000		256,900		260,000		261,800
Cable	54,000		53,700		53,900		54,400		55,300
Total Voice	308,100		308,700		310,800		314,400		317,100
Total Residential connections	930,100		918,700		914,400		913,000		907,800
Commercial connections
Broadband¹	34,900		34,400		34,000		33,700		33,400
Video²	19,100		19,400		19,700		19,700		20,300
Voice³	114,300		116,500		119,700		122,700		126,100
ManagedIP⁴	106,200		108,500		113,300		116,700		117,300
Total Commercial connections	274,400		278,800		286,700		292,900		297,200
Total connections	1,204,500		1,197,400		1,201,100		1,205,900		1,205,000

Residential revenue per connection⁵	$	57.66	$	56.97	$	55.66	$	55.66	$	53.82

Capital expenditures (millions)	$	99	$	70	$	147	$	92	$	75


Numbers may not foot due to rounding.
¹	The individual customers provided high-speed internet access through various transmission technologies, including fiber, DSL, dedicated internet circuit technologies or cable modem service.
²	The individual customers provided video services.
³	The individual circuits connecting a customer to TDS' central office facilities that provide voice services or the billable number of lines into a building for voice services.
⁴	The number of telephone handsets, data lines and IP trunks providing communications using IP networking technology.
⁵	Total residential revenue per connection is calculated by dividing total residential revenue by the average number of residential connections and by the number of months in the period.

Telephone and Data Systems, Inc.
Consolidated Statement of Operations Highlights
(Unaudited)

	Three Months Ended June 30,						Six Months Ended June 30,
	2021		2020		2021 vs. 2020		2021		2020		2021 vs. 2020
(Dollars and shares in millions, except per share amounts)
Operating revenues
UScellular	$	1,014	$	973	4	%	$	2,037	$	1,937	5	%
TDS Telecom	252		241		5	%	501		481		4	%
All Other¹	45		49		(8)	%	91		106		(15)	%
	1,311		1,263		4	%	2,629		2,524		4	%
Operating expenses
UScellular
Expenses excluding depreciation, amortization and accretion	796		738		8	%	1,561		1,471		6	%
Depreciation, amortization and accretion	180		178		1	%	350		354		(2)	%
(Gain) loss on asset disposals, net	2		4		(50)	%	7		8		(9)	%
(Gain) loss on sale of business and other exit costs, net	—		—		N/M		(1)		—		N/M
	978		920		6	%	1,917		1,833		5	%
TDS Telecom
Expenses excluding depreciation, amortization and accretion	174		158		10	%	342		319		7	%
Depreciation, amortization and accretion	49		51		(5)	%	98		103		(5)	%
(Gain) loss on asset disposals, net	1		—		N/M		1		—		N/M
	224		210		7	%	441		422		5	%
All Other¹
Expenses excluding depreciation and amortization	46		49		(6)	%	94		105		(13)	%
Depreciation and amortization	5		7		(17)	%	9		13		(17)	%
	51		55		(7)	%	103		118		(14)	%
Total operating expenses	1,253		1,185		6	%	2,461		2,373		4	%
Operating income (loss)
UScellular	36		53		(32)	%	120		104		16	%
TDS Telecom	28		31		(10)	%	60		59		1	%
All Other¹	(6)		(6)		–		(12)		(12)		2	%
	58		78		(26)	%	168		151		12	%
Investment and other income (expense)
Equity in earnings of unconsolidated entities	48		44		7	%	90		90		–
Interest and dividend income	3		2		40	%	6		8		(22)	%
Interest expense	(86)		(38)		N/M		(138)		(75)		(85)	%
Other, net	—		—		(11)	%	(1)		(1)		10	%
Total investment and other income (expense)	(35)		8		N/M		(43)		22		N/M
Income before income taxes	23		86		(73)	%	125		173		(28)	%
Income tax expense (benefit)	(11)		8		N/M		20		12		62	%
Net income	34		78		(56)	%	105		161		(35)	%
Less: Net income attributable to noncontrolling interests, net of tax	7		13		(44)	%	19		26		(26)	%
Net income attributable to TDS shareholders	27		65		(59)	%	86		135		(36)	%
TDS Preferred Share dividends	7		—		N/M		9		—		N/M
Net income attributable to TDS common shareholders	$	20	$	65	(69)	%	$	77	$	135	(43)	%

Basic weighted average shares outstanding	115		114		–		115		115		–
Basic earnings per share attributable to TDS common shareholders	$	0.18	$	0.57	(69)	%	$	0.67	$	1.18	(43)	%

Diluted weighted average shares outstanding	116		115		1	%	116		115		–
Diluted earnings per share attributable to TDS common shareholders	$	0.17	$	0.56	(70)	%	$	0.65	$	1.15	(43)	%


N/M - Percentage change not meaningful.
Numbers may not foot due to rounding.
¹	Consists of TDS corporate, intercompany eliminations and all other business operations not included in the UScellular and TDS Telecom segments.

Telephone and Data Systems, Inc.
Consolidated Balance Sheet Highlights
(Unaudited)

ASSETS

	June 30, 2021		December 31, 2020
(Dollars in millions)
Current assets
Cash and cash equivalents	$	385	$	1,429
Short-term investments	—		3
Accounts receivable, net	1,072		1,112
Inventory, net	189		154
Prepaid expenses	108		105
Income taxes receivable	187		187
Other current assets	50		36
Total current assets	1,991		3,026

Assets held for sale	3		2

Licenses	3,926		2,638

Goodwill	547		547

Other intangible assets, net	207		213

Investments in unconsolidated entities	487		477

Property, plant and equipment, net	3,972		3,972

Operating lease right-of-use assets	1,021		998

Other assets and deferred charges	626		652

Total assets	$	12,780	$	12,525

Telephone and Data Systems, Inc.
Consolidated Balance Sheet Highlights
(Unaudited)

LIABILITIES AND EQUITY

	June 30, 2021		December 31, 2020
(Dollars in millions, except per share amounts)
Current liabilities
Current portion of long-term debt	$	6	$	5
Accounts payable	374		508
Customer deposits and deferred revenues	199		193
Accrued interest	13		16
Accrued taxes	66		69
Accrued compensation	92		132
Short-term operating lease liabilities	138		129
Other current liabilities	98		101
Total current liabilities	986		1,153

Liabilities held for sale	—		1

Deferred liabilities and credits
Deferred income tax liability, net	903		863
Long-term operating lease liabilities	951		940
Other deferred liabilities and credits	538		541

Long-term debt, net	3,335		3,424

Noncontrolling interests with redemption features	10		10

Equity
TDS shareholders' equity
Series A Common and Common Shares, par value $0.01 per share	1		1
Capital in excess of par value	2,462		2,482
Preferred Shares, par value $0.01 per share	406		—
Treasury shares, at cost	(458)		(477)
Accumulated other comprehensive loss	(2)		(4)
Retained earnings	2,812		2,802
Total TDS shareholders' equity	5,221		4,804

Noncontrolling interests	836		789

Total equity	6,057		5,593

Total liabilities and equity	$	12,780	$	12,525

Balance Sheet Highlights
(Unaudited)

	June 30, 2021
			TDS		TDS Corporate		Intercompany		TDS
	UScellular		Telecom		& Other		Eliminations		Consolidated
(Dollars in millions)
Cash and cash equivalents	$	267	$	167	$	119	$	(168)	$	385

Licenses, goodwill and other intangible assets	$	3,917	$	756	$	7	$	—	$	4,680
Investment in unconsolidated entities	445		4		46		(8)		487
	$	4,362	$	760	$	53	$	(8)	$	5,167

Property, plant and equipment, net	$	2,386	$	1,492	$	94	$	—	$	3,972

Long-term debt, net:
Current portion	$	3	$	—	$	3	$	—	$	6
Non-current portion	2,710		4		621		—		3,335
	$	2,713	$	4	$	624	$	—	$	3,341

TDS Telecom Highlights
(Unaudited)

	Three Months Ended June 30,						Six Months Ended June 30,
	2021		2020		2021 vs. 2020		2021		2020		2021 vs. 2020
(Dollars in millions)
Operating revenues
Residential
Wireline, Incumbent	$	86	$	81	7	%	$	171	$	162	6	%
Wireline, Expansion	8		4		81	%	15		8		80	%
Cable	66		60		10	%	131		119		9	%
Total residential	160		145		10	%	317		289		10	%
Commercial	46		48		(4)	%	93		98		(5)	%
Wholesale	45		47		(3)	%	91		94		(3)	%
Total service revenues	251		240		5	%	500		480		4	%
Equipment revenues	—		—		5	%	1		1		7	%
Total operating revenues	252		241		5	%	501		481		4	%

Cost of services	101		92		10	%	199		188		6	%
Cost of equipment and products	—		—		(12)	%	—		—		(7)	%
Selling, general and administrative expenses	73		66		11	%	143		130		10	%
Depreciation, amortization and accretion	49		51		(5)	%	98		103		(5)	%
(Gain) loss on asset disposals, net	1		—		N/M		1		—		N/M
Total operating expenses	224		210		7	%	441		422		5	%

Operating income	$	28	$	31	(10)	%	$	60	$	59	1	%