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UScellular reports first quarter 2024 results

USM

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 ofinvestors.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.

2024Estimated 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
Results2


Three Months Ended

March 31, 2024


Year Ended
December 31, 2023

(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.

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

UnitedStates 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 period1

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

ARPU2

$ 51.96


$ 51.61


$ 51.11


$ 50.64


$ 50.66

ARPA3

$ 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 period1

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 CellularCorporation

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





Noncontrollinginterests 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

Cision View original content:https://www.prnewswire.com/news-releases/uscellular-reports-first-quarter-2024-results-302135338.html

SOURCE United States Cellular Corporation