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Subjects: ERN, ERP

UScellular reports second quarter 2022 results


2022 guidance reaffirmed

CHICAGO, Aug. 4, 2022 /PRNewswire/ --

As previously announced, UScellular will hold a teleconference on August 5, 2022, 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 $1,027 million for the second quarter of 2022, versus $1,014 million for the same period one year ago. Service revenues totaled $783 million, versus $774 million for the same period one year ago. Net income attributable to UScellular shareholders and related diluted earnings per share were $21 million and $0.25, respectively, for the second quarter of 2022 compared to $35 million and $0.39, respectively, in the same period one year ago.

"UScellular is continuing to execute on its growth strategy, resulting in increased retail service revenues and ARPU in the quarter," said Laurent Therivel, UScellular President and CEO. "We are seeing nice momentum in a number of the growth areas of the business, including fixed wireless and our tower portfolio. Additionally, we are seeing promising early results from our recent moves in the marketplace, including our rate plan guarantee and our existing-same-as-new offers.

"Halfway through the year, I believe UScellular is well-positioned, and I thank all of our associates for their hard work."

2022 Estimated Results

UScellular's current estimates of full-year 2022 results are shown below. Such estimates represent management's view as of August 4, 2022 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.


2022 Estimated Results


Previous

Current

(Dollars in millions)



Service revenues

$3,100-$3,200

Unchanged

Adjusted OIBDA1

$750-$900

Unchanged

Adjusted EBITDA1

$925-$1,075

Unchanged

Capital expenditures

$700-$800

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 2022 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


2022 Estimated Results


Six Months Ended

June 30, 2022


Year Ended
December 31, 2021

(Dollars in millions)






Net income (GAAP)

N/A


$                                 74


$                               160

Add back:






Income tax expense

N/A


50


20

Income before income taxes (GAAP)

$45-$195


$                               124


$                               180

Add back:






Interest expense

160


73


175

Depreciation, amortization and accretion expense

705


342


678

EBITDA (Non-GAAP)1

$910-$1,060


$                               539


$                           1,033

Add back or deduct:






Loss on impairment of licenses

?


3


?

(Gain) loss on asset disposals, net

15


8


23

(Gain) loss on sale of business and other exit costs, net

?


?


(2)

Adjusted EBITDA (Non-GAAP)1

$925-$1,075


$                               550


$                           1,054

Deduct:






Equity in earnings of unconsolidated entities

170


82


179

Interest and dividend income

5


4


6

Adjusted OIBDA (Non-GAAP)1

$750-$900


$                               464


$                               869



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 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 UScellular's 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 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, 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, 2022, can be found on UScellular's website at investors.uscellular.com.

 

Stock Repurchase

During the second quarter of 2022, UScellular repurchased 294,721 of its Common Shares for $9 million.

Conference Call Information

UScellular will hold a conference call on August 5, 2022 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 4.8 million retail connections in 21 states. The Chicago-based company had 4,700 full- and part-time associates as of June 30, 2022. At the end of the second quarter of 2022, Telephone and Data Systems, Inc. owned 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: intense competition; the ability to attract people of outstanding talent throughout all levels of the organization; USM's smaller scale relative to larger competitors; 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; 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; 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; 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 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

6/30/2022


3/31/2022


12/31/2021


9/30/2021


6/30/2021

Retail Connections










Postpaid










Total at end of period

4,296,000


4,335,000


4,380,000


4,391,000


4,399,000

Gross additions

128,000


126,000


165,000


145,000


141,000

Feature phones

4,000


2,000


3,000


2,000


3,000

Smartphones

90,000


89,000


122,000


103,000


98,000

Connected devices

34,000


35,000


40,000


40,000


40,000

Net additions (losses)

(40,000)


(44,000)


(12,000)


(8,000)


(6,000)

Feature phones

(8,000)


(10,000)


(7,000)


(7,000)


(7,000)

Smartphones

(23,000)


(26,000)


5,000


2,000


6,000

Connected devices

(9,000)


(8,000)


(10,000)


(3,000)


(5,000)

ARPU1,2

$        50.07


$        49.71


$        48.62


$         48.12


$         47.74

ARPA1,3

$      130.43


$      129.93


$      127.14


$       125.99


$       125.25

Churn rate4

1.30 %


1.30 %


1.35 %


1.15 %


1.11 %

Handsets

1.10 %


1.10 %


1.10 %


0.95 %


0.88 %

Connected devices

2.73 %


2.70 %


3.08 %


2.59 %


2.69 %

Prepaid










Total at end of period

490,000


495,000


513,000


518,000


507,000

Gross additions

56,000


55,000


63,000


74,000


65,000

Net additions (losses)

(4,000)


(18,000)


(5,000)


11,000


10,000

ARPU2

$        35.25


$        34.59


$        34.53


$         35.05


$         35.64

Churn rate4

4.07 %


4.84 %


4.39 %


4.09 %


3.66 %

Market penetration at end of period










Consolidated operating population

32,370,000


32,370,000


32,127,000


31,865,000


31,493,000

Consolidated operating penetration5

15 %


15 %


15 %


16 %


16 %

Capital expenditures (millions)

$            268


$           137


$           321


$            185


$            148

Total cell sites in service

6,916


6,899


6,898


6,857


6,819

Owned towers

4,323


4,310


4,301


4,274


4,278



1

Q3 2021 Postpaid ARPU and ARPA amounts exclude $9 million of postpaid revenue related to an out-of-period error recorded in that 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

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.

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. 

 

United States Cellular Corporation

Consolidated Statement of Operations Highlights

(Unaudited)






Three Months Ended

June 30,


Six Months Ended

June 30,


2022


2021


2022

vs. 2021


2022


2021


2022

vs. 2021

(Dollars and shares in millions, except per share amounts)












Operating revenues












Service

$      783


$      774


1 %


$  1,570


$  1,545


2 %

Equipment sales

244


240


2 %


467


492


(5) %

Total operating revenues

1,027


1,014


1 %


2,037


2,037


?













Operating expenses












System operations (excluding Depreciation, amortization and accretion reported below)

192


204


(6) %


377


389


(3) %

Cost of equipment sold

275


258


7 %


533


533


?

Selling, general and administrative

339


334


2 %


663


639


4 %

Depreciation, amortization and accretion

172


180


(4) %


342


350


(2) %

Loss on impairment of licenses

3


?


N/M


3


?


N/M

(Gain) loss on asset disposals, net

6


2


N/M


8


7


7 %

(Gain) loss on sale of business and other exit costs, net

?


?


N/M


?


(1)


52 %

Total operating expenses

987


978


1 %


1,926


1,917


?













Operating income

40


36


10 %


111


120


(8) %













Investment and other income (expense)












Equity in earnings of unconsolidated entities

37


47


(21) %


82


88


(8) %

Interest and dividend income

3


2


59 %


4


3


3 %

Interest expense

(40)


(60)


34 %


(73)


(97)


26 %

Total investment and other income (expense)

?


(11)


N/M


13


(6)


N/M













Income before income taxes

40


25


60 %


124


114


9 %

Income tax expense (benefit)

18


(10)


N/M


50


17


N/M

Net income

22


35


(37) %


74


97


(24) %

Less: Net income attributable to noncontrolling interests, net of tax

1


?


1 %


3


2


33 %

Net income attributable to UScellular shareholders

$        21


$        35


(38) %


$        71


$        95


(25) %













Basic weighted average shares outstanding

86


87


(1) %


86


87


(1) %

Basic earnings per share attributable to UScellular shareholders

$    0.25


$    0.40


(37) %


$    0.82


$    1.10


(25) %













Diluted weighted average shares outstanding

87


88


(1) %


87


88


(1) %

Diluted earnings per share attributable to UScellular shareholders

$    0.25


$    0.39


(37) %


$    0.82


$    1.08


(25) %


N/M - Percentage change not meaningful

 

United States Cellular Corporation

Consolidated Statement of Cash Flows

(Unaudited)


Six Months Ended

June 30,


2022


2021

(Dollars in millions)




Cash flows from operating activities




Net income

$                     74


$                     97

Add (deduct) adjustments to reconcile net income to net cash flows from operating activities




Depreciation, amortization and accretion

342


350

Bad debts expense

51


21

Stock-based compensation expense

14


12

Deferred income taxes, net

31


35

Equity in earnings of unconsolidated entities

(82)


(88)

Distributions from unconsolidated entities

80


79

Loss on impairment of licenses

3


?

(Gain) loss on asset disposals, net

8


7

(Gain) loss on sale of business and other exit costs, net

?


(1)

Other operating activities

3


19

Changes in assets and liabilities from operations




Accounts receivable

(17)


23

Equipment installment plans receivable

(25)


(32)

Inventory

(33)


(37)

Accounts payable

(8)


(72)

Customer deposits and deferred revenues

6


2

Accrued taxes

135


(23)

Accrued interest

1


?

Other assets and liabilities

(5)


(29)

Net cash provided by operating activities

578


363





Cash flows from investing activities




Cash paid for additions to property, plant and equipment

(288)


(281)

Cash paid for licenses

(563)


(1,259)

Cash received from investments

?


3

Cash received from divestitures and exchanges

1


1

Advance payments for license acquisitions

(1)


?

Other investing activities

?


2

Net cash used in investing activities

(851)


(1,534)





Cash flows from financing activities




Issuance of long-term debt

625


992

Repayment of long-term debt

(227)


(775)

Issuance of short-term debt

60


?

Common Shares reissued for benefit plans, net of tax payments

(5)


(13)

Repurchase of Common Shares

(18)


(2)

Payment of debt issuance costs

(1)


(16)

Distributions to noncontrolling interests

(2)


(2)

Other financing activities

(3)


(7)

Net cash provided by financing activities

429


177





Net increase (decrease) in cash, cash equivalents and restricted cash

156


(994)





Cash, cash equivalents and restricted cash




Beginning of period

199


1,291

End of period

$                   355


$                   297

 

United States Cellular Corporation

Consolidated Balance Sheet Highlights

(Unaudited)


ASSETS






June 30, 2022


December 31, 2021

(Dollars in millions)




Current assets




Cash and cash equivalents

$                                320


$                                156

Accounts receivable, net

1,044


1,046

Inventory, net

206


173

Prepaid expenses

62


58

Income taxes receivable

?


123

Other current assets

41


49

Total current assets

1,673


1,605





Assets held for sale

15


18





Licenses

4,677


4,088





Investments in unconsolidated entities

441


439





Property, plant and equipment, net

2,671


2,606





Operating lease right-of-use assets

944


959





Other assets and deferred charges

582


626





Total assets

$                          11,003


$                          10,341

 

United States Cellular Corporation

Consolidated Balance Sheet Highlights

(Unaudited)


LIABILITIES AND EQUITY






June 30, 2022


December 31, 2021

(Dollars in millions, except per share amounts)




Current liabilities




Current portion of long-term debt

$                                    8


$                                    3

Accounts payable

328


360

Customer deposits and deferred revenues

197


191

Accrued taxes

37


33

Accrued compensation

56


83

Short-term operating lease liabilities

133


129

Other current liabilities

223


104

Total current liabilities

982


903





Deferred liabilities and credits




Deferred income tax liability, net

705


674

Long-term operating lease liabilities

872


889

Other deferred liabilities and credits

690


573





Long-term debt, net

3,118


2,728





Noncontrolling interests with redemption features

12


11





Equity




UScellular shareholders' equity




Series A Common and Common Shares, par value $1.00 per share

88


88

Additional paid-in capital

1,692


1,678

Treasury shares

(75)


(68)

Retained earnings

2,903


2,849

Total UScellular shareholders' equity

4,608


4,547





Noncontrolling interests

16


16





Total equity

4,624


4,563





Total liabilities and equity

$                          11,003


$                          10,341

 

United States Cellular Corporation

Financial Measures and Reconciliations

(Unaudited)

Free Cash Flow



Three Months Ended

June 30,


Six Months Ended

June 30,


2022


2021


2022


2021

(Dollars in millions)








Cash flows from operating activities (GAAP)

$                267


$                239


$                578


$                363

Less: Cash paid for additions to property, plant and equipment

138


148


288


281

Free cash flow (Non-GAAP)1

$                129


$                  91


$                290


$                  82



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.

 

SOURCE United States Cellular Corporation


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