TDS reports fourth quarter and full year 2023 results

UScellular

2024 Estimated
Results

Actual Results for

the Year Ended

December 31, 2023

(Dollars in millions)

Service revenues

$2,950-$3,050

$3,044

Adjusted OIBDA1, 2

$750-$850

$818

Adjusted EBITDA1, 2

$920-$1,020

$986

Capital expenditures

$550-$650

$611

TDS Telecom

2024 Estimated
Results

Actual Results for
the Year Ended
December 31, 2023

(Dollars in millions)

Total operating revenues

$1,070-$1,100

$1,028

Adjusted OIBDA1

$310-$340

$279

Adjusted EBITDA1

$310-$340

$285

Capital expenditures

$310-$340

$577

UScellular

TDS Telecom

2024 Estimated
Results2

Actual Results for

the Year Ended

December 31, 2023

2024 Estimated
Results2

Actual Results for

the Year Ended

December 31, 2023

(Dollars in millions)

Net income (loss) (GAAP)

N/A

$58

N/A

($483)

Add back:

Income tax expense

N/A

53

N/A

(26)

Income (loss) before income taxes (GAAP)

$40-$140

$111

$40-$70

($509)

Add back:

Interest expense

195

196

—

(8)

Depreciation, amortization and accretion expense

665

656

270

245

EBITDA (Non-GAAP)1

$900-$1,000

$963

$310-$340

($272)

Add back or deduct:

Expenses related to strategic alternatives review

—

8

—

—

Loss on impairment of goodwill

—

—

—

547

(Gain) loss on asset disposals, net

20

17

—

10

(Gain) loss on license sales and exchanges, net

—

(2)

—

—

Adjusted EBITDA (Non-GAAP)1

$920-$1,020

$986

$310-$340

$285

Deduct:

Equity in earnings of unconsolidated entities

160

158

—

—

Interest and dividend income

10

10

—

4

Other, net

—

—

—

2

Adjusted OIBDA (Non-GAAP)1

$750-$850

$818

$310-$340

$279

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 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, 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 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, 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 (loss) or Income (loss) before income taxes. Additional information and reconciliations related to Non-GAAP financial measures for December 31, 2023, can be found on TDS’ website at investors.tdsinc.com.

2

2024 Estimated Results do not reflect any anticipated costs, expenses or results of the strategic alternatives review referenced above.

United States Cellular Corporation

Summary Operating Data (Unaudited)

 

As of or for the Quarter Ended

12/31/2023

9/30/2023

6/30/2023

3/31/2023

12/31/2022

Retail Connections

Postpaid

Total at end of period

4,106,000

4,159,000

4,194,000

4,223,000

4,247,000

Gross additions

129,000

128,000

125,000

137,000

154,000

Handsets

80,000

84,000

83,000

93,000

105,000

Connected devices

49,000

44,000

42,000

44,000

49,000

Net additions (losses)

(50,000)

(35,000)

(28,000)

(24,000)

(17,000)

Handsets

(53,000)

(38,000)

(29,000)

(25,000)

(20,000)

Connected devices

3,000

3,000

1,000

1,000

3,000

ARPU1

$        51.61

$        51.11

$        50.64

$        50.66

$        50.60

ARPA2

$      131.63

$      130.91

$      130.19

$      130.77

$      130.97

Handset upgrade rate3

5.8 %

4.5 %

4.8 %

4.9 %

7.0 %

Churn rate4

1.44 %

1.30 %

1.21 %

1.27 %

1.35 %

Handsets

1.22 %

1.11 %

1.01 %

1.06 %

1.12 %

Connected devices

3.03 %

2.64 %

2.65 %

2.78 %

2.99 %

Prepaid

Total at end of period

451,000

462,000

462,000

470,000

493,000

Gross additions

43,000

52,000

50,000

43,000

61,000

Net additions (losses)

(11,000)

—

(8,000)

(23,000)

—

ARPU1, 5

$        32.32

$        33.44

$        33.86

$        33.19

$        33.34

Churn rate4

3.87 %

3.68 %

4.18 %

4.63 %

4.11 %

Market penetration at end of period

Consolidated operating population

32,350,000

32,350,000

32,350,000

32,350,000

32,370,000

Consolidated operating penetration6

15 %

15 %

15 %

15 %

15 %

Capital expenditures (millions)

$           148

$           111

$           143

$           208

$           176

Total cell sites in service

7,000

6,973

6,952

6,950

6,945

Owned towers

4,373

4,356

4,341

4,338

4,336

Due to rounding, the sum of quarterly results may not equal the total for the year.

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

Handset upgrade rate calculated as total handset upgrade transactions divided by average postpaid handset connections.

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

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.

6

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

12/31/2023

9/30/2023

6/30/2023

3/31/2023

12/31/2022

Residential connections

Broadband

Wireline, Incumbent

244,800

248,800

249,200

247,900

249,100

Wireline, Expansion

92,200

79,400

70,200

62,800

56,100

Cable

202,900

204,400

204,200

204,700

204,800

Total Broadband

539,800

532,600

523,600

515,400

510,000

Video

131,500

132,400

132,300

132,600

135,300

Voice

281,600

284,000

288,200

289,200

291,600

Total Residential connections

952,900

949,000

944,100

937,200

936,900

Commercial connections

210,200

217,400

223,300

229,800

236,000

Total connections

1,163,100

1,166,400

1,167,400

1,167,000

1,173,000

Residential revenue per connection1

$           62.74

$           62.15

$           61.97

$           60.24

$           59.91

Capital expenditures (millions)

$               143

$               172

$               132

$               130

$               165

Numbers may not foot due to rounding.

1

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

December 31,

Year Ended

December 31,

2023

2022

2023

vs. 2022

2023

2022

2023

vs. 2022

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

Operating revenues

UScellular

$ 1,000

$           1,048

(5) %

$ 3,906

$           4,169

(6) %

TDS Telecom

261

257

2 %

1,028

1,020

1 %

All Other1

52

52

(1) %

226

224

1 %

1,313

1,357

(3) %

5,160

5,413

(5) %

Operating expenses

UScellular

Expenses excluding depreciation, amortization and accretion

812

885

(8) %

3,096

3,379

(8) %

Depreciation, amortization and accretion

166

179

(8) %

656

700

(6) %

Loss on impairment of licenses

—

—

—

—

3

N/M

(Gain) loss on asset disposals, net

3

11

(67) %

17

19

(9) %

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

—

—

N/M

—

(1)

N/M

(Gain) loss on license sales and exchanges, net

(2)

—

N/M

(2)

—

N/M

979

1,075

(9) %

3,767

4,100

(8) %

TDS Telecom

Expenses excluding depreciation, amortization and accretion

186

192

(4) %

749

732

2 %

Depreciation, amortization and accretion

65

56

17 %

245

215

14 %

Loss on impairment of goodwill

547

—

N/M

547

—

N/M

(Gain) loss on asset disposals, net

1

3

(59) %

10

7

31 %

799

252

N/M

1,551

954

63 %

All Other1

Expenses excluding depreciation and amortization

56

52

8 %

242

222

9 %

Depreciation and amortization

3

3

(6) %

14

14

(2) %

(Gain) loss on asset disposals, net

—

—

N/M

—

1

(95) %

59

56

7 %

256

237

8 %

Total operating expenses

1,837

1,383

33 %

5,574

5,291

5 %

Operating income (loss)

UScellular

21

(27)

N/M

139

69

N/M

TDS Telecom

(538)

5

N/M

(523)

66

N/M

All Other1

(7)

(4)

N/M

(30)

(13)

N/M

(524)

(26)

N/M

(414)

122

N/M

Investment and other income (expense)

Equity in earnings of unconsolidated entities

37

36

4 %

159

159

–

Interest and dividend income

4

7

(41) %

20

17

19 %

Interest expense

(66)

(55)

(20) %

(244)

(174)

(40) %

Other, net

1

—

N/M

2

1

94 %

Total investment and other income (expense)

(24)

(12)

(96) %

(63)

3

N/M

Income (loss) before income taxes

(548)

(38)

N/M

(477)

125

N/M

Income tax expense (benefit)

(45)

(8)

N/M

10

53

(81) %

Net income (loss)

(503)

(30)

N/M

(487)

72

N/M

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

3

(4)

N/M

13

10

28 %

Net income (loss) attributable to TDS shareholders

(506)

(26)

N/M

(500)

62

N/M

TDS Preferred Share dividends

17

17

—

69

69

–

Net loss attributable to TDS common shareholders

$   (523)

$   (43)

N/M

$   (569)

$      (7)

N/M

Basic weighted average shares outstanding

113

113

–

113

114

(1) %

Basic earnings (loss) per share attributable to TDS common shareholders

$  (4.64)

$  (0.38)

N/M

$  (5.05)

$  (0.07)

N/M

Diluted weighted average shares outstanding

113

113

–

113

114

(1) %

Diluted earnings (loss) per share attributable to TDS common shareholders

$  (4.64)

$  (0.38)

N/M

$  (5.06)

$  (0.07)

N/M

N/M – Percentage change not meaningful.

Numbers may not foot due to rounding.

1

Consists of TDS corporate, intercompany eliminations and other business operations not included in UScellular and TDS Telecom segments.

Telephone and Data Systems, Inc.

Consolidated Statement of Cash Flows

(Unaudited)

 

Year Ended December 31,

2023

2022

(Dollars in millions)

Cash flows from operating activities

Net income (loss)

$             (487)

$                 72

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

Depreciation, amortization and accretion

915

929

Bad debts expense

111

138

Stock-based compensation expense

41

42

Deferred income taxes, net

8

47

Equity in earnings of unconsolidated entities

(159)

(159)

Distributions from unconsolidated entities

150

145

Loss on impairment of intangible assets

547

3

(Gain) loss on asset disposals, net

27

27

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

—

(1)

(Gain) loss on license sales and exchanges, net

(2)

—

Other operating activities

8

10

Changes in assets and liabilities from operations

Accounts receivable

2

(69)

Equipment installment plans receivable

(20)

(199)

Inventory

61

(90)

Accounts payable

(99)

32

Customer deposits and deferred revenues

(8)

48

Accrued taxes

50

127

Other assets and liabilities

(3)

53

Net cash provided by operating activities

1,142

1,155

Cash flows from investing activities

Cash paid for additions to property, plant and equipment

(1,211)

(1,161)

Cash paid for licenses and other intangible assets

(130)

(614)

Other investing activities

14

(8)

Net cash used in investing activities

(1,327)

(1,783)

Cash flows from financing activities

Issuance of long-term debt

1,081

1,154

Repayment of long-term debt

(723)

(332)

Issuance of short-term debt

—

110

Repayment of short-term debt

(60)

(50)

TDS Common Shares reissued for benefit plans, net of tax payments

(3)

(4)

UScellular Common Shares reissued for benefit plans, net of tax payments

(6)

(5)

Repurchase of TDS Common Shares

(6)

(40)

Repurchase of UScellular Common Shares

—

(43)

Dividends paid to TDS shareholders

(153)

(151)

Payment of debt and equity issuance costs

(5)

(2)

Distributions to noncontrolling interests

(3)

(3)

Cash paid for software license agreements

(66)

(23)

Other financing activities

—

2

Net cash provided by financing activities

56

613

Net decrease in cash, cash equivalents and restricted cash

(129)

(15)

Cash, cash equivalents and restricted cash

Beginning of period

399

414

End of period

$               270

$               399

Telephone and Data Systems, Inc.

Consolidated Balance Sheet Highlights

(Unaudited)

 

ASSETS

December 31,

2023

2022

(Dollars in millions)

Current assets

Cash and cash equivalents

$                   236

$                   360

Accounts receivable, net

1,074

1,181

Inventory, net

208

268

Prepaid expenses

86

102

Income taxes receivable

4

59

Other current assets

52

58

Total current assets

1,660

2,028

Assets held for sale

15

26

Licenses

4,702

4,699

Goodwill

—

547

Other intangible assets, net

183

204

Investments in unconsolidated entities

505

495

Property, plant andequipment, net

5,062

4,760

Operating lease right-of-use assets

987

995

Other assets and deferred charges

807

796

Total assets

$              13,921

$              14,550

Telephone and Data Systems, Inc.

Consolidated Balance Sheet Highlights

(Unaudited)

 

LIABILITIES AND EQUITY

December 31,

2023

2022

(Dollars in millions, except per share amounts)

Current liabilities

Current portion of long-term debt

$                     26

$                     19

Accounts payable

360

506

Customer deposits and deferred revenues

277

285

Accrued interest

12

12

Accrued taxes

43

46

Accrued compensation

149

144

Short-term operating lease liabilities

147

146

Other current liabilities

170

356

Total current liabilities

1,184

1,514

Deferred liabilities and credits

Deferred income tax liability, net

975

969

Long-term operating lease liabilities

890

908

Other deferred liabilities and credits

784

813

Long-term debt, net

4,080

3,731

Noncontrolling interests with redemption features

12

12

Equity

TDS shareholders’ equity

Series A Common and Common Shares, par value $0.01 per share

1

1

Capital in excess of par value

2,558

2,551

Preferred Shares, par value $0.01 per share

1,074

1,074

Treasury shares, at cost

(465)

(481)

Accumulated other comprehensive income

11

5

Retained earnings

2,023

2,699

Total TDS shareholders’ equity

5,202

5,849

Noncontrolling interests

794

754

Total equity

5,996

6,603

Total liabilities and equity

$              13,921

$              14,550

Balance Sheet Highlights

(Unaudited)

December 31, 2023

UScellular

TDS

Telecom

TDS Corporate

& Other

Intercompany

Eliminations

TDS

Consolidated

(Dollars in millions)

Cash and cash equivalents

$                  150

$                    37

$                    90

$                  (41)

$                  236

Licenses and other intangible assets

$              4,693

$                  187

$                      5

$                    —

$              4,885

Investment in unconsolidated entities

461

4

48

(8)

505

$              5,154

$                  191

$                    53

$                    (8)

$              5,390

Property, plant and equipment, net

$              2,576

$              2,402

$                    84

$                    —

$              5,062

Long-term debt, net:

Current portion

$                    20

$                    —

$                      6

$                    —

$                    26

Non-current portion

3,044

3

1,033

—

4,080

$              3,064

$                      3

$              1,039

$                    —

$              4,106

TDS Telecom Highlights

(Unaudited)

Three Months Ended

December 31,

Year Ended

December 31,

2023

2022

2023 vs. 2022

2023

2022

2023 vs. 2022

(Dollars in millions)

Operating revenues

Residential

Wireline, Incumbent

$         88

$         87

1 %

$       352

$       350

1 %

Wireline, Expansion

23

14

61 %

75

49

53 %

Cable

69

67

2 %

273

270

1 %

Total residential

179

168

6 %

700

669

5 %

Commercial

37

43

(13) %

155

173

(10) %

Wholesale

45

45

(1) %

172

177

(3) %

Total service revenues

261

256

2 %

1,027

1,019

1 %

Equipment revenues

—

—

(22) %

1

1

(12) %

Total operating revenues

261

257

2 %

1,028

1,020

1 %

Cost of services

104

110

(5) %

423

418

1 %

Cost of equipment and products

—

—

N/M

—

1

(26) %

Selling, general and administrative expenses

82

83

(1) %

326

313

4 %

Depreciation, amortization and accretion

65

56

17 %

245

215

14 %

Loss on impairment of goodwill

547

—

N/M

547

—

N/M

(Gain) loss on asset disposals, net

1

3

(59) %

10

7

31 %

Total operating expenses

799

252

N/M

1,551

954

63 %

Operating income (loss)

$     (538)

$           5

N/M

$     (523)

$         66

N/M

N/M – Percentage change not meaningful.

Numbers may not foot due to rounding.

Telephone and Data Systems, Inc.

Financial Measures and Reconciliations

Free Cash Flow

Three Months Ended

December 31,

Year Ended

December 31,

TDS Consolidated

2023

2022

2023

2022

(Dollars in millions)

Cash flows from operating activities (GAAP)

$                 218

$                 255

$              1,142

$              1,155

Cash paid for additions to property, plant and equipment

(304)

(367)

(1,211)

(1,161)

Cash paid for software license agreements

(37)

(18)

(66)

(23)

Free cash flow (Non-GAAP)1

$               (123)

$               (130)

$               (135)

$                  (29)

Three Months Ended

December 31,

Year Ended

December 31,

UScellular

2023

2022

2023

2022

(Dollars in millions)

Cash flows from operating activities (GAAP)

$                 148

$                 180

$                 866

$                 832

Cash paid for additions to property, plant and equipment

(155)

(192)

(608)

(602)

Cash paid for software license agreements

(37)

(17)

(66)

(22)

Free cash flow (Non-GAAP)1

$                  (44)

$                  (29)

$                 192

$                 208

1

Free cash flow is a non-GAAP financial measure which TDS 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.

Year Ended December 31,

UScellular

2023

2022

(Dollars in millions)

Net income (GAAP)

$                 58

$                 35

Add back or deduct:

Income tax benefit

53

37

Income before income taxes (GAAP)

111

72

Add back:

Interest expense

196

163

Depreciation, amortization and accretion expense

656

700

EBITDA (Non-GAAP)

963

935

Add back or deduct:

Expenses related to strategic alternatives review

8

—

Loss on impairment of licenses

—

3

(Gain) loss on asset disposals, net

17

19

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

—

(1)

(Gain) loss on license sales and exchanges, net

(2)

—

Adjusted EBITDA (Non-GAAP)

986

956

Deduct:

Equity in earnings of unconsolidated entities

158

158

Interest and dividend income

10

8

Adjusted OIBDA (Non-GAAP)

$               818

$               790

Three Months Ended

December 31,

Year Ended

December 31,

2023

2022

2023

2022

(Dollars in millions)

Net loss attributable to TDS common shareholders (GAAP)

$               (523)

$                  (43)

$               (569)

$                    (7)

Adjustments:

Loss on impairment of goodwill

547

—

547

—

Deferred tax benefit on the tax-amortizable portion of the impaired Goodwill

(36)

—

(36)

—

Subtotal of Non-GAAP adjustments

511

—

511

—

Net loss attributable to TDS common shareholders excluding goodwill impairment
charge (Non-GAAP)

(12)

(43)

(58)

(7)

Noncontrolling interest adjustment to compute earnings (loss)

—

—

(1)

(1)

Net loss attributable to TDS common shareholders excluding goodwill impairment
charge used in diluted earnings (loss) per share (Non-GAAP)

$                  (12)

$                  (43)

$                  (59)

$                    (8)

Diluted weighted average shares outstanding

113

113

113

114

Diluted earnings (loss) per share attributable to TDS common shareholders (GAAP)

$              (4.64)

$              (0.38)

$              (5.06)

$              (0.07)

Adjustments:

Loss on impairment of goodwill

4.85

—

4.85

—

Deferred tax benefit on the tax-amortizable portion of the impaired Goodwill

(0.32)

—

(0.32)

—

Diluted earnings (loss) per share attributable to TDS common shareholders excluding
impairment of goodwill charge (Non-GAAP)

$              (0.11)

$              (0.38)

$              (0.53)

$              (0.07)