UScellular reports second quarter 2021 results

Rhea-AI Summary

UScellular reported a strong Q2 2021 with operating revenues of $1,014 million, an increase from $973 million year-over-year. Service revenues also grew to $774 million from $753 million. However, net income fell to $35 million and diluted EPS was $0.39, down from $68 million and $0.78 respectively, from Q2 2020. The CEO highlighted the growth in service revenue driven by postpaid ARPU and positive results from expanding the prepaid market. Full-year guidance remains unchanged for major metrics.

Positive

• Operating revenues increased to $1,014 million, up from $973 million year-over-year.
• Service revenues grew to $774 million, compared to $753 million in the previous year.
• Postpaid ARPU growth contributed positively to service revenue growth.
• Early positive results from 5G fixed wireless access tests indicate potential for future growth.

Negative

• Net income decreased to $35 million from $68 million year-over-year.
• Diluted earnings per share dropped to $0.39, down from $0.78 in the same quarter last year.

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

As previously announced, UScellular 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.uscellular.com.

United States Cellular Corporation (NYSE:USM) reported total operating revenues of $1,014 million for the second quarter of 2021, versus $973 million for the same period one year ago. Service revenues totaled $774 million, versus $753 million for the same period a year ago. Net income attributable to UScellular shareholders and related diluted earnings per share were $35 million and $0.39, respectively, for the second quarter of 2021 compared to $68 million and $0.78, respectively, in the same period one year ago.

"UScellular continued strong growth in service revenue and made meaningful progress towards our strategic priorities," said Laurent Therivel, UScellular President and CEO. "Higher postpaid ARPU helped drive service revenue growth as customers chose higher-value plans.

"Our efforts to expand our prepaid business are starting to generate positive results, and our business-and-government initiatives are laying the foundation for future growth. With the competitive environment top of mind, we are continuing to execute our community-by-community strategy in order to deliver solutions that are right for our customers. 

"Our 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 product to market.

"I continue to be impressed with the hard work of our associates and their commitment to keeping our customers connected. I'd like to thank all of them for their contributions this quarter."

2021 Estimated Results

UScellular's current estimates of full-year 2021 results 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. 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.

	2021 Estimated Results
	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

The following table reconciles EBITDA, Adjusted EBITDA and Adjusted OIBDA to the corresponding GAAP measures, Net income or Income before income taxes. In providing 2021 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
	2021 Estimated Results			Six Months Ended June 30, 2021				Year Ended December 31, 2020
(Dollars in millions)
Net income (GAAP)	N/A			$	97			$	233
Add back:
Income tax expense	N/A			17				17
Income before income taxes (GAAP)	$125-$225			$	114			$	250
Add back:
Interest expense	180			97				112
Depreciation, amortization and accretion expense	700			350				683
EBITDA (Non-GAAP)1	$1,005-$1,105			$	561			$	1,045
Add back or deduct:
(Gain) loss on asset disposals, net	20			7				25
(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	$1,025-$1,125			$	567			$	1,063
Deduct:
Equity in earnings of unconsolidated entities	170			88				179
Interest and dividend income	5			3				8
Adjusted OIBDA (Non-GAAP)1	$850-$950			$	476			$	876

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, 2021, can be found on UScellular's website at investors.uscellular.com.

Conference Call Information
UScellular 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.uscellular.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.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 5.0 million connections in 21 states. The Chicago-based company employed approximately 5,000 associates as of June 30, 2021. At the end of the second quarter of 2021, Telephone and Data Systems, Inc. owned 82 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 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; UScellular's 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 UScellular's businesses; the ability of the company to successfully construct and manage its networks; difficulties involving third parties; 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; potential conflicts of interests between TDS and UScellular; 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 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	6/30/2021				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.

 

United States Cellular Corporation
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
Service	$	774			$	753			3	%		$	1,545			$	1,515			2	%
Equipment sales	240				220				9	%		492				422				17	%
Total operating revenues	1,014				973				4	%		2,037				1,937				5	%
Operating expenses
System operations (excluding Depreciation, amortization and accretion reported below)	204				197				4	%		389				377				3	%
Cost of equipment sold	258				218				19	%		533				435				23	%
Selling, general and administrative	334				323				3	%		639				659				(3)	%
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
Total operating expenses	978				920				6	%		1,917				1,833				5	%
Operating income	36				53				(32)	%		120				104				16	%
Investment and other income (expense)
Equity in earnings of unconsolidated entities	47				44				7	%		88				89				–
Interest and dividend income	2				1				54	%		3				5				(30)	%
Interest expense	(60)				(25)				N/M			(97)				(49)				N/M
Total investment and other income (expense)	(11)				20				N/M			(6)				45				N/M
Income before income taxes	25				73				(66)	%		114				149				(24)	%
Income tax expense (benefit)	(10)				4				N/M			17				8				N/M
Net income	35				69				(49)	%		97				141				(31)	%
Less: Net income attributable to noncontrolling interests, net of tax	—				1				(2)	%		2				2				16	%
Net income attributable to UScellular shareholders	$	35			$	68			(49)	%		$	95			$	139			(32)	%
Basic weighted average shares outstanding	87				86				1	%		87				86				–
Basic earnings per share attributable to UScellular shareholders	$	0.40			$	0.79			(50)	%		$	1.10			$	1.62			(32)	%
Diluted weighted average shares outstanding	88				87				1	%		88				87				–
Diluted earnings per share attributable to UScellular shareholders	$	0.39			$	0.78			(50)	%		$	1.08			$	1.59			(32)	%

N/M - Percentage change not meaningful

 

United States Cellular Corporation
Consolidated Balance Sheet Highlights
(Unaudited)
ASSETS
	June 30, 2021				December 31, 2020
(Dollars in millions)
Current assets
Cash and cash equivalents	$	267			$	1,271
Short-term investments	—				3
Accounts receivable, net	974				998
Inventory, net	183				146
Prepaid expenses	55				51
Income taxes receivable	126				125
Other current assets	40				29
Total current assets	1,645				2,623
Assets held for sale	3				2
Licenses	3,917				2,629
Investments in unconsolidated entities	445				435
Property, plant and equipment, net	2,386				2,466
Operating lease right-of-use assets	950				924
Other assets and deferred charges	574				602
Total assets	$	9,920			$	9,681

 

United States Cellular Corporation
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	$	3			$	2
Accounts payable	293				387
Customer deposits and deferred revenues	153				151
Accrued taxes	46				48
Accrued compensation	53				82
Short-term operating lease liabilities	125				116
Other current liabilities	78				85
Total current liabilities	751				871
Liabilities held for sale	—				1
Deferred liabilities and credits
Deferred income tax liability, net	668				633
Long-term operating lease liabilities	890				875
Other deferred liabilities and credits	372				376
Long-term debt, net	2,710				2,489
Noncontrolling interests with redemption features	10				10
Equity
UScellular shareholders' equity
Series A Common and Common Shares, par value $1.00 per share	88				88
Additional paid-in capital	1,663				1,651
Treasury shares	(42)				(67)
Retained earnings	2,794				2,739
Total UScellular shareholders' equity	4,503				4,411
Noncontrolling interests	16				15
Total equity	4,519				4,426
Total liabilities and equity	$	9,920			$	9,681

 

 

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SOURCE United States Cellular Corporation

FAQ

What are UScellular's Q2 2021 financial results?

UScellular reported Q2 2021 operating revenues of $1,014 million, with net income of $35 million and diluted EPS of $0.39.

How did UScellular's service revenues perform in Q2 2021?

Service revenues for Q2 2021 reached $774 million, an increase from $753 million in Q2 2020.

When is the UScellular teleconference scheduled?

UScellular will hold a teleconference on August 6, 2021, at 9:00 a.m. CDT.

What is the current outlook for UScellular for the full year 2021?

UScellular's estimates for full-year 2021 service revenues remain unchanged at $3,050-$3,150 million.

What factors contributed to UScellular's service revenue growth?

Growth in service revenue was primarily driven by an increase in postpaid ARPU and expansion in the prepaid market.