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UScellular reports second quarter 2023 results

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UScellular reported total operating revenues of $957 million for 2Q'23, a decrease from $1,027 million in 2Q'22. Service revenues also decreased to $760 million from $783 million. Net income was $5 million, down from $21 million in the same period last year. Fixed Wireless customers grew 66% to 96,000. Tower rental revenues grew 10%. Debt balance reduced by $150 million. Launching 5G Mid-Band network in several states.
Positive
  • Fixed Wireless customer growth of 66% and tower rental revenue growth of 10% are positive indicators for UScellular. The reduction in debt balance by $150 million is also a positive sign. Launching 5G Mid-Band network can drive further growth.
Negative
  • Total operating revenues decreased compared to the same period last year. Service revenues also decreased. Net income decreased from $21 million to $5 million.

2Q 2023 Highlights*

  • Focused on improving subscriber trajectory to reduce postpaid losses - made progress in reducing postpaid churn
    • Reduced postpaid handset churn 8%
  • Executing on growth initiatives
    • Fixed Wireless customers grew 66% to 96,000  
    • Tower rental revenues grew 10%
  • Reduced debt balance by $150 million in 2Q'23
  • Launching 5G Mid-Band network - providing low latency and faster speeds
    • Ended June with availability in parts of Illinois, Iowa, Wisconsin, Maine, Missouri, Nebraska, Oklahoma, Oregon, Virginia and Washington

* Comparisons are 2Q'22 to 2Q'23 unless otherwise noted

CHICAGO, Aug. 4, 2023 /PRNewswire/ --

As previously announced, UScellular will hold a teleconference on August 4, 2023, 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 $957 million for the second quarter of 2023, versus $1,027 million for the same period one year ago. Service revenues totaled $760 million, versus $783 million for the same period one year ago. Net income attributable to UScellular shareholders and related diluted earnings per share were $5 million and $0.05, respectively, for the second quarter of 2023 compared to $21 million and $0.25, respectively, in the same period one year ago.

"Postpaid handset subscriber trends improved slightly year-over-year driven by improvements in churn, however, gross additions remained challenged. Two of UScellular's growth areas, fixed wireless and the tower portfolio, produced year-over-year double-digit increases in gross additions and revenues, respectively. And our ongoing cost optimization programs are helping to offset inflationary pressures," said Laurent Therivel, UScellular President and CEO. "In July, UScellular surpassed 100,000 fixed wireless customers – a key milestone as momentum for the product continues."

Recent Development: On August 4, 2023, Telephone and Data Systems (TDS) and UScellular announced a process to explore a range of strategic alternatives for UScellular.

2023 Estimated Results

UScellular's current estimates of full-year 2023 results are shown below. Such estimates represent management's view as of August 4, 2023 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.

The 2023 Estimated Results shown below do not reflect any anticipated costs, expenses or results of the strategic review referenced above.


2023 Estimated Results


Previous

Current

(Dollars in millions)



Service revenues

$3,050-$3,150

$3,025-$3,075

Adjusted OIBDA1

$725-$875

$750-$850

Adjusted EBITDA1

$875-$1,025

$925-$1,025

Capital expenditures

$600-$700

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 2023 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


2023 Estimated
Results


Six Months Ended

June 30, 2023


Year Ended
December 31, 2022

(Dollars in millions)






Net income (GAAP)

N/A


$20


$35

Add back:






Income tax expense

N/A


29


37

Income before income taxes (GAAP)

$50-$150


$49


$72

Add back:






Interest expense

200


99


163

Depreciation, amortization and accretion expense

655


330


700

EBITDA (Non-GAAP)1

$905-$1,005


$478


$935

Add back or deduct:






Loss on impairment of licenses



3

(Gain) loss on asset disposals, net

20


13


19

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



(1)

Adjusted EBITDA (Non-GAAP)1

$925-$1,025


$491


$956

Deduct:






Equity in earnings of unconsolidated entities

160


82


158

Interest and dividend income

15


5


8

Adjusted OIBDA (Non-GAAP)1

$750-$850


$404


$790



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, 2023, can be found on UScellular's website at investors.uscellular.com.

 

Conference Call Information

UScellular will hold a conference call on August 4, 2023 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 4.7 million retail connections in 21 states. The Chicago-based company had 4,600 full- and part-time associates as of June 30, 2023. At the end of the second quarter of 2023, 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: 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

United States Cellular Corporation

Summary Operating Data (Unaudited)

As of or for the Quarter Ended

6/30/2023


3/31/2023


12/31/2022


9/30/2022


6/30/2022

Retail Connections










Postpaid










Total at end of period

4,194,000


4,223,000


4,247,000


4,264,000


4,296,000

Gross additions

125,000


137,000


154,000


151,000


128,000

Handsets

83,000


93,000


105,000


107,000


94,000

Connected devices

42,000


44,000


49,000


44,000


34,000

Net additions (losses)

(28,000)


(24,000)


(17,000)


(31,000)


(40,000)

Handsets

(29,000)


(25,000)


(20,000)


(22,000)


(31,000)

Connected devices

1,000


1,000


3,000


(9,000)


(9,000)

ARPU1

$        50.64


$        50.66


$        50.60


$         50.21


$         50.07

ARPA2

$      130.19


$      130.77


$      130.97


$       130.27


$       130.43

Handset upgrade rate3

4.8 %


4.9 %


7.0 %


8.1 %


6.0 %

Churn rate4

1.21 %


1.27 %


1.35 %


1.42 %


1.30 %

Handsets

1.01 %


1.06 %


1.12 %


1.15 %


1.10 %

Connected devices

2.65 %


2.78 %


2.99 %


3.40 %


2.73 %

Prepaid










Total at end of period

462,000


470,000


493,000


493,000


490,000

Gross additions

50,000


43,000


61,000


62,000


56,000

Net additions (losses)

(8,000)


(23,000)



2,000


(4,000)

ARPU1

$        33.86


$        33.19


$        33.34


$         35.04


$         35.25

Churn rate4

4.18 %


4.63 %


4.11 %


4.07 %


4.07 %

Market penetration at end of period










Consolidated operating population

32,350,000


32,350,000


32,370,000


32,370,000


32,370,000

Consolidated operating penetration5

15 %


15 %


15 %


15 %


15 %

Capital expenditures (millions)

$            143


$           208


$           176


$            136


$            268

Total cell sites in service

6,952


6,950


6,945


6,933


6,916

Owned towers

4,341


4,338


4,336


4,329


4,323



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

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,


2023


2022


2023

vs. 2022


2023


2022


2023

vs. 2022

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












Operating revenues












Service

$      760


$      783


(3) %


$  1,527


$  1,570


(3) %

Equipment sales

197


244


(20) %


415


467


(11) %

Total operating revenues

957


1,027


(7) %


1,942


2,037


(5) %













Operating expenses












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

190


192


(1) %


372


377


(1) %

Cost of equipment sold

228


275


(17) %


480


533


(10) %

Selling, general and administrative

341


339


1 %


686


663


3 %

Depreciation, amortization and accretion

161


172


(7) %


330


342


(4) %

Loss on impairment of licenses


3


N/M



3


N/M

(Gain) loss on asset disposals, net

3


6


(44) %


13


8


73 %

Total operating expenses

923


987


(7) %


1,881


1,926


(2) %













Operating income

34


40


(13) %


61


111


(45) %













Investment and other income (expense)












Equity in earnings of unconsolidated entities

38


37


3 %


82


82


Interest and dividend income

3


3


11 %


5


4


43 %

Interest expense

(51)


(40)


(30) %


(99)


(73)


(35) %

Total investment and other income (expense)

(10)



N/M


(12)


13


N/M













Income before income taxes

24


40


(40) %


49


124


(60) %

Income tax expense

19


18


6 %


29


50


(41) %

Net income

5


22


(76) %


20


74


(73) %

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


1


(7) %


2


3


(33) %

Net income attributable to UScellular shareholders

$          5


$        21


(79) %


$        18


$        71


(75) %













Basic weighted average shares outstanding

85


86


(1) %


85


86


(1) %

Basic earnings per share attributable to UScellular shareholders

$    0.05


$    0.25


(79) %


$    0.21


$    0.82


(75) %













Diluted weighted average shares outstanding

86


87


(1) %


86


87


(1) %

Diluted earnings per share attributable to UScellular shareholders

$    0.05


$    0.25


(79) %


$    0.20


$    0.82


(75) %


N/M - Percentage change not meaningful

 

United States Cellular Corporation

Consolidated Statement of Cash Flows

(Unaudited)


Six Months Ended

June 30,


2023


2022

(Dollars in millions)




Cash flows from operating activities




Net income

$                     20


$                     74

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




Depreciation, amortization and accretion

330


342

Bad debts expense

50


51

Stock-based compensation expense

6


14

Deferred income taxes, net

25


31

Equity in earnings of unconsolidated entities

(82)


(82)

Distributions from unconsolidated entities

78


80

Loss on impairment of licenses


3

(Gain) loss on asset disposals, net

13


8

Other operating activities

3


3

Changes in assets and liabilities from operations




Accounts receivable

35


(17)

Equipment installment plans receivable

7


(25)

Inventory

52


(33)

Accounts payable

(106)


(8)

Customer deposits and deferred revenues

(9)


6

Accrued taxes

1


135

Accrued interest

(1)


1

Other assets and liabilities

(32)


(5)

Net cash provided by operating activities

390


578





Cash flows from investing activities




Cash paid for additions to property, plant and equipment

(351)


(288)

Cash paid for licenses

(8)


(563)

Advance payments for license acquisitions


(1)

Other investing activities

14


1

Net cash used in investing activities

(345)


(851)





Cash flows from financing activities




Issuance of long-term debt

115


625

Repayment of long-term debt

(156)


(227)

Issuance of short-term debt


60

Repayment of short-term debt

(60)


Common Shares reissued for benefit plans, net of tax payments

(6)


(5)

Repurchase of Common Shares


(18)

Distributions to noncontrolling interests

(2)


(2)

Cash paid for software license agreements

(19)


(3)

Other financing activities

(1)


(1)

Net cash provided by (used in) financing activities

(129)


429





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

(84)


156





Cash, cash equivalents and restricted cash




Beginning of period

308


199

End of period

$                   224


$                   355

 

United States Cellular Corporation

Consolidated Balance Sheet Highlights

(Unaudited)


ASSETS






June 30, 2023


December 31, 2022

(Dollars in millions)




Current assets




Cash and cash equivalents

$                                186


$                                273

Accounts receivable, net

984


1,072

Inventory, net

210


261

Prepaid expenses

69


68

Income taxes receivable

4


4

Other current assets

47


45

Total current assets

1,500


1,723





Assets held for sale

16


26





Licenses

4,694


4,690





Investments in unconsolidated entities

457


452





Property, plant and equipment, net

2,640


2,624





Operating lease right-of-use assets

912


918





Other assets and deferred charges

670


686





Total assets

$                          10,889


$                          11,119

 

United States Cellular Corporation

Consolidated Balance Sheet Highlights

(Unaudited)


LIABILITIES AND EQUITY






June 30, 2023


December 31, 2022

(Dollars in millions, except per share amounts)




Current liabilities




Current portion of long-term debt

$                                  54


$                                  13

Accounts payable

249


356

Customer deposits and deferred revenues

231


239

Accrued taxes

32


35

Accrued compensation

54


84

Short-term operating lease liabilities

134


133

Other current liabilities

254


335

Total current liabilities

1,008


1,195





Deferred liabilities and credits




Deferred income tax liability, net

732


708

Long-term operating lease liabilities

836


843

Other deferred liabilities and credits

607


604





Long-term debt, net

3,105


3,187





Noncontrolling interests with redemption features

12


12





Equity




UScellular shareholders' equity




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

88


88

Additional paid-in capital

1,710


1,703

Treasury shares

(80)


(98)

Retained earnings

2,855


2,861

Total UScellular shareholders' equity

4,573


4,554





Noncontrolling interests

16


16





Total equity

4,589


4,570





Total liabilities and equity

$                          10,889


$                          11,119

 

United States Cellular Corporation

Financial Measures and Reconciliations

(Unaudited)

Free Cash Flow



Three Months Ended

June 30,


Six Months Ended

June 30,


2023


2022


2023


2022

(Dollars in millions)








Cash flows from operating activities (GAAP)

$                349


$                267


$                390


$                578

Cash paid for additions to property, plant and equipment

(155)


(138)


(351)


(288)

Cash paid for software license agreements

(12)



(19)


(3)

Free cash flow (Non-GAAP)1

$                182


$                129


$                  20


$                287



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.

 

Cision View original content:https://www.prnewswire.com/news-releases/uscellular-reports-second-quarter-2023-results-301893559.html

SOURCE United States Cellular Corporation

United States Cellular Corporation

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