TDS reports fourth quarter and full year 2022 results

UScellular

2023 EstimatedResults

`

Actual Results for

the Year Ended

December 31, 2022

(Dollars in millions)

Service revenues

$3,050-$3,150

$3,125

Adjusted OIBDA1

$725-$875

$790

Adjusted EBITDA1

$875-$1,025

$956

Capital expenditures

$600-$700

$717

TDS Telecom

2023 EstimatedResults

Actual Results forthe Year EndedDecember 31, 2022

(Dollars in millions)

Total operating revenues

$1,030-$1,060

$1,020

Adjusted OIBDA1

$260-$290

$288

Adjusted EBITDA1

$260-$290

$291

Capital expenditures

$500-$550

$556

UScellular

TDS Telecom

2023 EstimatedResults

Actual Results for

the Year Ended

December 31, 2022

2023 EstimatedResults

Actual Results for

the Year Ended

December 31, 2022

(Dollars in millions)

Net income (GAAP)

N/A

$35

N/A

$53

Add back:

Income tax expense

N/A

37

N/A

23

Income before income taxes (GAAP)

$10-$160

$72

$40-$70

$76

Add back:

Interest expense

205

163

—

(7)

Depreciation, amortization and accretion expense

645

700

220

215

EBITDA (Non-GAAP)1

$860-$1,010

$935

$260-$290

$284

Add back or deduct:

Loss on impairment of licenses

—

3

—

—

(Gain) loss on asset disposals, net

15

19

—

7

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

—

(1)

—

—

Adjusted EBITDA (Non-GAAP)1

$875-$1,025

$956

$260-$290

$291

Deduct:

Equity in earnings of unconsolidated entities

145

158

—

—

Interest and dividend income

5

8

—

2

Other, net

—

—

—

1

Adjusted OIBDA (Non-GAAP)1

$725-$875

$790

$260-$290

$288

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 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 TDS' 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 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, 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 December 31, 2022, can be found on TDS' website at investors.tdsinc.com.

United States Cellular Corporation

Summary Operating Data (Unaudited) 

As of or for the Quarter Ended

12/31/2022

9/30/2022

6/30/2022

3/31/2022

12/31/2021

Retail Connections

Postpaid

Total at end of period

4,247,000

4,264,000

4,296,000

4,335,000

4,380,000

Gross additions

154,000

151,000

128,000

126,000

165,000

Feature phones

6,000

5,000

4,000

2,000

3,000

Smartphones

99,000

102,000

90,000

89,000

122,000

Connected devices

49,000

44,000

34,000

35,000

40,000

Net additions (losses)

(17,000)

(31,000)

(40,000)

(44,000)

(12,000)

Feature phones

(6,000)

(6,000)

(8,000)

(10,000)

(7,000)

Smartphones

(14,000)

(16,000)

(23,000)

(26,000)

5,000

Connected devices

3,000

(9,000)

(9,000)

(8,000)

(10,000)

ARPU1

$        50.60

$        50.21

$        50.07

$        49.71

$        48.62

ARPA2

$      130.97

$      130.27

$      130.43

$      129.93

$      127.14

Churn rate3

1.35 %

1.42 %

1.30 %

1.30 %

1.35 %

Handsets

1.12 %

1.15 %

1.10 %

1.10 %

1.10 %

Connected devices

2.99 %

3.40 %

2.73 %

2.70 %

3.08 %

Prepaid

Total at end of period

493,000

493,000

490,000

495,000

513,000

Gross additions

61,000

62,000

56,000

55,000

63,000

Net additions (losses)

—

2,000

(4,000)

(18,000)

(5,000)

ARPU1

$        33.34

$        35.04

$        35.25

$        34.59

$        34.53

Churn rate3

4.11 %

4.07 %

4.07 %

4.84 %

4.39 %

Market penetration at end of period

Consolidated operating population

32,370,000

32,370,000

32,370,000

32,370,000

32,127,000

Consolidated operating penetration4

15 %

15 %

15 %

15 %

15 %

Capital expenditures (millions)

$           176

$           136

$           268

$           137

$           321

Total cell sites in service

6,945

6,933

6,916

6,899

6,898

Owned towers

4,336

4,329

4,323

4,310

4,301

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

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

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

12/31/2022

9/30/2022

6/30/2022

3/31/2022

12/31/2021

Residential connections

Broadband

Wireline, Incumbent

249,100

252,600

252,700

250,100

250,200

Wireline, Expansion

56,100

49,400

44,100

40,600

36,900

Cable

204,800

204,500

204,000

204,600

203,200

Total Broadband

510,000

506,500

500,800

495,200

490,300

Video

135,300

136,600

137,400

140,000

141,500

Voice

291,600

295,500

298,300

301,700

303,700

Total Residential connections

936,900

938,600

936,500

936,900

935,600

Commercial connections

236,000

242,800

250,700

260,000

264,300

Total connections

1,173,000

1,181,400

1,187,200

1,196,900

1,199,900

Residential revenue per connection1

$           59.91

$           60.32

$           59.67

$           57.95

$           57.86

Capital expenditures (millions)

$               165

$               166

$               120

$               105

$               151

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,

2022

2021

2022

vs. 2021

2022

2021

2022

vs. 2021

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

Operating revenues

UScellular

$ 1,048

$  1,068

(2) %

$ 4,169

$  4,122

1 %

TDS Telecom

257

254

1 %

1,020

1,006

1 %

All Other1

52

50

4 %

224

201

11 %

1,357

1,372

(1) %

5,413

5,329

2 %

Operating expenses

UScellular

Expenses excluding depreciation, amortization and accretion

885

887

—

3,379

3,253

4 %

Depreciation, amortization and accretion

179

169

7 %

700

678

3 %

Loss on impairment of licenses

—

—

—

3

—

N/M

(Gain) loss on asset disposals, net

11

8

28 %

19

23

(18) %

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

—

(1)

78 %

(1)

(2)

52 %

1,075

1,063

1 %

4,100

3,952

4 %

TDS Telecom

Expenses excluding depreciation, amortization and accretion

192

179

8 %

732

696

5 %

Depreciation, amortization and accretion

56

52

8 %

215

198

8 %

(Gain) loss on asset disposals, net

3

1

N/M

7

2

N/M

252

231

9 %

954

896

6 %

All Other1

Expenses excluding depreciation and amortization

52

49

7 %

222

200

11 %

Depreciation and amortization

3

5

(25) %

14

19

(22) %

(Gain) loss on asset disposals, net

—

—

N/M

1

1

N/M

56

54

4 %

237

220

8 %

Total operating expenses

1,383

1,348

3 %

5,291

5,068

4 %

Operating income (loss)

UScellular

(27)

5

N/M

69

170

(59) %

TDS Telecom

5

23

(78) %

66

110

(40) %

All Other1

(4)

(4)

(7) %

(13)

(19)

27 %

(26)

24

N/M

122

261

(53) %

Investment and other income (expense)

Equity in earnings of unconsolidated entities

36

43

(16) %

159

182

(12) %

Interest and dividend income

7

3

N/M

17

11

45 %

Interest expense

(55)

(39)

(41) %

(174)

(232)

25 %

Other, net

—

—

N/M

1

(1)

N/M

Total investment and other income (expense)

(12)

7

N/M

3

(40)

N/M

Income (loss) before income taxes

(38)

31

N/M

125

221

(44) %

Income tax expense (benefit)

(8)

(5)

(54) %

53

33

59 %

Net income (loss)

(30)

36

N/M

72

188

(62) %

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

(4)

5

N/M

10

32

(69) %

Net income (loss) attributable to TDS shareholders

(26)

31

N/M

62

156

(61) %

TDS Preferred Share dividends

17

17

—

69

39

79 %

Net income (loss) attributable to TDS common shareholders

$     (43)

$     14

N/M

$       (7)

$   117

N/M

Basic weighted average shares outstanding

113

115

(1) %

114

115

(1) %

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

$  (0.38)

$  0.12

N/M

$  (0.07)

$  1.03

N/M

Diluted weighted average shares outstanding

113

116

(2) %

114

116

(1) %

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

$  (0.38)

$  0.11

N/M

$  (0.07)

$  1.00

N/M

N/M - Percentage change not meaningful.

Numbers may not foot due to rounding.

1

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

Telephone and Data Systems, Inc.

Consolidated Statement of Cash Flows

(Unaudited)

Year Ended December 31,

2022

2021

(Dollars in millions)

Cash flows from operating activities

Net income

$                 72

$               188

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

Depreciation, amortization and accretion

929

895

Bad debts expense

138

60

Stock-based compensation expense

42

49

Deferred income taxes, net

47

52

Equity in earnings of unconsolidated entities

(159)

(182)

Distributions from unconsolidated entities

145

180

Loss on impairment of licenses

3

—

(Gain) loss on asset disposals, net

27

26

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

(1)

(2)

Other operating activities

10

61

Changes in assets and liabilities from operations

Accounts receivable

(69)

(22)

Equipment installment plans receivable

(199)

(116)

Inventory

(90)

(25)

Accounts payable

32

(69)

Customer deposits and deferred revenues

48

43

Accrued taxes

127

(49)

Other assets and liabilities

53

14

Net cash provided by operating activities

1,155

1,103

Cash flows from investing activities

Cash paid for additions to property, plant and equipment

(1,161)

(1,131)

Cash paid for licenses and other intangible assets

(614)

(1,308)

Cash received from divestitures and exchanges

8

3

Advance payments for license acquisitions

—

(20)

Other investing activities

(16)

(6)

Net cash used in investing activities

(1,783)

(2,462)

Cash flows from financing activities

Issuance of long-term debt

1,154

1,543

Repayment of long-term debt

(332)

(2,081)

Issuance of short-term debt

110

—

Repayment of short-term debt

(50)

—

Issuance of TDS Preferred Shares

—

1,110

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

(4)

(5)

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

(5)

(16)

Repurchase of TDS Common Shares

(40)

(8)

Repurchase of UScellular Common Shares

(43)

(31)

Dividends paid to TDS shareholders

(151)

(119)

Payment of debt and equity issuance costs

(2)

(62)

Distributions to noncontrolling interests

(3)

(3)

Cash paid for software license agreements

(23)

(9)

Other financing activities

2

2

Net cash provided by financing activities

613

321

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

(15)

(1,038)

Cash, cash equivalents and restricted cash

Beginning of period

414

1,452

End of period

$               399

$               414

Telephone and Data Systems, Inc.

Consolidated Balance Sheet Highlights

(Unaudited)

ASSETS

December 31,

2022

2021

(Dollars in millions)

Current assets

Cash and cash equivalents

$                   360

$                   367

Accounts receivable, net

1,181

1,151

Inventory, net

268

178

Prepaid expenses

102

103

Income taxes receivable

59

184

Other current assets

58

61

Total current assets

2,028

2,044

Assets held for sale

26

18

Licenses

4,699

4,097

Goodwill

547

547

Other intangible assets, net

204

197

Investments in unconsolidated entities

495

479

Property, plant and equipment, net

4,760

4,361

Operating lease right-of-use assets

995

1,040

Other assets and deferred charges

796

710

Total assets

$              14,550

$              13,493

Telephone and Data Systems, Inc.

Consolidated Balance Sheet Highlights

(Unaudited)

LIABILITIES AND EQUITY

December 31,

2022

2021

(Dollars in millions, except per share amounts)

Current liabilities

Current portion of long-term debt

$                     19

$                        6

Accounts payable

506

481

Customer deposits and deferred revenues

285

236

Accrued interest

12

10

Accrued taxes

46

45

Accrued compensation

144

137

Short-term operating lease liabilities

146

141

Other current liabilities

356

124

Total current liabilities

1,514

1,180

Deferred liabilities and credits

Deferred income tax liability, net

969

921

Long-term operating lease liabilities

908

960

Other deferred liabilities and credits

813

759

Long-term debt, net

3,731

2,928

Noncontrolling interests with redemption features

12

11

Equity

TDS shareholders' equity

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

1

1

Capital in excess of par value

2,551

2,496

Preferred Shares, par value $0.01 per share

1,074

1,074

Treasury shares, at cost

(481)

(461)

Accumulated other comprehensive income

5

5

Retained earnings

2,699

2,812

Total TDS shareholders' equity

5,849

5,927

Noncontrolling interests

754

807

Total equity

6,603

6,734

Total liabilities and equity

$              14,550

$              13,493

Balance Sheet Highlights

(Unaudited)

December 31, 2022

UScellular

TDS

Telecom

TDS Corporate

& Other

Intercompany

Eliminations

TDS

Consolidated

(Dollars in millions)

Cash and cash equivalents

$                  273

$                  104

$                    95

$                (112)

$                  360

Licenses, goodwill and other intangible assets

$              4,690

$                  755

$                      5

$                    —

$              5,450

Investment in unconsolidated entities

452

4

46

(7)

495

$              5,142

$                  759

$                    51

$                    (7)

$              5,945

Property, plant and equipment, net

$              2,624

$              2,047

$                    89

$                    —

$              4,760

Long-term debt, net:

Current portion

$                    13

$                    —

$                      6

$                    —

$                    19

Non-current portion

3,187

3

541

—

3,731

$              3,200

$                      3

$                  547

$                    —

$              3,750

TDS Telecom Highlights

(Unaudited)

Three Months Ended

December 31,

Year Ended

December 31,

2022

2021

2022 vs.2021

2022

2021

2022 vs.2021

(Dollars in millions)

Operating revenues

Residential

Wireline, Incumbent

$         87

$         86

1 %

$       350

$       345

1 %

Wireline, Expansion

14

10

42 %

49

34

46 %

Cable

67

66

1 %

270

263

3 %

Total residential

168

162

4 %

669

641

4 %

Commercial

43

45

(5) %

173

183

(5) %

Wholesale

45

46

(2) %

177

181

(2) %

Total service revenues

256

254

1 %

1,019

1,005

1 %

Equipment revenues

—

—

5 %

1

1

(5) %

Total operating revenues

257

254

1 %

1,020

1,006

1 %

Cost of services

110

103

6 %

418

404

3 %

Cost of equipment and products

—

—

(58) %

1

1

(2) %

Selling, general and administrative expenses

83

75

10 %

313

291

8 %

Depreciation, amortization and accretion

56

52

8 %

215

198

8 %

(Gain) loss on asset disposals, net

3

1

N/M

7

2

N/M

Total operating expenses

252

231

9 %

954

896

6 %

Operating income

$           5

$         23

(78) %

$         66

$       110

(40) %

N/M - Percentage change not meaningful.

Numbers may not foot due to rounding.

Telephone and Data Systems, Inc.

Financial Measures and Reconciliations

Three Months Ended

December 31,

Year Ended

December 31,

2022

2021

2022

2021

(Dollars in millions)

Cash flows from operating activities (GAAP)

$                 255

$                 239

$              1,155

$              1,103

Cash paid for additions to property, plant and equipment

(367)

(404)

(1,161)

(1,131)

Cash paid for software license agreements

(18)

(5)

(23)

(9)

Free cash flow (Non-GAAP)1

$               (130)

$               (170)

$                  (29)

$                  (37)

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.