UScellular reports third quarter 2021 results
CHICAGO, Nov. 4, 2021 /PRNewswire/ --
As previously announced, UScellular will hold a teleconference November 4, 2021, at 4:00 p.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 $1,016 million for the third quarter of 2021, versus $1,027 million for the same period one year ago. Service revenues totaled $788 million, versus $775 million for the same period a year ago. Net income attributable to UScellular shareholders and related diluted earnings per share were $34 million and $0.38, respectively, for the third quarter of 2021 compared to $85 million and $0.97, respectively, in the same period one year ago.
"UScellular's third quarter results show continued growth in retail service revenue, driven in part by the positive impact of postpaid ARPU," said Laurent Therivel, UScellular President and CEO. "Prepaid results have also continued to improve as we have progressed through the year.
"Our business and government and tower operations are gaining momentum towards the growth we believe is achievable in their respective areas. Leveraging our regional strategy, we are optimizing promotions that balance subscriber growth and profitability as we head into the upcoming holiday season.
"Network performance is a hallmark of our value proposition. Our 5G and network modernization programs are on track, and we are optimistic on the use of millimeter wave spectrum for fixed wireless access and its potential to serve rural customers. We are continuing trials to validate network performance and customer experience as we look to bring this high-speed product to market.
"I am constantly impressed with our team at UScellular and the resilience that they are displaying through the pandemic. As workforce shortages become an increasing concern, UScellular's associate retention rates remain very high, evidence of our strong associate engagement."
2021 Estimated Results
UScellular's current estimates of full-year 2021 results are shown below. Such estimates represent management's view as of November 4, 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 | $3,075-$3,125 |
Adjusted OIBDA1 | $850-$950 | Unchanged |
Adjusted EBITDA1 | $1,025-$1,125 | Unchanged |
Capital expenditures | $775-$875 | $700-$800 |
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 | Nine Months EndedSeptember 30, 2021 | Year EndedDecember 31, 2020 | ||||||||
(Dollars in millions) | ||||||||||
Net income (GAAP) | N/A | $ | 132 | $ | 233 | |||||
Add back: | ||||||||||
Income tax expense | N/A | 31 | 17 | |||||||
Income before income taxes (GAAP) | $155-$255 | $ | 163 | $ | 250 | |||||
Add back: | ||||||||||
Interest expense | 180 | 144 | 112 | |||||||
Depreciation, amortization and accretion expense | 675 | 510 | 683 | |||||||
EBITDA (Non-GAAP)1 | $1,010-$1,110 | $ | 817 | $ | 1,045 | |||||
Add back or deduct: | ||||||||||
(Gain) loss on asset disposals, net | 15 | 15 | 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 | $ | 831 | $ | 1,063 | |||||
Deduct: | ||||||||||
Equity in earnings of unconsolidated entities | 170 | 137 | 179 | |||||||
Interest and dividend income | 5 | 5 | 8 | |||||||
Adjusted OIBDA (Non-GAAP)1 | $850-$950 | $ | 689 | $ | 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 September 30, 2021, can be found on UScellular's website at investors.uscellular.com. |
Stock RepurchaseDuring the third quarter of 2021, UScellular repurchased 626,410 Common Shares for $20 million.
Conference Call InformationUScellular will hold a conference call on November 4, 2021 at 4:00 p.m. Central Time.
- Access the live call on the Events & Presentations page of investors.uscellular.com or at https://event.on24.com/wcc/r/3192472/D1EB8251CA63A8AE47DD208E6469C968
- Access the call by phone at (833) 968-2187, conference ID: 6753568.
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 UScellularUnited 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 4,900 associates as of September 30, 2021. At the end of the third 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 | 9/30/2021 | 6/30/2021 | 3/31/2021 | 12/31/2020 | 9/30/2020 | ||||||||||||||
Retail Connections | |||||||||||||||||||
Postpaid | |||||||||||||||||||
Total at end of period | 4,391,000 | 4,399,000 | 4,406,000 | 4,412,000 | 4,401,000 | ||||||||||||||
Gross additions | 145,000 | 141,000 | 143,000 | 171,000 | 168,000 | ||||||||||||||
Feature phones | 2,000 | 3,000 | 3,000 | 2,000 | 4,000 | ||||||||||||||
Smartphones | 103,000 | 98,000 | 101,000 | 117,000 | 98,000 | ||||||||||||||
Connected devices | 40,000 | 40,000 | 39,000 | 52,000 | 66,000 | ||||||||||||||
Net additions (losses) | (8,000) | (6,000) | (6,000) | 11,000 | 28,000 | ||||||||||||||
Feature phones | (7,000) | (7,000) | (9,000) | (9,000) | (8,000) | ||||||||||||||
Smartphones | 2,000 | 6,000 | 6,000 | 12,000 | 8,000 | ||||||||||||||
Connected devices | (3,000) | (5,000) | (3,000) | 8,000 | 28,000 | ||||||||||||||
ARPU1,2 | $ | 48.12 | $ | 47.74 | $ | 47.65 | $ | 47.51 | $ | 47.10 | |||||||||
ARPA1,3 | $ | 125.99 | $ | 125.25 | $ | 125.25 | $ | 124.87 | $ | 123.27 | |||||||||
Churn rate4 | 1.15 | % | 1.11 | % | 1.12 | % | 1.21 | % | 1.06 | % | |||||||||
Handsets | 0.95 | % | 0.88 | % | 0.92 | % | 1.01 | % | 0.88 | % | |||||||||
Connected devices | 2.59 | % | 2.69 | % | 2.53 | % | 2.64 | % | 2.35 | % | |||||||||
Prepaid | |||||||||||||||||||
Total at end of period | 518,000 | 507,000 | 496,000 | 499,000 | 506,000 | ||||||||||||||
Gross additions | 74,000 | 65,000 | 62,000 | 56,000 | 65,000 | ||||||||||||||
Net additions (losses) | 11,000 | 10,000 | (3,000) | (8,000) | 11,000 | ||||||||||||||
ARPU2 | $ | 35.05 | $ | 35.64 | $ | 35.25 | $ | 35.15 | $ | 35.45 | |||||||||
Churn rate4 | 4.09 | % | 3.66 | % | 4.37 | % | 4.24 | % | 3.59 | % | |||||||||
Total connections at end of period5 | 4,972,000 | 4,967,000 | 4,961,000 | 4,968,000 | 4,962,000 | ||||||||||||||
Market penetration at end of period | |||||||||||||||||||
Consolidated operating population | 31,865,000 | 31,493,000 | 31,493,000 | 31,314,000 | 31,314,000 | ||||||||||||||
Consolidated operating penetration6 | 16 | % | 16 | % | 16 | % | 16 | % | 16 | % | |||||||||
Capital expenditures (millions) | $ | 185 | $ | 148 | $ | 125 | $ | 320 | $ | 216 | |||||||||
Total cell sites in service | 6,857 | 6,819 | 6,802 | 6,797 | 6,758 | ||||||||||||||
Owned towers | 4,274 | 4,278 | 4,270 | 4,271 | 4,246 | ||||||||||||||
1 | Q3 2021 Postpaid ARPU and ARPA amounts exclude $9 million of postpaid revenue related to a third quarter out-of-period error. | |
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 | Includes reseller and other connections. | |
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. | |
United States Cellular Corporation | |||||||||||||||||||||
Consolidated Statement of Operations Highlights | |||||||||||||||||||||
(Unaudited) | |||||||||||||||||||||
Three Months EndedSeptember 30, | Nine Months EndedSeptember 30, | ||||||||||||||||||||
2021 | 2020 | 2021vs. 2020 | 2021 | 2020 | 2021vs. 2020 | ||||||||||||||||
(Dollars and shares in millions, except per share amounts) | |||||||||||||||||||||
Operating revenues | |||||||||||||||||||||
Service1 | $ | 788 | $ | 775 | 2 | % | $ | 2,333 | $ | 2,290 | 2 | % | |||||||||
Equipment sales | 228 | 252 | (10) | % | 720 | 674 | 7 | % | |||||||||||||
Total operating revenues | 1,016 | 1,027 | (1) | % | 3,053 | 2,964 | 3 | % | |||||||||||||
Operating expenses | |||||||||||||||||||||
System operations (excluding Depreciation, amortization and accretion reported below) | 205 | 203 | 1 | % | 594 | 580 | 2 | % | |||||||||||||
Cost of equipment sold | 252 | 257 | (2) | % | 786 | 692 | 14 | % | |||||||||||||
Selling, general and administrative | 346 | 335 | 3 | % | 984 | 994 | (1) | % | |||||||||||||
Depreciation, amortization and accretion | 160 | 161 | – | 510 | 516 | (1) | % | ||||||||||||||
(Gain) loss on asset disposals, net | 8 | 6 | 29 | % | 15 | 14 | 7 | % | |||||||||||||
(Gain) loss on sale of business and other exit costs, net | — | — | N/M | (1) | — | N/M | |||||||||||||||
Total operating expenses | 971 | 962 | 1 | % | 2,888 | 2,796 | 3 | % | |||||||||||||
Operating income | 45 | 65 | (31) | % | 165 | 168 | (2) | % | |||||||||||||
Investment and other income (expense) | |||||||||||||||||||||
Equity in earnings of unconsolidated entities | 48 | 48 | – | 137 | 137 | – | |||||||||||||||
Interest and dividend income | 1 | 2 | (23) | % | 5 | 6 | (28) | % | |||||||||||||
Gain (loss) on investments | — | 3 | N/M | — | 3 | N/M | |||||||||||||||
Interest expense | (45) | (29) | (56) | % | (144) | (76) | (86) | % | |||||||||||||
Total investment and other income (expense) | 4 | 24 | (82) | % | (2) | 70 | N/M | ||||||||||||||
Income before income taxes | 49 | 89 | (44) | % | 163 | 238 | (31) | % | |||||||||||||
Income tax expense | 14 | 4 | N/M | 31 | 11 | N/M | |||||||||||||||
Net income | 35 | 85 | (59) | % | 132 | 227 | (42) | % | |||||||||||||
Less: Net income attributable to noncontrolling interests, net of tax | 1 | — | 33 | % | 4 | 3 | 21 | % | |||||||||||||
Net income attributable to UScellular shareholders | $ | 34 | $ | 85 | (60) | % | $ | 128 | $ | 224 | (43) | % | |||||||||
Basic weighted average shares outstanding | 86 | 86 | 1 | % | 87 | 86 | 1 | % | |||||||||||||
Basic earnings per share attributable to UScellular shareholders | $ | 0.39 | $ | 0.98 | (61) | % | $ | 1.48 | $ | 2.60 | (43) | % | |||||||||
Diluted weighted average shares outstanding | 87 | 88 | – | 88 | 87 | – | |||||||||||||||
Diluted earnings per share attributable to UScellular shareholders | $ | 0.38 | $ | 0.97 | (60) | % | $ | 1.46 | $ | 2.56 | (43) | % | |||||||||
N/M - Percentage change not meaningful | |
1 | During the three months ended September 30, 2021, UScellular recorded a $9 million out-of-period error, which increased Service revenue by $9 million for the three and nine months ended September 30, 2021. |
United States Cellular Corporation | |||||||
Consolidated Statement of Cash Flows | |||||||
(Unaudited) | |||||||
Nine Months EndedSeptember 30, | |||||||
2021 | 2020 | ||||||
(Dollars in millions) | |||||||
Cash flows from operating activities | |||||||
Net income | $ | 132 | $ | 227 | |||
Add (deduct) adjustments to reconcile net income to net cash flows from operating activities | |||||||
Depreciation, amortization and accretion | 510 | 516 | |||||
Bad debts expense | 34 | 52 | |||||
Stock-based compensation expense | 20 | 25 | |||||
Deferred income taxes, net | 47 | 158 | |||||
Equity in earnings of unconsolidated entities | (137) | (137) | |||||
Distributions from unconsolidated entities | 106 | 118 | |||||
(Gain) loss on asset disposals, net | 15 | 14 | |||||
(Gain) loss on sale of business and other exit costs, net | (1) | — | |||||
(Gain) loss on investments | — | (3) | |||||
Other operating activities | 31 | 1 | |||||
Changes in assets and liabilities from operations | |||||||
Accounts receivable | 19 | 31 | |||||
Equipment installment plans receivable | (44) | 13 | |||||
Inventory | 10 | 5 | |||||
Accounts payable | (33) | 77 | |||||
Customer deposits and deferred revenues | 10 | (23) | |||||
Accrued taxes | (36) | (102) | |||||
Accrued interest | 7 | 14 | |||||
Other assets and liabilities | (23) | (36) | |||||
Net cash provided by operating activities | 667 | 950 | |||||
Cash flows from investing activities | |||||||
Cash paid for additions to property, plant and equipment | (456) | (690) | |||||
Cash paid for licenses | (1,263) | (169) | |||||
Cash received from investments | 3 | 1 | |||||
Cash paid for investments | — | (1) | |||||
Cash received from divestitures and exchanges | 2 | 1 | |||||
Advance payments for license acquisitions | (20) | — | |||||
Other investing activities | 2 | 3 | |||||
Net cash used in investing activities | (1,732) | (855) | |||||
Cash flows from financing activities | |||||||
Issuance of long-term debt | 1,217 | 625 | |||||
Repayment of long-term debt | (1,117) | (6) | |||||
Common Shares reissued for benefit plans, net of tax payments | (16) | (12) | |||||
Repurchase of Common Shares | (21) | (23) | |||||
Payment of debt issuance costs | (20) | (20) | |||||
Distributions to noncontrolling interests | (2) | (2) | |||||
Other financing activities | (4) | — | |||||
Net cash provided by financing activities | 37 | 562 | |||||
Net increase (decrease) in cash, cash equivalents and restricted cash | (1,028) | 657 | |||||
Cash, cash equivalents and restricted cash | |||||||
Beginning of period | 1,291 | 291 | |||||
End of period | $ | 263 | $ | 948 | |||
United States Cellular Corporation | |||||||
Consolidated Balance Sheet Highlights | |||||||
(Unaudited) | |||||||
ASSETS | |||||||
September 30, 2021 | December 31, 2020 | ||||||
(Dollars in millions) | |||||||
Current assets | |||||||
Cash and cash equivalents | $ | 231 | $ | 1,271 | |||
Short-term investments | — | 3 | |||||
Accounts receivable, net | 978 | 998 | |||||
Inventory, net | 136 | 146 | |||||
Prepaid expenses | 59 | 51 | |||||
Income taxes receivable | 125 | 125 | |||||
Other current assets | 42 | 29 | |||||
Total current assets | 1,571 | 2,623 | |||||
Assets held for sale | 3 | 2 | |||||
Licenses | 4,102 | 2,629 | |||||
Investments in unconsolidated entities | 466 | 435 | |||||
Property, plant and equipment, net | 2,457 | 2,466 | |||||
Operating lease right-of-use assets | 953 | 924 | |||||
Other assets and deferred charges | 592 | 602 | |||||
Total assets | $ | 10,144 | $ | 9,681 | |||
United States Cellular Corporation | |||||||
Consolidated Balance Sheet Highlights | |||||||
(Unaudited) | |||||||
LIABILITIES AND EQUITY | |||||||
September 30, 2021 | December 31, 2020 | ||||||
(Dollars in millions, except per share amounts) | |||||||
Current liabilities | |||||||
Current portion of long-term debt | $ | 3 | $ | 2 | |||
Accounts payable | 372 | 387 | |||||
Customer deposits and deferred revenues | 161 | 151 | |||||
Accrued taxes | 32 | 48 | |||||
Accrued compensation | 69 | 82 | |||||
Short-term operating lease liabilities | 126 | 116 | |||||
Other current liabilities | 93 | 85 | |||||
Total current liabilities | 856 | 871 | |||||
Liabilities held for sale | — | 1 | |||||
Deferred liabilities and credits | |||||||
Deferred income tax liability, net | 680 | 633 | |||||
Long-term operating lease liabilities | 890 | 875 | |||||
Other deferred liabilities and credits | 565 | 376 | |||||
Long-term debt, net | 2,604 | 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 | 1,671 | 1,651 | |||||
Treasury shares | (58) | (67) | |||||
Retained earnings | 2,822 | 2,739 | |||||
Total UScellular shareholders' equity | 4,523 | 4,411 | |||||
Noncontrolling interests | 16 | 15 | |||||
Total equity | 4,539 | 4,426 | |||||
Total liabilities and equity | $ | 10,144 | $ | 9,681 | |||
United States Cellular Corporation | |||||||||||||||
Financial Measures and Reconciliations | |||||||||||||||
(Unaudited) | |||||||||||||||
Free Cash Flow | |||||||||||||||
Three Months EndedSeptember 30, | Nine Months EndedSeptember 30, | ||||||||||||||
2021 | 2020 | 2021 | 2020 | ||||||||||||
(Dollars in millions) | |||||||||||||||
Cash flows from operating activities (GAAP) | $ | 304 | $ | 257 | $ | 667 | $ | 950 | |||||||
Less: Cash paid for additions to property, plant and equipment | 175 | 219 | 456 | 690 | |||||||||||
Free cash flow (Non-GAAP)1 | $ | 129 | $ | 38 | $ | 211 | $ | 260 | |||||||
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. |
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SOURCE United States Cellular Corporation