Telephone and Data Systems, Inc. · NYSE:TDS
Telephone and Data Systems — Q3 2018 Earnings Presentation
28 slides from Telephone and Data Systems's earnings presentation, Nov 2, 2018
Slide 1: Third Quarter 2018 Results
Third Quarter 2018 Results November 2, 2018
Slide 2: Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995
Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995 All information set forth in this presentation, except historical and factual information, represents forward-looking statements. This includes all statements about the company’s plans, beliefs, estimates, and expectati
Slide 3: U.S. Cellular
K US. Cellular
Slide 4: Executing on 2018 strategic priorities
Executing on 2018 strategic priorities • Attract new customers and protect our base • Sequential improvement in gross and net additions • Postpaid handset churn remained low at 1.02% in Q3 • Drive revenue growth • Operating revenues up 4%, up 5% excluding ASC 606 • Aggressive, yet economical, promot
Slide 5: Total postpaid connections
Total postpaid connections 5
Slide 6: Postpaid handsets connections
Postpaid handsets connections 6
Slide 7: Postpaid churn rate
Postpaid churn rate TK US Cellular 3.50% 4 3.04% 3.00% 2.50% 2.00% 1.50% 1.00% 0.50% 0.00% Q3'17 Q4'17 Quis Q2'18 Q3'18 Handsets Ms Connected Devices
Slide 8: Impacts of New Revenue Recognition Accounting Standard (ASC 606)
Impacts of New Revenue Recognition Accounting Standard (ASC 606) (1) (in millions) · (Gain) loss on license sales and exchanges, netResults under prior accounting Three Months Ended September 30, 2018 standard Adjustment As reported Service revenues $ 787 $ (28) $ 759 Equipment sales 223 19 242 Tota
Slide 9: Total operating revenues
Total operating revenues (1) (in millions) (1) - See slide 28 for explanation 9
Slide 10: Postpaid revenue
Postpaid revenue Average Billings Per User (ABPU) Average Billings Per Account (ABPA) 10
Slide 11: Adjusted OIBDA
Adjusted OIBDA ($ in millions) Q3'18 (1) Q3'17 % Change Total operating revenues $ 1,001 $ 963 4% System operations expense 200 185 8% Cost of equipment sold 258 261 (1)% SG&A expenses 346 350 (1)% Total cash expenses (2) 804 796 1% Adjusted OIBDA (3) $ 197 $ 167 18% (1), (2), (3) - See slide 28 for
Slide 12: Adjusted EBITDA
Adjusted EBITDA ($ in millions) Q3'18 (1) Q3'17 % Change Adjusted OIBDA (3) $ 197 $ 167 18% Equity in earnings of unconsolidated entities 42 35 19% Interest and dividend income 4 2 N/M Adjusted EBITDA (3) $ 243 $ 204 19% N/M - Percentage change not meaningful (1), (3) - See slide 28 for explanations
Slide 13: 2018 guidance
2018 guidance * Strong performance drives increased guidance ($ in millions) 2018 Current 2018 Previous As of November 2, 2018 2017 Actual Estimates (1) Estimates (1) Total operating revenues $3,890 $3,950-$4,000 $3,925-$4,025 Adjusted OIBDA (3) $675 $760-$810 $700-$800 Adjusted EBITDA (3) $820 $925
Slide 14: BendBroadband
@ bendbroadband 14
Slide 15: Executing on 2018 strategic priorities
Executing on 2018 strategic priorities Wireline and Cable • Intense focus on increasing broadband penetration • Invest in Cloud TV platform • Wireline • Execute fiber program both in and out of the current ILEC footprint Service Addresses at Sept. 30, 2018 (770,900) • Rural Broadband Deployment Copp
Slide 16: TDS Telecom operating performance
TDS Telecom operating performance ($ in millions) % Q3’18 (1) Q3’17 Change Wireline $ 177 $ 179 (1)% Cable 58 52 11% Total operating revenues * 234 230 2% Cash expenses (2) 157 154 2% Adjusted EBITDA (3) $ 80 $ 79 1% Capital expenditures $ 54 $ 56 (3)% * Includes intercompany eliminations (1), (2),
Slide 17: Third quarter Wireline highlights
Third quarter Wireline highlights • Growth in video connections and broadband penetration driving an increase in residential revenue per connection •Demand for higher speeds is strong • Growth from fiber investments and A-CAM support helps to offset legacy revenue declines Residential revenue per co
Slide 18: Wireline operating performance
Wireline operating performance ($ in millions) % Q3’18 (1) Q3’17 Change Residential $ 81 $ 80 1% Commercial 46 50 (8)% Wholesale 50 49 2% Total operating revenues 177 179 (1)% Cash expenses (2) 118 115 2% Adjusted EBITDA (3) $ 61 $ 66 (6)% Capital expenditures $ 41 $ 41 (1)% (1), (2), (3) - See slid
Slide 19: Third quarter Cable highlights
Third quarter Cable highlights • Broadband connections increase 14% (including acquisitions) • Tenth consecutive quarter of double digit broadband growth • Revenues increase 11% • Adjusted EBITDA increases 35% 10% Total connections (Y/Y growth) 14% Broadband connections (Y/Y growth) 19
Slide 20: Cable operating performance
Cable operating performance ($ in millions) % Q3’18 (1) Q3’17 Change Residential $ 47 $ 43 11% Commercial 10 9 14% Total operating revenues 58 52 11% Cash expenses (2) 40 38 4% Adjusted EBITDA (3) $ 18 $ 14 35% Capital expenditures $ 13 $ 14 (7)% (1), (2), (3) - See slide 28 for explanations 20
Slide 21: 2018 TDS Telecom guidance
2018 TDS Telecom guidance * Wireline and Cable ($ in millions) 2018 Current 2018 Previous As of November 2, 2018 2017 Actual Estimates (1) Estimates (1) Total operating revenues $919 $900-$950 Unchanged Adjusted OIBDA (3) $314 $290-$320 Unchanged Adjusted EBITDA (3) $323 $300-$330 Unchanged Capital
Slide 22: Third quarter HMS highlights
Third quarter HMS highlights • Total revenues up due to equipment revenue growth ◦ Continued to add new logos ◦ Strategic services, such as cloud revenues, were up ◦ Churn and compression continues to impact service revenues • Continuing to implement additional cost saving programs 22
Slide 23: Appendix
Appendix 23
Slide 24: Adjusted OIBDA and Adjusted EBITDA Reconciliation
Adjusted OIBDA and Adjusted EBITDA Reconciliation (1) Three Months Ended September 30, 2018 Three Months Ended September 30, 2017 Total Total U.S. TDS U.S. TDS ($ in millions) Cellular Wireline Cable Telecom(5) TDS (6) Cellular Wireline Cable Telecom(5)(7) TDS (6) Net income (loss) (GAAP) $37 N/A N/
Slide 25: Adjusted OIBDA and Adjusted EBITDA Reconciliation – 2018 Estimated and 2017 Full Year
Adjusted OIBDA and Adjusted EBITDA Reconciliation – 2018 Estimated and 2017 Full Year (1) In providing 2018 estimated results, TDS has not completed the below reconciliation to net income because it does not provide guidance for income taxes. TDS believes that the impact of income taxes cannot be re
Slide 26: Cable and Wireline Reconciliation to Total TDS Telecom
Cable and Wireline Reconciliation to Total TDS Telecom (5) Adjusted OIBDA and Adjusted EBITDA Reconciliation For Year-Ended December 31, 2017 ($ in millions) Wireline Cable Cable/Wireline Cable and Wireline HMS Eliminations TDS Telecom (As Adjustments reported) (7) Total operating revenues $714 $206
Slide 27: Postpaid ABPU and Postpaid ABPA Reconciliation
Postpaid ABPU (4) and Postpaid ABPA (4) Reconciliation (Dollars and connection counts in millions)) Three months ended Three Months Ended September (1) 30, 2018 September 30, 2017 Calculation of Postpaid ARPU Postpaid service revenues $607 $586 Average number of postpaid connections 4.47 4.50 Number
Slide 28: Footnotes and non-GAAP definitions
1) As of January 1, 2018, TDS and U.S. Cellular adopted ASC 606, using modified retroactive approach. Under this method, the new accounting standard is applied only to 2018. 2) Total cash expenses represent total operating expenses as shown in the Consolidated Statement of Operations Highlights in t
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