Telephone and Data Systems, Inc. · NYSE:TDS
Telephone and Data Systems — Q4 2022 Earnings Presentation
30 slides from Telephone and Data Systems's earnings presentation, Feb 17, 2023
Slide 1: Fourth Quarter 2022 Results
Fourth Quarter 2022 Results 2022 Accomplishments 2023 Strategic Priorities 2023 Guidance February 17, 2023
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: Upcoming conferences
Upcoming conferences 3/8/23 - Morgan Stanley Technology, Media & Telecom Conference From management: Doug Chambers, Michelle Brukwicki and Julie Mathews 3/7/23-3/8/23 - Raymond James 44rd Annual Institutional Investors Conference From management: Vicki Villacrez, Fred Lubeley and Colleen Thompson 3/
Slide 4: Maintaining a strong financial foundation
Maintaining a strong financial foundation Available Sources of Capital* (in millions) $1,000 ~$1.5 B as of 12/31/22 Long-term debt obligations** (in millions) (TDS and UScellular) $750 $500 $250 $— TDS UScellular Cash Revolver Term Loan EIP Facilities *Subsequent to December 31, 2022, TDS borrowed $
Slide 5: Returning value to shareholders
Returning value to shareholders 2023 is the 49th consecutive year that TDS has increased its common share dividend Annual Dividend Rate (1995-2022) $0.80 2022 Common Share Repurchase Programs: $0.60 • TDS Repurchased $40 million • USM Repurchased $43 million $0.40 $0.20 $0.00 1995 2000 2005 2010 201
Slide 6: UScellular
3 uscellular
Slide 7: Significant accomplishments in 2022
Significant accomplishments in 2022 Postpaid ARPU and ARPA both grew 4% Cost optimization program remains strong Fixed wireless momentum continued - connections grew 57% Tower business continued to gain momentum - tower rental revenues grew 13% Continued network modernization and 5G deployment 7
Slide 8: Continuing to focus on growth
Continuing to focus on growth 8
Slide 9: Postpaid net additions
Postpaid net additions Gross Additions* Net Additions* Postpaid churn rate 1.50% 1.42% 175 15 1.35% 1.35% 1.30% 1.30% 10 150 5 1.15% 40 1.10% 1.12% 3 1.10% 1.10% 0 (2) 125 44 49 -5 (10) 1.00% 35 34 -10 (20) 100 (22) -15 (12) (31) -20 (36) 75 (17) -25 125 (9) 50 107 105 -30 91 94 (31) 0.50% -35 (9) 2
Slide 10: Prepaid net additions
Prepaid net additions Gross Additions* Net Additions* 5 75 2 0 0 (4) (5) 50 -5 (18) -10 63 62 61 55 56 25 -15 -20 0 Q4'21 Q1'22 Q2'22 Q3'22 Q4'22 Q4'21 Q1'22 Q2'22 Q3'22 Q4'22 10 *In thousands
Slide 11: Total operating revenues
Total operating revenues Total Revenues ($ in millions) $1,200 $1,068 $1,083 $1,027 $1,048 $1,010 $900 $286 $244 $302 $274 $223 $65 $64 $65 $68 $68 $24 $21 $18 $17 $11 $600 $693 $702 $700 $696 $695 $300 $0 Q4'21 Q1'22 Q2'22 Q3'22 Q4'22 Retail service Roaming Other Equipment sales 11 Note: 2021 amoun
Slide 12: Postpaid ARPU & ARPA
Postpaid ARPU & ARPA Average Revenue Per User (ARPU) Average Revenue Per Account (ARPA) $52 $135 $130 $50 $125 $48 $120 $46 $50.21 $50.60 $115 $129.93 $130.43 $130.27 $130.97 $49.71 $50.07 $127.14 $48.62 $44 $110 $42 $105 $40 $100 Q4'21 Q1'22 Q2'22 Q3'22 Q4'22 Q4'21 Q1'22 Q2'22 Q3'22 Q4'22 12 Note:
Slide 13: Tower revenues
Tower revenues • 4,336 owned towers (62% of total cell sites) • 2,401 colocators Tower rental revenues ($ millions) $26 $24 $24.4 $23.6 14% $22.9 $22 $22.3 $21.5 Y/Y growth $20 $18 $16 Q4'21 Q1'22 Q2'22 Q3'22 Q4'22 13
Slide 14: Adjusted OIBDA and Adjusted EBITDA
Adjusted OIBDA and Adjusted EBITDA ($ in millions) Q4'22 Q4'21 % Change Service revenues $ 774 $ 782 (1)% Equipment sales 274 286 (4)% Total operating revenues 1,048 1,068 (2)% System operations expense 181 196 (8)% Cost of equipment sold 330 332 (1)% SG&A expenses 374 359 4% Total cash expenses (1)
Slide 15: Annual financial results
Annual financial results ($ in millions) 2022 2021 % Change Service revenues* $ 3,125 $ 3,115 — Equipment sales 1,044 1,007 4% Total operating revenues 4,169 4,122 1% System operations expense 755 790 (4)% Cost of equipment sold 1,216 1,118 9% SG&A expenses 1,408 1,345 5% Total cash expenses (1) 3,3
Slide 16: UScellular 2023 guidance
UScellular 2023 guidance * ($ in millions) 2022 Previous As of February 16, 2023 Estimates 2022 Actuals 2023 Estimates Service revenues $3,100-$3,150 $3,125 $3,050-$3,150 Adjusted OIBDA (2) $750-$825 $790 $725-$875 Adjusted EBITDA (2) $925-$1,000 $956 $875-$1,025 Capital expenditures $700-$800 $717
Slide 17: Slide 17
Slide 18: Our strategy is built on five priorities that will continue to transform our business
Our strategy is built on five priorities that will continue to transform our business Grow Revenue Grow Scale Reduce Improve Platform Cost Customer Structure Experience 18
Slide 19: Fiber expansion program remains on track
Fiber expansion program remains on track Targeted Marketable Fiber Service Addresses* Total Service Address Mix 1.5M ~2.2M 100% 1,300,000 ~1.2M 39% ~60% 975,000 75% 650,000 582K 325,000 28% 50% 0 2020 2021 2022 2023 2024 2025 2026 ~20% 25% 16% Additional 2026 Goals: ~15% 17% • Deliver fiber to 60% o
Slide 20: We made significant progress toward our goals in 2022
We made significant progress toward our goals in 2022 Grew footprint 9% Deployed 133,000 new marketable fiber addresses Continued to plant fiber flags - ended year with approximately 100 communities in various stages of fiber deployment Executed on A-CAM and state broadband grant programs 21% 20
Slide 21: Strategy continues to drive residential broadband growth
Strategy continues to drive residential broadband growth • Residential broadband revenues grew 8% Residential Broadband Connections Residential Broadband Connections By Speed 600,000 100% 8% 11% 7% 500,000 8% 75% 400,000 4% 51% 300,000 Y/Y growth 53% 50% 200,000 25% 100,000 34% 28% 0 —% Q4'21 Q4'22
Slide 22: Broadband growth is offsetting legacy revenue declines
Broadband growth is offsetting legacy revenue declines Total Operating Revenues Residential Revenue Per Connection $300 $59.91 $254 $256 $257 $60.00 $10 $14 $57.86 $200 $86 $87 4% $55.00 4% $66 $67 Y/Y growth Residential $100 Revenues Y/Y $45 $43 growth $50.00 $46 $45 $0 Q4'21 Q4'22 Wholesale Commer
Slide 23: TDS Telecom operating performance
TDS Telecom operating performance % % ($ in millions) Q4’22 Q4’21 Change 2022 2021 Change Total operating revenues $ 257 $ 254 1% $ 1,020 $ 1,006 1% Cash expenses (1) 192 179 8% 732 696 5% Adjusted EBITDA (2) $ 66 $ 75 (13)% $ 291 $ 310 (6)% Capital expenditures $ 165 $ 151 9% $ 556 $ 411 35 % 23 (1
Slide 24: TDS Telecom 2023 guidance
TDS Telecom 2023 guidance * ($ in millions) 2022 Previous As of February 16, 2023 Estimates 2022 Actual 2023 Estimates Total operating revenues $1,010-$1,040 $1,020 $1,030-$1,060 Adjusted OIBDA (2) $270-$290 $288 $260-$290 Adjusted EBITDA (2) $270-$290 $291 $260-$290 Capital expenditures $500-$550 $
Slide 25: Appendix
Appendix 25
Slide 26: Adjusted OIBDA and Adjusted EBITDA reconciliation
Adjusted OIBDA and Adjusted EBITDA reconciliation Three Months Ended December 31, 2022 Three Months Ended December 31, 2021 ($ in millions) UScellular TDS Telecom TDS (3) UScellular TDS Telecom TDS (3) Net income (loss) (GAAP) $(28) $2 $(30) $28 $22 $36 Add back: Income tax expense (benefit) (9) 6 (
Slide 27: Adjusted OIBDA and Adjusted EBITDA reconciliation – Estimated Results
Adjusted OIBDA and Adjusted EBITDA reconciliation – Estimated Results In providing estimated results, TDS has not completed the below reconciliation to net income because it does not provide guidance for income taxes. TDS believes that the impact of income taxes cannot be reasonably predicted; there
Slide 28: UScellular Adjusted EBITDA reconciliation
UScellular Adjusted EBITDA reconciliation Year ended December 31, ($ in millions) 2022 2021 Net income (GAAP) $ 35 $ 160 Add back: Income tax expense 37 20 Income before income taxes (GAAP) $ 72 $ 180 Add back: Interest expense 163 175 Depreciation, amortization and accretion 700 678 (2) EBITDA (non
Slide 29: TDS Telecom Adjusted EBITDA reconciliation
TDS Telecom Adjusted EBITDA reconciliation Year ended December 31, ($ in millions) 2022 2021 Net income (GAAP) $ 53 $ 90 Add back: Income tax expense 23 24 Income before income taxes (GAAP) $ 76 $ 114 Add back or deduct: Interest expense (7) (5) Depreciation, amortization and accretion 215 198 EBITD
Slide 30: Definitions and explanations of non-GAAP measures
1) Total cash expenses represent total operating expenses as shown in the Consolidated Statement of Operations Highlights in the TDS and UScellular SEC Forms 8-K, less depreciation, amortization and accretion and gain/losses. 2) EBITDA, Adjusted EBITDA and Adjusted OIBDA are defined as net income ad
Telephone and Data Systems — Q4 2022 Earnings Presentation on 6ix