Telephone and Data Systems, Inc. · NYSE:TDS
Telephone and Data Systems — Q1 2017 Earnings Presentation
28 slides from Telephone and Data Systems's earnings presentation, May 5, 2017
Slide 1: First Quarter 2017 Results
First Quarter 2017 Results May 5, 2017
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 • 6/7/17 – Baird Global Consumer, Technology & Services Conference – 2017 (New York) • 6/8/17 – Citi 2017 Small & Mid Cap Conference (New York) 3
Slide 4: U.S. Cellular
FE US. Cellular
Slide 5: First quarter highlights
First quarter highlights • Focus on protecting customer base • Launched Total Plans, including an unlimited plan, in late February • Handset churn reduced to 1.08% • Competitive portfolio of products and services • Adjusted EBITDA up 11% • Economically justified promotions • Strong cost focus 5
Slide 6: Network Quality is still our competitive advantage
Network Quality is still our competitive advantage • U.S. Cellular received the JD Power award for the Highest Wireless Network Quality Performance in the North Central Region • VoLTE deployment • Iowa commercial launch imminent • WI, WA, OR and CA are next VoLTE markets for 2018 • New products and
Slide 7: Connection Activity
Connection Activity Q1’17 Q1’16 Postpaid gross additions 146,000 215,000 Handsets gross additions 95,000 133,000 Connected Devices gross additions 51,000 82,000 Postpaid churn 1.29% 1.28% Postpaid net additions (losses) (27,000) 45,000 Handsets net losses (28,000) (5,000) Connected Devices net addit
Slide 8: Postpaid churn rate
Postpaid churn rate 3.00% 2.55% 2.49% 2.50% 2.01% 2.04% 2.00% 1.84% 1.50% 1.18% 1.22% 1.23% 1.10% 1.08% 1.00% 0.50% 0.00% Q1'16 Q2'16 Q3'16 Q4'16 Q1'17 Handset Churn Connected Device Churn 8
Slide 9: Total operating revenues
Total operating revenues ($ in millions) % Q1’17 Q1’16 Change Service revenues (1) $746 $771 (3%) Retail service 657 682 (4%) Roaming 27 36 (26%) Tower rentals 15 14 7% Other (1) 47 39 21% Equipment sales revenues 190 198 (4%) Total operating revenues (1) $936 $969 (3%) (1)Equipment installment plan
Slide 10: Postpaid revenue
Postpaid revenue % Q1’17 Q1’16 Change Average Revenue Per User $45.42 $48.13 (6%) Add: EIP billings 10.40 7.93 31% Average Billings Per User (ABPU) (1) $55.82 $56.06 0% Average Revenue Per Account $121.88 $125.36 (3%) Add: EIP billings 27.90 20.63 35% Average Billings Per Account (ABPA) (1) $149.78
Slide 11: Operating cash flow
Operating cash flow ($ in millions) % Q1’17 Q1’16 Change Total operating revenues (3) $936 $969 (3%) System operations expense 175 184 (4%) Cost of equipment sold 228 256 (11%) SG&A expenses 339 361 (6%) Total cash expenses (1) 742 801 (7%) Operating cash flow (2)(3) $194 $168 15% (1)Total cash expe
Slide 12: Adjusted EBITDA
Adjusted EBITDA ($ in millions) % Q1’17 Q1’16 Change Operating cash flow (1)(2) $194 $168 15% Equity in earnings of unconsolidated entities 33 35 (7%) Interest and dividend income (2) 3 2 44% Other, net (1) 1 (1%) Adjusted EBITDA (1) $229 $206 11% (1)Operating cash flow and Adjusted EBITDA are non-G
Slide 13: 2017 guidance
2017 guidance (1) ($ in millions) 2017 2017 Previous Revised As of May 5, 2017 2016 Actual (2) Estimates Estimates Total operating revenues $3,990 $3,800-$4,000 Unchanged Operating cash flow (3) $669 $500-$650 $550-$650 Adjusted EBITDA (3) $816 $650-$800 $700-$800 Capital expenditures $446 Approx. $
Slide 14: TDS Telecom (bendbroadband, OneNeck IT Solutions)
@ bendbroadband ©)OneNeck’ IT SOLUTIONS a TDS*Company 14
Slide 15: 2017 strategic priorities
2017 strategic priorities • Wireline • Increase penetration in existing fiber markets and continue to modestly deploy fiber where economically feasible • Leverage copper bonding to increase penetration of higher speed broadband customers • Year 1 A-CAM – drive fiber deeper into network • Cable • Inc
Slide 16: TDS Telecom operating performance
TDS Telecom operating performance ($ in millions) % Q1’17 Q1’16 Change Wireline $179 $173 3% Cable 49 45 10% HMS 71 64 11% Total operating revenues (1) 299 281 6% Cash expenses (1)(2) 213 205 4% Adjusted EBITDA (3) $ 86 $ 76 13% Capital expenditures $ 33 $ 42 (22%) (1)Includes intercompany eliminati
Slide 17: First quarter Wireline highlights
First quarter Wireline highlights • Continued success selling triple play bundles • IPTV connections up 18% • Residential revenue per connection up 4% • Demand for higher speeds is strong • Ability to offset legacy declines with growth from fiber investments and A- CAM support • Free cash flow impro
Slide 18: Wireline operating performance
Wireline operating performance ($ in millions) % Q1’17 Q1’16 Change Residential $79 $76 4% Commercial 51 54 (6)% Wholesale 49 43 15% Total service revenues 179 173 4% Cash expenses (1) 111 111 --- Adjusted EBITDA (2) $69 $63 10% Capital expenditures $17 $27 (37%) (1)Cash expenses represent cost of s
Slide 19: First quarter Cable highlights
First quarter Cable highlights • Broadband connections Total increase 13% 350,000 Connections connections • Revenues increase 10% 4% (Y/Y growth) 300,000 Steady Growth in Broadband Penetration 13% 250,000 42% 41% Broadband 41% connections 40% 200,000 (Y/Y growth) 40% 39% 39% 150,000 38% 38% 37% 37%
Slide 20: Cable operating performance
Cable operating performance ($ in millions) % Q1’17 Q1’16 Change Residential $ 41 $ 35 15% Commercial 9 10 (8%) Total operating revenues 49 45 10% Cash expenses (1) 36 34 6% Adjusted EBITDA (2) $13 $10 23% Capital expenditures $9 $13 (30%) (1)Cash expenses represent cost of services and selling, gen
Slide 21: First quarter HMS highlights
First quarter HMS highlights • Focus on growth of recurring service revenues • Utilize new data center capacity • Equipment revenue and COGS higher due to timing of sales • Capital expenditures related to expansion of fully-utilized Madison data center Rentable data center Operating Revenues 90 ($ i
Slide 22: Hosted and Managed Services operating performance
Hosted and Managed Services operating performance ($ in millions) % Q1’17 Q1’16 Change Service revenues $29 $29 (1%) Equipment sales 43 35 21% Total operating revenues 71 64 11% Cash expenses (1) 67 61 9% Adjusted EBITDA (2) $5 $3 41% Capital expenditures $6 $2 >100% (1)Cash expenses represent cost
Slide 23: 2017 TDS Telecom guidance
2017 TDS Telecom guidance (1) Unchanged from previous estimates ($ in millions) As of May 5, 2017 2016 Actual 2017 Estimates Total operating revenues $1,151 $1,200 - $1,250 Operating cash flow (2) $295 $300 - $340 Adjusted EBITDA (2) $298 $300 - $340 Capital expenditures $173 Approx. $225 (1)There c
Slide 24: Appendix
Appendix 24
Slide 25: Operating Cash Flow and Adjusted EBITDA Reconciliation
Operating Cash Flow and Adjusted EBITDA Reconciliation Three months ended March 31, 2017 Three months ended March 31, 2016 Total Total U.S. TDS U.S. TDS ($ in millions) Cellular Wireline Cable HMS Telecom TDS (1) Cellular Wireline Cable HMS Telecom TDS (1) Net income (loss) (GAAP) $28 N/A N/A N/A $1
Slide 26: Operating Cash Flow and Adjusted EBITDA Reconciliation – 2017 Estimated and 2016 Full Year
Operating Cash Flow and Adjusted EBITDA Reconciliation – 2017 Estimated and 2016 Full Year In providing 2017 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 r
Slide 27: Postpaid ABPU and Postpaid ABPA Reconciliation
Postpaid ABPU (5) and Postpaid ABPA (5) Reconciliation (dollars and connection counts in Three months Three months millions)) ended March ended March 31, 2017 31, 2016 Calculation of Postpaid ARPU Postpaid service revenues $608 $639 Average number of postpaid connections 4.46 4.43 Number of months i
Slide 28: Reconciliation footnotes
(1)The TDS column includes U.S. Cellular, TDS Telecom and also the impacts of consolidating eliminations, corporate operations and non-reportable segments, all of which are not presented above. (2)Adjusted EBITDA (earnings before interest, taxes, depreciation, amortization and accretion) is defined
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