Telephone and Data Systems, Inc. · NYSE:TDS
Telephone and Data Systems — Q3 2021 Earnings Presentation
31 slides from Telephone and Data Systems's earnings presentation, Nov 4, 2021
Slide 1: Third Quarter 2021 Results
Third Quarter 2021 Results November 4, 2021
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 about Telephone and Data Systems, Inc., including its subsidiaries UScellular and TDS Telecom, except historical and factual information, represents forward- looking statem
Slide 3: Investor relations calendar
Investor relations calendar • November 30, 2021 - 5th Annual Wells Fargo TMT Summit (Virtual) – From management: LT Therivel, Jane McCahon and Colleen Thompson • January 3-5, 2022 - Raymond James Deer Valley Summit – From management: Doug Chambers, Vicki Villacrez and Colleen Thompson • January 6, 2
Slide 4: TDS considers the S in ESG as our 3Cs - Customer, Culture and Community
TDS considers the S in ESG as our 3Cs - Customer, Culture and Community 3Cs TDS Telecom announced that TDS, UScellular and TDS Through September 30, it will be the first company to Telecom all conducted UScellular has donated $3.6M deploy a fiber network in engagement surveys with to Boys & Girls Cl
Slide 5: Lowering the average cost of financing
Lowering the average cost of financing • Since the beginning of 2020, TDS and UScellular have: ◦ Raised $3.4 B in new capital (debt and preferred equity) at an average cost of 4.9% ◦ Redeemed $1.6 B in debt that carried a weighted average cost of 1 7.0% 1 ◦ These refinancing actions result in $33M i
Slide 6: UScellular
3 uscellular America’s Locally Grown Wireless
Slide 7: UScellular strategic priorities
UScellular strategic priorities • Maintain the health and safety of customers & associates • Maintain industry-leading network ◦ Continue network modernization and 5G deployment ◦ Fixed wireless mmWave trials • Advocate for customers - especially in underserved areas - to bridge the digital divide •
Slide 8: Postpaid connections
Postpaid connections Gross Additions Net Additions Smartphone Connections (in thousands) (in thousands) (As a % of Postpaid Handset Connections) 175 30 100% 25 150 52 90% 66 20 125 80% 39 40 40 15 70% 28 100 60% 10 75 50% 8 92.0% 92.3% 90.5% 91.2% 91.6% 5 119 40% 50 102 104 101 105 3 0 — 30% (1) (3)
Slide 9: Prepaid connections
Prepaid connections Gross Additions Net Additions (in thousands) 15 (in thousands) 75 10 50 11 11 5 10 74 65 65 62 0 56 25 (3) (8) -5 0 Q3'20 Q4'20 Q1'21 Q2'21 Q3'21 Q3'20 Q4'20 Q1'21 Q2'21 Q3'21 9
Slide 10: Postpaid churn rate
Postpaid churn rate 1.60% 1.40% 1.21% 1.20% 1.15% 1.12% 1.11% 1.06% 1.01% 1.00% 0.95% 0.92% 0.88% 0.88% 0.80% 0.60% 0.40% 0.20% 0.00% Q3'20 Q4'20 Q1'21 Q2'21 Q3'21 Handsets Total Postpaid 10
Slide 11: Total operating revenues
Total operating revenues* ($ in millions) $1,200 $1,073 $1,027 $1,023 $1,014 $1,016 $297 $900 $252 $252 $240 $228 $59 $60 $58 $60 $59 $33 $28 $28 $30 $42 $600 $674 $683 $685 $686 $699 $300 $0 Q3'20 Q4'20 Q1'21 Q2'21 Q3'21 Retail service Roaming Other service Equipment sales * Q3 2021 Retail service
Slide 12: Postpaid revenue
Postpaid revenue* Average Revenue Per User (ARPU) Average Revenue Per Account (ARPA) Y/Y Growth 2% Y/Y Growth 2% $50 $128 $124 $48 $120 $46 $116 $125.25 $125.25 $125.99 $112 $124.87 $44 $48.12 $123.27 $47.51 $47.65 $47.74 $47.10 $108 $42 $104 $40 $100 Q3'20 Q4'20 Q1'21 Q2'21 Q3'21 Q3'20 Q4'20 Q1'21
Slide 13: Towers: Building value
Towers: Building value • 4,274 Owned towers (62% of total cell sites) • 2,010 colocators • Positive momentum in tower colocation applications Tower rental revenue ($ in millions) $21 $20.7 $20.3 $20.2 $19.6 $19.7 $18 $15 $12 Q3'20 Q4'20 Q1'21 Q2'21 Q3'21 13
Slide 14: Adjusted OIBDA
Adjusted OIBDA ($ in millions) Q3'21 Q3'20 % Change Service revenues* $ 788 $ 775 2 % Equipment sales 228 252 (10)% Total operating revenues 1,016 1,027 (1)% System operations expense 205 203 1 % Cost of equipment sold 252 257 (2)% SG&A expenses 346 335 3 % (1) Total cash expenses 803 795 1 % (2) Ad
Slide 15: Adjusted EBITDA
Adjusted EBITDA ($ in millions) Q3'21 Q3'20 % Change (2) Adjusted OIBDA $ 213 $ 232 (8)% Equity in earnings of unconsolidated entities 48 48 – Interest and dividend income 1 2 (23)% (2) Adjusted EBITDA $ 262 $ 282 (7)% (2) - See final slide for explanation 15
Slide 16: 2021 guidance
2021 guidance* ($ in millions) 2020 2021 Previous 2021 Current As of November 4, 2021 Actual Estimates Estimates Service revenues $3,067 $3,050-$3,150 $3,075-$3,125 (2) Adjusted OIBDA $876 $850-$950 Unchanged (2) Adjusted EBITDA $1,063 $1,025-$1,125 Unchanged Capital expenditures $940 $775-$875 $700
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Slide 18: TDS Telecom strategy
TDS Telecom strategy We remain committed to our strategic priorities • Focus on growth ◦ Continue execution of broadband growth strategy ◦ Execute on fiber expansion and A-CAM buildout ◦ Disciplined approach to acquisitions • Expand penetration of TDS TV+ • Operate lean - reinvest savings into growt
Slide 19: Highlights and trends
Highlights and trends • Residential revenues increased 6% due to increases in broadband connections and speeds • Growth from fiber investments, cable and A-CAM support offsets legacy revenue declines Residential Connections Residential Revenue per Connection $70.00 500,000 450,000 $66.10 Broadband 4
Slide 20: Broadband highlights
Broadband highlights • Residential broadband connections increased 7% • Residential broadband revenues grew 13% • 1Gig service available to 57% of total service addresses Residential Broadband Residential Broadband Total Service Connections Connections by Speed Addresses 500,000 100% 5% 1,500,000 8%
Slide 21: Video highlights
Video highlights • Bundling strategy leads to lower churn • Residential video connections continue to hold steady with 6% growth across Wireline driven by expansion markets • 38% of Wireline broadband customers take video in IPTV markets Residential Video Connections TDS TV+ Video Mix 150,000 20% 18
Slide 22: Fiber strategy
Fiber strategy Proven and repeatable • Fiber is the superior technology to deliver broadband • Accelerating fiber deployment over the next couple of years • Recent market launches continue to confirm our direction Success factors • Market selection, "flag planting" and clustering are critical • Pre-
Slide 23: Fiber highlights and trends
Fiber highlights and trends • Fiber-to-the-Home to 358,000 or 40% of Wireline Service Addresses (SA)* • Total Wireline SAs increased 8% to 891,000 with expansion into new markets Wireline Service Addresses * 100% 900,000 34% 36% 880,000 38% 39% 40% 75% 860,000 23% 24% 50% 24% 25% 840,000 25% 820,000
Slide 24: Fiber highlights and trends
Fiber highlights and trends • Announced an additional 270,000 long-term target service addresses in the third quarter • Working to overcome short-term permitting and construction delays Long-Term Service Target Broadband Addresses Service Launch Penetration Q3'21 Addresses Date as of Q3'21 Southern
Slide 25: TDS Telecom operating revenues
TDS Telecom operating revenues ($ in millions) $300 $247 $248 $249 $252 $252 $250 $8 $9 $5 $6 $7 $200 $85 $84 $85 $86 $87 $150 $62 $63 $65 $66 $66 $100 $46 $47 $45 $45 $44 $50 $48 $48 $47 $46 $45 $— Q3'20 Q4'20 Q1'21 Q2'21 Q3'21 Commercial Wholesale Residential - Cable Residential - Wireline, Incumb
Slide 26: TDS Telecom operating performance
TDS Telecom operating performance ($ in millions) Q3'21 Q3'20 % Change Residential $ 162 $ 152 6 % Commercial 45 48 (6)% Wholesale 44 46 (5)% Total operating revenues 252 247 2 % (1) Cash expenses 175 169 3 % (2) Adjusted EBITDA 77 78 (2)% Capital expenditures $ 91 $ 92 (1)% (1), (2) - See final sli
Slide 27: 2021 TDS Telecom guidance
* 2021 TDS Telecom guidance ($ in millions) 2021 Previous 2021 Current As of November 4, 2021 2020 Actual Estimates Estimates Total operating revenues $976 $975-$1,025 $990-$1,020 (2) Adjusted OIBDA $314 $290-$320 $295-$315 (2) Adjusted EBITDA $317 $290-$320 $295-$315 Capital expenditures $368 $425-
Slide 28: Appendix
Appendix 28
Slide 29: Adjusted OIBDA and Adjusted EBITDA Reconciliation
Adjusted OIBDA and Adjusted EBITDA Reconciliation Three Months Ended September 30, Three Months Ended September 30, 2021 2020 TDS (3) TDS (3) ($ in millions) UScellular Telecom TDS UScellular Telecom TDS Net income (GAAP) $35 $21 $47 $85 $25 $93 Add back: Income tax expense 14 7 19 4 4 6 Income befo
Slide 30: Adjusted OIBDA and Adjusted EBITDA Reconciliation – 2021 Estimated and 2020 Full Year
Adjusted OIBDA and Adjusted EBITDA Reconciliation – 2021 Estimated and 2020 Full Year In providing 2021 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 reason
Slide 31: Explanations of non-GAAP measures and cash expenses
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
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