Telephone And Data Systems, Inc. · NYSE:TDS
Telephone And Data Systems — Q4 2023 Earnings Presentation
27 slides from Telephone And Data Systems's earnings presentation, Feb 16, 2024
Slide 1: Fourth Quarter 2023 Results
Fourth Quarter 2023 Results 2023 Accomplishments 2024 Strategic Priorities 2024 Guidance February 16, 2024
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 stateme
Slide 3: Corporate Update
Corporate Update Strategic alternatives review of UScellular announced on August 4, 2023 Supporting our business units as they make key investments Sizable amount of debt is very long term 3
Slide 4: UScellular
3 uscellular
Slide 5: Significant accomplishments in 2023
Significant accomplishments in 2023 Postpaid ARPU grew 2% Cost optimization program remains strong; Adjusted EBITDA grew 3% Fixed wireless momentum continued - connections grew 46% Tower business continued to gain momentum - tower rental revenues grew 8% Network modernization completed; focusing on
Slide 6: 2024 Priorities
2024 Priorities Focus on Growth • Improve postpaid subscriber trajectory • Grow postpaid ARPU • Tower revenue • Fixed wireless Financial Discipline • Cost management helping drive positive free cash flow Advance the Network • Mid-band deployment for higher speeds and capacity 6
Slide 7: Postpaid operating metrics
Postpaid operating metrics Gross Additions (K)* Net Additions (K)* 49 44 3 1 1 3 3 42 44 49 (29) 105 (20) 93 (25) 83 84 80 (38) (53) 4Q'22 1Q'23 2Q'23 3Q'23 4Q'23 Q4'22 Q1'23 Q2'23 Q3'23 Q4'23 Handsets Connected Devices Handsets Connected devices Fixed Wireless Subscribers (K)* Churn 1.44% 1.35% 114
Slide 8: Prepaid operating metrics
Prepaid operating metrics Gross Additions (K)* Net Additions (K)* 75 5 0 0 0 — — (11) (8) 50 -5 -10 (23) 61 25 50 52 -15 43 43 -20 -25 0 Q4'22 Q1'23 Q2'23 Q3'23 Q4'23 Q4'22 Q1'23 Q2'23 Q3'23 Q4'23 8 *In thousands; Quarterly amounts may not foot to annual total due to rounding
Slide 9: Financial Summary
Financial Summary Operating Revenue ($M) Postpaid ARPU $1,048 $51.11 $51.61 $986 $1,000 $50.60 $50.66 $50.64 $957 $963 2% $274 $219 $197 $201 $245 Y/Y Growth $774 $767 $760 $762 $755 Q4'22 Q1'23 Q2'23 Q3'23 Q4'23 Q4'22 Q1'23 Q2'23 Q3'23 Q4'23 Service revenue Equipment sales 9
Slide 10: Tower revenues
Tower revenues 4,373 $24.4 $24.7 $25.2 $25.4 $25.1 Owned Towers 2,390 8% Number of Colocations Full Year Revenue Growth 1.55 Q4'22 Q1'23 Q2'23 Q3'23 Q4'23 Tower Tenancy Rate Tower rental revenues 10
Slide 11: Diversified third-party customer base
Diversified third-party customer base UScellular Owned Towers Tower Revenue Distribution - 4Q'23 13% 34% 27% 26% AT&T Verizon T-Mobile Other 11
Slide 12: UScellular Operating Performance
UScellular Operating Performance ($M) Q4'23 Q4'22 % Change 2023 2022 % Change Service revenues $ 755 $ 774 (3)% $ 3,044 $ 3,125 (3)% Equipment sales 245 274 (10)% 862 1,044 (17)% Total operating revenues 1,000 1,048 (5)% 3,906 4,169 (6)% System operations expense 183 181 1% 740 755 (2)% Cost of equi
Slide 13: UScellular 2024 guidance
UScellular 2024 guidance * ($ in millions) 2023 Previous As of February 16, 2024 Estimates 2023 Actuals 2024 Estimates Service revenues $3,025-$3,075 $3,044 $2,950-$3,050 Adjusted OIBDA (1) $770-$830 $818 $750-$850 Adjusted EBITDA (1) $945-$1,005 $986 $920-$1,020 Capital expenditures $600-$700 $611
Slide 14: TDS Telecom
Slide 15: 2023 Highlights
2023 Highlights 100% of expansion communities have been initially launched Deployed 217,000 new marketable fiber addresses; up 24% from original target Added 29,800 broadband connections, up 6% Accepted Enhanced A-CAM - Secured $90 million of annual support through 2038 21% 15
Slide 16: Transforming into a fiber broadband company
Transforming into a fiber broadband company Total Service Addresses 2.2M Grow 100% Fiber Expansion markets at 100%Revenuefiber; service 1.7M Grow Scale addresses will continue to grow as fiber builds 100% Fiber progress 16% Fiber ReduceCable delivering Improve 1 Gig speeds 16% over Fiber DOCSIS 3.1
Slide 17: Progress on our long-term fiber program
Progress on our long-term fiber program Marketable Fiber Service Addresses* 75% Goal: Goal: Goal: 1.2 million 60% 80% marketable service service fiber service addresses to addresses 1,000,000 60% addresses be served by with speeds 799K fiber of 1 Gig+ Where are Where are Where are 45% we: we: we: 79
Slide 18: Growing fiber footprint driving faster speeds
Growing fiber footprint driving faster speeds Total Service Address Mix Residential Broadband Connections by Speed 1.5M 1.7M 100% 100% 11% 16% 8% Service 9% 39% 75% 47% Addresses 75% 72% 1 Gig+ 12% 53% 50% 51% 50% 28% Y/Y growth 25% 25% 25% 16% 13% 28% 24% 17% 15% —% —% Q4'22 Q4'23 Q4'22 Q4'23 Fiber
Slide 19: Strong residential revenue growth
Strong residential revenue growth Residential Broadband Net Additions Residential Revenue per Connection Operating Revenues ($M) 15,000 7,200 $300 $257 $256 $261 12,500 $65.00 5% $14 $23 6% 10,000 $62.74 3,500 7,500 $200 Residential Y/Y growth $87 $88 Revenue Y/Y 5,000 $59.91 growth $60.00 2,500 $67
Slide 20: TDS Telecom operating performance
TDS Telecom operating performance % % ($ in millions) Q4’23 Q4’22 Change 2023 2022 Change Total operating revenues $ 261 $ 257 2% $ 1,028 $ 1,020 1% Cash expenses (1) 186 192 (4)% 749 732 2% Adjusted EBITDA (2) $ 78 $ 66 19 % $ 285 $ 291 (2)% Capital expenditures $ 143 $ 165 (13)% $ 577 $ 556 4% 20
Slide 21: TDS Telecom 2024 guidance
TDS Telecom 2024 guidance * ($ in millions) 2023 Previous As of February 16, 2024 Estimates 2023 Actual 2024 Estimates Total operating revenues $1,030-$1,060 $1,028 $1,070-$1,100 Adjusted OIBDA (1) $270-$300 $279 $310-$340 Adjusted EBITDA (1) $270-$300 $285 $310-$340 Capital expenditures Approx. $55
Slide 22: Appendix
Appendix 22
Slide 23: Adjusted OIBDA and Adjusted EBITDA reconciliation
Adjusted OIBDA and Adjusted EBITDA reconciliation Three Months Ended December 31, 2023 Three Months Ended December 31, 2022 ($ in millions) UScellular TDS Telecom TDS* UScellular TDS Telecom TDS* Net income (loss) (GAAP) $15 ($503) $(503) ($28) $2 ($30) Add back: Income tax expense (benefit) (4) (31
Slide 24: Adjusted OIBDA and Adjusted EBITDA reconciliation – Estimated Results
Adjusted OIBDA and Adjusted EBITDA reconciliation – Estimated Results In providing estimated results, TDS has not completed the below reconciliation to net income because it does not provide guidance for income taxes. TDS believes that the impact of income taxes cannot be reasonably predicted; there
Slide 25: UScellular Adjusted EBITDA reconciliation
UScellular Adjusted EBITDA reconciliation Year ended December 31, ($ in millions) 2023 2022 Net income (GAAP) $ 58 $ 35 Add back: Income tax expense 53 37 Income before income taxes (GAAP) $ 111 $ 72 Add back: Interest expense 196 163 Depreciation, amortization and accretion 656 700 (1) EBITDA (non-
Slide 26: TDS Telecom Adjusted EBITDA reconciliation
TDS Telecom Adjusted EBITDA reconciliation Year ended December 31, ($ in millions) 2023 2022 Net income (loss) (GAAP) $ (483) $ 53 Add back: Income tax expense (benefit) (26) 23 Income (loss) before income taxes (GAAP) $ (509) $ 76 Add back or deduct: Interest expense (8) (7) Depreciation, amortizat
Slide 27: Cash expenses; EBITDA, Adjusted EBITDA and Adjusted OIBDA definitions
Cash expenses 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. EBITDA, Adjusted EBITDA and Adjusted OIBDA EBITDA, Adjusted EBI
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