Telephone And Data Systems, Inc. · NYSE:TDS
Telephone And Data Systems — Q2 2021 Earnings Presentation
30 slides from Telephone And Data Systems's earnings presentation, Aug 6, 2021
Slide 1: Second Quarter 2021 Results
Second Quarter 2021 Results August 6, 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 updates
Investor relations updates Calendar • August 12, 2021 - Morgan Stanley Media and Communications Corporate Access Day (Virtual) - From management: Jane McCahon ESG • Updated and refreshed ESG website • To prioritize ESG issues, TDS conducted its first-ever Materiality Assessment to identify opportuni
Slide 4: Financing Strategies
Financing Strategies • Continue to maintain ample liquidity and flexibility • Employ a conservative financing strategy with long-dated repayment obligations • Executing on a wide range of funding options to lower the average cost of financing (1) $1.3 Billion of Available Sources * Long-term debt ob
Slide 5: Lowering the average cost of financing
(1) Lowering the average cost of financing • Since the beginning of 2020, TDS and UScellular have: ◦ Raised $2.6B in new capital (debt and preferred equity) at an average cost of 4.8% ◦ Redeemed $1.1B in debt that carried a weighted average cost of 7.1% ◦ These refinancing actions result in $25M in
Slide 6: UScellular
3 uscellular America’s Locally Grown Wireless
Slide 7: UScellular Strategic Priorities
UScellular Strategic Priorities • Maintain the health and safety of customers & associates • Focus on Growth ◦ Regional approach to drive market share expansion ◦ Expand digital capabilities, focusing on customer lifecycle ◦ New branding highlights our strong, local presence ◦ Renew focus on Prepaid
Slide 8: Postpaid connections
Postpaid connections Gross Additions Net Additions Smartphone Connections (in thousands) (in thousands) (in thousands) 175 30 3,550 150 25 3,525 52 66 20 3,500 125 39 40 44 3,475 15 100 28 3,450 10 3,543 75 3,528 9 3,515 8 3,425 119 5 3,486 3,483 50 102 104 101 85 3 3 3,400 0 — (1) 25 (3) 3,375 (5)
Slide 9: Postpaid churn rate
Postpaid churn rate 1.60% 1.40% 1.21% 1.20% 1.12% 1.11% 1.06% 1.01% 1.00% 0.89% 0.92% 0.88% 0.88% 0.80% 0.71% 0.60% 0.40% 0.20% 0.00% Q2'20 Q3'20 Q4'20 Q1'21 Q2'21 Handsets Total Postpaid 9
Slide 10: Total operating revenues
Total operating revenues ($ in millions) $1,200 $1,073 $1,027 $1,023 $1,014 $973 $297 $900 $252 $252 $240 $220 $59 $60 $58 $60 $54 $42 $33 $28 $28 $41 $600 $658 $674 $683 $685 $686 $300 $0 Q2'20 Q3'20 Q4'20 Q1'21 Q2'21 Retail service Roaming Other service Equipment sales 10
Slide 11: Postpaid revenue
Postpaid revenue Average Revenue Per User (ARPU) Average Revenue Per Account (ARPA) $48 $128 $124 $46 $120 $116 $44 $47.51 $47.65 $47.74 $47.10 $124.87 $125.25 $125.25 $112 $123.27 $46.24 $120.70 $108 $42 $104 $40 $100 Q2'20 Q3'20 Q4'20 Q1'21 Q2'21 Q2'20 Q3'20 Q4'20 Q1'21 Q2'21 11
Slide 12: Towers: Building value
Towers: Building value • 4,278 Owned towers (63% of total cell sites) • 1,937 colocators • Signed Master Lease Agreement with DISH Wireless; revenues expected to begin in 2022 Tower rental revenue ($ in millions) $21 $20.3 $20.2 $19.6 $19.7 $19.1 $18 $15 $12 Q2'20 Q3'20 Q4'20 Q1'21 Q2'21 12
Slide 13: Adjusted OIBDA
Adjusted OIBDA ($ in millions) Q2'21 Q2'20 % Change Service revenues $ 774 $ 753 3 % Equipment sales 240 220 9 % Total operating revenues 1,014 973 4 % System operations expense 204 197 4 % Cost of equipment sold 258 218 19 % SG&A expenses 334 323 3 % (2) Total cash expenses 796 738 8 % (3) Adjusted
Slide 14: Adjusted EBITDA
Adjusted EBITDA ($ in millions) Q2'21 Q2'20 % Change (3) Adjusted OIBDA $ 218 $ 235 (7)% Equity in earnings of unconsolidated entities 47 44 7 % Interest and dividend income 2 1 54 % (3) Adjusted EBITDA $ 267 $ 280 (5)% (3) - See final slide for explanation 14
Slide 15: 2021 Guidance
2021 Guidance* ($ in millions) 2021 Previous 2021 Current As of August 5, 2021 2020 Actual Estimates Estimates Service revenues $3,067 $3,050-$3,150 Unchanged (3) Adjusted OIBDA $876 $850-$950 Unchanged (3) Adjusted EBITDA $1,063 $1,025-$1,125 Unchanged Capital expenditures $940 $775-$875 Unchanged
Slide 16: 16
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Slide 17: 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 18: Highlights and trends
Highlights and trends • Residential revenues increased 10% 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 480,000 $70.00 7% 7% 420,000 $65.75 $65.
Slide 19: Broadband highlights
Broadband highlights • Residential broadband connections increased 7% • Residential broadband revenues grew 16% • 1Gig service available to 56% of total service addresses Residential Broadband Residential Broadband Total Service Connections Connections by Speed Addresses 500,000 100% 3% 1,500,000 6%
Slide 20: Video highlights
Video highlights • Bundling strategy leads to lower churn • Residential video connections continue to hold steady with 6% growth across Wireline driven by expansion markets • 40% of Wireline broadband customers take video in IPTV markets Residential Video Connections TDS TV+ Video Mix 150,000 14% 12
Slide 21: Fiber strategy
Fiber strategy Proven and repeatable • Fiber is the superior technology to deliver broadband • Accelerating fiber deployment over the next couple of years • Recent market launches continue to confirm our direction Success factors • Market selection, "flag planting" and clustering are critical • Pre-
Slide 22: Fiber highlights and trends
Fiber highlights and trends • Fiber-to-the-Home to 338,000 or 39% of Wireline Service Addresses (SA)* • Total Wireline SAs increased 8% to 873,000 with expansion into new markets Wireline Service Addresses * 100% 880,000 33% 34% 36% 860,000 38% 39% 75% 840,000 20% 23% 24% 50% 24% 25% 820,000 800,000
Slide 23: Fiber highlights and trends
Fiber highlights and trends • Targeting an additional 320,000 service addresses with access to fiber over the next few years • Working to overcome short-term permitting and construction delays • Total fiber broadband penetration at 37% Long-Term Service Target Broadband Addresses Service Launch Pene
Slide 24: TDS Telecom operating revenues
TDS Telecom operating revenues ($ in millions) $300 $247 $248 $249 $252 $250 $241 $8 $5 $6 $7 $4 $200 $85 $84 $85 $86 $81 $150 $60 $62 $63 $65 $66 $100 $47 $46 $47 $45 $45 $50 $48 $48 $48 $47 $46 $— Q2'20 Q3'20 Q4'20 Q1'21 Q2'21 Commercial Wholesale Residential - Cable Residential - Wireline, Incumb
Slide 25: TDS Telecom operating performance
TDS Telecom operating performance ($ in millions) Q2'21 Q2'20 % Change Residential $ 160 $ 145 10 % Commercial 46 48 (4)% Wholesale 45 47 (3)% Total operating revenues 252 241 5 % (2) Cash expenses 174 158 10 % (3) Adjusted EBITDA 78 83 (7)% Capital expenditures $ 99 $ 75 33 % (2), (3) - See final s
Slide 26: 2021 TDS Telecom Guidance
* 2021 TDS Telecom Guidance ($ in millions) 2021 Previous 2021 Current As of August 5, 2021 2020 Actual Estimates Estimates Total operating revenues $976 $975-$1,025 Unchanged (3) Adjusted OIBDA $314 $290-$320 Unchanged (3) Adjusted EBITDA $317 $290-$320 Unchanged Capital expenditures $368 $425-$475
Slide 27: Appendix
Appendix 27
Slide 28: Adjusted OIBDA and Adjusted EBITDA Reconciliation
Adjusted OIBDA and Adjusted EBITDA Reconciliation Three Months Ended June 30, 2021 Three Months Ended June 30, 2020 TDS (4) TDS (4) ($ in millions) UScellular Telecom TDS UScellular Telecom TDS Net income (GAAP) $35 $22 $34 $69 $28 $78 Add back: Income tax expense (benefit) (10) 7 (11) 4 5 8 Income
Slide 29: 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 30: Footnotes and explanations
1) The chart reflects $100 million of long-term debt due in 2022 related to the EIP securitization facility. Although the current facility expires in December 2022, it is the Company’s intent to renew and extend this facility for the foreseeable future. 2) Total cash expenses represent total operati
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