Telephone And Data Systems, Inc. · NYSE:TDS
Telephone And Data Systems — Q4 2020 Earnings Presentation
34 slides from Telephone And Data Systems's earnings presentation, Feb 19, 2021
Slide 1: Fourth Quarter 2020 Results
Fourth Quarter 2020 Results 2020 Accomplishments 2021 Strategic Priorities 2021 Guidance February 19, 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 news release, 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 virtual conferences
Upcoming virtual conferences • 3/2/21 - Raymond James 42nd Annual Institutional Investors Conference ◦ From management: LT Therivel, Doug Chambers, Vicki Villacrez and Jane McCahon • 3/4/21 - Morgan Stanley Technology, Media & Telecom Conference ◦ From management: LT Therivel, Doug Chambers, Jim But
Slide 4: Maintaining strong financial flexibility
Maintaining strong financial flexibility • Continuing to maintain ample liquidity • Employ a conservative financing strategy with long-dated repayment obligations • Evaluating a wide range of potential funding options $2.7 Billion of Available Sources* Long-term debt obligations Dec. 31, 2020 Dec. 3
Slide 5: UScellular
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Slide 6: 2020 goals and accomplishments
2020 goals and accomplishments • Pandemic response - stepping up to the challenges ◦ Confirmation of how essential our service is to society ◦ Safety of customers and associates remains critical • Improved subscriber and financial results ◦ Low postpaid churn, offsets lower store traffic and switche
Slide 7: 2021 strategic priorities
2021 strategic priorities • Maintain the health and safety of customers & associates • Focus on Growth ◦ Regional approach to drive market share expansion ◦ Expanded digital capabilities, focused on customer lifecycle ◦ Maintain retail momentum and place renewed focus on under- indexed segments - Pr
Slide 8: Postpaid connections
Postpaid connections Gross Additions Net Additions Smartphone Connections (in thousands) (in thousands) (in thousands) 175 30 3,525 25 150 40 52 20 3,500 66 15 125 28 10 3,475 42 9 44 8 100 5 2 3 3 0 — 3,450 3,515 75 -5 130 (14) 119 3,483 3,486 -10 (20) 102 3,425 3,468 3,472 50 90 85 -15 25 -20 3,40
Slide 9: Postpaid churn rate
Postpaid churn rate 1.60% 1.38% 1.40% 1.21% 1.21% 1.20% 1.11% 1.06% 1.01% 1.00% 0.95% 0.89% 0.88% 0.80% 0.71% 0.60% 0.40% 0.20% 0.00% Q4'19 Q1'20 Q2'20 Q3'20 Q4'20 Handsets Total Postpaid 9
Slide 10: Total operating revenues
Total operating revenues ($ in millions) $1,200 $1,073 $1,052 $1,027 $963 $973 $289 $297 $900 $252 $201 $220 $55 $54 $59 $60 $54 $42 $37 $42 $33 $41 $600 $666 $671 $658 $674 $683 $300 $0 Q4'19 Q1'20 Q2'20 Q3'20 Q4'20 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 $125 $120 $46 $115 $44 $124.87 $47.51 $122.92 $123.27 $47.23 $47.10 $46.57 $120.99 $120.70 $46.24 $110 $42 $105 $40 $100 Q4'19 Q1'20 Q2'20 Q3'20 Q4'20 Q4'19 Q1'20 Q2'20 Q3'20 Q4'20 11
Slide 12: Towers: Building value
Towers: Building value • 4,271 Owned towers (63% of total cell sites) • 1,894 colocators Tower rental revenues ($ in millions) $20 $19.6 $19.7 $18.7 $19.1 $18.1 $15 $10 $5 $0 Q4'19 Q1'20 Q2'20 Q3'20 Q4'20 12
Slide 13: Adjusted OIBDA
Adjusted OIBDA ($ in millions) Q4'20 Q4'19 % Change Total operating revenues $ 1,073 $ 1,052 2 % System operations expense 202 188 7 % Cost of equipment sold 319 305 5 % SG&A expenses 374 378 (1)% (1) Total cash expenses 895 871 3 % (2) Adjusted OIBDA $ 178 $ 181 (2)% (1), (2) - See slide 34 for exp
Slide 14: Adjusted EBITDA
Adjusted EBITDA ($ in millions) Q4'20 Q4'19 % Change (2) Adjusted OIBDA $ 178 $ 181 (2)% Equity in earnings of unconsolidated entities 42 38 11 % Interest and dividend income 2 3 (44)% (2) Adjusted EBITDA $ 222 $ 222 – (2) - See slide 34 for explanations 14
Slide 15: Annual financial results
Annual financial results ($ in millions) 2020 2019 % Change Total operating revenues $ 4,037 $ 4,022 – System operations expense 782 756 3 % Cost of equipment sold 1,011 1,028 (2)% SG&A expenses 1,368 1,406 (3)% (1) Total cash expenses 3,161 3,190 (1)% (2) Adjusted OIBDA 876 832 5 % Equity in earnin
Slide 16: 2021 guidance
2021 guidance * ($ in millions) As of February 19, 2021 2020 Estimates 2020 Actual 2021 Estimates Service revenues $3,025-$3,075 $3,067 $3,025-$3,125 (2) Adjusted OIBDA $800-$875 $876 $800-$950 (2) Adjusted EBITDA $975-$1,050 $1,063 $975-$1,125 Capital expenditures $850-$950 $940 $775-$875 2020 Actu
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Slide 18: 2020 Accomplishments - Success driven by execution of broadband strategy
2020 Accomplishments - Success driven by execution of broadband strategy • Pandemic highlights broadband is essential ◦ Safety of customers and employees remains critical ◦ Network infrastructure enabled ability to serve our communities • Invested nearly $130 million to deploy fiber and build infras
Slide 19: 2021 Strategic Priorities
2021 Strategic Priorities • Grow revenue ◦ Continue execution of broadband growth strategy ◦ Leverage our proven and repeatable formula to accelerate fiber and our superior suite of products to over 150,000 service addresses ▪ Fiber is the superior technology to deliver broadband ▪ Expansion markets
Slide 20: 2021 Strategic Priorities
2021 Strategic Priorities • Improve customer experience and new product penetration ◦ Leverage our broadband penetration to increase bundling ◦ Penetrate and expand TDS TV+ into new markets • Operate lean – reinvest savings into growth opportunities ◦ Supply chain management and inventory logistics
Slide 21: TDS Telecom operating performance
TDS Telecom operating performance ($ in millions) Q4’20 Q4’19 % Change Wireline $ 173 $ 171 1 % Cable 76 64 18 % * Total operating revenues 248 235 6 % (1) Cash expenses 175 162 8 % (2) Adjusted EBITDA $ 74 $ 75 (2)% Capital expenditures $ 147 $ 124 19 % * Includes intercompany eliminations (1), (2)
Slide 22: Wireline highlights and trends
Wireline highlights and trends • Growth in video connections and broadband penetration driving an increase in residential revenue per connection ◦ Demand for higher speeds is strong • Growth from fiber investments and A-CAM support helps to offset legacy revenue declines Residential revenue per conn
Slide 23: Fiber highlights and trends
Fiber highlights and trends • Fiber-to-the-Home to 307,000 or 36% of Wireline Service Addresses (SA)** • Total Wireline SAs increased 7% to 845,000 with expansion into new markets Fiber Program Service Address Progress* Service Addresses at December 31, 2020** (845,000) Individual Markets Cumulative
Slide 24: Wireline operating performance
Wireline operating performance ($ in millions) Q4’20 Q4’19 % Change Residential $ 90 $ 83 8 % Commercial 37 40 (8)% Wholesale 46 47 (3)% Total operating revenues 173 171 1 % (1) Cash expenses 123 119 3 % (2) Adjusted EBITDA $ 50 $ 54 (8)% Capital expenditures $ 122 $ 98 24 % (1), (2) - See slide 34
Slide 25: Fourth quarter cable highlights
Fourth quarter cable highlights • Broadband connections increased 8% • Revenues increased 18%; 9% organic • Adjusted EBITDA increased 14%; 2% organic Connections Residential Revenue 225,000 Per Connection 200,000 2% $70.00 6% $63.30 $59.83 175,000 $60.00 Total (Y/Y) 150,000 connections $50.00 125,00
Slide 26: Cable operating performance
Cable operating performance ($ in millions) Q4’20 Q4’19 % Change Residential $ 63 $ 53 19 % Commercial 13 11 15 % Total operating revenues 76 64 18 % (1) Cash expenses 52 44 19 % (2) Adjusted EBITDA $ 23 $ 21 14 % Capital expenditures $ 25 $ 26 – (1), (2) - See slide 34 for explanations 26
Slide 27: TDS Telecom annual operating performance
TDS Telecom annual operating performance ($ in millions) 2020 2019 % Change Wireline $ 685 $ 683 – Cable 292 247 18 % * Total operating revenues 976 930 5 % (1) Cash expenses 663 629 5 % (2) Adjusted EBITDA $ 317 $ 313 1 % Capital expenditures $ 368 $ 316 16 % * Includes intercompany eliminations (1
Slide 28: TDS Telecom 2021 guidance
TDS Telecom 2021 guidance * ($ in millions) As of February 19, 2021 2020 Estimates 2020 Actual 2021 Estimates Total operating revenues $950-$1,000 $976 $975-$1,025 (2) Adjusted OIBDA $300-$320 $314 $290-$320 (2) Adjusted EBITDA $305-$325 $317 $290-$320 Capital expenditures $300-$350 $368 $425-$475 2
Slide 29: Appendix
Appendix 29
Slide 30: Adjusted OIBDA and Adjusted EBITDA reconciliation
Adjusted OIBDA and Adjusted EBITDA reconciliation Three Months Ended December 31, 2020 Three Months Ended December 31, 2019 Total Total TDS (3) TDS (3) ($ in millions) UScellular Wireline Cable Telecom TDS UScellular Wireline Cable Telecom TDS Net income (GAAP) $7 N/A N/A $19 $16 $18 N/A N/A $18 $15
Slide 31: Adjusted OIBDA and Adjusted EBITDA reconciliation – Estimated Results
Adjusted OIBDA and Adjusted EBITDA reconciliation – Estimated Results In providing estimated results, TDS has not completed the below reconciliation to net income because it does not provide guidance for income taxes. TDS believes that the impact of income taxes cannot be reasonably predicted; there
Slide 32: UScellular Adjusted EBITDA reconciliation
UScellular Adjusted EBITDA reconciliation Year ended December 31, ($ in millions) 2020 2019 Net income (GAAP) $ 233 $ 133 Add back or deduct: Income tax expense (benefit) 17 52 Income (loss) before income taxes (GAAP) $ 250 $ 185 Add back: Interest expense 112 110 Depreciation, amortization and accr
Slide 33: TDS Telecom Adjusted EBITDA reconciliation
TDS Telecom Adjusted EBITDA reconciliation Year ended December 31, ($ in millions) 2020 2019 Net income (GAAP) $ 100 $ 92 Add back: Income tax expense 18 30 Income before income taxes (GAAP) $ 117 $ 122 Add back: Interest expense (4) (3) Depreciation, amortization and accretion 203 200 (2) EBITDA (n
Slide 34: Footnotes: total cash expenses and non-GAAP definitions
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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