Telephone And Data Systems, Inc. · NYSE:TDS
Telephone And Data Systems — Q2 2014 Earnings Presentation
32 slides from Telephone And Data Systems's earnings presentation, Aug 1, 2014
Slide 1: Second Quarter Results
August 1, 2014 Second Quarter Results
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 9/3/14 – Drexel Hamilton - New York 9/10/14 – Analyst day at CTIA - Las Vegas 9/29/14 – 10/3/14 – European roadshow 3
Slide 4: TDS second quarter update
TDS second quarter update • Return value to shareholders • Repurchased $17.3 million of TDS shares • Repurchased $6.3 million of U.S. Cellular shares • Paid $14.5 million in TDS dividends • Revolving credit agreement amended to increase leverage covenant • Manage the enterprise portfolio • Divesting
Slide 5: U.S. Cellular
K US. Cellular
Slide 6: Drive subscriber growth
Drive subscriber growth Positive postpaid net additions in June and July • Increase gross additions with high-quality network, strong device portfolio, connected devices, product and pricing improvements • Postpaid gross additions* up 15% • Competitive offerings • iPhone – 32% of smartphone sales •
Slide 7: Drive revenue growth
Drive revenue growth • Increase smartphone penetration • Postpaid smartphone penetration* increased from 46% to 55% • Launch new products and services that utilize and monetize our data network • Connected devices are 4.5% of postpaid base • Shared Connect Plans (shared data) • Equipment Installment
Slide 8: Customer results
Customer results* Q2 ‘14 Q2 ’13 Postpaid gross additions 190,000 165,000 Postpaid churn 1.7% 1.6% Postpaid net (losses) (26,000) (53,000) Prepaid net additions (losses) (4,000) 8,000 Retail net (losses) (30,000) (45,000) Total retail customers 4,500,000 4,793,000 * Core markets-definition provided i
Slide 9: Postpaid churn
Postpaid churn* * Core markets-definition provided in note at the end of this presentation 9
Slide 10: Smartphone sales and penetration
Smartphone sales and penetration* * Core markets-definition provided in note at the end of this presentation 10
Slide 11: Postpaid ARPU
Postpaid ARPU* * Core markets-definition provided in note at the end of this presentation 11
Slide 12: Total operating revenues
Total operating revenues* ($ in millions) Q2 ‘14 Q2 ‘13 Service revenues $843.5 $867.3 Retail service 746.1 762.5 Roaming 57.6 61.7 Other 39.8 43.1 Equipment revenues 114.3 83.6 Total operating revenues $957.8 $951.0 * Core markets-definition provided in note at the end of this presentation 12
Slide 13: Financial performance
Financial performance* ($ in millions) Q2 ‘14 Q2 ‘13 Service revenues $843.5 $867.3 System operations expense 187.1 179.9 Loss on equipment 157.7 132.4 SG&A expenses 404.3 393.5 Total investment and other income 20.5 26.8 Adjusted income before income taxes (1) $122.3 $190.6 (1) Adjusted income befo
Slide 14: Financial performance - Total company
Financial performance - Total company ($ in millions) Q2 ‘14 Q2 ‘13 Service revenues $843.5 $911.0 System operations expense 187.1 192.3 Loss on equipment 157.7 132.9 SG&A expenses 404.3 404.1 Total investment and other income 20.5 45.3 Adjusted income before income taxes (1) $122.3 $209.5 (1) Adjus
Slide 15: Financial performance - Total company (cont.)
Financial performance - Total company (cont.) ($ in millions, except per share amounts) Q2 ‘14 Q2 ‘13 Net income (loss) attributable to U.S. Cellular shareholders ($18.8) $143.4 Diluted earnings (loss) per share attributable to ($0.22) $1.69 U.S. Cellular shareholders Cash flows from operating activ
Slide 16: Accounting for Equipment Installment Plans
Accounting for Equipment Income Statement Full-year 2014 Installment Plans Service revenue - Equipment revenue + AIBIT impact + 12 month installment plan Interest income + • Selling price recognized as Equipment Revenue on Day 1 Net income + 24 month installment plan – with no upgrade option Balance
Slide 17: 2014 guidance
2014 guidance (as of 8/1/14) Total Company Total operating revenues $3,900 - $4,000 M Adjusted income before income taxes (1) $350 - $450 M Capital expenditures $640 M (1) Adjusted income before income taxes is a non-GAAP financial measure that is defined in 17 the non-GAAP reconciliation at the end
Slide 18: Slide 18
Slide 19: Second quarter update
Second quarter update • Wireline • Fiber/IPTV results encouraging • Cost reductions drive 14% increase in adjusted income before income taxes • Divesting four ILECs • Cable • Improve customer penetration in Baja Broadband markets • Tuck-in acquisitions – Lovington and Socorro, New Mexico • Acquisiti
Slide 20: TDS Telecom operating performance
TDS Telecom operating performance ($ in millions) Q2 ‘14 Q2 ‘13 Change Wireline $180.7 $182.2 (1%) Cable 22.5 --- N/M HMS 67.9 41.4 64% Total operating revenues(1) 270.9 223.5 21% Expenses(1)(2) 197.4 163.0 21% Adjusted income before income $72.9 $61.6 18% taxes(3) (1) Reflects intercompany eliminat
Slide 21: Wireline operating performance
Wireline operating performance ($ in millions) Q2 ’14 Q2 ’13 Change Residential $ 73.4 $ 72.9 1% Commercial 57.5 57.1 1% Wholesale 49.5 51.4 (4%) Total service revenues 180.3 181.4 (1%) Expenses(1) 112.5 123.5 (9%) Adjusted income before income taxes(2) $68.1 $59.9 14% (1) Represents cost of product
Slide 22: Broadband speeds, IPTV driving wireline residential revenue growth
Broadband speeds, IPTV driving wireline residential revenue growth ILEC Residential Customers Wireline Residential Average by Broadband Speeds Revenue Per Connection 6/30/14 6/30/13 6/30/14 6/30/13 > 5 Mb 81% 75% $41.05 $40.10 > 10 Mb 38% 31% IPTV Connections 6/30/14 6/30/13 IPTV 18,200 10,500 22
Slide 23: Wireline managedIP connections increased 19%
Wireline managedIP connections increased 19% 23
Slide 24: Cable operating performance
Cable operating performance (as of 6/30/14) Connections Q2 ‘14 Video 69,700 Total operating revenues $22.5 Broadband 63,200 Expenses(1) 17.7 Voice 17,800 Total cable connections 150,700 Adjusted income before income $ 4.4 taxes(2) Industry (as of 6/30/14) Penetration Baja Penetration Video 41% 30% B
Slide 25: Hosted and Managed Services operating performance
Hosted and Managed Services operating performance ($ in millions) Q2 ’14 Q2 ’13 Change Service revenues $27.6 $23.2 19% Equipment revenues 40.4 18.2 N/M Total operating revenues 67.9 41.4 64% Expenses(1) 67.6 39.5 71% Adjusted income before $0.4 $1.8 (77%) income taxes(2) (1) Represents cost of prod
Slide 26: 2014 TDS Telecom guidance
2014 TDS Telecom guidance(1) (as of 8/1/14) 2014 Estimates 2014 Estimates (Current) (Previous) ($ in millions) Total operating revenues $1,050 - $1,100 Unchanged Adjusted income before $260 - $290 $250 - $280 income taxes (2) Capital expenditures $200 Unchanged (1) 2014 guidance will be updated for
Slide 27: Appendix
Appendix 27
Slide 28: Total operating revenues
Total operating revenues Core Divestiture ($ in millions) Markets* Markets Consolidated Service revenues $867.3 $43.7 $911.0 Retail service 762.5 39.9 802.4 Roaming 61.7 3.3 65.0 Other 43.1 0.5 43.6 Equipment revenues 83.6 0.6 84.2 Total operating revenues(1) $951.0 $44.2 $995.1 * Core markets-defin
Slide 29: Adjusted income before income taxes reconciliation (actual results)
Adjusted income before income taxes reconciliation (actual results) Three Months Ended 6/30/14 Three Months Ended 6/30/13 ($ in millions) U.S. Cellular TDS U.S. Cellular TDS Consolidated Telecom Consolidated Telecom (1) Wireline Cable HMS Total TDS (2) (1) Wireline Cable HMS Total TDS (2) Income (lo
Slide 30: Adjusted income before income taxes reconciliation
Adjusted income before income taxes reconciliation* Core markets Core markets ($ in millions) Three months ended 6/30/14 Three months ended 6/30/13 Income (loss) before income taxes ($30) $45 Depreciation, amortization and accretion 148 134 expense (Gain) loss on sale of business and other (11) 1 ex
Slide 31: Notes to non-GAAP reconciliations
(1) The U.S. Cellular Consolidated amounts represent GAAP financial measures and include the results of both the Core Markets and the Divestiture Markets. The amounts for Core Markets and Divestiture Markets represent non-GAAP financial measures. TDS believes that the amounts for the Core Markets an
Slide 32: Ea TELEPHONE AND
Ea TELEPHONE AND TDS. paTA SYSTEMS” K Cellular
Telephone and Data Systems — Q2 2014 Earnings Presentation on 6ix