Telephone And Data Systems, Inc. · NYSE:TDS
Telephone And Data Systems — Q1 2020 Earnings Presentation
32 slides from Telephone And Data Systems's earnings presentation, May 1, 2020
Slide 1: First Quarter 2020 Results COVID-19 Update
First Quarter 2020 Results COVID-19 Update May 1, 2020
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 U.S. Cellular and TDS Telecom (the "company"), except historical and factual information, represents forwa
Slide 3: COVID-19 related safe harbor statement
COVID-19 related safe harbor statement The impact of the COVID-19 pandemic on TDS' business is uncertain, but depending on its duration and severity it could have a material adverse effect on TDS' business, financial condition or results of operations. The impact of the recent global spread of COVID
Slide 4: Upcoming investor relations calendar
Upcoming investor relations calendar • 5/12/20 - J.P. Morgan 48th Annual Global Technology, Media and Communications Conference (Virtual) - From management - Ted Carlson, Doug Chambers, Vicki Villacrez, and Jane McCahon • We welcome the opportunity to do virtual meetings with investors 4
Slide 5: Living our mission as an essential service
Living our mission as an essential service Our mission at TDS is to provide outstanding communications services to our customers and meet the needs of our shareholders, our people, and our communities. Customers – The TDS family of businesses is fulfilling our promise to provide high-quality communi
Slide 6: Our balance sheet is strong
Our balance sheet is strong • Continue to maintain a strong balance sheet with ample liquidity • Employ a conservative financing strategy with long-dated repayment obligations Available Sources Potential Sources Long-term debt obligations March 31, 2020 March 31, 2020 ($ in millions) 700 600 $150 4,
Slide 7: Recent treasury activities and tax benefits
Recent treasury activities and tax benefits • Closely monitoring customer receipts, accounts receivable balances and aging, cash disbursements activity, inventory balances, and other leading indicators. No trends currently indicating a material deterioration in cash flows or liquidity. • Completed 2
Slide 8: U.S. Cellular
K US. Cellular
Slide 9: Keeping people connected
Keeping people connected Our Company is open and working through this crisis. More than ever consumers and businesses appreciate how essential wireless service is to how they work and stay connected! • Associates ◦ A resilient, dedicated organization • Operations ◦ Customer service substantially mig
Slide 10: U.S. Cellular strategy
U.S. Cellular strategy U.S. Cellular's strategic priorities remain intact, but managing through COVID-19 crisis is job one now: Highlights of efforts that continue: • Providing products and services that customers need • Churn mitigation: Strategies to help customers pay bills • Cost optimization ef
Slide 11: Postpaid connections
Postpaid connections Gross Additions Net Additions Smartphone Connections (in thousands) (in thousands) (in thousands) 3,480 175 5 150 40 2 0 39 (2) 3,455 125 -5 (11) 35 35 (14) (14) 42 -10 (17) (20) 100 3,430 -15 3,472 3,468 75 (15) 124 130 -20 3,441 50 102 102 (18) (6) 90 3,405 -25 3,419 25 3,409
Slide 12: Postpaid churn rate
Postpaid churn rate 1.60% 1.38% 1.38% 1.40% 1.26% 1.23% 1.21% 1.20% 1.11% 1.09% 0.99% 0.97% 1.00% 0.95% 0.80% 0.60% 0.40% 0.20% 0.00% Q1'19 Q2'19 Q3'19 Q4'19 Q1'20 Handsets Total Postpaid 12
Slide 13: Total operating revenues
Total operating revenues ($ in millions) $1,031 $1,052 $966 $973 $963 $900 $257 $289 $225 $216 $201 $51 $57 $55 $54 $48 $34 $44 $54 $42 $37 $600 $659 $662 $663 $666 $671 $300 $0 Q1'19 Q2'19 Q3'19 Q4'19 Q1'20 Retail service Roaming Other service Equipment sales 13
Slide 14: Postpaid revenue
Postpaid revenue Average Revenue Per User (ARPU) Average Revenue Per Account (ARPA) $125 $48 $120 $46 $115 $44 $47.23 $122.92 $46.57 $120.99 $46.16 $110 $119.46 $119.87 $45.90 $118.84 $45.44 $42 $105 $40 $100 Q1'19 Q2'19 Q3'19 Q4'19 Q1'20 Q1'19 Q2'19 Q3'19 Q4'19 Q1'20 14
Slide 15: Adjusted OIBDA
Adjusted OIBDA ($ in millions) Q1'20 Q1'19 % Change Total operating revenues $ 963 $ 966 – System operations expense 180 176 2 % Cost of equipment sold 217 233 (7)% SG&A expenses 335 326 3 % Total cash expenses (1) 732 735 – Adjusted OIBDA (2) $ 231 $ 231 – (1), (2) - See slide 32 for explanations 1
Slide 16: Adjusted EBITDA
Adjusted EBITDA ($ in millions) Q1'20 Q1'19 % Change Adjusted OIBDA (2) $ 231 $ 231 – Equity in earnings of unconsolidated entities 45 44 3 % Interest and dividend income 4 6 (33)% Other, net 1 — (86)% Adjusted EBITDA (2) $ 281 $ 281 – (2) - See slide 32 for explanation 16
Slide 17: 2020 guidance
2020 guidance * ($ in millions) 2020 Previous 2020 Current As of May 1, 2020 2019 Actual Estimates Estimates Service revenues $3,035 $3,000-$3,100 Unchanged Adjusted OIBDA (2) $832 $775-$900 $725-$850 Adjusted EBITDA (2) $1,015 $950-$1,075 $900-$1,025 Capital expenditures $710 $850-$950 Unchanged 20
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Slide 19: Keeping our customers connected
Keeping our customers connected This crisis has validated the need for high speed broadband services and we are dedicated to providing the best solutions. • One third of our workforce goes in/out of homes and safety is our #1 priority. To that end, we have implemented tools and techniques to continu
Slide 20: Wireline and cable strategy
Wireline and cable strategy Wireline and cable strategic priorities remain intact but managing through COVID-19 crisis is job one now: Target new markets where our formula wins: • Attractive demographics and competitive landscape • Target build cost per household passed • Hyper-localized marketing a
Slide 21: TDS Telecom operating performance
TDS Telecom operating performance ($ in millions) Q1'20 Q1'19 % Change Wireline $ 169 $ 171 (1)% Cable 71 60 19 % Total operating revenues * 240 230 4 % Cash expenses (1) 160 150 7 % Adjusted EBITDA (2) 82 83 (2)% Capital expenditures $ 54 $ 42 27 % * Includes intercompany eliminations (1), (2) - Se
Slide 22: Wireline highlights and trends
Wireline highlights and trends • Growth in residential video and broadband 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 Connection Resid
Slide 23: Fiber highlights and trends
Fiber highlights and trends • Fiber-to-the-Home to 32% of Wireline Service Addresses (SA)* • Total Wireline SAs increased 5% with expansion into new markets • Construction Watch Points: ◦ Municipalities slowing permitting processes ◦ Electric utilities slowing pole preparation for aerial portions of
Slide 24: Wireline operating performance
Wireline operating performance ($ in millions) Q1'20 Q1'19 % Change Residential $ 84 $ 81 4 % Commercial 39 43 (10)% Wholesale 46 46 – Total operating revenues 169 171 (1)% Cash expenses (1) 114 110 3 % Adjusted EBITDA (2) 57 63 (9)% Capital expenditures $ 39 $ 29 32 % (1), (2) - See slide 32 for ex
Slide 25: Cable highlights and trends
Cable highlights and trends • Cable connections grew 10% due to an increase in broadband connections and the acquisition of Continuum ◦ Continuum added 15,800 broadband connections; 9,400 video connections; 5,800 voice connections • Revenues increase 19%; Adjusted EBITDA increase 22% Connections Res
Slide 26: Cable operating performance
Cable operating performance ($ in millions) Q1'20 Q1'19 % Change Residential $ 60 $ 49 20% Commercial 11 10 11% Total operating revenues 71 60 19% Cash expenses (1) 47 40 17% Adjusted EBITDA (2) 25 20 22% Capital expenditures $ 15 $ 13 15% (1), (2) - See slide 32 for explanations 26
Slide 27: What investors are asking
What investors are asking Numerous factors to watch over the short- and medium- term that could impact our 2020 results Headwinds Tailwinds • Bad debts – tracking daily cash • Broadband gross adds – new receipts customer orders taking BB and other services • SMB customers – number of defections due
Slide 28: 2020 TDS Telecom guidance
2020 TDS Telecom guidance* ($ in millions) 2020 Previous 2020 Current As of May 1, 2020 2019 Actual Estimates Estimates Total operating revenues $930 $950-$1,000 Unchanged Adjusted OIBDA (2) $300 $280-$310 Unchanged Adjusted EBITDA (2) $313 $290-$320 Unchanged Capital expenditures $316 $300-$350 Unc
Slide 29: Appendix
Appendix 29
Slide 30: Adjusted OIBDA and Adjusted EBITDA Reconciliation
Adjusted OIBDA and Adjusted EBITDA Reconciliation Three Months Ended March 31, 2020 Three Months Ended March 31, 2019 Total Total U.S. TDS U.S. TDS ($ in millions) Cellular Wireline Cable Telecom TDS (3) Cellular Wireline Cable Telecom TDS (3) Net income (GAAP) $72 N/A N/A $28 $83 $58 N/A N/A $31 $7
Slide 31: Adjusted OIBDA and Adjusted EBITDA Reconciliation – 2020 Estimated and 2019 Full Year
Adjusted OIBDA and Adjusted EBITDA Reconciliation – 2020 Estimated and 2019 Full Year In providing 2020 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 32: Explanations of cash expenses and non-GAAP measures
1) Total cash expenses represent total operating expenses as shown in the Consolidated Statement of Operations Highlights in the TDS and U.S. Cellular SEC Forms 8-K, less depreciation, amortization and accretion and gain/losses. 2) EBITDA, Adjusted EBITDA and Adjusted OIBDA are defined as net income
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