Telephone And Data Systems, Inc. · NYSE:TDS
Telephone And Data Systems — Q4 2021 Earnings Presentation
35 slides from Telephone And Data Systems's earnings presentation, Feb 17, 2022
Slide 1: Fourth Quarter 2021 Results
Fourth Quarter 2021 Results 2021 Accomplishments 2022 Strategic Priorities 2022 Guidance February 18, 2022
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 3/7/22 - Raymond James 43rd Annual Institutional Investors Conference From management: Jim Butman, Doug Chambers and Colleen Thompson 3/7/22 - Morgan Stanley Technology, Media & Telecom Conference From management: Ted Carlson, Michelle Brukwicki and Jane McCahon 3/14/22 - Deutsc
Slide 4: Well positioned for long-term sustainable growth
Well positioned for long-term sustainable growth • Importance of connectivity driven by remote • Strong position in rural and suburban • Aligned with TDS values for over 50 years work and education America • “S”ocial focus related to 3Cs – Culture, • Americans are migrating to the suburbs • Core to
Slide 5: Improving the health of the balance sheet
Improving the health of the balance sheet TDS' diversified funding sources Lowered the average cost of financing 5
Slide 6: UScellular
3 uscellular
Slide 7: Significant accomplishments in 2021
Significant accomplishments in 2021 Expanded ARPU and service revenues in an intensely competitive environment Launched regionalization strategy to optimize go-to-market Strengthened business and government sector Tower business continued to gain momentum Continued network modernization and 5G deplo
Slide 8: Strong spectrum position
ong = Strong spectrum position 7€ uscellular. All three layers of spectrum are needed (low-, mid-, and high- bands) to have a competitive product that meets the needs of our customers in terms of coverage, capacity and speed. HIGH-BAND: Ultra high-speed layer for dense user areas and . 530 MHz aggre
Slide 9: Key strategic priorities
Key strategic priorities Advance Our Mission Continued Focus on Growth Expand Return on Capital Optimize Infrastructure Programs Advance the Network Invest in our Team 3¥ uscellular a TDS
Slide 10: Multi-pronged growth strategies
Multi-pronged growth strategies Focus on Growth 10
Slide 11: Smartphone connections increase 48,000 year over year
Smartphone connections increase 48,000 year over year Gross Additions* Net Additions* Smartphone 175 Connections* 15 3,600 150 52 40 10 125 39 40 8 40 3,550 5 100 3 0 (1) 75 (3) (2) 3,500 125 (5) 119 (5) 3,563 104 105 -5 (3) 3,543 3,551 50 101 (3) (10) 3,529 3,515 3,450 25 -10 0 -15 3,400 Q4'20 Q1'2
Slide 12: Postpaid churn
Postpaid churn 1.60% 1.40% 1.35% 1.21% 1.20% 1.12% 1.11% 1.15% 1.10% 1.01% 1.00% 0.92% 0.95% 0.88% 0.80% 0.60% 0.40% 0.20% 0.00% Q4'20 Q1'21 Q2'21 Q3'21 Q4'21 Handsets Total Postpaid 12
Slide 13: Prepaid connections
Prepaid connections Gross Additions* Net Additions* 15 75 10 50 5 11 10 74 0 62 65 63 56 (3) 25 (5) (8) -5 -10 0 Q4'20 Q1'21 Q2'21 Q3'21 Q4'21 Q4'20 Q1'21 Q2'21 Q3'21 Q4'21 13 *In thousands
Slide 14: ARPU drives retail service revenue growth
ARPU drives retail service revenue growth ($ in millions) $1,200 $1,073 $1,068 $1,023 $1,014 $1,016 $900 $297 $252 $240 $228 $286 $60 $58 $60 $59 $62 $33 $28 $28 $30 $24 $600 $683 $685 $686 $699 $696 $300 $0 Q4'20 Q1'21 Q2'21 Q3'21 Q4'21 Retail service Roaming Other service Equipment sales 14 Note:
Slide 15: Improving postpaid ARPU & ARPA
Improving postpaid ARPU & ARPA Average Revenue Per User (ARPU) Average Revenue Per Account (ARPA) $50 $130 $125 $48 $120 $46 $115 $127.14 $48.62 $124.87 $125.25 $125.25 $125.99 $44 $48.12 $47.51 $47.65 $47.74 $110 $42 $105 $40 $100 Q4'20 Q1'21 Q2'21 Q3'21 Q4'21 Q4'20 Q1'21 Q2'21 Q3'21 Q4'21 15 Note:
Slide 16: Growing tower revenues
Growing tower revenues • 4,301 owned towers (62% of total cell sites) • 2,110 colocators; avg number of tenants per site is 0.48 (excluding UScellular) Tower rental revenues ($ in millions) $22 $21.5 $20.7 $20 $20.3 $20.2 $19.7 9% $18 (Y/Y growth) $16 Q4'20 Q1'21 Q2'21 Q3'21 Q4'21 16
Slide 17: Improved Adjusted OIBDA and Adjusted EBITDA
Improved Adjusted OIBDA and Adjusted EBITDA ($ in millions) Q4'21 Q4'20 % Change Service revenues $ 782 $ 776 1% Equipment sales 286 297 (4)% Total operating revenues 1,068 1,073 – System operations expense 196 202 (3)% Cost of equipment sold 332 319 4% SG&A expenses 359 374 (4)% Total cash expenses
Slide 18: Annual financial results
Annual financial results ($ in millions) 2021 2020 % Change Service revenues $ 3,115 $ 3,067 2% Equipment sales 1,007 970 4% Total operating revenues 4,122 4,037 2% System operations expense 790 782 1% Cost of equipment sold 1,118 1,011 11 % SG&A expenses 1,345 1,368 (2)% Total cash expenses (1) 3,2
Slide 19: 2022 guidance
2022 guidance * ($ in millions) As of February 17, 2022 2021 Estimates 2021 Actuals 2022 Estimates Service revenues $3,075-$3,125 $3,115 $3,100-$3,200 Adjusted OIBDA (2) $850-$950 $869 $750-$900 Adjusted EBITDA (2) $1,025-$1,125 $1,054 $925-$1,075 Capital expenditures $700-$800 $780 $700-$800 2021 A
Slide 20: Slide 20
Slide 21: We made significant progress in 2021
We made significant progress in 2021 Surpassed $1B in Revenue Exceeded 500K total broadband connections Deployed 86K new marketable fiber addresses Continued to plant flags in new fiber markets Executed on A-CAM and state broadband grant programs Continued to transform our workforce and advance dive
Slide 22: Our strategy is built on five pillars that will continue to transform our business
Our strategy is built on five pillars that will continue to transform our business Expand footprint through fiber Increase top line through average deployments in new markets Grow Grow revenue per connection growth, and consider acquisitions Scale Revenue broadband penetration growth, and continued
Slide 23: Investments will drive meaningful growth and improve returns
Investments will drive meaningful growth and improve returns Highlights Total Service Address Mix • Investments over the last five years have Service 1.1M 1.4M ~2.2M doubled our mix of fiber addresses and Addresses provided 1Gig+ speeds to 58% of our 14% footprint 28% • By 2026, our goals include: 3
Slide 24: Over the next five years we have a goal to triple our fiber service addresses
Over the next five years we have a goal to triple our fiber service addresses Target Marketable Fiber Service Addresses* ~1.2M+ owth ~3X Gr 393K 2020 2021 2022 2023 2024 2025 2026 Fiber Highlights Forecasted Residential Broadband Penetration Proven criteria for expansion market selection 50% • Broad
Slide 25: Footprint expansion and investments drive growth
Footprint expansion and investments drive growth • 1Gig service available to 58% of total service addresses • Growth from broadband helps to offset legacy revenue declines • Higher value product mix driving an increase in residential revenue per connection Total Service Addresses Residential Connect
Slide 26: Broadband demand is strong
Broadband demand is strong • Residential broadband revenues grew 12% • 20% of new customers are taking our 1Gig product Residential Broadband Connections Residential Broadband Connections by Speed 500,000 100% 6% 8% 4% 7% 400,000 75% 51% 300,000 51% 7% 50% 200,000 (Y/Y growth) 25% 100,000 39% 34% 0
Slide 27: TDS Telecom operating revenues
TDS Telecom operating revenues ($ in millions) $300 $248 $249 $252 $252 $254 $250 $6 $7 $8 $9 $10 6% $200 $84 $85 $86 $87 $86 Residential Revenue Y/Y $150 Growth $63 $65 $66 $66 $66 $100 $47 $45 $45 $44 $46 $50 $48 $47 $46 $45 $45 $— Q4'20 Q1'21 Q2'21 Q3'21 Q4'21 Commercial Wholesale Residential - C
Slide 28: TDS Telecom operating performance
TDS Telecom operating performance % % ($ in millions) Q4’21 Q4’20 Change 2021 2020 Change Total operating revenues $ 254 $ 248 2% $ 1,006 $ 976 3% Cash expenses (1) 179 175 2% 696 663 5% Adjusted EBITDA (2) $ 75 $ 74 2% $ 310 $ 317 (2)% Capital expenditures $ 151 $ 147 2% $ 411 $ 368 12 % 28 (1), (2
Slide 29: TDS Telecom 2022 guidance
TDS Telecom 2022 guidance * ($ in millions) As of February 17, 2022 2021 Estimates 2021 Actual 2022 Estimates Total operating revenues $990-$1,020 $1,006 $1,010-$1,040 Adjusted OIBDA (2) $295-$315 $310 $260-$290 Adjusted EBITDA (2) $295-$315 $310 $260-$290 Capital expenditures $400-$450 $411 $500-$5
Slide 30: Appendix
Appendix 30
Slide 31: Adjusted OIBDA and Adjusted EBITDA reconciliation
Adjusted OIBDA and Adjusted EBITDA reconciliation Three Months Ended December 31, 2021 Three Months Ended December 31, 2020 ($ in millions) UScellular TDS Telecom TDS (3) UScellular TDS Telecom TDS (3) Net income (GAAP) $28 $22 $36 $7 $19 $16 Add back: Income tax expense (benefit) (11) 2 (5) 5 5 — I
Slide 32: Adjusted OIBDA and Adjusted EBITDA reconciliation – Estimated Results
Adjusted OIBDA and Adjusted EBITDA reconciliation – Estimated Results In providing estimated results, TDS has not completed the below reconciliation to net income because it does not provide guidance for income taxes. TDS believes that the impact of income taxes cannot be reasonably predicted; there
Slide 33: UScellular Adjusted EBITDA reconciliation
UScellular Adjusted EBITDA reconciliation Year ended December 31, ($ in millions) 2021 2020 Net income (GAAP) $ 160 $ 233 Add back: Income tax expense 20 17 Income before income taxes (GAAP) $ 180 $ 250 Add back: Interest expense 175 112 Depreciation, amortization and accretion 678 683 (2) EBITDA (n
Slide 34: TDS Telecom Adjusted EBITDA reconciliation
TDS Telecom Adjusted EBITDA reconciliation Year ended December 31, ($ in millions) 2021 2020 Net income (GAAP) $ 90 $ 100 Add back: Income tax expense 24 18 Income before income taxes (GAAP) $ 114 $ 117 Add back or deduct: Interest expense (5) (4) Depreciation, amortization and accretion 198 203 EBI
Slide 35: Footnotes: total cash expenses and EBITDA 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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