Market Overview

UScellular reports third quarter 2020 results

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CHICAGO, Nov. 5, 2020 /PRNewswire/ -- 

As previously announced, UScellular will hold a teleconference November 6, 2020, at 9:00 a.m. CST. Listen to the call live via the Events & Presentations page of investors.uscellular.com.

United States Cellular Corporation (NYSE:USM) reported total operating revenues of $1,027 million for the third quarter of 2020, versus $1,031 million for the same period one year ago. Service revenues totaled $775 million, versus $774 million for the same period a year ago. Net income attributable to UScellular shareholders and related diluted earnings per share were $85 million and $0.97, respectively, for the third quarter of 2020 compared to $23 million and $0.27, respectively, in the same period one year ago.

"Our strong financial performance this quarter is a testament to the value consumers ascribe to wireless services and UScellular's unwavering commitment to customer experience," said Laurent Therivel, UScellular President and CEO. "We generated impressive financial and subscriber results, as churn remained low and we saw growth in retail net additions through an increase in connected devices. We had higher ARPU which, combined with maintaining our operational and cost discipline throughout the quarter, helped to drive increases in profitability compared to the same period one year ago. This puts us in a strong position as we approach a very non-traditional holiday selling season and resulted in an increase in our expectations for full-year financial results.

"We are continuing our network modernization programs. On the 5G front, working with Qualcomm Technologies and Ericsson, we successfully completed an extended range 5G millimeter wave data session over a distance of more than 5 kilometers with speeds ranging from 100 Mbps near the edge to 1.8 Gbps closer to the cell site, significantly expanding the reach and speed from prior tests. This accomplishment will enhance our ability to connect communities with fiber-like speeds and better serve our rural customers, connecting them to education, healthcare and entertainment solutions.

"We also continued our ongoing efforts to enhance our brand relevance by refreshing our logo and brand identity with a modern new look. This is a powerful visual signal of how we're working to expand our brand and business appeal. I am looking forward to continued progress as we close out 2020 and want to thank all of our associates for their support and enthusiasm."

2020 Estimated Results

UScellular's current estimates of full-year 2020 results are shown below. Such estimates represent management's view as of November 5, 2020 and should not be assumed to be current as of any future date. UScellular undertakes no duty to update such estimates, whether as a result of new information, future events, or otherwise. There can be no assurance that final results will not differ materially from estimated results.


2020 Estimated Results


Previous

Current

(Dollars in millions)



Service revenues

$3,000-$3,100

$3,025-$3,075

Adjusted OIBDA1

$725-$850

$800-$875

Adjusted EBITDA1

$900-$1,025

$975-$1,050

Capital expenditures

$850-$950

Unchanged

The following table provides a reconciliation of Net income to Adjusted OIBDA and Adjusted EBITDA for 2020 estimated results, actual results for the nine months ended September 30, 2020, and actual results for the year ended December 31, 2019. In providing 2020 estimated results, UScellular has not completed the below reconciliation to Net income because it does not provide guidance for income taxes. Although potentially significant, UScellular believes that the impact of income taxes cannot be reasonably predicted; therefore, UScellular is unable to provide such guidance.




Actual Results


2020 Estimated
Results


Nine Months Ended

September 30, 2020


Year Ended

December 31, 2019

(Dollars in millions)






Net income (GAAP)

N/A



$

227



$

133


Add back:






Income tax expense

N/A



11



52


Income before income taxes (GAAP)

$165-$240



$

238



$

185


Add back:






Interest expense

110



76



110


Depreciation, amortization and accretion expense

680



516



702


EBITDA (Non-GAAP)1

$955-$1,030



$

830



$

997


Add back or deduct:






(Gain) loss on asset disposals, net

20



14



19


(Gain) loss on sale of business and other exit costs, net





(1)


(Gain) loss on investments



(3)




Adjusted EBITDA (Non-GAAP)1

$975-$1,050



$

841



$

1,015


Deduct:






Equity in earnings of unconsolidated entities

170



137



166


Interest and dividend income

5



6



17


Adjusted OIBDA (Non-GAAP)1

$800-$875



$

698



$

832




EBITDA, Adjusted EBITDA and Adjusted OIBDA are defined as net income adjusted for the items set forth in the reconciliation above. EBITDA, Adjusted EBITDA and Adjusted OIBDA are not measures of financial performance under Generally Accepted Accounting Principles in the United States (GAAP) and should not be considered as alternatives to Net income or Cash flows from operating activities, as indicators of cash flows or as measures of liquidity. UScellular does not intend to imply that any such items set forth in the reconciliation above are non-recurring, infrequent or unusual; such items may occur in the future. Management uses Adjusted EBITDA and Adjusted OIBDA as measurements of profitability, and therefore reconciliations to Net income are deemed appropriate. Management believes Adjusted EBITDA and Adjusted OIBDA are useful measures of UScellular's operating results before significant recurring non-cash charges, gains and losses, and other items as presented above as they provide additional relevant and useful information to investors and other users of UScellular's financial data in evaluating the effectiveness of its operations and underlying business trends in a manner that is consistent with management's evaluation of business performance. Adjusted EBITDA shows adjusted earnings before interest, taxes, depreciation, amortization and accretion, and gains and losses, while Adjusted OIBDA reduces this measure further to exclude Equity in earnings of unconsolidated entities and Interest and dividend income in order to more effectively show the performance of operating activities excluding investment activities. The table above reconciles EBITDA, Adjusted EBITDA and Adjusted OIBDA to the corresponding GAAP measure, Net income or Income before income taxes. Additional information and reconciliations related to Non-GAAP financial measures for September 30, 2020, can be found on UScellular's website at investors.uscellular.com.

Conference Call Information

UScellular will hold a conference call on November 6, 2020 at 9:00 a.m. Central Time.

Before the call, certain financial and statistical information to be discussed during the call will be posted to investors.uscellular.com. The call will be archived on the Events & Presentations page of investors.uscellular.com.

About UScellular

United States Cellular Corporation provides a comprehensive range of wireless products and services, excellent customer support, and a high-quality network to customers with 5.0 million connections in 21 states. The Chicago-based company had 5,300 full- and part-time associates as of September 30, 2020. At the end of the third quarter of 2020, Telephone and Data Systems, Inc. owned 82 percent of UScellular. For more information about UScellular, visit uscellular.com.

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 expectations. These statements are based on current estimates, projections, and assumptions, which involve certain risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements. Important factors that may affect these forward-looking statements include, but are not limited to: the impact, duration and severity of the COVID-19 pandemic; intense competition; the ability to execute UScellular's business strategy; uncertainties in UScellular's future cash flows and liquidity and access to the capital markets; the ability to make payments on UScellular indebtedness or comply with the terms of debt covenants; the ability to obtain or maintain roaming arrangements with other carriers on acceptable terms; the ability to obtain access to adequate radio spectrum to meet current or anticipated future needs, including participation in FCC auctions; the state and federal regulatory environment; the ability to attract people of outstanding talent throughout all levels of the organization; conditions in the U.S. telecommunications industry; UScellular's smaller scale relative to larger competitors; changes in demand, consumer preferences, price competition, or  churn rates; advances in  technology; the value of assets and investments; impacts of costs, integration problems or other factors associated with acquisitions, divestitures or exchanges of properties or licenses and/or expansion of UScellular's businesses; the ability of the company to successfully construct and manage its networks; difficulties involving third parties; cyber-attacks or other breaches of network or information technology security; changes in facts and circumstances that could require UScellular to record adjustments to amounts reflected in the financial statements; disruption in credit or other financial markets; deterioration of U.S. or global economic conditions; pending and future litigation; potential conflicts of interests between TDS and UScellular. Investors are encouraged to consider these and other risks and uncertainties that are more fully described under "Risk Factors" in the most recent filing of UScellular's Form 10-K, as updated by any UScellular Form 10-Q filed subsequent to such Form 10-K. 

The impact of the COVID-19 pandemic on UScellular's business is uncertain, but depending on its duration and severity it could have a material adverse effect on UScellular's business, financial condition or results of operations.

The impact of the global spread of COVID-19 on UScellular's future operations is uncertain. Public health emergencies, such as COVID-19, pose the risk that UScellular or its associates, agents, partners and suppliers may be unable to conduct business activities for an extended period of time and/or provide the level of service expected. UScellular's ability to attract customers, maintain an adequate supply chain and execute on its business strategies and initiatives could be negatively impacted by this outbreak. Additionally, COVID-19 has caused and could continue to cause increased unemployment, economic downturn and credit market deterioration, all of which could negatively impact UScellular. The extent of the impact of COVID-19 on UScellular's business, financial condition and results of operations will depend on future circumstances, including the severity of the disease, the duration of the outbreak, actions taken by governmental authorities and other possible direct and indirect consequences, all of which are uncertain and cannot be predicted.

For more information about UScellular, visit: www.uscellular.com

United States Cellular Corporation

Summary Operating Data (Unaudited)

As of or for the Quarter Ended

9/30/2020


6/30/2020


3/31/2020


12/31/2019


9/30/2019

Retail Connections










Postpaid










Total at end of period

4,401,000



4,372,000



4,359,000



4,383,000



4,395,000


Gross additions

168,000



129,000



132,000



170,000



163,000


Feature phones

4,000



3,000



2,000



2,000



3,000


Smartphones

98,000



82,000



88,000



128,000



121,000


Connected devices

66,000



44,000



42,000



40,000



39,000


Net additions (losses)

28,000



12,000



(26,000)



(12,000)



(19,000)


Feature phones

(8,000)



(8,000)



(10,000)



(11,000)



(11,000)


Smartphones

8,000



11,000



(10,000)



13,000



9,000


Connected devices

28,000



9,000



(6,000)



(14,000)



(17,000)


ARPU1

$

47.10



$

46.24



$

47.23



$

46.57



$

46.16


ARPA2

$

123.27



$

120.70



$

122.92



$

120.99



$

119.87


Churn rate3

1.06

%


0.89

%


1.21

%


1.38

%


1.38

%

Handsets

0.88

%


0.71

%


0.95

%


1.11

%


1.09

%

Connected devices

2.35

%


2.24

%


3.11

%


3.44

%


3.44

%

Prepaid










Total at end of period

506,000



496,000



494,000



506,000



510,000


Gross additions

65,000



62,000



57,000



63,000



70,000


Net additions (losses)

11,000



2,000



(12,000)



(3,000)



9,000


ARPU1

$

35.45



$

34.89



$

34.07



$

34.11



$

34.35


Churn rate3

3.59

%


4.05

%


4.67

%


4.40

%


4.03

%

Total connections at end of period4

4,962,000



4,919,000



4,903,000



4,941,000



4,957,000


Market penetration at end of period










Consolidated operating population

31,314,000



31,292,000



31,292,000



30,740,000



31,310,000


Consolidated operating penetration5

16

%


16

%


16

%


16

%


16

%

Capital expenditures (millions)

$

216



$

168



$

236



$

243



$

170


Total cell sites in service

6,758



6,673



6,629



6,578



6,554


Owned towers

4,246



4,208



4,184



4,166



4,123




Average Revenue Per User (ARPU) - metric is calculated by dividing a revenue base by an average number of connections and by the number of months in the period. These revenue bases and connection populations are shown below:


 · 

Postpaid ARPU consists of total postpaid service revenues and postpaid connections.


 · 

Prepaid ARPU consists of total prepaid service revenues and prepaid connections.

Average Revenue Per Account (ARPA) - metric is calculated by dividing total postpaid service revenues by the average number of postpaid accounts and by the number of months in the period.

Churn rate represents the percentage of the connections that disconnect service each month. These rates represent the average monthly churn rate for each respective period.

Includes reseller and other connections.

5  

Market penetration is calculated by dividing the number of wireless connections at the end of the period by the total population of consolidated operating markets as estimated by Nielsen.

 

United States Cellular Corporation

Consolidated Statement of Operations Highlights

(Unaudited)






Three Months Ended

September 30,


Nine Months Ended

September 30,


2020


2019


2020

vs. 2019


2020


2019


2020

vs. 2019

(Dollars and shares in millions, except per share amounts)












Operating revenues












Service

$

775



$

774





$

2,290



$

2,272



1

%

Equipment sales

252



257



(2)

%


674



698



(3)

%

Total operating revenues

1,027



1,031





2,964



2,970
















Operating expenses












System operations (excluding Depreciation, amortization and accretion reported below)

203



199



2

%


580



568



2

%

Cost of equipment sold

257



266



(4)

%


692



724



(4)

%

Selling, general and administrative

335



358



(6)

%


994



1,027



(3)

%

Depreciation, amortization and accretion

161



181



(11)

%


516



524



(2)

%

(Gain) loss on asset disposals, net

6



5



15

%


14



13



10

%

(Gain) loss on sale of business and other exit costs, net





N/M




(1)



N/M

(Gain) loss on license sales and exchanges, net



2



N/M






N/M

Total operating expenses

962



1,011



(5)

%


2,796



2,855



(2)

%













Operating income

65



20



N/M


168



115



46

%













Investment and other income (expense)












Equity in earnings of unconsolidated entities

48



44



10

%


137



128



7

%

Interest and dividend income

2



4



(59)

%


6



14



(55)

%

Gain (loss) on investments

3





N/M


3





N/M

Interest expense

(29)



(29)





(76)



(87)



11

%

Total investment and other income

24



19



27

%


70



55



27

%













Income before income taxes

89



39



N/M


238



170



40

%

Income tax expense

4



15



(78)

%


11



55



(80)

%

Net income

85



24



N/M


227



115



98

%

Less: Net income attributable to noncontrolling interests, net of tax



1



(28)

%


3



6



(47)

%

Net income attributable to UScellular shareholders

$

85



$

23



N/M


$

224



$

109



N/M













Basic weighted average shares outstanding

86



86



(1)

%


86



87



(1)

%

Basic earnings per share attributable to UScellular shareholders

$

0.98



$

0.27



N/M


$

2.60



$

1.26



N/M













Diluted weighted average shares outstanding

88



88



(1)

%


87



88



(1)

%

Diluted earnings per share attributable to UScellular shareholders

$

0.97



$

0.27



N/M


$

2.56



$

1.24



N/M


N/M - Percentage change not meaningful

 

United States Cellular Corporation

Consolidated Statement of Cash Flows

(Unaudited)


Nine Months Ended

September 30,


2020


2019

(Dollars in millions)




Cash flows from operating activities




Net income

$

227



$

115


Add (deduct) adjustments to reconcile net income to net cash flows from operating activities




Depreciation, amortization and accretion

516



524


Bad debts expense

52



77


Stock-based compensation expense

25



32


Deferred income taxes, net

158



(34)


Equity in earnings of unconsolidated entities

(137)



(128)


Distributions from unconsolidated entities

118



99


(Gain) loss on asset disposals, net

14



13


(Gain) loss on sale of business and other exit costs, net



(1)


(Gain) loss on investments

(3)




Other operating activities

1



3


Changes in assets and liabilities from operations




Accounts receivable

31



(35)


Equipment installment plans receivable

13



(42)


Inventory

5



3


Accounts payable

77



(4)


Customer deposits and deferred revenues

(23)



(1)


Accrued taxes

(102)



81


Accrued interest

14



9


Other assets and liabilities

(36)



(24)


Net cash provided by operating activities

950



687






Cash flows from investing activities




Cash paid for additions to property, plant and equipment

(690)



(439)


Cash paid for licenses

(169)



(257)


Cash received from investments

1



29


Cash paid for investments

(1)



(11)


Cash received from divestitures and exchanges

1



32


Other investing activities

3



(1)


Net cash used in investing activities

(855)



(647)






Cash flows from financing activities




Issuance of long-term debt

625




Repayment of long-term debt

(6)



(14)


Common Shares reissued for benefit plans, net of tax payments

(12)



(8)


Repurchase of Common Shares

(23)



(21)


Payment of debt issuance costs

(20)



(1)


Distributions to noncontrolling interests

(2)



(3)


Other financing activities



(1)


Net cash provided by (used in) financing activities

562



(48)






Net increase (decrease) in cash, cash equivalents and restricted cash

657



(8)






Cash, cash equivalents and restricted cash




Beginning of period

291



583


End of period

$

948



$

575


 

United States Cellular Corporation

Consolidated Balance Sheet Highlights

(Unaudited)


ASSETS






September 30, 2020


December 31, 2019

(Dollars in millions)




Current assets




Cash and cash equivalents

$

931



$

285


Accounts receivable, net

945



1,010


Inventory, net

157



162


Prepaid expenses

54



50


Income taxes receivable

174



46


Other current assets

28



20


Total current assets

2,289



1,573






Assets held for sale

19








Licenses

2,628



2,471






Investments in unconsolidated entities

467



447






Property, plant and equipment, net

2,322



2,207






Operating lease right-of-use assets

919



900






Other assets and deferred charges

536



566






Total assets

$

9,180



$

8,164


 

United States Cellular Corporation

Consolidated Balance Sheet Highlights

(Unaudited)


LIABILITIES AND EQUITY






September 30, 2020


December 31, 2019

(Dollars in millions, except per share amounts)




Current liabilities




Current portion of long-term debt

$

2



$

8


Accounts payable

313



304


Customer deposits and deferred revenues

126



148


Accrued taxes

44



30


Accrued compensation

63



76


Short-term operating lease liabilities

113



105


Other current liabilities

69



79


Total current liabilities

730



750






Deferred liabilities and credits




Deferred income tax liability, net

665



507


Long-term operating lease liabilities

877



865


Other deferred liabilities and credits

364



319






Long-term debt, net

2,108



1,502






Noncontrolling interests with redemption features

10



11






Equity




UScellular shareholders' equity




Series A Common and Common Shares, par value $1.00 per share

88



88


Additional paid-in capital

1,654



1,629


Treasury shares

(67)



(70)


Retained earnings

2,736



2,550


Total UScellular shareholders' equity

4,411



4,197






Noncontrolling interests

15



13






Total equity

4,426



4,210






Total liabilities and equity

$

9,180



$

8,164


 

United States Cellular Corporation
Financial Measures and Reconciliations
(Unaudited)

Free Cash Flow



Three Months Ended

September 30,


Nine Months Ended

September 30,


2020


2019


2020


2019

(Dollars in millions)








Cash flows from operating activities (GAAP)

$

257



$

211



$

950



$

687


Less: Cash paid for additions to property, plant and equipment

219



157



690



439


Free cash flow (Non-GAAP)1

$

38



$

54



$

260



$

248




Free cash flow is a non-GAAP financial measure which UScellular believes may be useful to investors and other users of its financial information in evaluating liquidity, specifically, the amount of net cash generated by business operations after deducting Cash paid for additions to property, plant and equipment.

 

 

Cision View original content:http://www.prnewswire.com/news-releases/uscellular-reports-third-quarter-2020-results-301167473.html

SOURCE United States Cellular Corporation

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