U.S. Cellular Corporation (USM) reported soft first-quarter 2025 results, with both top and bottom lines missing the respective Zacks Consensus Estimate. The company reported a revenue decline year over year, owing to a decrease in postpaid and prepaid retail connections. However, increasing customer growth in fixed wireless businesses partially supported the top line. Healthy postpaid handset growth and improvement in tower rental revenues are tailwinds. The 5G mid-band network deployment is boosting speed ...

United States Cellular Corporation (USM) Q1 2025 Earnings Call May 02, 2025 10:00 AM ET Company Participants Colleen Thompson - Vice President of Corporate RelationsVicki Villacrez - Executive VP, CFO & DirectorLaurent Therivel - President & CEODouglas Chambers - Executive VP, CFO, Treasurer & DirectorKristina Bothfeld - VP of Finance & CFORic Prentiss - Managing DirectorSergey Dluzhevskiy - Portifolio Manager Conference Call Participants Sebastiano Petti - Senior Research Analyst Operator Hello, and thank ...

Financial Data and Key Metrics Changes - Total operating revenues decreased by 3% year over year, impacted by divestitures and declines in commercial and wholesale revenue, as well as decreases in residential video and voice connections [44] - Free cash flow for Q1 2025 was $79 million, an increase of $18 million compared to the same quarter last year [13][19] - Cash expenses increased by 6% or $11 million compared to the prior year, with $4 million of this increase attributed to a cumulative non-cash adjustment to stock-based compensation [44] Business Line Data and Key Metrics Changes - Postpaid handset results showed year-over-year improvements, while third-party tower revenues increased by 6% due to new co-locations and escalators on renewed leases [12] - Fiber service addresses grew by 6% year over year, with 14,000 new addresses delivered in the quarter [33][42] - Residential broadband net additions were 2,800, with 8,300 coming from fiber markets, lower than prior quarters due to timing of service address delivery [34][38] Market Data and Key Metrics Changes - The company continues to face aggressive promotional competition in the wireless industry, with competitors offering multi-year price locks and aggressive pricing [14] - Demand for higher broadband speeds remains strong, with 82% of residential broadband customers taking 100 megabits or higher and 24% taking one gig or higher at the end of the quarter [42] Company Strategy and Development Direction - The company is focused on completing the proposed transaction with T-Mobile, which is expected to close in mid-2025, and is preparing for a smooth transition [9][16] - A special dividend to shareholders is anticipated following the closing of the T-Mobile transaction, with proceeds expected to be used to repay outstanding bank debt [10][18] - The fiber program has expanded the company's footprint by over 30% in the last three years, with further growth opportunities identified [11] Management's Comments on Operating Environment and Future Outlook - Management acknowledged increased uncertainties in the broader economy and markets but remains optimistic about the long-term potential of the tower business and fiber expansion [7][12] - The company is focused on cost optimization and expects capital expenditures to decline in 2025 as planned 5G coverage builds are largely completed [13][46] - Management expressed confidence in achieving $100 million in annual cost savings by the end of 2028 through transformation efforts [35][72] Other Important Information - The company does not plan to redeem Series UU and Series BV preferred stock, viewing them as foundational capital for future operations [10][68] - The expected cash income tax obligations related to the T-Mobile transaction are estimated to be between $225 million and $325 million [28][30] Q&A Session Summary Question: Timeline for designated entity spectrum approval - The timing is uncertain and dependent on regulatory approval by the FCC, but there is optimism for a positive outcome [52][54] Question: Free cash flow run rate - The $79 million in free cash flow is not necessarily a run rate, but capital expenditures are expected to be down in 2025, which is positive for free cash flow [55] Question: Debt exchange offer impact - The debt exchange offer will be launched about 50 days before the anticipated close, and the amount of debt exchanged will impact transaction proceeds [56][110] Question: Fiber net adds and sales efforts - Fiber net additions were lower due to timing of address delivery, but management expects improvements as construction activity ramps up [60][62] Question: Divestiture strategy and criteria - The company is focused on divesting non-core assets, particularly isolated copper markets without an economic path to fiber, ensuring that net proceeds exceed the present value of cash flows from continued operations [95][96]

United States Cellular (USM) came out with quarterly earnings of $0.21 per share, missing the Zacks Consensus Estimate of $0.37 per share. This compares to earnings of $0.20 per share a year ago. These figures are adjusted for non-recurring items.This quarterly report represents an earnings surprise of -43.24%. A quarter ago, it was expected that this wireless telecommunications service provider would post a loss of $0.10 per share when it actually produced earnings of $0.05, delivering a surprise of 150%.O ...

Financial Performance - UScellular reported total operating revenues of $891 million for the three months ended March 31, 2025, a decrease of 6% compared to $950 million for the same period in 2024[25]. - Wireless operating revenues decreased by 7% to $864 million, while Towers segment revenues increased by 5% to $61 million[25]. - Operating income fell by 19% to $41 million, with net income attributable to UScellular shareholders remaining flat at $18 million[25]. - Adjusted OIBDA decreased by 6% to $215 million, and Adjusted EBITDA decreased by 7% to $254 million[25]. - Total operating revenues for the three months ended March 31, 2025, were $864 million, a decrease of 7% compared to $925 million in the same period of 2024[34]. - UScellular's net income for the three months ended March 31, 2025, was $20 million, compared to $24 million for the same period in 2024[86]. - Operating income for Q1 2025 was $41 million, a decrease of 19.6% compared to $51 million in Q1 2024[110]. - EBITDA for the three months ended March 31, 2025, was $243 million, compared to $260 million for the same period in 2024[86]. - Service revenues decreased to $741 million in Q1 2025, down from $754 million in Q1 2024, representing a decline of 1.7%[110]. - Equipment sales decreased to $150 million in Q1 2025, compared to $196 million in Q1 2024, reflecting a decline of 23.5%[134]. Capital Expenditures - Capital expenditures significantly decreased by 60% to $53 million compared to $131 million in the prior year[25]. - Capital expenditures for the wireless segment significantly decreased by 60% to $51 million in Q1 2025 from $127 million in Q1 2024[34]. - Capital expenditures decreased by $78 million or 60% year-over-year, aligning with the focus on enhancing speed and capacity for existing 5G services[66]. - The company expects to finance its capital expenditures for 2025 primarily through cash flows from operating activities and existing cash balances[67]. Debt and Financing - UScellular's long-term debt as of March 31, 2025, totaled $2.918 billion, with a weighted average interest rate of 6.1%[107]. - Approximately 70% of UScellular's long-term debt is in fixed-rate senior notes, while 30% is in variable-rate debt[105]. - UScellular's consolidated leverage ratio is required to be maintained at a maximum of 4.00 to 1.00 until March 31, 2025, and then reduced to 3.75 to 1.00 thereafter[62]. - UScellular has an unsecured revolving credit agreement with a maximum borrowing capacity of $300 million, with no outstanding borrowings as of March 31, 2025[160]. - UScellular's outstanding borrowings under term loan agreements were $718 million as of March 31, 2025, with maximum borrowing capacities of $800 million[162]. Shareholder Actions - The company repurchased 328,835 common shares for $21 million at an average cost of $63.49 per share during the three months ended March 31, 2025[71]. - The maximum number of shares that may yet be purchased under the stock repurchase plan is 658,107 shares[197]. - UScellular anticipates declaring special dividends to shareholders following the completion of the T-Mobile transaction, pending regulatory approval[72]. Network and Operations - The company continues to enhance its network capabilities by deploying 5G technology to meet growing customer demand for data services[20]. - UScellular serves approximately 4.4 million retail connections, including about 3.9 million postpaid and 0.4 million prepaid connections[13]. - UScellular incurred third-party expenses related to announced transactions of $10 million for the three months ended March 31, 2025, compared to $7 million in the same period of 2024[21]. - Total tower revenues increased by 5% to $61 million in Q1 2025, up from $58 million in Q1 2024, driven by new colocations and rent escalations[45]. Transactions and Sales - The company is in the process of selling its wireless operations and select spectrum assets to T-Mobile for a total purchase price of $4,400 million, expected to close in mid-2025[15]. - UScellular entered into agreements to sell wireless spectrum licenses to Verizon and AT&T for total proceeds of $1,000 million and $1,018 million, respectively, both transactions subject to regulatory approval[17][18]. - UScellular agreed to sell its wireless operations and select spectrum assets to T-Mobile for a purchase price of $4,400 million, with approximately $2,000 million in debt assumption[151]. - UScellular entered into a License Purchase Agreement with Verizon for certain wireless spectrum licenses, expecting total proceeds of $1,000 million, with a book value of $586 million as of March 31, 2025[152]. - UScellular also signed a License Purchase Agreement with AT&T for certain wireless spectrum licenses, with total proceeds of $1,018 million and a book value of $859 million as of March 31, 2025[153]. Customer Metrics - UScellular's retail connections decreased to 4,377,000 as of March 31, 2025, down from 4,487,000 in 2024, representing a decline of 2.5%[29]. - Postpaid revenue average revenue per user (ARPU) increased slightly to $52.06 in Q1 2025 from $51.96 in Q1 2024, while average revenue per account (ARPA) rose to $132.25 from $132.00[32]. - Total postpaid handset net losses decreased by 11% to 39,000 in Q1 2025 compared to 44,000 in Q1 2024, attributed to increased gross additions and reduced defections[30]. Cash Flow and Assets - Cash flows from operating activities for Q1 2025 were $160 million, down from $203 million in Q1 2024[89]. - Free cash flow for the three months ended March 31, 2025, was $79 million, an increase from $61 million in the same period of 2024[89]. - Total current assets increased to $1,373 million as of March 31, 2025, compared to $1,345 million at the end of 2024, reflecting a growth of 2.08%[114]. - Cash and cash equivalents rose to $182 million, up 26.39% from $144 million at the end of 2024[114]. - Total assets decreased to $10,365 million as of March 31, 2025, from $10,449 million at the end of 2024, a decline of 0.81%[114].

Financial Performance - UScellular reported total operating revenues of $891 million for Q1 2025, a decrease of 6% from $950 million in Q1 2024[3]. - Service revenues for Q1 2025 were $741 million, down 2% from $754 million in the same period last year[20]. - Net income for the three months ended March 31, 2025, was $20 million, a decrease of 17% compared to $24 million in the same period of 2024[22]. - Total operating revenues decreased by 6% to $891 million in Q1 2025 from $950 million in Q1 2024, with wireless revenues down 7% to $864 million[28]. - Adjusted EBITDA for the three months ended March 31, 2025, was $254 million, down 7% from $272 million in the same period of 2024[28]. - Free cash flow for Q1 2025 was $79 million, an increase of 29% compared to $61 million in Q1 2024[32]. - Net income (GAAP) for Q1 2025 was $20 million, down from $24 million in Q1 2024, representing a decrease of 16.67%[35]. - Adjusted EBITDA (Non-GAAP) for Q1 2025 was $215 million, compared to $228 million in Q1 2024, reflecting a decline of 5.70%[35]. Operational Metrics - UScellular's postpaid gross additions were 105,000 in Q1 2025, while net losses improved to 39,000 compared to 14,000 in Q1 2024[18]. - The churn rate for postpaid connections was 1.21% in Q1 2025, an improvement from 1.29% in Q1 2024[18]. - UScellular's total retail connections at the end of Q1 2025 were 4.4 million, with 3.946 million postpaid connections[18]. - The company reported a 24% decline in equipment sales, totaling $150 million in Q1 2025 compared to $196 million in Q1 2024[30]. - Operating income for the wireless segment decreased by 30% to $20 million in Q1 2025 from $29 million in Q1 2024[30]. - Operating income (GAAP) for UScellular Wireless in Q1 2025 was $20 million, down from $29 million in Q1 2024, a decrease of 31.03%[35]. - Adjusted EBITDA for UScellular Wireless was $182 million in Q1 2025, compared to $195 million in Q1 2024, a decline of 6.67%[35]. Capital Expenditures and Assets - Capital expenditures for Q1 2025 were $53 million, significantly lower than $162 million in Q4 2024[18]. - Capital expenditures decreased significantly by 60% to $53 million in Q1 2025 from $131 million in Q1 2024[28]. - Total assets as of March 31, 2025, were $10,365 million, a slight decrease from $10,449 million at the end of 2024[26]. - Total current liabilities decreased to $807 million as of March 31, 2025, from $884 million at the end of 2024[26]. - Cash and cash equivalents increased to $182 million as of March 31, 2025, compared to $144 million at the end of 2024[24]. Shareholder Returns and Expenses - The company repurchased 328,835 common shares for $21 million during Q1 2025[10]. - Interest expense for UScellular was $40 million in Q1 2025, compared to $43 million in Q1 2024, a decrease of 6.98%[35]. - Expenses related to strategic alternatives review for UScellular Wireless increased to $9 million in Q1 2025 from $7 million in Q1 2024, an increase of 28.57%[35]. - Equity in earnings of unconsolidated entities was $36 million in Q1 2025, down from $42 million in Q1 2024, a decrease of 14.29%[35]. Future Outlook - Due to the pending sale of wireless operations to T-Mobile, UScellular is not providing financial guidance for 2025[8].

Company Overview - United States Cellular (USM) shares increased by 5.3% to close at $65.94, with trading volume significantly higher than usual, contrasting with a 3% loss over the past four weeks [1] - The company is focused on accelerating subscriber additions and improving churn management, aiming to provide superior wireless experiences through enhanced network quality and national coverage [2] Financial Performance - U.S. Cellular is expected to report quarterly earnings of $0.37 per share, reflecting an 85% year-over-year increase, while revenues are projected at $925.42 million, a decrease of 2.6% from the previous year [3] - The consensus EPS estimate for U.S. Cellular has remained stable over the last 30 days, indicating that stock price movements may not sustain without earnings estimate revisions [4] Industry Context - U.S. Cellular operates within the Zacks Wireless National industry, where competitive pricing strategies, such as flat rate plans, are gaining traction among postpaid customers [2] - ATN International, another player in the same industry, has seen a significant EPS estimate change of -64.5% over the past month, with a current Zacks Rank of 1 (Strong Buy) [5]

Core Viewpoint - Shares of United States Cellular Corporation (USM) have increased by 91.7% over the past year, driven by strong performance in the wireless sector and rising earnings estimates for the current and next fiscal years, indicating significant growth potential [1] Group 1: Growth Drivers - U.S. Cellular is implementing strategies to boost subscriber growth and manage churn effectively, focusing on providing superior network quality and national coverage [2][8] - The company is expanding its market presence and adopting unlimited plans to increase average revenue per user, while also progressing with 5G deployment and network modernization [2][9] - Fixed wireless business is experiencing solid user engagement, with a 27% year-over-year growth in fixed wireless customers, reaching 145,000 [3] Group 2: Financial Strategies - U.S. Cellular is actively working to reduce its debt and improve liquidity by monetizing its spectrum holdings, including a $4.4 billion agreement with T-Mobile US Inc. to sell most of its wireless operations and 30% of its spectrum assets [4][5] - The divestiture will enhance liquidity and reduce debt, while also providing a steady revenue stream from T-Mobile as an anchor tenant on over 2,015 towers for 15 years [5] Group 3: Operational Initiatives - The company is focused on enhancing profitability through various initiatives, including a new billing system, continuous rollout of 4G LTE, and expansion of 5G device offerings [10] - U.S. Cellular aims to improve customer service and capitalize on business opportunities related to 5G and IoT, while managing data delivery costs effectively [10]

Core Viewpoint - United States Cellular (USM) shares have increased by 3.5% recently, with analysts suggesting a potential upside of 26% based on a mean price target of $85.33 [1][9] Price Targets - The mean estimate for USM's price target is $85.33, with a standard deviation of $2.52, indicating a relatively tight clustering of estimates [2][7] - The lowest price target is $83, suggesting a 22.6% increase, while the highest target is $88, indicating a potential 30% rise [2] Analyst Sentiment - Analysts show strong agreement in revising earnings estimates upward, which correlates with positive stock price movements [4][9] - Over the past 30 days, the Zacks Consensus Estimate for USM's current year earnings has increased by 9.4%, with two estimates moving higher and no negative revisions [10] Zacks Rank - USM holds a Zacks Rank 1 (Strong Buy), placing it in the top 5% of over 4,000 ranked stocks based on earnings estimate factors, indicating strong potential for upside [11] Caution on Price Targets - While price targets are a common tool for investors, they can often mislead, and reliance solely on them may not yield favorable returns [5][8]

Core Viewpoint - United States Cellular (USM) shows a significantly improving earnings outlook, making it a solid investment choice as analysts continue to raise their earnings estimates [1][2] Earnings Estimate Revisions - Analysts' optimism regarding U.S. Cellular's earnings prospects is leading to higher estimates, which is expected to positively impact the stock price [2] - The earnings estimate for the current quarter is $0.37 per share, reflecting an increase of +85% from the previous year [4] - Over the last 30 days, the Zacks Consensus Estimate for U.S. Cellular has risen by 17.74%, with two estimates moving higher and no negative revisions [4] - For the full year, the expected earnings are $1.16 per share, indicating a change of +352.17% from the prior year [5] - The consensus estimate for the current year has increased by 9.43%, with two estimates moving higher and no negative revisions [5] Zacks Rank - U.S. Cellular currently holds a Zacks Rank 1 (Strong Buy), indicating promising estimate revisions and a strong potential for outperformance [6] - Stocks with Zacks Rank 1 and 2 have historically outperformed the S&P 500 [6] Stock Performance - U.S. Cellular shares have increased by 5.1% over the past four weeks, suggesting investor confidence in its earnings growth prospects [7]