Q3 2024 Earnings Overview UScellular's Q3 2024 results show a decline in total operating and service revenues, with a net loss to shareholders primarily due to a significant licenses impairment charge Q3 2024 Financial Highlights UScellular experienced a year-over-year decline in total operating and service revenues in Q3 2024, reporting a net loss to shareholders driven by a significant licenses impairment charge, though net income and EPS were flat excluding this charge - Q3 2024 Key Financial Data (Year-over-Year) | Metric | Q3 2024 | Q3 2023 | Change | | :----------------------------------- | :------ | :------ | :----- | | Total Operating Revenues | $922M | $963M | (4)% | | Service Revenues | $747M | $762M | (2)% | | Net Income (Loss) Attributable to UScellular Shareholders | $(79)M | $23M | N/M | | Diluted Earnings (Loss) Per Share Attributable to UScellular Shareholders | $(0.92) | $0.26 | N/M | | Net Income (Loss) Attributable to UScellular Shareholders (Excluding Licenses Impairment) | $23M | $23M | 0% | | Diluted Earnings Per Share (Excluding Licenses Impairment) | $0.26 | $0.26 | 0% | | Licenses Impairment | $136M | $0 | N/M | Recent Business Highlights UScellular announced significant spectrum asset sales, improved wireless operating performance with reduced postpaid handset net losses and lower churn, and strong fixed wireless customer growth - Announced the sale of certain spectrum assets to Verizon for $1 billion in October 2024, along with additional spectrum sales to two other mobile carriers59 - Improved wireless operating performance includes reduced postpaid handset net losses, 2% growth in postpaid ARPU, increased prepaid net additions, and improved postpaid and prepaid churn rates5 - Fixed wireless customers grew 32% to 140,0005 - Future network investments will focus on mid-band spectrum deployment to enhance speed and capacity, building on significant progress in 5G coverage6 Strategic Transactions and Alternatives UScellular and TDS reached a definitive agreement to sell UScellular's wireless business and certain spectrum assets to T-Mobile, expected to close mid-2025, while also selling additional spectrum to Verizon and other carriers for $1 billion and continuing to explore monetization opportunities for remaining spectrum - A definitive agreement has been reached with T-Mobile to sell UScellular's wireless business and certain spectrum assets, expected to close mid-2025, pending regulatory approvals7 - The T-Mobile transaction excludes approximately 4,400 UScellular-owned cell towers, equity investments, and about 70% of its spectrum assets8 - In October 2024, UScellular announced the sale of certain remaining spectrum assets to Verizon for $1 billion, and additional spectrum to two other mobile network operators, with these transactions contingent on the completion of the T-Mobile transaction9 2024 Financial Guidance UScellular updated its 2024 financial guidance, narrowing ranges for service revenues and capital expenditures while raising the lower and upper bounds for Adjusted OIBDA and Adjusted EBITDA, reflecting improved operational performance Updated 2024 Estimates UScellular updated its 2024 financial guidance, narrowing the ranges for service revenues and capital expenditures, and raising the lower and upper bounds for Adjusted OIBDA and Adjusted EBITDA, indicating confidence in operational improvements - Updated 2024 Estimates | Metric | Prior Guidance | Current Guidance | | :-------------------------- | :---------------- | :--------------- | | Service Revenues | $2,950-$3,050M | $2,950-$3,000M | | Adjusted OIBDA (Non-GAAP) | $750-$850M | $800-$875M | | Adjusted EBITDA (Non-GAAP) | $920-$1,020M | $970-$1,045M | | Capital Expenditures | $550-$650M | $550-$600M | Non-GAAP Reconciliations for Guidance This report provides a reconciliation of GAAP Net Income (Loss) to non-GAAP EBITDA, Adjusted EBITDA, and Adjusted OIBDA for the 2024 estimates, highlighting adjustments for interest, depreciation, strategic alternatives review costs, and licenses impairment - 2024 Forecast Non-GAAP Reconciliation Highlights | Metric | 2024 Forecast | | :------------------------------------------------- | :--------------------- | | Net Income (Loss) (GAAP) | N/A | | Earnings (Loss) Before Income Taxes (GAAP) | $(35)-$40M | | Interest Expense | $180M | | Depreciation, Amortization and Accretion Expense | $665M | | EBITDA (Non-GAAP) | $810-$885M | | Strategic Alternatives Review Related Costs | — | | Licenses Impairment Loss | $135M | | Adjusted EBITDA (Non-GAAP) | $970-$1,045M | | Equity in Earnings of Unconsolidated Entities | $160M | | Interest and Dividend Income | $10M | | Adjusted OIBDA (Non-GAAP) | $800-$875M | Operational Metrics UScellular's Q3 2024 operational performance shows a decline in total postpaid connections but improved postpaid handset net losses and positive prepaid net additions Retail Connections UScellular experienced a decrease in total postpaid connections in Q3 2024, but saw an improvement in postpaid handset net losses and positive growth in prepaid net additions - Retail Connections (Q3 2024 vs Q3 2023) | Metric | Q3 2024 | Q3 2023 | Change | | :------------------------- | :-------- | :-------- | :------- | | Postpaid Ending Connections | 3,999,000 | 4,159,000 | (3.8)% | | Postpaid Handset Net Additions (Losses) | (28,000) | (35,000) | Improved | | Prepaid Ending Connections | 452,000 | 462,000 | (2.2)% | | Prepaid Net Additions (Losses) | 13,000 | 0 | Increased | ARPU and Churn Rates In Q3 2024, postpaid ARPU increased year-over-year, while both postpaid and prepaid churn rates improved, indicating enhanced customer retention - ARPU and Churn Rates (Q3 2024 vs Q3 2023) | Metric | Q3 2024 | Q3 2023 | Change | | :------------------- | :------ | :------ | :----- | | Postpaid ARPU | $52.04 | $51.11 | 1.8% | | Postpaid Churn Rate | 1.25% | 1.30% | Improved | | Postpaid Handset Churn Rate | 1.07% | 1.11% | Improved | | Prepaid ARPU | $32.01 | $33.44 | (4.3)% | | Prepaid Churn Rate | 3.30% | 3.68% | Improved | Network and Capital Expenditures UScellular increased its capital expenditures in Q3 2024 while maintaining stable numbers for total cell sites and company-owned towers - Network Infrastructure and Capital Expenditures (Q3 2024 vs Q3 2023) | Metric | Q3 2024 | Q3 2023 | Change | | :-------------------------- | :------ | :------ | :----- | | Capital Expenditures (Millions USD) | $120 | $111 | 8.1% | | Total Cell Sites in Service | 7,007 | 6,973 | 0.5% | | Company-Owned Towers | 4,407 | 4,356 | 1.2% | | Collocations | 2,418 | 2,406 | 0.5% | | Tower Lease-Up Rate | 1.55 | 1.55 | 0% | Consolidated Financial Statements UScellular reported a significant operating and net loss in Q3 2024, primarily due to a $136 million licenses impairment loss, with total operating revenues declining by 4% year-over-year Consolidated Statement of Operations Highlights In Q3 2024, UScellular recorded a substantial operating and net loss, mainly driven by a $136 million licenses impairment loss, with total operating revenues decreasing by 4% year-over-year - Q3 2024 Consolidated Statement of Operations Highlights | Metric | Q3 2024 | Q3 2023 | Change | | :-------------------------------------------------------------------- | :------ | :------ | :----- | | Total Operating Revenues | $922M | $963M | (4)% | | Service Revenues | $747M | $762M | (2)% | | Equipment Sales | $175M | $201M | (13)% | | Total Operating Expenses | $1,012M | $906M | 12% | | Licenses Impairment Loss | $136M | $0 | N/M | | Operating Income (Loss) | $(90)M | $57M | N/M | | Net Income (Loss) Attributable to UScellular Shareholders | $(79)M | $23M | N/M | | Diluted Earnings (Loss) Per Share Attributable to UScellular Shareholders | $(0.92) | $0.26 | N/M | Consolidated Cash Flow Highlights For the nine months ended September 30, 2024, net cash provided by operating activities increased, and net cash used in investing activities decreased, leading to a net increase in cash, cash equivalents, and restricted cash, reversing the prior year's trend - Cash Flow Highlights for the Nine Months Ended September 30, 2024 | Metric | 9 Months 2024 | 9 Months 2023 | Change | | :------------------------------------------ | :------ | :------ | :----- | | Net Cash Provided by Operating Activities | $761M | $719M | 5.8% | | Net Cash Used in Investing Activities | $(415)M | $(464)M | 10.6% | | Net Cash Used in Financing Activities | $(237)M | $(378)M | 37.3% | | Net Increase (Decrease) in Cash, Cash Equivalents and Restricted Cash | $109M | $(123)M | N/M | | Cash, Cash Equivalents and Restricted Cash (End of Period) | $288M | $185M | 55.7% | Consolidated Balance Sheet Highlights As of September 30, 2024, UScellular's total assets slightly decreased, primarily due to reduced license values, while cash and cash equivalents significantly increased and long-term debt decreased - Consolidated Balance Sheet Highlights (September 30, 2024 vs December 31, 2023) | Metric | September 30, 2024 | December 31, 2023 | Change | | :----------------------------------- | :----------- | :----------- | :----- | | Total Assets | $10,516M | $10,750M | (2.2)% | | Cash and Cash Equivalents | $272M | $150M | 81.3% | | Licenses | $4,576M | $4,693M | (2.5)% | | Total Current Liabilities | $909M | $901M | 0.9% | | Long-Term Debt, Net | $2,882M | $3,044M | (5.4)% | | Total Equity Attributable to UScellular Shareholders | $4,582M | $4,626M | (1.0)% | Segment Results In Q3 2024, UScellular's total operating revenues declined, resulting in an operating loss, yet Adjusted OIBDA and Adjusted EBITDA both showed positive growth, indicating improved underlying profitability Overall Segment Performance In Q3 2024, UScellular's total operating revenues decreased, leading to an operating loss, but Adjusted OIBDA and Adjusted EBITDA both saw positive growth, suggesting improved underlying profitability - Q3 2024 Overall Segment Performance | Metric | Q3 2024 | Q3 2023 | Change | | :------------------------- | :------ | :------ | :----- | | Total Operating Revenues | $922M | $963M | (4)% | | Wireless Operating Revenues | $896M | $938M | (4)% | | Tower Operating Revenues | $59M | $57M | 2% | | Operating Income (Loss) | $(90)M | $57M | N/M | | Adjusted OIBDA (Non-GAAP) | $222M | $220M | 1% | | Adjusted EBITDA (Non-GAAP) | $269M | $263M | 3% | | Capital Expenditures | $120M | $111M | 8% | Wireless Segment Performance In Q3 2024, the Wireless segment's total operating revenues decreased by 4%, resulting in an operating loss, though its Adjusted OIBDA and Adjusted EBITDA still showed slight growth - Q3 2024 Wireless Segment Performance | Metric | Q3 2024 | Q3 2023 | Change | | :-------------------------- | :------ | :------ | :----- | | Total Operating Revenues | $896M | $938M | (4)% | | Service Revenues | $721M | $737M | (2)% | | Equipment Sales | $175M | $201M | (13)% | | Operating Income (Loss) | $(109)M | $38M | N/M | | Adjusted OIBDA (Non-GAAP) | $191M | $190M | 1% | | Adjusted EBITDA (Non-GAAP) | $191M | $190M | 1% | | Capital Expenditures | $114M | $106M | 7% | Towers Segment Performance In Q3 2024, the Towers segment saw a 2% increase in total revenues, maintained stable operating income, and achieved positive growth in both Adjusted OIBDA and Adjusted EBITDA, with a significant increase in capital expenditures - Q3 2024 Towers Segment Performance | Metric | Q3 2024 | Q3 2023 | Change | | :-------------------------- | :------ | :------ | :----- | | Total Tower Revenues | $59M | $57M | 2% | | Third-Party Revenues | $26M | $25M | 1% | | Intercompany Revenues | $33M | $32M | 3% | | Operating Income | $19M | $19M | (1)% | | Adjusted OIBDA (Non-GAAP) | $31M | $30M | 3% | | Adjusted EBITDA (Non-GAAP) | $31M | $30M | 3% | | Capital Expenditures | $6M | $5M | 33% | Non-GAAP Financial Measures & Reconciliations This section provides reconciliations for non-GAAP financial measures, including free cash flow and net income excluding licenses impairment, to offer a clearer view of UScellular's underlying financial performance Free Cash Flow Reconciliation For the nine months ended September 30, 2024, UScellular's free cash flow significantly increased to $331 million, driven by higher cash flow from operating activities and reduced capital expenditures - Free Cash Flow for the Nine Months Ended September 30, 2024 | Metric | 9 Months 2024 | 9 Months 2023 | Change | | :------------------------------------------------------- | :------ | :------ | :----- | | Net Cash Provided by Operating Activities (GAAP) | $761M | $719M | 5.8% | | Cash Paid for Property, Plant and Equipment | $(399)M | $(454)M | 12.1% | | Cash Paid for Software License Agreements | $(31)M | $(28)M | (10.7)% | | Free Cash Flow (Non-GAAP) | $331M | $237M | 39.7% | Net Income Excluding Licenses Impairment Excluding the $136 million licenses impairment charge and its deferred tax benefit, UScellular's Q3 2024 net income attributable to shareholders would be $23 million, flat year-over-year, with diluted EPS of $0.26 - Q3 2024 Net Income Excluding Licenses Impairment | Metric | Q3 2024 (GAAP) | Q3 2024 (Non-GAAP, Excluding Impairment) | Q3 2023 (GAAP) | | :------------------------------------------------------------------------------------------------------------------------------------ | :------------- | :----------------------------------- | :------------- | | Net Income (Loss) Attributable to UScellular Shareholders | $(79)M | $23M | $23M | | Licenses Impairment Loss | — | $136M | — | | Deferred Tax Benefit on Tax-Deductible Portion of Impaired Licenses | — | $(34)M | — | | Diluted Earnings (Loss) Per Share Attributable to UScellular Shareholders | $(0.92) | $0.26 | $0.26 | Additional Corporate Information This section provides supplementary corporate details, including stock repurchase activities, an overview of UScellular, and a safe harbor statement regarding forward-looking information Stock Repurchase In Q3 2024, UScellular repurchased 474,074 shares of common stock for a total value of $26 million - In Q3 2024, UScellular repurchased 474,074 shares of common stock for $26 million13 About UScellular United States Cellular Corporation is a wireless service provider serving 4.5 million retail connections across 21 states, with Telephone and Data Systems, Inc. holding approximately 83% of its equity as of Q3 2024 - UScellular provides comprehensive wireless products and services to 4.5 million retail connections across 21 states16 - As of September 30, 2024, Telephone and Data Systems, Inc. owned approximately 83% of UScellular's equity16 Safe Harbor Statement The safe harbor statement clarifies that all content in the press release, excluding historical and factual information, constitutes forward-looking statements based on current estimates and assumptions, subject to risks and uncertainties that could cause actual results to differ materially - All content in the press release, except for historical and factual information, constitutes forward-looking statements based on current estimates and assumptions, subject to risks and uncertainties that could cause actual results to differ materially from those projected17 - Key factors influencing forward-looking statements include the successful completion of announced transactions (T-Mobile, Verizon), strategic decisions regarding the tower business, intense competition, spectrum acquisition capabilities, and the regulatory environment17
U.S. Cellular(USM) - 2024 Q3 - Quarterly Results