U.S. Cellular(USM) - 2025 Q2 - Quarterly Report

Management Discussion and Analysis of Financial Condition and Results of Operations Executive Overview The company, now Array, is undergoing a strategic transformation by divesting wireless operations to focus on its Towers business - Company Name Change: United States Cellular Corporation changed its name to Array Digital Infrastructure, Inc. on August 1, 2025[8] - Strategic Divestitures: - Wireless operations and select spectrum assets sold to T-Mobile on August 1, 2025, for $2,629 million cash proceeds[14][15] - Pending sale of AWS, Cellular, and PCS wireless spectrum licenses to Verizon for $1,000 million, expected to close Q3 2026[16] - Pending sale of 3.45 GHz and 700 MHz wireless spectrum licenses to AT&T for $1,018 million, expected to close in 2025[20] - Future Business Focus: Grow Towers operations, manage noncontrolling interests in wireless operating companies, and opportunistically monetize remaining wireless spectrum[12][13][17] - Subsequent Events (Post June 30, 2025): - Acquisition of King Street Wireless, Inc and Sunshine Spectrum, Inc for $17 million, expecting a $50 million income tax benefit - Termination of receivables securitization agreement on July 31, 2025 - T-Mobile transaction closed on August 1, 2025, resulting in $2,629 million cash proceeds and an expected $250-$300 million cash income tax liability - Debt exchange offer concluded, exchanging $1,680 million of long-term debt - Master License Agreement (MLA) with T-Mobile for 15-year leases on a minimum of 2,015 Array-owned towers - Special dividend of $23.00 per share declared on August 1, 2025 - Repayment of $863 million in term loans and export credit financing on August 4, 2025[19][20] Terms Used by Array This section defines key industry-specific and non-GAAP financial terms to ensure clarity and consistent understanding - Definitions provided for industry terms like 5G, Account, Churn Rate, Colocations, Connected Devices, Postpaid ARPA, Postpaid ARPU, Retail Connections, Tower Tenancy Rate, and Universal Service Fund (USF)[21] - Definitions provided for non-GAAP financial measures: EBITDA, Adjusted EBITDA, Adjusted OIBDA, and Free Cash Flow[21] Financial Overview – Array Array's recent financial performance shows decreased revenue and operating income but significantly higher net income due to tax benefits Consolidated Financial Performance (YoY Change) | Metric | Q2 2025 vs Q2 2024 | YTD 2025 vs YTD 2024 | | :--- | :--- | :--- | | Total operating revenues | (1)% | (4)% | | Operating income | (4)% | (13)% | | Income before income taxes | 13% | (9)% | | Income tax expense | (73)% | (42)% | | Net income | 77% | 24% | | Net income attributable to Array shareholders | 80% | 41% | | Adjusted OIBDA (Non-GAAP) | (9)% | (7)% | | Adjusted EBITDA (Non-GAAP) | (6)% | (7)% | | Capital expenditures | (52)% | (55)% | - Equity in earnings of unconsolidated entities increased by 8% for Q2 2025 and decreased by 3% for YTD 2025, with the LA Partnership contributing $20 million and $35 million for the respective periods[23][24] - Interest expense decreased for the three and six months ended June 30, 2025, due primarily to a decrease in the average principal balance outstanding on the term loan and receivables securitization agreements[25] - Income tax expense decreased for the three and six months ended June 30, 2025, due primarily to excess stock compensation deductions for awards vesting in the current period[26] - Enactment of H.R.1 – the One big beautiful bill Act (OBBBA) is expected to result in favorable deferral of cash taxes in future periods[27] Wireless Operations Prior to divestiture, wireless operations showed declining retail connections and revenues, with increased postpaid net losses from higher churn Retail Connections – End of Period | Metric | June 30, 2025 | June 30, 2024 | Change | | :--- | :--- | :--- | :--- | | Postpaid | 3,904,000 | 4,027,000 | (3.05)% | | Prepaid | 429,000 | 439,000 | (2.28)% | | Total | 4,333,000 | 4,466,000 | (3.00)% | Postpaid Activity and Churn (YoY Change) | Metric | Q2 2025 vs Q2 2024 | YTD 2025 vs YTD 2024 | | :--- | :--- | :--- | | Total Gross Additions | (7)% | (4)% | | Total Net Additions (Losses) | (75)% | (21)% | | Churn (Handsets) | 1.12% (vs 0.97%) | 1.08% (vs 1.00%) | | Churn (Connected Devices) | 2.36% (vs 2.47%) | 2.38% (vs 2.50%) | | Total Churn | 1.29% (vs 1.16%) | 1.25% (vs 1.19%) | - Total postpaid handset net losses increased for the three and six months ended June 30, 2025, due to higher defections as a result of elevated churn and aggressive industry-wide competition[29] - Total postpaid connected device net additions decreased for the three and six months ended June 30, 2025, due to lower gross additions for home internet and connected watches[30] Postpaid Revenue Metrics (YoY Change) | Metric | Q2 2025 vs Q2 2024 | YTD 2025 vs YTD 2024 | | :--- | :--- | :--- | | Postpaid ARPU | 1% | 1% | | Postpaid ARPA | 1% | 1% | Wireless Financial Performance (YoY Change) | Metric | Q2 2025 vs Q2 2024 | YTD 2025 vs YTD 2024 | | :--- | :--- | :--- | | Retail service revenues | (2)% | (2)% | | Equipment sales | (2)% | (13)% | | Total operating revenues | (1)% | (4)% | | Operating income | (21)% | (27)% | | Adjusted OIBDA (Non-GAAP) | (11)% | (9)% | | Adjusted EBITDA (Non-GAAP) | (11)% | (9)% | | Capital expenditures | (52)% | (55)% | - Retail service revenues decreased due to a decline in average postpaid and prepaid connections, partially offset by an increase in Postpaid ARPU[38] - Equipment sales revenues decreased for the six months ended June 30, 2025, primarily driven by a lower volume of upgrades[38] - System operations expenses increased for Q2 2025 due to higher maintenance and utilities, but decreased for YTD 2025 due to the shutdown of the 3G CDMA network[40][41] - Cost of equipment sold decreased for the six months ended June 30, 2025, due to a decline in smartphone devices sold[43] - (Gain) loss on license sales and exchanges increased due to the write-off of the liability associated with the Put/Call Agreement with T-Mobile in 2025[44] Towers Operations Towers operations demonstrated growth in key metrics and revenues, though future performance will be impacted by the wireless divestiture Towers Operational Metrics (as of June 30) | Metric | 2025 | 2024 | Change | | :--- | :--- | :--- | :--- | | Owned towers | 4,418 | 4,388 | 1% | | Number of colocations | 2,527 | 2,392 | 6% | | Tower tenancy rate | 1.57 | 1.55 | 2% | Towers Financial Performance (YoY Change) | Metric | Q2 2025 vs Q2 2024 | YTD 2025 vs YTD 2024 | | :--- | :--- | :--- | | Third-party revenues | 12% | 9% | | Intra-company revenues | 3% | 3% | | Total tower revenues | 7% | 6% | | Operating income | 11% | 2% | | Adjusted OIBDA (Non-GAAP) | 9% | 4% | | Adjusted EBITDA (Non-GAAP) | 9% | 4% | | Capital expenditures | (51)% | (47)% | - Third-party revenues increased primarily as a result of new colocations and escalators on renewed leases[48] - Intra-company revenues increased primarily as a result of rent escalations and an increase in the number of owned towers[48] - Post-divestiture, Array expects an increase in Third-party revenues from the T-Mobile MLA, but Intra-company revenues have ceased, which will significantly lower future tower rental revenues[49] - Total operating expenses increased due to higher cell site rent and maintenance expenses[50] - Following the T-Mobile transaction, Array expects to incur costs related to decommissioning certain towers and executing strategic alternatives for its remaining spectrum[51] Liquidity and Capital Resources Array maintains sufficient liquidity through cash, financing agreements, and asset sales, with significant undrawn borrowing capacity - Array believes existing cash, investments, financing agreements, and asset dispositions will provide sufficient liquidity for operating needs and debt service[53] Available Undrawn Borrowing Capacity (as of June 30, 2025) | Facility | Amount (Millions) | | :--- | :--- | | Revolving Credit Agreement | $300 | | Term Loan Agreements | $800 | | Receivables Securitization Agreement | $450 | | Total | $1,550 | - Revolving Credit Agreement: Amended in April 2025 to extend maturity to July 2027 and allow for permitted dispositions[60] - Term Loan Agreements: $713 million outstanding at June 30, 2025, was fully repaid on August 4, 2025, with an additional $800 million of borrowing capacity secured[61][62] - Export Credit Financing Agreement: $150 million outstanding at June 30, 2025, was fully repaid on August 4, 2025[63] - Receivables Securitization Agreement: Terminated on July 31, 2025[64] - Debt Covenants: Array was in compliance as of June 30, 2025, with key leverage and interest coverage ratios[65][66][67] - Credit Ratings: On August 1, 2025, Standard & Poor's updated the Array issuer credit rating from BB to BBB- with a stable outlook[69] - Capital expenditures decreased by 55% to $132 million for the six months ended June 30, 2025, in line with expectations for 5G deployment[70][72] - Common Share Repurchase Program: During the six months ended June 30, 2025, Array repurchased 328,835 Common Shares for $21 million[75] - Dividends: On August 1, 2025, the Array Board of Directors declared a special dividend of $23.00 per share[76] Consolidated Cash Flow Analysis Array's cash position significantly increased due to strong operating cash flows and reduced investing and financing activities - Net increase in cash, cash equivalents and restricted cash: $242 million for YTD 2025 vs $36 million for YTD 2024[79][81] - Net cash provided by operating activities: $485 million for YTD 2025, driven by net income adjusted for non-cash items and distributions from unconsolidated entities[79][81] - Cash flows used for investing activities: $150 million for YTD 2025, primarily for payments for property, plant and equipment[80][82] - Cash flows used for financing activities: $93 million for YTD 2025, primarily for tax withholdings, share repurchases, and software license agreements[80][82] Consolidated Balance Sheet Analysis The balance sheet reflects a decrease in net inventory from sales and a reduction in accrued compensation following bonus payments - Inventory, net decreased $53 million due primarily to the sell through of inventory on hand and seasonality[84] - Accrued compensation decreased $39 million due primarily to associate bonus payments in March 2025[85] Supplemental Information Relating to Non-GAAP Financial Measures This section reconciles non-GAAP measures like EBITDA and Free Cash Flow, which management uses to evaluate business performance - Non-GAAP financial measures used in the MD&A and business segment information include EBITDA, Adjusted EBITDA, Adjusted OIBDA, and Free cash flow[90] Array Consolidated Non-GAAP Reconciliation (YoY Change) | Metric | Q2 2025 | Q2 2024 | YTD 2025 | YTD 2024 | | :--- | :--- | :--- | :--- | :--- | | Net income (GAAP) | $32 | $18 | $52 | $42 | | EBITDA (Non-GAAP) | $244 | $242 | $485 | $503 | | Adjusted EBITDA (Non-GAAP) | $254 | $268 | $506 | $542 | | Adjusted OIBDA (Non-GAAP) | $208 | $227 | $422 | $456 | | Operating income (GAAP) | $35 | $36 | $76 | $88 | Array Wireless Non-GAAP Reconciliation (YoY Change) | Metric | Q2 2025 | Q2 2024 | YTD 2025 | YTD 2024 | | :--- | :--- | :--- | :--- | :--- | | EBITDA (Non-GAAP) | $165 | $171 | $336 | $355 | | Adjusted EBITDA and Adjusted OIBDA (Non-GAAP) | $174 | $196 | $355 | $392 | | Operating income (GAAP) | $14 | $17 | $34 | $47 | Array Towers Non-GAAP Reconciliation (YoY Change) | Metric | Q2 2025 | Q2 2024 | YTD 2025 | YTD 2024 | | :--- | :--- | :--- | :--- | :--- | | EBITDA (Non-GAAP) | $33 | $30 | $65 | $62 | | Adjusted EBITDA and Adjusted OIBDA (Non-GAAP) | $34 | $31 | $67 | $64 | | Operating income (GAAP) | $21 | $19 | $42 | $41 | Free Cash Flow (Non-GAAP) (YoY Change) | Metric | YTD 2025 | YTD 2024 | | :--- | :--- | :--- | | Cash flows from operating activities (GAAP) | $485 | $516 | | Cash paid for additions to property, plant and equipment | $(147) | $(270) | | Cash paid for software license agreements | $(20) | $(20) | | Free cash flow (Non-GAAP) | $318 | $226 | Application of Critical Accounting Policies and Estimates Array's financial statements adhere to GAAP, with critical accounting policies consistent with its 2024 Form 10-K - Array prepares its consolidated financial statements in accordance with GAAP[95] - Array's application of critical accounting policies and estimates is discussed in detail in its Form 10-K for the year ended December 31, 2024[95] Private Securities Litigation Reform Act of 1995 Safe Harbor Cautionary Statement This section cautions that forward-looking statements involve risks and uncertainties, and actual results may differ materially - This Form 10-Q contains forward-looking statements, as defined in the Private Securities Litigation Reform Act of 1995[97] - Such forward-looking statements involve known and unknown risks that may cause actual results to be significantly different[97] - Readers should carefully consider the factors and other information contained in this Form 10-Q to understand the material risks relating to Array's business[97] Risk Factors Key risks include uncertainties in pending spectrum sales, reliance on T-Mobile, and competition in the tower industry - Closing of the T-Mobile transaction will require significant changes to Array's remaining business, which is of a substantially smaller scale[106] - Uncertainty regarding the consummation of the Verizon and AT&T spectrum sales could impact the availability of funds[109][111] - Array's business is substantially dependent upon T-Mobile due to the Master License Agreement (MLA) for tower leases[108] - An inability to monetize the remaining spectrum assets, coupled with ongoing costs, could adversely affect Array's operations[115][116] - Increasing competition in the tower industry from larger, better-resourced competitors could adversely affect Array's revenues and future growth[117] - A substantial portion of Array's revenues are derived from a small number of tenants concentrated in the wireless industry[118][119] - Uncertainty in Array's future cash flow and liquidity, its level of indebtedness, and inability to access capital could impact business operations[127][128][129][130] - Array's assets and revenue are concentrated in the U.S. wireless telecommunications industry, representing increased risk[131] - Potential conflicts of interest exist between TDS (controlling shareholder) and Array[138][140] - Cyber-attacks or other breaches of information technology security are expected to occur regularly and could have an adverse effect on Array's business[145] Quantitative and Qualitative Disclosures About Market Risk Array's primary market risk is interest rate fluctuation on its debt, which is a mix of fixed and variable rates - As of June 30, 2025, approximately 70% of Array's long-term debt was in fixed-rate senior notes and approximately 30% in variable-rate debt[147] Scheduled Principal Payments on Long-Term Debt (as of June 30, 2025) | Period | Long-Term Debt Obligations (Millions) | Weighted-Avg. Interest Rates | | :--- | :--- | :--- | | Remainder of 2025 | $10 | 6.1% | | 2026 | $36 | 6.1% | | 2027 | $351 | 5.9% | | 2028 | $286 | 6.4% | | 2029 | $5 | 6.9% | | Thereafter | $2,222 | 6.1% | | Total | $2,910 | 6.1% | - The debt exchange offer with T-Mobile concluded on August 1, 2025, resulting in the exchange of $1,680 million of long-term debt, and Array subsequently repaid $863 million of other borrowings[149] Financial Statements (Unaudited) Consolidated Statement of Operations Array's operating revenues slightly decreased, but net income attributable to shareholders increased due to lower income tax expense Consolidated Statement of Operations (YoY Change) | Metric | Q2 2025 | Q2 2024 | YTD 2025 | YTD 2024 | | :--- | :--- | :--- | :--- | :--- | | Total operating revenues | $916 | $927 | $1,807 | $1,877 | | Operating income | $35 | $36 | $76 | $88 | | Income before income taxes | $36 | $32 | $76 | $83 | | Income tax expense | $4 | $14 | $24 | $41 | | Net income | $32 | $18 | $52 | $42 | | Net income attributable to Array shareholders | $31 | $17 | $50 | $35 | | Basic earnings per share | $0.37 | $0.20 | $0.58 | $0.41 | | Diluted earnings per share | $0.36 | $0.20 | $0.57 | $0.40 | - (Gain) loss on license sales and exchanges, net: $4 million gain for Q2 2025 (vs $8 million loss for Q2 2024) and $5 million gain for YTD 2025 (vs $7 million loss for YTD 2024)[152] Consolidated Statement of Cash Flows Array's cash position significantly increased due to strong operating cash flows and reduced investing and financing activities Consolidated Statement of Cash Flows (YTD Change) | Metric | YTD 2025 | YTD 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $485 | $516 | | Net cash used in investing activities | $(150) | $(284) | | Net cash used in financing activities | $(93) | $(196) | | Net increase in cash, cash equivalents and restricted cash | $242 | $36 | | Cash, cash equivalents and restricted cash, end of period | $401 | $215 | - Distributions from unconsolidated entities: $88 million for YTD 2025 (vs $80 million for YTD 2024)[154] - Cash paid for additions to property, plant and equipment: $(147) million for YTD 2025 (vs $(270) million for YTD 2024)[154] - Repayment of long-term debt: $(12) million for YTD 2025 (vs $(198) million for YTD 2024)[154] - Repurchase of Common Shares: $(21) million for YTD 2025 (vs $0 for YTD 2024)[154] Consolidated Balance Sheet Total assets and liabilities decreased slightly, while cash and cash equivalents saw a significant increase Consolidated Balance Sheet (as of) | Metric | June 30, 2025 | December 31, 2024 | Change | | :--- | :--- | :--- | :--- | | Cash and cash equivalents | $386 | $144 | $242 | | Total current assets | $1,509 | $1,345 | $164 | | Licenses | $4,583 | $4,579 | $4 | | Property, plant and equipment, net | $2,313 | $2,502 | $(189) | | Total assets | $10,377 | $10,449 | $(72) | | Total current liabilities | $808 | $884 | $(76) | | Long-term debt, net | $2,819 | $2,837 | $(18) | | Total liabilities and equity | $10,377 | $10,449 | $(72) | | Total Array shareholders' equity | $4,600 | $4,577 | $23 | - Equipment installment plan receivables, net: $957 million at June 30, 2025 (vs $1,028 million at December 31, 2024)[195] - Consolidated VIEs assets: $1,871 million at June 30, 2025 (vs $1,982 million at December 31, 2024)[160][222] - Consolidated VIEs liabilities: $109 million at June 30, 2025 (vs $110 million at December 31, 2024)[160][222] Consolidated Statement of Changes in Equity Total shareholders' equity increased slightly, driven by net income partially offset by share repurchases Total Array Shareholders' Equity | Date | Amount (Millions) | | :--- | :--- | | December 31, 2024 | $4,577 | | June 30, 2025 | $4,600 | - Net income attributable to Array shareholders: $50 million for the six months ended June 30, 2025[168] - Repurchase of Common Shares: $(21) million for the six months ended June 30, 2025[168] Notes to Consolidated Financial Statements Note 1 Basis of Presentation The financial statements are prepared under GAAP for Array Digital Infrastructure, Inc, an 82.5%-owned subsidiary of TDS - United States Cellular Corporation changed its name to Array Digital Infrastructure, Inc (Array) on August 1, 2025[174] - As of June 30, 2025, Array is an 82.5%-owned subsidiary of Telephone and Data Systems, Inc (TDS)[174] - Array's business segments are Wireless and Towers, operating only in the United States[176] - Array has not changed its significant accounting and reporting policies from those disclosed in its Form 10-K for the year ended December 31, 2024[178] Reconciliation of Cash, cash equivalents and restricted cash | Metric | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Cash and cash equivalents | $386 | $144 | | Restricted cash included in Other current assets | $15 | $15 | | Cash, cash equivalents and restricted cash in the statement of cash flows | $401 | $159 | Note 2 Revenue Recognition Revenue is disaggregated by service type and timing, with service revenues recognized over time and equipment sales at a point in time Disaggregated Revenue (YoY Change) | Metric | Q2 2025 | Q2 2024 | YTD 2025 | YTD 2024 | | :--- | :--- | :--- | :--- | :--- | | Retail service | $652 | $666 | $1,312 | $1,344 | | Other service | $56 | $52 | $109 | $102 | | Service revenues from contracts with customers | $708 | $718 | $1,421 | $1,446 | | Equipment sales | $180 | $184 | $330 | $380 | | Total revenues from contracts with customers | $888 | $902 | $1,751 | $1,826 | | Operating lease income (Towers) | $28 | $25 | $56 | $51 | | Total operating revenues | $916 | $927 | $1,807 | $1,877 | Contract Balances (as of) | Metric | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Contract assets | $4 | $4 | | Contract liabilities | $320 | $334 | - Revenue recognized related to contract liabilities existing at January 1, 2025, was $154 million for the six months ended June 30, 2025[184] Transaction Price Allocated to Remaining Performance Obligations (Service Revenues) | Period | Amount (Millions) | | :--- | :--- | | Remainder of 2025 | $171 | | 2026 | $114 | | Thereafter | $73 | | Total | $358 | - The contract cost asset balance related to commission fees and other costs was $129 million at June 30, 2025[187] Note 3 Fair Value Measurements Array had no material assets or liabilities recorded at fair value, and the fair value of long-term debt is estimated using market prices - As of June 30, 2025 and December 31, 2024, Array did not have any material financial or nonfinancial assets or liabilities required to be recorded at fair value[188] Fair Value of Long-term Debt (as of) | Metric | June 30, 2025 (Book Value) | June 30, 2025 (Fair Value) | December 31, 2024 (Book Value) | December 31, 2024 (Fair Value) | | :--- | :--- | :--- | :--- | :--- | | Long-term debt | $2,873 | $2,702 | $2,890 | $2,785 | - The fair values of Cash and cash equivalents and restricted cash approximate their book values due to the short-term nature of these financial instruments[192] Note 4 Equipment Installment Plans Array sells devices via equipment installment plans, with the allowance for credit losses decreasing in the first half of 2025 Equipment Installment Plan Receivables, Net (as of) | Metric | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Equipment installment plan receivables, gross | $1,032 | $1,110 | | Allowance for credit losses | $(75) | $(82) | | Equipment installment plan receivables, net | $957 | $1,028 | Allowance for Credit Losses Activity (YTD) | Metric | YTD 2025 | YTD 2024 | | :--- | :--- | :--- | | Allowance for credit losses, beginning of period | $82 | $90 | | Bad debts expense | $30 | $33 | | Write-offs, net of recoveries | $(37) | $(38) | | Allowance for credit losses, end of period | $75 | $85 | Note 5 Earnings Per Share Basic and diluted earnings per share are calculated based on net income attributable to Array shareholders and weighted average shares Earnings Per Share (YoY Change) | Metric | Q2 2025 | Q2 2024 | YTD 2025 | YTD 2024 | | :--- | :--- | :--- | :--- | :--- | | Net income attributable to Array shareholders | $31 | $17 | $50 | $35 | | Basic earnings per share | $0.37 | $0.20 | $0.58 | $0.41 | | Diluted earnings per share | $0.36 | $0.20 | $0.57 | $0.40 | - Weighted average basic shares outstanding: 86 million for both the three and six months ended June 30, 2025[198] Note 6 Divestitures Array is pursuing strategic alternatives, including the closed sale of wireless operations to T-Mobile and pending spectrum sales to Verizon and AT&T - Strategic alternatives process initiated on August 4, 2023[199] - Wireless operations and select spectrum assets sold to T-Mobile (closed August 1, 2025)[199] - Pending sale of AWS, Cellular, and PCS wireless spectrum licenses to Verizon for total proceeds of $1,000 million, expected to close in Q3 2026[200] - Pending sale of 3.45 GHz and 700 MHz wireless spectrum licenses to AT&T for total proceeds of $1,018 million, expected to close in 2025[201] - Third-party expenses related to announced transactions and strategic alternatives review: $12 million for Q2 2025 and $22 million for YTD 2025[203] - Put/Call Agreement with T-Mobile for $106 million spectrum assets; the entire fair value of the net written call option was written off as of June 30, 2025[204] Note 7 Investments in Unconsolidated Entities Array holds noncontrolling interests in various entities, which contributed significantly to its equity in earnings Total Investments in Unconsolidated Entities (as of) | Metric | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Equity method investments | $431 | $440 | | Measurement alternative method investments | $5 | $5 | | Investments recorded using the net asset value practical expedient | $8 | $9 | | Total | $444 | $454 | Combined Results of Operations of Equity Method Investments (YoY Change) | Metric | Q2 2025 | Q2 2024 | YTD 2025 | YTD 2024 | | :--- | :--- | :--- | :--- | :--- | | Revenues | $1,933 | $1,821 | $3,841 | $3,663 | | Operating expenses | $1,511 | $1,413 | $3,028 | $2,828 | | Operating income | $422 | $408 | $813 | $835 | | Net income | $419 | $416 | $798 | $834 | Note 8 Debt Array manages various debt instruments, with significant repayments and amendments to credit facilities occurring post-quarter end - Revolving Credit Agreement: $300 million maximum borrowing capacity, amended in April 2025 to extend maturity to July 2027[209] - Term Loan Agreements: $713 million outstanding at June 30, 2025, with an additional $800 million borrowing capacity secured in June 2025[210][211] - Export Credit Financing Agreement: $150 million outstanding at June 30, 2025[212] - Receivables Securitization Agreement: No outstanding borrowings at June 30, 2025, and terminated on July 31, 2025[213] - Debt Covenants: Array was in compliance as of June 30, 2025, with key leverage and interest coverage ratios[214][215][216] Note 9 Variable Interest Entities Array consolidates certain Variable Interest Entities (VIEs) where it holds a controlling financial interest - Array consolidates VIEs in which it has a controlling financial interest, including special purpose entities for securitized borrowings and designated entities for wireless spectrum licenses[217][218][219][223] Consolidated VIEs' Assets and Liabilities (as of) | Metric | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Total assets | $1,871 | $1,982 | | Total liabilities | $109 | $110 | - Array manages but does not consolidate certain other limited partnerships where it is not the primary beneficiary[224][225] - Array made contributions, loans or advances to its VIEs totaling $6 million during the six months ended June 30, 2025[226] Note 10 Business Segment Information Array operates in two reportable segments, Wireless and Towers, with Adjusted EBITDA as the key performance measure - Array has two reportable segments: Wireless and Towers[227] - Adjusted EBITDA is the segment measure of profit or loss reported to the chief operating decision maker[228] Wireless Segment Financials (YoY Change) | Metric | Q2 2025 | Q2 2024 | YTD 2025 | YTD 2024 | | :--- | :--- | :--- | :--- | :--- | | Revenues from external customers | $888 | $902 | $1,751 | $1,826 | | Segment Adjusted EBITDA (Non-GAAP) | $174 | $196 | $355 | $392 | | Capital expenditures | $77 | $160 | $127 | $286 | Towers Segment Financials (YoY Change) | Metric | Q2 2025 | Q2 2024 | YTD 2025 | YTD 2024 | | :--- | :--- | :--- | :--- | :--- | | Revenues from external customers | $28 | $25 | $56 | $51 | | Intersegment revenues | $34 | $33 | $67 | $65 | | Segment Adjusted EBITDA (Non-GAAP) | $34 | $31 | $67 | $64 | | Capital expenditures | $3 | $5 | $5 | $9 | Note 11 Subsequent Events Significant events after June 30, 2025 include acquisitions, the T-Mobile sale closing, debt restructuring, and a special dividend - On July 14, 2025, Array completed the acquisition of King Street Wireless, Inc and Sunshine Spectrum, Inc for $17 million, expecting a $50 million tax benefit[239] - On July 31, 2025, Array terminated the receivables securitization agreement[239] - On August 1, 2025, the sale of the wireless operations to T-Mobile closed, and Array received cash proceeds of $2,629 million[239] - The debt exchange offering concluded on August 1, 2025, resulting in the exchange of $1,680 million of long-term debt[239] - On August 1, 2025, Array and T-Mobile entered into a Master License Agreement (MLA) for T-Mobile to license space on a minimum of 2,015 towers[239] - On August 1, 2025, the Array Board of Directors declared a special dividend of $23.00 per share[239] - On August 4, 2025, Array repaid $863 million in outstanding borrowings under its term loan and export credit financing agreements[239] Controls and Procedures Evaluation of Disclosure Controls and Procedures Management concluded that the company's disclosure controls and procedures were effective as of June 30, 2025 - Array's principal executive officer and principal financial officer concluded that Array's disclosure controls and procedures were effective as of June 30, 2025, at the reasonable assurance level[242] Changes in Internal Control Over Financial Reporting No material changes occurred in Array's internal control over financial reporting during the second quarter of 2025 - There have been no changes in internal controls over financial reporting that have occurred during the three months ended June 30, 2025, that have materially affected, or are reasonably likely to materially affect, Array's internal control over financial reporting[243] Legal Proceedings Legal Proceedings Array is involved in several legal proceedings, including a False Claims Act inquiry and multiple stockholder lawsuits - Federal False Claims Act Inquiry: DOJ inquiries regarding Array's participation in FCC wireless spectrum license auctions, with one matter dismissed and another pending[244] - Stockholder Class Action: A settlement in principle was reached on February 28, 2025, with a final approval hearing set for September 2025[245] - Stockholder Derivative Lawsuits: Multiple lawsuits filed alleging breach of fiduciary duty, with some cases dismissed and others pending[246][247][248] - Array is unable at this time to determine whether the outcome of these actions would have a material impact on its financial condition or results of operations[249] Unregistered Sales of Equity Securities and Use of Proceeds Unregistered Sales of Equity Securities and Use of Proceeds Array has an authorized share repurchase program with remaining capacity, but no purchases were made during the second quarter of 2025 - Array's Board of Directors authorized the repurchase of up to 1,300,000 additional Common Shares on an annual basis beginning in 2009[250] - The maximum number of shares that may yet be purchased under this program was 658,107 as of June 30, 2025[251] - There were no purchases made by or on behalf of Array of Array Common Shares during the quarter covered by this Form 10-Q[251] Other Information Rule 10b5-1 Trading Arrangements No Rule 10b5-1 trading arrangements were adopted or terminated by directors or officers during the second quarter of 2025 - During the three months ended June 30, 2025, none of Array's directors or officers adopted or terminated a Rule 10b5-1 trading arrangement or a non-Rule 10b5–1 trading arrangement[253] Exhibits Exhibits This section lists exhibits filed with the Form 10-Q, including corporate amendments, debt agreements, and the T-Mobile MLA - Exhibit 3.1: Certificate of Amendment No 1 to the Restated Certificate of Incorporation of United States Cellular Corporation, dated as of August 1, 2025[254] - Exhibit 3.2: Amended and Restated Bylaws of Array Digital Infrastructure, Inc, as adopted on August 1, 2025[254] - Exhibits 4.1-4.4: Twelfth through Fifteenth Supplemental Indentures related to the Registrant's Senior Notes[254] - Exhibit 4.5: Fourth Amended and Restated Credit Agreement among the Registrant, CoBank, ACB, as Administrative Agent, and the other lenders party thereto, dated June 25, 2025[254] - Exhibit 10.3: Master License Agreement, dated as of August 1, 2025, between ADI Leasing Company, LLC and T-Mobile USA, Inc[254] Form 10-Q Cross Reference Index Form 10-Q Cross Reference Index This section provides a cross-reference index to the various items and page numbers within the Form 10-Q - The index lists items such as Financial Statements, MD&A, Risk Factors, and Exhibits with their corresponding page numbers[256] Signatures Signatures The report is duly signed by Array's President and CEO, and its Executive Vice President and CFO, on August 11, 2025 - The report is signed by Douglas W Chambers, President and Chief Executive Officer, and Vicki L Villacrez, Executive Vice President, Chief Financial Officer and Treasurer[259] - The signing date is August 11, 2025[259]