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Telephone and Data Systems (TDS) Q4 Loss Narrower Than Expected
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Telephone and Data Systems, Inc. (TDS - Free Report) reported mixed fourth-quarter 2022 results, with the top line missing the Zacks Consensus Estimate and the bottom line beating the same by a penny. TDS continues to make significant investments with the aim of commercial expansion, enhancement of network technologies and improving competitiveness. However, these investments are affecting the company’s profitability in the short term. The Chicago-based telecom service provider reported year-over-year lower revenues during the fourth quarter.
Net Income
Net loss in the quarter was $43 million or a loss of 38 cents per share against net income of $14 million or 11 cents per share in the prior-year quarter. The year-over-year decline was caused by top-line contraction and higher operating expenses during the quarter. The bottom line beat the Zacks Consensus Estimate by a penny.
For 2022, the company witnessed a net loss of $7 million or a loss of 7 cents per share against a net income of $117 million or $1 per share in 2021.
Telephone and Data Systems, Inc. Price, Consensus and EPS Surprise
Quarterly total operating revenues were reported at $1,357 million declined from $1,372 million in the prior-year quarter. Declining postpaid handset addition combined with high promotional costs had dent top-line performance. However, growth in residential broadband and tower rental revenue partially offset this negative impact. The top line missed the consensus estimate by $32 million.
U.S. Cellular's revenues decreased by 2% year over year to $1,048 million due to declining equipment sales and falling service revenues. Retail service revenues were also relatively flat due to reduced average postpaid connections. Higher promotional expenses had hurt revenues from equipment sales.
Total operating expenses inched up 1% to $1,075 million. Operating loss was $27 million, compared with an operating income of $5 million in the year-ago quarter. Postpaid average revenue per user (ARPU) increased to $50.60 from $48.62 and postpaid average revenue per account (ARPA) grew to $130.97 from $127.14 in the previous-year period. Prepaid ARPU declined year over to $33.34 from $34.53.
Revenues from TDS Telecom increased by 1% to $257 million from $254 million in the prior-year quarter. The improvement was induced by higher deliveries of marketable fiber service addresses and 4% growth year over year in residential broadband revenues. Broadband investments are bringing the benefit as the company now can offer at least 1 gig service to 66% of its footprint and even 8-gig speed product in some areas.
Total operating expenses for TDS Telecom increased to $252 million from $231 million. Operating income decreased to $5 million from $23 million. Total connections stood at 1,173,000 compared with 1,199,900 in the year-ago quarter. Residential revenue per connection increased to $59.91 from $57.86 in the year-ago quarter. Adjusted EBITDA witnessed a 13% decline to $66 million due to increased cash expenses to support company’s growing fiber program.
In 2022, revenues were $5,413 million compared with $5,329 million in the previous year.
Other Details
In the reported quarter, operating expenses stood at $1,383 million, up 2.5% from prior year quarter. Operating loss were $26 million against an operating income of $24 million in year ago period. Higher operating expenses in US Cellular offset the gains in TDS Telecom. Adjusted EBITDA in TDS Telecom declined by 13% to $66 million due to increased cash expenses to support company’s growing fiber program. Adjusted EBITDA for US Cellular witnessed a decline by10% to $202 million compared to prior year figure of $225 million.
Cash Flow & Liquidity
In 2022, Telephone and Data Systems generated $1,155 million of cash from operating activities compared with $1,103 million in the prior-year period. The company witnessed a negative free cash flow of $29 million compared with a negative free cash flow of $37 million in the previous year. As of Dec 31, 2022, the company had $360 million in cash and cash equivalents with $3,731 million of long-term debt compared with $367 million and $2,928 million of respective figures in 2021.
Outlook
For 2023, the company expects total operating revenues at TDS Telecom in the range of $1,030-$1,060 million. Adjusted EBITDA (non-GAAP) is projected to be $260-$290 million. Adjusted OIBDA (non-GAAP) is anticipated to be $260-$290 million and capital expenditures are estimated in the band of $500-$550 million.
U.S. Cellular expects service revenues in the range of $3,050-$3,150 million. It estimates adjusted EBITDA (non-GAAP) in the band of $875 to $1,025 million and adjusted OIBDA (non-GAAP) within $725-$875 million. Capital expenditures are anticipated between $600 million and $700 million.
TDS is focused on its investment commitment to network modernization and mid-band 5G deployment. Management expects growth in fixed wireless and tower portfolio will continue in 2023. It also anticipates strong growth in B2B driven by growth in the loT space.
T-Mobile US, Inc. (TMUS - Free Report) , carrying a Zacks Rank #2 (Buy), delivered an earnings surprise of 67.6%, on average, in the trailing four quarters. Earnings estimates for TMUS for the current year stand at $6.67 per share.
T-Mobile US, Inc. is a national wireless service provider. The company offers its services under the T-Mobile, Metro by T-Mobile and Sprint brands. T-Mobile, through its subsidiaries, provides wireless services for branded postpaid and prepaid, and wholesale customers.
Splunk Inc. , carrying a Zacks Rank #2, delivered an earnings surprise of 222%, on average, in the trailing four quarters. It has an Earnings ESP of +0.39%.
Splunk Inc. provides software solutions that enable enterprises to gain real-time operational intelligence by harnessing the value of their data. The company’s offerings enable users to investigate, monitor, analyze and act on machine data and big data, irrespective of format or source and help in operational decision-making.
Arista Networks, Inc. (ANET - Free Report) , sporting a Zacks Rank #1, delivered an earnings surprise of 14.17%, on average, in the trailing four quarters. Earnings estimates for ANET for the current year stand at $5.76 per share.
Arista Networks, Inc. is engaged in providing cloud networking solutions for data centers and cloud computing environments. The company offers 10/25/40/50/100 Gigabit Ethernet switches and routers optimized for next-generation data center networks.
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Telephone and Data Systems (TDS) Q4 Loss Narrower Than Expected
Telephone and Data Systems, Inc. (TDS - Free Report) reported mixed fourth-quarter 2022 results, with the top line missing the Zacks Consensus Estimate and the bottom line beating the same by a penny. TDS continues to make significant investments with the aim of commercial expansion, enhancement of network technologies and improving competitiveness. However, these investments are affecting the company’s profitability in the short term. The Chicago-based telecom service provider reported year-over-year lower revenues during the fourth quarter.
Net Income
Net loss in the quarter was $43 million or a loss of 38 cents per share against net income of $14 million or 11 cents per share in the prior-year quarter. The year-over-year decline was caused by top-line contraction and higher operating expenses during the quarter. The bottom line beat the Zacks Consensus Estimate by a penny.
For 2022, the company witnessed a net loss of $7 million or a loss of 7 cents per share against a net income of $117 million or $1 per share in 2021.
Telephone and Data Systems, Inc. Price, Consensus and EPS Surprise
Telephone and Data Systems, Inc. price-consensus-eps-surprise-chart | Telephone and Data Systems, Inc. Quote
Revenues
Quarterly total operating revenues were reported at $1,357 million declined from $1,372 million in the prior-year quarter. Declining postpaid handset addition combined with high promotional costs had dent top-line performance. However, growth in residential broadband and tower rental revenue partially offset this negative impact. The top line missed the consensus estimate by $32 million.
U.S. Cellular's revenues decreased by 2% year over year to $1,048 million due to declining equipment sales and falling service revenues. Retail service revenues were also relatively flat due to reduced average postpaid connections. Higher promotional expenses had hurt revenues from equipment sales.
Total operating expenses inched up 1% to $1,075 million. Operating loss was $27 million, compared with an operating income of $5 million in the year-ago quarter. Postpaid average revenue per user (ARPU) increased to $50.60 from $48.62 and postpaid average revenue per account (ARPA) grew to $130.97 from $127.14 in the previous-year period. Prepaid ARPU declined year over to $33.34 from $34.53.
Revenues from TDS Telecom increased by 1% to $257 million from $254 million in the prior-year quarter. The improvement was induced by higher deliveries of marketable fiber service addresses and 4% growth year over year in residential broadband revenues. Broadband investments are bringing the benefit as the company now can offer at least 1 gig service to 66% of its footprint and even 8-gig speed product in some areas.
Total operating expenses for TDS Telecom increased to $252 million from $231 million. Operating income decreased to $5 million from $23 million. Total connections stood at 1,173,000 compared with 1,199,900 in the year-ago quarter. Residential revenue per connection increased to $59.91 from $57.86 in the year-ago quarter. Adjusted EBITDA witnessed a 13% decline to $66 million due to increased cash expenses to support company’s growing fiber program.
In 2022, revenues were $5,413 million compared with $5,329 million in the previous year.
Other Details
In the reported quarter, operating expenses stood at $1,383 million, up 2.5% from prior year quarter. Operating loss were $26 million against an operating income of $24 million in year ago period. Higher operating expenses in US Cellular offset the gains in TDS Telecom. Adjusted EBITDA in TDS Telecom declined by 13% to $66 million due to increased cash expenses to support company’s growing fiber program. Adjusted EBITDA for US Cellular witnessed a decline by10% to $202 million compared to prior year figure of $225 million.
Cash Flow & Liquidity
In 2022, Telephone and Data Systems generated $1,155 million of cash from operating activities compared with $1,103 million in the prior-year period. The company witnessed a negative free cash flow of $29 million compared with a negative free cash flow of $37 million in the previous year. As of Dec 31, 2022, the company had $360 million in cash and cash equivalents with $3,731 million of long-term debt compared with $367 million and $2,928 million of respective figures in 2021.
Outlook
For 2023, the company expects total operating revenues at TDS Telecom in the range of $1,030-$1,060 million. Adjusted EBITDA (non-GAAP) is projected to be $260-$290 million. Adjusted OIBDA (non-GAAP) is anticipated to be $260-$290 million and capital expenditures are estimated in the band of $500-$550 million.
U.S. Cellular expects service revenues in the range of $3,050-$3,150 million. It estimates adjusted EBITDA (non-GAAP) in the band of $875 to $1,025 million and adjusted OIBDA (non-GAAP) within $725-$875 million. Capital expenditures are anticipated between $600 million and $700 million.
TDS is focused on its investment commitment to network modernization and mid-band 5G deployment. Management expects growth in fixed wireless and tower portfolio will continue in 2023. It also anticipates strong growth in B2B driven by growth in the loT space.
Zacks Rank & Stocks to Consider
Telephone and Data Systems, Inc. currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
T-Mobile US, Inc. (TMUS - Free Report) , carrying a Zacks Rank #2 (Buy), delivered an earnings surprise of 67.6%, on average, in the trailing four quarters. Earnings estimates for TMUS for the current year stand at $6.67 per share.
T-Mobile US, Inc. is a national wireless service provider. The company offers its services under the T-Mobile, Metro by T-Mobile and Sprint brands. T-Mobile, through its subsidiaries, provides wireless services for branded postpaid and prepaid, and wholesale customers.
Splunk Inc. , carrying a Zacks Rank #2, delivered an earnings surprise of 222%, on average, in the trailing four quarters. It has an Earnings ESP of +0.39%.
Splunk Inc. provides software solutions that enable enterprises to gain real-time operational intelligence by harnessing the value of their data. The company’s offerings enable users to investigate, monitor, analyze and act on machine data and big data, irrespective of format or source and help in operational decision-making.
Arista Networks, Inc. (ANET - Free Report) , sporting a Zacks Rank #1, delivered an earnings surprise of 14.17%, on average, in the trailing four quarters. Earnings estimates for ANET for the current year stand at $5.76 per share.
Arista Networks, Inc. is engaged in providing cloud networking solutions for data centers and cloud computing environments. The company offers 10/25/40/50/100 Gigabit Ethernet switches and routers optimized for next-generation data center networks.