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Telephone and Data Systems' (TDS) Q1 Earnings Miss Estimates
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Telephone and Data Systems, Inc. (TDS - Free Report) reported weak first-quarter 2023 results, with the top and the bottom line missing the respective Zacks Consensus Estimate. Despite improvement in residential connections and fixed wireless networks, TDS reported lower revenues year over year due to declining service and equipment sales revenue in U.S Cellular vertical.
Net Income
Net loss in the quarter was $9 million or a loss 8 cents per share against a net income of $44 million or 38 cents per share in the prior-year quarter. Declining net sales and higher operating expenses affected the net income during the quarter. The bottom line fell short of Zacks Consensus Estimate by 14 cents.
Telephone and Data Systems, Inc. Price, Consensus and EPS Surprise
Revenues during the quarter were $1,303 million down from $1,315 million reported in the prior-year quarter. Declining net sales in U.S Cellular segment hampered the company’s first-quarter performance. The top line missed the Zacks Consensus Estimate by $27 million.
U.S Cellular’s revenues were $986 million, down 2% year over year owing to net sales decline in service and equipment sales. A reduction in postpaid retail and prepaid connections dented the revenues from this vertical. However, growth in fixed wireless and tower revenue partially reversed this negative trend.
Total operating expenses rose 2% to $960 million. Operating income was $26 million compared with $71 million in the year-ago quarter. Postpaid average revenue per user (ARPU) increased to $50.66 from $49.71. Postpaid average revenue per account (ARPA) increased to $130.77 from $129.93 in the previous-year period. Prepaid ARPU declined to $33.19 from $34.59 in the year-ago quarter.
Revenues from TDS Telecom stood at $253 million, up 1% year over year from $251 million reported in the prior-year quarter. Residential broadband revenues increased 8% year over year and residential broadband connection secured 4% year-over-year improvement. Residential revenues per connection increased to $60.24 from $57.95 in the year-earlier quarter. Around 72% of the customer are opting for 100 Mbps or greater speed compared with 67% in the prior-year quarter.
Total operating expenses in TDS Telecom increased to $245 million from $223 million. Operating income declined to $8 million from $28 million. Total connections stood at 1,167,000 compared with 1,196,900 in the year-ago quarter.
Other Details
In the reported quarter, operating expenses stood at $1,274 million, up 4% from the prior-year quarter’s levels. Operating income were $29 million compared with $95 million in the year-ago period. Higher operating expenses in all the verticals led to a 70% year-over-year decline. Adjusted EBITDA in TDS Telecom witnessed a 76% decline to $69 million owing to higher cash expenses. Adjusted EBITDA for US Cellular witnessed a decline by 73.6% to $252 million compared with the prior-year quarter’s figure of $956 million.
Cash Flow & Liquidity
In first-quarter 2023, Telephone and Data Systems generated $46 million of net cash from operating activities. As of Mar 31, 2023, the company had $259 million in cash and cash equivalents with $4,040 million of long-term debt. The company witnessed a negative cash flow of $293 million against a positive free cash flow of $108 million in the prior year.
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-$1,025 million and adjusted OIBDA (non-GAAP) within $725-$875 million. Capital expenditures are anticipated between $600 million and $700 million.
For U.S Cellular, the company is focused on investing in network advancement and improve efficiency through cost optimization. With this, management is expecting to stabilize its customer base and further improve postpaid subscriber trends. TDS Telecom is focusing on expanding its footprint through fiber deployment, optimizing platform cost structure and improving customer experience.
Bandwidth Inc. (BAND - Free Report) , carrying a Zacks Rank #2 (Buy), delivered an earnings surprise of 341.97%, on average, in the trailing four quarters. It operates as a Communications Platform-as-a-Service (CPaaS) provider, offering avant-garde software application programming interfaces for voice and messaging services. It is the only application programming interface (API) platform provider that owns a Tier 1 network with enhanced network capacity, primarily catering to business enterprises.
With 8,800 on-net rate centers, it delivers unparalleled network quality and proactively monitors network operations 24/7 to resolve quality issues, capitalizing on an efficient cost structure for seamless connectivity and speed-to-market.
Meta Platforms Inc. (META - Free Report) , sporting a Zacks Rank #1, delivered an earnings surprise of 15.46%, on average, in the trailing four quarters. Meta Platforms is the world’s largest social media platform. The company’s portfolio offering evolved from a single Facebook app to multiple apps like photo and video sharing app Instagram and WhatsApp messaging app owing to acquisitions.
Meta is considered to have pioneered the concept of social networking, which is why it enjoys a first mover’s advantage in this market. As developed regions mature, Meta undertakes measures to drive penetration in emerging markets of South East Asia, Latin America and Africa.
Workday Inc (WDAY - Free Report) , carrying a Zacks Rank #2, delivered an earnings surprise of 7.67%, on average, in the trailing four quarters. In the last reported quarter, it pulled off an earnings surprise of 11.24%.
Workday is a provider of enterprise-level software solutions for financial management and human resource domains. The company’s cloud-based platform combines finance and HR in a single system that makes it easier for organizations to provide analytical insights and decision support.
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Telephone and Data Systems' (TDS) Q1 Earnings Miss Estimates
Telephone and Data Systems, Inc. (TDS - Free Report) reported weak first-quarter 2023 results, with the top and the bottom line missing the respective Zacks Consensus Estimate. Despite improvement in residential connections and fixed wireless networks, TDS reported lower revenues year over year due to declining service and equipment sales revenue in U.S Cellular vertical.
Net Income
Net loss in the quarter was $9 million or a loss 8 cents per share against a net income of $44 million or 38 cents per share in the prior-year quarter. Declining net sales and higher operating expenses affected the net income during the quarter. The bottom line fell short of Zacks Consensus Estimate by 14 cents.
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
Revenues during the quarter were $1,303 million down from $1,315 million reported in the prior-year quarter. Declining net sales in U.S Cellular segment hampered the company’s first-quarter performance. The top line missed the Zacks Consensus Estimate by $27 million.
U.S Cellular’s revenues were $986 million, down 2% year over year owing to net sales decline in service and equipment sales. A reduction in postpaid retail and prepaid connections dented the revenues from this vertical. However, growth in fixed wireless and tower revenue partially reversed this negative trend.
Total operating expenses rose 2% to $960 million. Operating income was $26 million compared with $71 million in the year-ago quarter. Postpaid average revenue per user (ARPU) increased to $50.66 from $49.71. Postpaid average revenue per account (ARPA) increased to $130.77 from $129.93 in the previous-year period. Prepaid ARPU declined to $33.19 from $34.59 in the year-ago quarter.
Revenues from TDS Telecom stood at $253 million, up 1% year over year from $251 million reported in the prior-year quarter. Residential broadband revenues increased 8% year over year and residential broadband connection secured 4% year-over-year improvement. Residential revenues per connection increased to $60.24 from $57.95 in the year-earlier quarter. Around 72% of the customer are opting for 100 Mbps or greater speed compared with 67% in the prior-year quarter.
Total operating expenses in TDS Telecom increased to $245 million from $223 million. Operating income declined to $8 million from $28 million. Total connections stood at 1,167,000 compared with 1,196,900 in the year-ago quarter.
Other Details
In the reported quarter, operating expenses stood at $1,274 million, up 4% from the prior-year quarter’s levels. Operating income were $29 million compared with $95 million in the year-ago period. Higher operating expenses in all the verticals led to a 70% year-over-year decline. Adjusted EBITDA in TDS Telecom witnessed a 76% decline to $69 million owing to higher cash expenses. Adjusted EBITDA for US Cellular witnessed a decline by 73.6% to $252 million compared with the prior-year quarter’s figure of $956 million.
Cash Flow & Liquidity
In first-quarter 2023, Telephone and Data Systems generated $46 million of net cash from operating activities. As of Mar 31, 2023, the company had $259 million in cash and cash equivalents with $4,040 million of long-term debt. The company witnessed a negative cash flow of $293 million against a positive free cash flow of $108 million in the prior year.
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-$1,025 million and adjusted OIBDA (non-GAAP) within $725-$875 million. Capital expenditures are anticipated between $600 million and $700 million.
For U.S Cellular, the company is focused on investing in network advancement and improve efficiency through cost optimization. With this, management is expecting to stabilize its customer base and further improve postpaid subscriber trends. TDS Telecom is focusing on expanding its footprint through fiber deployment, optimizing platform cost structure and improving customer experience.
Zacks Rank & Stocks to Consider
TDS currently carries a Zacks Rank #3 (Hold).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Bandwidth Inc. (BAND - Free Report) , carrying a Zacks Rank #2 (Buy), delivered an earnings surprise of 341.97%, on average, in the trailing four quarters. It operates as a Communications Platform-as-a-Service (CPaaS) provider, offering avant-garde software application programming interfaces for voice and messaging services. It is the only application programming interface (API) platform provider that owns a Tier 1 network with enhanced network capacity, primarily catering to business enterprises.
With 8,800 on-net rate centers, it delivers unparalleled network quality and proactively monitors network operations 24/7 to resolve quality issues, capitalizing on an efficient cost structure for seamless connectivity and speed-to-market.
Meta Platforms Inc. (META - Free Report) , sporting a Zacks Rank #1, delivered an earnings surprise of 15.46%, on average, in the trailing four quarters. Meta Platforms is the world’s largest social media platform. The company’s portfolio offering evolved from a single Facebook app to multiple apps like photo and video sharing app Instagram and WhatsApp messaging app owing to acquisitions.
Meta is considered to have pioneered the concept of social networking, which is why it enjoys a first mover’s advantage in this market. As developed regions mature, Meta undertakes measures to drive penetration in emerging markets of South East Asia, Latin America and Africa.
Workday Inc (WDAY - Free Report) , carrying a Zacks Rank #2, delivered an earnings surprise of 7.67%, on average, in the trailing four quarters. In the last reported quarter, it pulled off an earnings surprise of 11.24%.
Workday is a provider of enterprise-level software solutions for financial management and human resource domains. The company’s cloud-based platform combines finance and HR in a single system that makes it easier for organizations to provide analytical insights and decision support.