Telephone and Data Systems, Inc. Quarterly Report on Form 10-Q for the Quarter Ended March 31, 2024
Telephone and Data Systems, Inc. Quarterly Report on Form 10-Q for the Quarter Ended March 31, 2024
Telephone and Data Systems, Inc. filed a quarterly report on Form 10-Q for the quarter ended March 31, 2024. The company has filed all required reports during the preceding 12 months and has been subject to filing requirements for the past 90 days. The company is a non-accelerated filer and not an emerging growth company. The number of shares outstanding for each class of common stock as of March 31, 2024, is 106 million Common Shares and 7 million Series A Common Shares.
Financial Performance
TDS reported net income of $38 million in the first quarter of 2024, an increase from $12 million in the first quarter of 2023. The improvement was primarily due to lower operating expenses, partially offset by lower revenues and higher interest and tax expenses.
Adjusted EBITDA (a profitability measure) increased 14% to $366 million, due to lower operating expenses, partially offset by lower revenues.
Revenue and Customer Trends
Total first quarter revenues declined 3% to $1.26 billion.
UScellular revenues fell 4% to $950 million, driven by lower equipment sales and a small decline in retail service revenue. Average revenue per user increased due to lower promotional discounts and higher cost recovery fees. However, UScellular lost 44,000 postpaid customers in the quarter due to aggressive competition across the wireless industry.
TDS Telecom revenues increased 5% to $266 million due to broadband customer growth and price increases. Residential revenue increased 10%.
Expenses
Total operating expenses declined 6% to $1.2 billion due to lower costs across all major spending categories.
| Category | Change | Reason |
|---|---|---|
| System operations | Flat | Lower employee costs offset by higher roaming expenses |
| Cost of equipment sold | Down 14% | Lower smartphone sales |
| SG&A | Down 4% | Lower employee and advertising costs |
| Depreciation & amortization | Down 2% |
Cash Flows and Capital Expenditures
| Metric | Q1 2024 | Q1 2023 | Change |
|---|---|---|---|
| Capital expenditures | $219 million | $343 million | Down 36% |
| Free cash flow | -$20 million | -$293 million |
The decline in capital spending was driven by reduced network investment at UScellular and slower fiber deployment at TDS Telecom.
TDS expects full-year 2024 capital expenditures of $550-$650 million at UScellular and $310-$340 million at TDS Telecom.
Balance Sheet
At March 31, 2024, TDS had $199 million of available borrowing capacity on its revolving credit facility and UScellular had $610 million available on its credit agreements.
In May 2024, TDS secured a new $375 million term loan, providing additional liquidity.
Outlook
For full year 2024, TDS provided the following commentary:
- Industry competition is expected to remain aggressive on pricing and promotions
- UScellular will continue enhancing its 5G network capabilities
- TDS Telecom plans to expand fiber deployments at a slower pace than previously expected
- TDS may need to delay or reduce capital expenditures and dividends to manage cash flows
TDS is also exploring strategic alternatives for UScellular, including a potential sale of the business.
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