Filing summary
Issuer discrepancy: The supplied filing is United States Cellular Corporation (UScellular), not Array Digital Infrastructure, Inc. Investors should verify that this is the intended filing before relying on the figures below.
Business context and reporting period
This unaudited Form 10-Q covers the three months ended March 31, 2022, compared with the three months ended March 31, 2021. UScellular, an 83%-owned subsidiary of Telephone and Data Systems, provides wireless service in 21 states and reported 4.83 million retail connections at quarter-end.
Financial and operating performance
| Metric | Q1 2022 | Q1 2021 |
|---|---|---|
| Total operating revenue | $1.010 billion | $1.023 billion |
| Operating income | $71 million | $84 million |
| Net income | $52 million | $62 million |
| Net income attributable to UScellular shareholders | $49 million | $60 million |
| Diluted EPS attributable to UScellular shareholders | $0.57 | $0.69 |
| Adjusted EBITDA (non-GAAP) | $289 million | $302 million |
| Adjusted OIBDA (non-GAAP) | $243 million | $258 million |
| Operating cash flow | $311 million | $124 million |
| Capital expenditures for property, plant and equipment | $150 million | $133 million |
| Free cash flow (non-GAAP) | $161 million | $(9) million |
Service revenue rose 2% to $787 million, while equipment sales fell 12% to $223 million. Operating expenses were $939 million in both periods. Postpaid ARPU increased 4% to $49.71; postpaid ARPA increased 4% to $129.93. Postpaid connections declined by 44,000 during the quarter, versus a 6,000 decline a year earlier; total postpaid churn increased to 1.30% from 1.12%.
At March 31, 2022, cash and cash equivalents were $300 million ($344 million including restricted cash). Long-term debt, net was $3.220 billion. The company reported $590 million of undrawn capacity across existing debt facilities; availability under certain facilities is subject to terms and collateral. Approximately 60% of long-term debt was fixed-rate and 40% variable-rate. The quarter’s $123 million federal tax refund related to a 2020 net operating loss carryback contributed to operating cash flow.
Material changes versus the prior period
- Revenue decreased 1%; operating income fell 15%, net income fell 17%, and Adjusted EBITDA declined 4% year over year.
- Postpaid handset net losses widened to 36,000 from 3,000. Management cited lower gross additions and higher defections amid aggressive industry competition. Connected-device net losses were 8,000 versus 3,000, attributed primarily to reduced demand following a decline in COVID-related funding.
- Retail service revenue increased, supported by higher postpaid ARPU. Lower roaming usage and rates reduced inbound roaming revenue by 27%; management expected further year-over-year roaming revenue declines during 2022. Equipment sales declined on lower smartphone and accessory volumes and increased promotional activity.
- Operating cash flow improved substantially, including from the tax refund and working-capital movements. Investing cash outflow was $710 million, including $561 million for spectrum licenses, compared with $1.388 billion in the prior-year quarter.
- Long-term debt, net increased $492 million from year-end 2021 to $3.220 billion, principally reflecting term-loan and export-credit borrowings, partly offset by repayments.
Outlook, risks and unusual items
- Management expected full-year 2022 capital expenditures of $700 million to $800 million, primarily for network modernization and 5G deployment, coverage and capacity, and information technology. Planned funding sources included operating cash flow, cash balances and, as needed, debt financing.
- UScellular said existing liquidity and expected cash flows should cover normal operating needs and debt service for the foreseeable future, while noting that future liquidity is not assured and negative free cash flow could recur.
- The company was a provisional winning bidder for 380 Auction 110 spectrum licenses for $580 million; the licenses were granted May 4, 2022, after quarter-end. It said access to Auction 107 spectrum was not expected until late 2023 and cited approximately $187 million of related relocation costs and incentives payable from 2021 through 2024.
- Management identified intense competition and promotions, customer churn, declining roaming revenue, spectrum access, supply-chain and device constraints, and network deployment execution as risks. Bad-debt expense increased to $25 million from $7 million; management attributed higher SG&A in part to bad debts.
- A False Claims Act matter relating to participation in past FCC spectrum auctions remained pending; UScellular said it could not predict the outcome. It stated there had been no material changes to previously disclosed risk factors and reported effective disclosure controls as of March 31, 2022.
Important facts for investors to verify
- Confirm the issuer: the supplied document is UScellular’s Form 10-Q, not an Array Digital Infrastructure filing.
- Review customer losses and churn trends, and whether competitive promotions continue to pressure revenue and margins.
- Assess debt, variable-rate exposure, facility availability and the funding required for planned capex and spectrum obligations.
- Verify the timing and usability of newly granted spectrum, including Auction 110 licenses and expected access to Auction 107 spectrum.
- Track the False Claims Act litigation and the effect of supply constraints, bad debts and roaming revenue declines on subsequent results.