Attached files
| file | filename |
|---|---|
| 8-K - FORM 8-K - SPRINT Corp | sprintq1fy178-kearningsrel.htm |
| EX-99.2 - PRINT VERSION OF QUARTERLY INVESTOR UPDATE - SPRINT Corp | fiscal1q17sprintquarterlyinv.pdf |
| EX-99.1 - PRESS RELEASE ANNOUNCING FIRST QUARTER OF FISCAL YEAR 2017 RESULTS - SPRINT Corp | sprintq1fy17earningsrelease.htm |
Investor
Update
Fiscal 1Q17 | 8-1-2017
www.sprint.com/investors
| 2
Sprint Quarterly Investor Update – Fiscal 1Q17
Fiscal 2Q16
3
4
8
10
0
11
18
TABLE
of contents
Customer Metrics
Highlights
Activations
Network
Financials
Outlook
19 Results Tables
17 Liquidity
| 3
Sprint Quarterly Investor Update – Fiscal 1Q17
Highlights
| 4
Sprint Quarterly Investor Update – Fiscal 1Q17
Total
Connections
602 599 564
368
61
53.4
54.0
53.3
53.6 53.7
1QFY16 2QFY16 3QFY16 4QFY16 1QFY17
Net Additions - In Thousands End of Period - In Millions
The company had 61,000 net additions in the current quarter compared with 602,000 in the
year-ago period and 368,000 net additions in the prior quarter.
Sprint ended the quarter with nearly 53.7 million connections, including 31.5 million postpaid,
8.7 million prepaid, and 13.5 million wholesale and affiliate connections.
The company is no longer reporting Lifeline connections in its customer base due to recent
regulatory changes resulting in tighter restrictions on the program. At the end of the fourth
fiscal quarter of 2016, 6.1 million connections were removed from the base, including 3.3 million
Assurance customers in the prepaid base and 2.8 million connections in the wholesale and
affiliate base. Historical periods have been restated to reflect this change, including the
reclassification of Assurance revenue from prepaid service revenue to wholesale, affiliate and
other revenue.
Customer Metrics
| 5
Sprint Quarterly Investor Update – Fiscal 1Q17
180
344
405
(118)
(39)
1QFY16 2QFY16 3QFY16 4QFY16 1QFY17
Postpaid Net Additions (Losses)
In Thousands
Postpaid net losses were
39,000 during the quarter
compared to net additions of
180,000 in the year-ago period
and net losses of 118,000 in the
prior quarter. The year-over-
year decline was primarily
impacted by higher tablet net
losses, while the sequential
increase was primarily driven
by lower phone churn.
1.39% 1.37%
1.57% 1.58%
1.50%
1.56% 1.52%
1.67%
1.75%
1.65%
1QFY16 2QFY16 3QFY16 4QFY16 1QFY17
Postpaid Phone Churn Postpaid Total Churn
Postpaid Total Churn and Postpaid Phone Churn
Postpaid phone churn of 1.50 percent compared to 1.39 percent in the year-ago period and 1.58
percent in the prior quarter.
Postpaid total churn of 1.65 percent for the quarter compared to 1.56 percent in the year-ago
period and 1.75 percent in the prior quarter.
In the quarter, the company enhanced subscriber reporting to better align certain early-life gross
additions and deactivations. This enhancement had no impact to net additions, but did result in
reporting lower gross additions and lower deactivations in the quarter. Without this enhancement,
postpaid phone churn in the quarter would have been 1.58 percent, and postpaid total churn in the
quarter would have been 1.73 percent.
Customer Metrics
| 6
Sprint Quarterly Investor Update – Fiscal 1Q17
173
347 368
42
88
1QFY16 2QFY16 3QFY16 4QFY16 1QFY17
Postpaid Phone Net Additions
In Thousands
Postpaid phone net additions of
88,000 compared to net additions
of 173,000 in the year-ago period
and 42,000 in the prior quarter.
The year-over-year decrease was
driven by higher phone churn and
partially offset by higher gross
additions, while the sequential
improvement was mostly driven
by lower churn. The company
ended the quarter with 26.2
million phone connections.
Tablet and other device net losses of 127,000 in the quarter compared to net additions of 7,000
in the year-ago period and net losses of 160,000 in the prior quarter. The current quarter included
171,000 tablet net losses, compared to 31,000 in the year-ago period and 170,000 in the prior
quarter. The year-over-year increase in tablet net losses was due to lower gross additions and higher
churn, as the company continues to focus on growing phone connections.
25.3 25.7 26.0 26.1 26.2
5.6 5.6 5.7 5.5 5.3
30.9 31.3 31.7 31.6 31.5
1QFY16 2QFY16 3QFY16 4QFY16 1QFY17
Phones Tablets and Other DevicesPostpaid Connections
In Millions
Customer Metrics
| 7
Sprint Quarterly Investor Update – Fiscal 1Q17
2.73 2.74 2.75
2.77 2.78
1QFY16 2QFY16 3QFY16 4QFY16 1QFY17
Average Postpaid Connections per AccountAverage postpaid connections
per account of 2.78 at quarter
end compared to 2.73 in the
year-ago period and 2.77 in the
prior quarter. The growth has
been driven by higher phones
per account, partially offset by
recent tablet pressure.
Wholesale & affiliate net additions were 65,000 in the quarter compared to 728,000 in the year-ago
period and net additions of 291,000 in the prior quarter. The year-over-year and sequential declines
were impacted by lower connected device net additions, which generally have a lower ARPU than
other wholesale & affiliate customers.
Prepaid net additions of 35,000 during the quarter compared to net losses of 306,000 in the year-
ago period and net additions of 195,000 in the prior quarter. Year-over-year improvements were
driven by strong performance in the Boost brand, as well as by fewer net losses within the Virgin
brand. Sequentially, the decrease was mostly driven by seasonally lower Boost gross additions.
Prepaid churn was 4.57 percent compared to 5.39 percent for the year-ago period and 4.69
percent for the prior quarter. While churn was relatively flat sequentially, the year-over-year
improvement was due to lower churn in both the Boost and Virgin brands.
Customer Metrics
| 8
Sprint Quarterly Investor Update – Fiscal 1Q17
3.3 3.7
4.8
3.5 3.7
2.6 2.5
2.3
2.5 2.3
5.9 6.2
7.1
6.0 6.0
1QFY16 2QFY16 3QFY16 4QFY16 1QFY17
Postpaid PrepaidRetail Activations
In Millions
Retail activations were more
than 6.0 million during the
quarter compared to 5.9 million
in the year-ago period and 6.0
million in the prior quarter. Year-
over-year, higher postpaid
upgrades were offset by lower
prepaid gross additions.
Sequentially, higher postpaid
upgrades were offset by
seasonally lower prepaid gross
additions.
35%
42%
50%
55%
60%
1QFY16 2QFY16 3QFY16 4QFY16 1QFY17
Postpaid Carrier Aggregation Capable Phones as a Percentage of Phone
Connections
Postpaid carrier aggregation capable phones, which allow for higher download data speeds, were
81 percent of postpaid phones activated during the quarter, increasing the number of these phones
within the phone base to 60 percent.
Activations
| 9
Sprint Quarterly Investor Update – Fiscal 1Q17
64%
67%
71% 74%
76%
1QFY16 2QFY16 3QFY16 4QFY16 1QFY17
Postpaid Phone Connections on Unsubsidized Service PlansPostpaid phone connections
on unsubsidized service
plans represented 76 percent
of the base at the end of the
quarter, compared to 64
percent in the year-ago period
and 74 percent in the prior
quarter.
69% 73%
80% 82% 85%
75% 78%
84% 86%
89%
1QFY16 2QFY16 3QFY16 4QFY16 1QFY17
Lease Percentage of Activations
Installment Percentage of Activations
Financed Phone Percentage of Phone Activations
Postpaid Device
Financing
Postpaid device financing rate was 85 percent of postpaid
activations for the quarter compared to 69 percent for the year-
ago period and 82 percent in the prior quarter. At the end of the
quarter, 39 percent of the postpaid connection base was active
on a leasing agreement compared to 36 percent in the year-ago
quarter and 38 percent in the prior quarter.
Postpaid phone financing rate was 89 percent of phone
activations for the quarter compared to 75 percent for the year-
ago period and 86 percent in the prior quarter.
Postpaid upgrade
rate was 6.8 percent
during the quarter
compared to 5.4
percent for the year-
ago period and 6.1
percent for the prior
quarter. Both the
year-over-year and
sequential increases
were driven by a
higher percent of
the base being
eligible to upgrade.
Activations
| 10
Sprint Quarterly Investor Update – Fiscal 1Q17
Sprint is unlocking the value of the largest
spectrum holdings in the U.S. by
densifying and optimizing its network. The
company has already deployed thousands
of small cell solutions, including the
recently announced Sprint Magic Box, the
world’s first all-wireless small cell.
Network performance improvements have
been validated by numerous third-party
sources:
• RootMetrics® awarded Sprint more
than 25 percent more first-place
(outright or shared) Metropolitan
area RootScore® Awards (from 166
to 211) for reliability, speed, data,
call, text or overall network
performance in the first half of 2017
compared to the year-ago testing
period. 1
• Sprint’s overall network reliability
continues to perform within 1
percent of Verizon and AT&T, based
on an analysis of Nielsen data. 2
• Sprint's average download speeds
have increased 20 percent in the last
six months, according to Ookla's
Speedtest Intelligence data for all
results from January through June
2017.
1 Rankings based on RootMetrics Metro RootScore Reports from 1H
2016 and 1H 2017 for mobile performance as tested on best available
2 Average network reliability (voice & data) based on Sprint’s analysis
of latest Nielsen drive test data in the top 106 metro markets.
Network
Sprint’s analysis of Ookla's Speedtest Intelligence data
from January 2017 to June 2017 for All Mobile Results.
plans and devices on four mobile networks across all available network
types. Your experiences may vary. The RootMetrics award is not an
endorsement of Sprint. Visit www.rootmetrics.com for more details.
| 11
Sprint Quarterly Investor Update – Fiscal 1Q17
$8.0
$8.2
$8.5 $8.5
$8.2
1QFY16 2QFY16 3QFY16 4QFY16 1QFY17
Net Operating Revenues
Dollars In Billions
Net operating revenues of $8.2 billion for the quarter increased $145 million year-over-year and
declined $382 million sequentially. The year-over-year growth was mostly driven by higher
equipment revenue, partially offset by lower wireless and wireline service revenue. Sequentially, the
decrease was driven by lower equipment revenue.
Wireless service revenue of $5.7 billion declined $377 million year-over-year and declined $20
million sequentially. Approximately half of the year-over-year decrease was driven by changes to the
company’s device insurance program, which were accretive to Adjusted EBITDA* but resulted in
lower insurance revenue as the program revenue is accounted for and presented on a net basis.
Additionally, the year-over-year reduction was impacted by lower postpaid phone ARPU, as
customers continued to migrate to rate plans offered in conjunction with device financing, partially
offset by growth in the postpaid phone customer base.
Equipment revenue of $2.1 billion increased $590 million year-over-year and declined $337 million
sequentially. The year-over-year growth was mostly driven by more sales of used devices to third
parties and higher lease revenue. Sales of used devices to third parties, which have a corresponding
impact to cost of products expense and are relatively neutral to Adjusted EBITDA*, were
approximately $350 million in the quarter. Sequentially, the decline was mostly driven by a lower
mix of installment billing sales, which recognize more revenue at the point of sale relative to leasing
sales, and partially offset by higher lease revenue.
Wireline revenues of $433 million for the quarter declined $112 million year-over-year and $47
million sequentially. The year-over-year and sequential declines were driven by lower voice volumes,
as the company continues to de-emphasize certain voice services, and the annual intercompany
rate reduction based on current market prices for voice and IP services sold to the wireless segment.
Financials
| 12
Sprint Quarterly Investor Update – Fiscal 1Q17
$72.17 $71.69 $71.77 $68.66 $69.51
1QFY16 2QFY16 3QFY16 4QFY16 1QFY17
Service Equipment
Postpaid Phone Average Billings Per User
(ABPU)*
Postpaid Phone Average Billings
Per User (ABPU)* of $69.51 for the
quarter decreased 4 percent year-
over-year and increased 1 percent
sequentially. The year-over-year
decline was almost entirely due to
lower insurance revenue resulting
from the change in the company’s
device insurance program, which
was accretive to Adjusted EBITDA*.
Normalizing for this change, ABPU
was relatively flat year-over-year.
$170.56 $170.29 $171.28 $165.92 $168.95
1QFY16 2QFY16 3QFY16 4QFY16 1QFY17
Service EquipmentPostpaid Average Billings Per Account
(ABPA)*
Postpaid Average Billings Per Account (ABPA)* of
$168.95 for the quarter decreased 1 percent year-over-
year and increased 2 percent sequentially. The year-over-
year decline was primarily driven by lower insurance
revenue resulting from the change in the company’s
device insurance program. Normalizing for this change,
ABPA would have increased 2 percent year-over-year.
Financials
Prepaid Average Revenue
Per User (ARPU) of $38.24
for the quarter increased 16
percent year-over-year and
decreased 1 percent
sequentially. The year-over-
year increase was primarily
driven by a change in the
company’s churn rules
resulting in the removal of
low-engagement customers
from the base in the third
fiscal quarter of 2016.
2%
Increased
Year-Over-Year^
^Normalized for device
insurance program change
Normalized
Normalized
| 13
Sprint Quarterly Investor Update – Fiscal 1Q17
$2.1 $2.1
$1.9
$1.7 $1.7
1QFY16 2QFY16 3QFY16 4QFY16 1QFY17
Cost of Services
Dollars In Billions
Cost of services (CoS) of $1.7 billion
for the quarter decreased $390
million year-over-year and $27
million sequentially. The year-over-
year decrease was impacted by
changes to the company’s device
insurance program, as the program
revenue is accounted for and
reported on a net basis and related
expenses are no longer incurred by
Sprint. The year-over-year decrease
was also driven by lower network
labor expenses, lower wireline
expenses, and lower roaming
expenses including the termination
of our wholesale arrangement with
nTelos.
$1.9 $2.0
$2.1 $2.0 $1.9
1QFY16 2QFY16 3QFY16 4QFY16 1QFY17
Selling, General, and Administrative
Dollars In Billions
Selling, general and administrative
expenses (SG&A) of $1.9 billion for
the quarter increased by $21 million
year-over-year and decreased $64
million sequentially. The year-over-
year increase was mostly driven by
higher marketing expenses, partially
offset by lower customer care costs.
Sequentially, the decrease was
primarily driven by lower bad debt
expense related to a decrease in
installment billing sales, as more bad
debt expense is recognized at the
time of activation under installment
billing relative to the leasing model.
Financials
| 14
Sprint Quarterly Investor Update – Fiscal 1Q17
$1.0 $1.0 $1.0 $1.0 $1.0
$0.7 $0.7 $0.8 $0.9 $0.9
$0.3 $0.3 $0.3 $0.2 $0.2
$2.0 $2.0 $2.1 $2.1 $2.1
1QFY16 2QFY16 3QFY16 4QFY16 1QFY17
Amortization
Leased Devices
Network and Other Depreciation
Depreciation and
Amortization
Dollars In Billions
$1.4
$1.7
$2.0 $2.0
$1.5
1QFY16 2QFY16 3QFY16 4QFY16 1QFY17
Cost of Products
Dollars In Billions
Cost of products of $1.5 billion for
the quarter increased $126 million
year-over-year and decreased $435
million sequentially. The year-over-
year increase was driven by more
sales of used devices to third parties,
partially offset by the elimination of
lease payments associated with the
first sale-leaseback transaction with
Mobile Leasing Solutions, LLC. Sales
of used devices to third parties, which
have a corresponding impact to
equipment revenue and are relatively
neutral to Adjusted EBITDA*, were
approximately $350 million in the
quarter. Sequentially, the decrease
was primarily driven by a lower mix of
installment billing sales.
Depreciation and amortization expense of $2.1 billion for
the quarter increased $87 million year-over-year and
decreased $56 million sequentially. Leased device
depreciation was $854 million in the quarter, $644 million in
the year-ago period, and $911 million in the prior quarter.
Other, net in the current
quarter represented a net
gain of $252 million,
primarily resulting from a
pre-tax non-cash gain of
$479 million related to
spectrum swap exchanges
with other carriers, as well as
a $55 million reduction of
legal reserves related to
favorable developments in
pending legal proceedings,
and was partially offset by a
$181 million loss from asset
dispositions and $112 million
related to loss on leased
devices, with only the loss on
leased devices impacting
Adjusted EBITDA*.
Financials
| 15
Sprint Quarterly Investor Update – Fiscal 1Q17
Financials
$0.4
$0.6
$0.3
$0.5
$1.2
1QFY16 2QFY16 3QFY16 4QFY16 1QFY17
Operating Income
Dollars In Billions
Operating income of $1.2 billion
compared to $361 million in the
year-ago period and $470 million in
the prior quarter. The current quarter
included a pre-tax non-recurring net
gain of $364 million primarily related
to spectrum swap exchanges with
other carriers, a reduction of legal
reserves related to favorable
developments in pending legal
proceedings, and asset dispositions.
The year-ago period included $113
million of non-recurring contract
termination charges related to an
arrangement with nTelos, while the
previous quarter included $100
million of severance and exit costs,
litigation settlements, and contract
terminations.
$2.5
$2.3
$2.5
$2.7
$2.9
1QFY16 2QFY16 3QFY16 4QFY16 1QFY17
Adjusted EBITDA*
Dollars In Billions
Adjusted EBITDA* was $2.9
billion for the quarter, compared
to $2.5 billion in the year-ago
period and $2.7 billion in the
prior quarter. The year-over-year
improvement was primarily due
to lower cost of services
expenses and higher operating
revenues, partially offset by
higher cost of products
expenses. The sequential
increase was driven by lower
cost of products expenses that
were partially offset by lower
equipment revenue.
Net income of $206 million for the quarter compared
to a net loss of $302 million in the year-ago period and
a net loss of $283 million in the prior quarter.
Excluding the after-tax benefit of non-recurring items
in the quarter, Sprint would have reported net income
of more than $150 million.
| 16
Sprint Quarterly Investor Update – Fiscal 1Q17
$466
$707
($646)
$80
$239
1QFY16 2QFY16 3QFY16 4QFY16 1QFY17
Adjusted Free Cash Flow *
Dollars In Millions
Cash provided by operating activities of $1.3 billion for the quarter compared to $542 million in
the year-ago period and $1.3 billion in the prior quarter. Year-over-year, the increase was driven by
improvements in Adjusted EBITDA* along with favorable working capital changes, while sequentially
improvements in Adjusted EBITDA* were offset by unfavorable working capital changes.
Adjusted free cash flow* of $239 million for the quarter compared to $466 million in the year-ago
period and $80 million in the prior quarter. The year-over-year decrease was driven by higher
network capital expenditures and lower net proceeds of financings related to devices and
receivables, partially offset by higher cash provided by operating activities. Sequentially, an
increase in net proceeds of financings related to devices and receivables was partially offset by
higher network capital expenditures.
Cash capital expenditures were $1.6 billion in the quarter compared to $878 million in the year-
ago period and $924 million in the prior quarter. The year-over-year and sequential increases were
driven by higher network capital expenditures. Capital expenditures for leased devices were $497
million in the current quarter compared to $405 million in the year-ago period and $395 million in
the prior quarter.
Financials
| 17
Sprint Quarterly Investor Update – Fiscal 1Q17
2.2
6.8
1.8
0.8
0.9
1.8
Liquidity as of
06/30/17
Current
Maturities **
Cash, Cash Equiv, Short-Term Investments Revolver
Network Equipment Financing
Receivables/Device FinancingVendor Financing Note Maturities
Other
** Includes maturities due through June 2018
Liquidity and Debt
Dollars In Billions
$8.7 of
General
Purpose
Liquidity
$ 5.1
$ 9.6
Liquidity
Total general purpose liquidity was $8.7 billion at the end of the quarter, including $6.8 billion of
cash, cash equivalents and short-term investments. Additionally, the company has approximately
$900 million of availability under vendor financing agreements that can be used toward the
purchase of 2.5GHz network equipment.
Sprint continued to execute its financing strategy of diversifying its funding sources, lowering its
cost of capital, and reducing its future cash interest expenses. During the quarter, the company
repaid $1.2 billion of 9 percent Guaranteed Notes due 2018 and $388 million of 8.375 percent
Notes due 2017. In addition, the company also retired nearly $300 million associated with its
Network LeaseCo and Mobile Leasing Solution facilities.
| 18
Sprint Quarterly Investor Update – Fiscal 1Q17
Outlook
| 19
Sprint Quarterly Investor Update – Fiscal 1Q17
Wireless Operating Statistics (Unaudited)
Quarter To Date
6/30/17 3/31/17 6/30/16
Net additions (losses) (in thousands)
Postpaid (39) (118) 180
Postpaid phone 88 42 173
Prepaid (f ) 35 195 (306)
Wholesale and affiliate (f ) 65 291 728
Total wireless net additions 61 368 602
End of period connections (in thousands)
Postpaid (d) 31,518 31,576 30,945
Postpaid phone (d) 26,153 26,079 25,322
Prepaid (d) (e) (f ) 8,719 8,688 10,636
Wholesale and affiliate (d) (e) (f ) 13,461 13,375 11,782
Total end of period connections 53,698 53,639 53,363
Churn (g)
Postpaid 1.65% 1.75% 1.56%
Postpaid phone 1.50% 1.58% 1.39%
Prepaid (e) 4.57% 4.69% 5.39%
Supplemental data - connected devices
End of period connections (in thousands)
Retail postpaid 2,091 2,001 1,822
Wholesale and affiliate 11,100 10,880 9,244
Total 13,191 12,881 11,066
ARPU (a)
Postpaid 47.30$ 47.34$ 51.54$
Postpaid phone 53.92$ 54.10$ 59.20$
Prepaid (e) 38.24$ 38.48$ 33.00$
NON-GAAP RECONCILIATION - ABPA* AND ABPU* (Unaudited)
(Millions, except accounts, connections, ABPA*, and ABPU*)
6/30/17 3/31/17 6/30/16
ABPA*
Postpaid service revenue 4,466$ 4,493$ 4,778$
Add: Installment plan billings 368 343 264
Add: Lease revenue 899 842 755
Total for postpaid connections $ 5,733 $ 5,678 $ 5,797
Average postpaid accounts (in thousands) 11,312 11,405 11,329
Postpaid ABPA* (b) 168.95$ 165.92$ 170.56$
6/30/17 3/31/17 6/30/16
Postpaid phone ABPU*
Postpaid phone service revenue 4,214$ 4,228$ 4,489$
Add: Installment plan billings 332 309 243
Add: Lease revenue 887 829 741
Total for postpaid phone connections $ 5,433 $ 5,366 $ 5,473
Postpaid average phone connections (in thousands) 26,052 26,053 25,275
Postpaid phone ABPU* (c) 69.51$ 68.66$ 72.17$
(g)
In the quarter ended June 30, 2017, the Company enhanced subscriber reporting to better align certain early-life gross activations and deactivations. This
enhancement had no impact to net additions, but did result in reporting lower gross additions and lower deactivations in the quarter. Without this enhancement,
total postpaid churn in the quarter would have been 1.73 percent versus 1.65 percent.
(e) During the three-month period ended June 30, 2017, 2,000 Wi-Fi connections were adjusted from the postpaid subscriber base.
(b)
Postpaid ABPA* is calculated by dividing service revenue earned from connections plus installment plan billings and lease revenue by the sum of the monthly
average number of accounts during the period.
(c)
Postpaid phone ABPU* is calculated by dividing postpaid phone service revenue earned from postpaid phone connections plus installment plan billings and
lease revenue by the sum of the monthly average number of postpaid phone connections during the period.
(d) As part of the Shentel transaction, 186,000 and 92,000 subscribers were transferred from postpaid and prepaid, respectively, to affiliates. An additional 270,000
of nTelos' subscribers are now part of our affiliate relationship with Shentel and were reported in wholesale and affiliate subscribers beginning with the quarter ended
June 30, 2016. In addition, during the three-month period ended June 30, 2017, 17,000 and 4,000 subscribers were transferred from postpaid and prepaid,
respectively, to affiliates as a result of a the transfer of additional subscribers to Shentel.
(f )
Sprint is no longer reporting Lifeline subscribers due to recent regulatory changes resulting in tighter program restrictions. We have excluded them from our
customer base for all periods presented, including our Assurance Wireless prepaid brand and subscribers through our wholesale MVNO's.
(a)
ARPU is calculated by dividing service revenue by the sum of the monthly average number of connections in the applicable service category. Changes in
average monthly service revenue reflect connections for either the postpaid or prepaid service category who change rate plans, the level of voice and data usage,
the amount of service credits which are offered to connections, plus the net effect of average monthly revenue generated by new connections and deactivating
connections. Postpaid phone ARPU represents revenues related to our postpaid phone connections.
Quarter To Date
Quarter To Date
Results Tables
|
20
Sprint Quarterly Investor Update – Fiscal 1Q17
Wireless Device Financing Summary (Unaudited)
(Millions, except sales, connections, and leased devices in property, plant and equipment)
Quarter To Date
6/30/17 3/31/17 6/30/16
Postpaid activations (in thousands) 3,668 3,471 3,268
Postpaid activations financed 85% 82% 69%
Postpaid activations - leases 55% 42% 44%
Installment plans
Installment sales financed 553$ 696$ 407$
Installment billings 368$ 343$ 264$
Installment receivables, net 1,792$ 1,764$ -$
Leasing revenue and depreciation
Lease revenue 899$ 842$ 755$
Lease depreciation 854$ 911$ 644$
Leased device additions
Cash paid for capital expenditures - leased devices 497$ 395$ 405$
Transfers from inventory - leased devices 850$ 639$ 541$
Leased devices
Leased devices in property, plant and equipment, net 4,336$ 4,162$ 3,766$
Leased device units
Leased devices in property, plant and equipment (units in thousands) 12,223 11,888 8,600
Leased device and receivables financings net proceeds
Proceeds 765$ 100$ 1,055$
Repayments (273) (414) (240)
Net proceeds (repayments) of financings related to devices and receivables 492$ (314)$ 815$
Results Tables
| 21
Sprint Quarterly Investor Update – Fiscal 1Q17
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
(Millions, except per share data)
6/30/17 3/31/17 6/30/16
Net operating revenues
Service revenue 6,071$ 6,116$ 6,516$
Equipment revenue 2,086 2,423 1,496
Total net operating revenues 8,157 8,539 8,012
Net operating expenses
Cost of services (exclusive of depreciation and amortization below) 1,709 1,736 2,099
Cost of products (exclusive of depreciation and amortization below) 1,545 1,980 1,419
Selling, general and administrative 1,938 2,002 1,917
Depreciation - network and other 977 960 1,036
Depreciation - leased devices 854 911 644
Amortization 223 239 287
Other, net (252) 241 249
Total net operating expenses 6,994 8,069 7,651
Operating income 1,163 470 361
Interest expense (613) (631) (615)
Other (expense) income, net (52) 27 8
Income (loss) before income taxes 498 (134) (246)
Income tax expense (292) (149) (56)
Net income (loss) 206$ (283)$ (302)$
Basic net income (loss) per common share 0.05$ (0.07)$ (0.08)$
Diluted net income (loss) per common share 0.05$ (0.07)$ (0.08)$
Weighted average common shares outstanding 3,993 3,988 3,975
Diluted weighted average common shares outstanding 4,076 3,988 3,975
Effective tax rate 58.6% -111.2% -22.8%
NON-GAAP RECONCILIATION - NET INCOME (LOSS) TO ADJUSTED EBITDA* (Unaudited)
(Millions)
6/30/17 3/31/17 6/30/16
Net income (loss) 206$ (283)$ (302)$
Income tax expense 292 149 56
Income (loss) before income taxes 498 (134) (246)
Other expense (income), net 52 (27) (8)
Interest expense 613 631 615
Operating income 1,163 470 361
Depreciation - network and other 977 960 1,036
Depreciation - leased devices 854 911 644
Amortization 223 239 287
EBITDA* (1) 3,217 2,580 2,328
Gain from asset dispositions, exchanges, and other, net (2) (304) - -
Severance and exit costs (3) - 36 16
Contract terminations (4) (5) 27 113
Litigation and other contingencies (5) (55) 37 -
Adjusted EBITDA* (1) 2,853$ 2,680$ 2,457$
Adjusted EBITDA margin* 47.0% 43.8% 37.7%
Selected items:
Cash paid for capital expenditures - network and other 1,121$ 529$ 473$
Cash paid for capital expenditures - leased devices 497$ 395$ 405$
Quarter To Date
Quarter To Date
Results Tables
| 22
Sprint Quarterly Investor Update – Fiscal 1Q17
WIRELESS STATEMENTS OF OPERATIONS (Unaudited)
(Millions)
6/30/17 3/31/17 6/30/16
Net operating revenues
Service revenue
Postpaid 4,466$ 4,493$ 4,778$
Prepaid (6) 999 982 1,074
Wholesale, affiliate and other (6) 259 269 249
Total service revenue 5,724 5,744 6,101
Equipment revenue 2,086 2,423 1,496
Total net operating revenues 7,810 8,167 7,597
Net operating expenses
Cost of services (exclusive of depreciation and amortization below) 1,412 1,448 1,784
Cost of products (exclusive of depreciation and amortization below) 1,545 1,980 1,419
Selling, general and administrative 1,875 1,944 1,834
Depreciation - network and other 925 911 985
Depreciation - leased devices 854 911 644
Amortization 223 239 287
Other, net (202) 232 249
Total net operating expenses 6,632 7,665 7,202
Operating income 1,178$ 502$ 395$
WIRELESS NON-GAAP RECONCILIATION (Unaudited)
(Millions)
6/30/17 3/31/17 6/30/16
Operating income 1,178$ 502$ 395$
Gain from asset dispositions, exchanges, and other, net (2) (304) - -
Severance and exit costs (3) (5) 27 16
Contract terminations (4) (5) 27 113
Litigation and other contingencies (5) - 37 -
Depreciation - network and other 925 911 985
Depreciation - leased devices 854 911 644
Amortization 223 239 287
Adjusted EBITDA* (1) 2,866$ 2,654$ 2,440$
Adjusted EBITDA margin* 50.1% 46.2% 40.0%
Selected items:
Cash paid for capital expenditures - network and other 938$ 468$ 376$
Cash paid for capital expenditures - leased devices 497$ 395$ 405$
Quarter To Date
Quarter To Date
Results Tables
| 23
Sprint Quarterly Investor Update – Fiscal 1Q17
WIRELINE STATEMENTS OF OPERATIONS (Unaudited)
(Millions)
6/30/17 3/31/17 6/30/16
Net operating revenues
Voice 124$ 143$ 181$
Data 34 39 43
Internet 255 276 302
Other 20 22 19
Total net operating revenues 433 480 545
Net operating expenses
Cost of services (exclusive of depreciation and amortization below) 387 402 448
Selling, general and administrative 57 49 78
Depreciation and amortization 51 47 49
Other, net 5 8 -
Total net operating expenses 500 506 575
Operating loss (67)$ (26)$ (30)$
WIRELINE NON-GAAP RECONCILIATION (Unaudited)
(Millions)
6/30/17 3/31/17 6/30/16
Operating loss (67)$ (26)$ (30)$
Severance and exit costs (3) 5 8 -
Depreciation and amortization 51 47 49
Adjusted EBITDA* (11)$ 29$ 19$
Adjusted EBITDA margin* -2.5% 6.0% 3.5%
Selected items:
Cash paid for capital expenditures - network and other 62$ 19$ 20$
Quarter To Date
Quarter To Date
Results Tables
| 24
Sprint Quarterly Investor Update – Fiscal 1Q17
CONDENSED CONSOLIDATED CASH FLOW INFORMATION (Unaudited)**
(Millions)
6/30/17 3/31/17 6/30/16
Operating activities
Net income (loss) 206$ (283)$ (302)$
Depreciation and amortization 2,054 2,110 1,967
Provision for losses on accounts receivable 102 149 93
Share-based and long-term incentive compensation expense 41 36 15
Deferred income tax expense 282 157 46
Gains from asset dispositions and exchanges (479) - -
Call premiums paid on debt redemptions (129) - -
Loss on early extinguishment of debt 66 - -
Amortization of long-term debt premiums, net (51) (68) (80)
Loss on disposal of property, plant and equipment 293 141 120
Litigation - 37 -
Contract terminations (5) 15 96
Other changes in assets and liabilities:
Accounts and notes receivable (53) (475) (106)
Inventories and other current assets (711) (51) (98)
Deferred purchase price from sale of receivables - (69) (117)
Accounts payable and other current liabilities (474) (268) (1,016)
Non-current assets and liabilities, net 73 5 (159)
Other, net 65 (168) 83
Net cash provided by operating activities 1,280 1,268 542
Investing activities
Capital expenditures - network and other (1,121) (529) (473)
Capital expenditures - leased devices (497) (395) (405)
Expenditures relating to FCC licenses (13) (37) (15)
Change in short-term investments, net 1,095 (3,095) (1,304)
Proceeds from sales of assets and FCC licenses 101 93 27
Other, net (3) (68) (25)
Net cash used in investing activities (438) (4,031) (2,195)
Financing activities
Proceeds from debt and financings 902 4,136 3,255
Repayments of debt, financing and capital lease obligations (2,121) (2,151) (294)
Debt financing costs - (86) (175)
Other, net (15) 27 6
Net cash (used in) provided by financing activities (1,234) 1,926 2,792
Net (decrease) increase in cash and cash equivalents (392) (837) 1,139
Cash and cash equivalents, beginning of period 2,870 3,707 2,641
Cash and cash equivalents, end of period 2,478$ 2,870$ 3,780$
RECONCILIATION TO CONSOLIDATED FREE CASH FLOW* (NON-GAAP) (Unaudited)
(Millions)
6/30/17 3/31/17 6/30/16
Net cash provided by operating activities 1,280$ 1,268$ 542$
Capital expenditures - network and other (1,121) (529) (473)
Capital expenditures - leased devices (497) (395) (405)
Expenditures relating to FCC licenses, net (13) (37) (15)
Proceeds from sales of assets and FCC licenses 101 93 27
Other investing activities, net (3) (6) (25)
Free cash flow* (253)$ 394$ (349)$
Net proceeds (repayments) of financings related to devices and receivables 492 (314) 815
Adjusted free cash flow* 239$ 80$ 466$
**Certain prior period amounts have been reclassified to conform to the current period presentation.
Quarter to Date
Quarter to Date
Results Tables
| 25
Sprint Quarterly Investor Update – Fiscal 1Q17
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
(Millions)
6/30/17 3/31/17
ASSETS
Current assets
Cash and cash equivalents 2,478$ 2,870$
Short-term investments 4,349 5,444
Accounts and notes receivable, net 4,089 4,138
Device and accessory inventory 979 1,064
Prepaid expenses and other current assets 601 601
Total current assets 12,496 14,117
Property, plant and equipment, net 18,866 19,209
Goodwill 6,578 6,579
FCC licenses and other 41,074 40,585
Definite-lived intangible assets, net 3,075 3,320
Other assets 1,235 1,313
Total assets 83,324$ 85,123$
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable 2,616$ 3,281$
Accrued expenses and other current liabilities 3,830 4,141
Current portion of long-term debt, financing and capital lease obligations 5,125 5,036
Total current liabilities 11,571 12,458
Long-term debt, financing and capital lease obligations 34,459 35,878
Deferred tax liabilities 14,701 14,416
Other liabilities 3,578 3,563
Total liabilities 64,309 66,315
Stockholders' equity
Common stock 40 40
Paid-in capital 27,761 27,756
Accumulated deficit (8,378) (8,584)
Accumulated other comprehensive loss (408) (404)
Total stockholders' equity 19,015 18,808
Total liabilities and stockholders' equity 83,324$ 85,123$
NET DEBT* (NON-GAAP) (Unaudited)
(Millions)
6/30/17 3/31/17
Total debt 39,584$ 40,914$
Less: Cash and cash equivalents (2,478) (2,870)
Less: Short-term investments (4,349) (5,444)
Net debt* 32,757$ 32,600$
Results Tables
| 26
Sprint Quarterly Investor Update – Fiscal 1Q17
SCHEDULE OF DEBT (Unaudited)
(Millions)
6/30/17
ISSUER MATURITY PRINCIPAL
Sprint Corporation
7.25% Senior notes due 2021 09/15/2021 2,250$
7.875% Senior notes due 2023 09/15/2023 4,250
7.125% Senior notes due 2024 06/15/2024 2,500
7.625% Senior notes due 2025 02/15/2025 1,500
Sprint Corporation 10,500
Sprint Spectrum Co LLC, Sprint Spectrum Co II LLC and Sprint Spectrum Co III LLC
3.36% Senior secured notes due 2021 09/20/2021 3,500
Sprint Spectrum Co LLC, Sprint Spectrum Co II LLC and Sprint Spectrum Co III LLC 3,500
Sprint Communications, Inc.
Export Development Canada secured loan 12/17/2019 300
8.375% Senior notes due 2017 08/15/2017 912
9% Guaranteed notes due 2018 11/15/2018 1,800
7% Guaranteed notes due 2020 03/01/2020 1,000
7% Senior notes due 2020 08/15/2020 1,500
11.5% Senior notes due 2021 11/15/2021 1,000
9.25% Secured debentures due 2022 04/15/2022 200
6% Senior notes due 2022 11/15/2022 2,280
Sprint Communications, Inc. 8,992
Sprint Capital Corporation
6.9% Senior notes due 2019 05/01/2019 1,729
6.875% Senior notes due 2028 11/15/2028 2,475
8.75% Senior notes due 2032 03/15/2032 2,000
Sprint Capital Corporation 6,204
Clearwire Communications LLC
8.25% Exchangeable notes due 2040 (a) 12/01/2017 629
Clearwire Communications LLC 629
Credit facilities
Secured equipment credit facilities 2020 - 2021 430
Secured term loan 02/03/2024 3,990
Credit facilities 4,420
Accounts receivable facility 11/19/2018 2,604
Financing obligations 2017 - 2021 2,190
Capital leases and other obligations 2017 - 2024 541
Total principal 39,580
Net premiums and debt financing costs 4
Total debt 39,584$
(a)
$629 million Clearwire 8.25% Exchangeable Notes due 2040 have both a par call and put in December 2017.
Results Tables
| 27
Sprint Quarterly Investor Update – Fiscal 1Q17
NOTES TO THE FINANCIAL INFORMATION (Unaudited)
(1) As more of our customers elect to lease a device rather than purchasing one under our subsidized program, there is a significant positive impact
to EBITDA* and Adjusted EBITDA* from direct channel sales primarily due to the fact the cost of the device is not recorded as cost of products
but rather is depreciated over the customer lease term. Under our device leasing program for the direct channel, devices are transferred from
inventory to property and equipment and the cost of the leased device is recognized as depreciation expense over the customer lease term to an
estimated residual value. The customer payments are recognized as revenue over the term of the lease. Under our subsidized program, the cash
received from the customer for the device is recognized as equipment revenue at the point of sale and the cost of the device is recognized as cost
of products. During the three-month period ended June 30, 2017, we leased devices through our Sprint direct channels totaling approximately
$850 million, which would have increased cost of products and reduced EBITDA* if they had been purchased under our subsidized program. Also,
during the three-month period ended June 30, 2017, the equipment revenue derived from customers electing to finance their devices through
device leasing or installment billing programs in our direct channel was 58%.
The impact to EBITDA* and Adjusted EBITDA* resulting from the sale of devices under our installment billing program is generally neutral except
for the impact from the time value of money element related to the imputed interest on the installment receivable.
(2) During the first quarter of fiscal year 2017, the company recorded losses on dispositions of assets primarily related to cell site construction and
network development costs that are no longer relevant as a result of changes in the company's network plans. Additionally, the company recorded
a pre-tax non-cash gain related to spectrum swaps with other carriers.
(3) Severance and exit costs consist of lease exit costs primarily associated with tower and cell sites, access exit costs related to payments that
will continue to be made under the company's backhaul access contracts for which the company will no longer be receiving any economic benefit,
and severance costs associated with reduction in its work force.
(4) During the first quarter of fiscal year 2017, we recorded a $5 million gain due to reversal of a liability recorded in relation to the termination of our
relationship with General Wireless Operations, Inc. (Radio Shack). During the fourth quarter of fiscal year 2016, we terminated our relationship
with Radio Shack and incurred net contract termination charges of approximately $27 million primarily related to cash termination payments and
write-downs of leasehold improvements at associated retail stores that were shut down as of March 31, 2017. During the first quarter of fiscal year
2016, contract terminations primarily relate to the termination of our pre-existing wholesale arrangement with NTELOS Holding Corp.
(5) During the first quarter of fiscal year 2017, we recorded a $55 million reduction in legal reserves related to favorable developments in pending legal
proceedings. During the fourth quarter of fiscal year 2016, litigation and other contingencies consist of unfavorable developments associated with
legal matters as well as federal and state matters such as sales, use or property taxes.
(6) Sprint is no longer reporting Lifeline subscribers due to recent regulatory changes resulting in tighter program restrictions. We have excluded
them from our customer base for all periods presented, including our Assurance Wireless prepaid brand and subscribers through our wholesale
Lifeline mobile virtual network operators (MVNO). The table reflects the reclassification of the related Assurance Wireless prepaid revenue from
Prepaid service revenue to Wholesale, affiliate and other revenue of $82 million, $85 million and $91 million for the three months ended June 30,
2017, March 31, 2017 and June 30, 2016, respectively. Revenue associated with subscribers through our wholesale Lifeline MVNO's continue to
remain in Wholesale, affiliate and other revenue following this change.
Notes
| 28
Sprint Quarterly Investor Update – Fiscal 1Q17
*FINANCIAL MEASURES
Sprint provides financial measures determined in accordance with GAAP and adjusted GAAP (non-GAAP). The non-GAAP
financial measures reflect industry conventions, or standard measures of liquidity, profitability or performance commonly
used by the investment community for comparability purposes. These measurements should be considered in addition to,
but not as a substitute for, financial information prepared in accordance with GAAP. We have defined below each of the
non-GAAP measures we use, but these measures may not be synonymous to similar measurement terms used by other
companies.
Sprint provides reconciliations of these non-GAAP measures in its financial reporting. Because Sprint does not predict
special items that might occur in the future, and our forecasts are developed at a level of detail different than that used to
prepare GAAP-based financial measures, Sprint does not provide reconciliations to GAAP of its forward-looking financial
measures.
The measures used in this release include the following:
EBITDA is operating income/(loss) before depreciation and amortization. Adjusted EBITDA is EBITDA excluding severance,
exit costs, and other special items. Adjusted EBITDA Margin represents Adjusted EBITDA divided by non-equipment net
operating revenues for Wireless and Adjusted EBITDA divided by net operating revenues for Wireline. We believe that
Adjusted EBITDA and Adjusted EBITDA Margin provide useful information to investors because they are an indicator of the
strength and performance of our ongoing business operations. While depreciation and amortization are considered
operating costs under GAAP, these expenses primarily represent non-cash current period costs associated with the use of
long-lived tangible and definite-lived intangible assets. Adjusted EBITDA and Adjusted EBITDA Margin are calculations
commonly used as a basis for investors, analysts and credit rating agencies to evaluate and compare the periodic and future
operating performance and value of companies within the telecommunications industry.
Postpaid ABPA is average billings per account and calculated by dividing postpaid service revenue earned from postpaid
customers plus installment plan billings and lease revenue by the sum of the monthly average number of postpaid accounts
during the period. We believe that ABPA provides useful information to investors, analysts and our management to evaluate
average postpaid customer billings per account as it approximates the expected cash collections, including installment
plan billings and lease revenue, per postpaid account each month.
Postpaid Phone ABPU is average billings per postpaid phone user and calculated by dividing service revenue earned from
postpaid phone customers plus installment plan billings and lease revenue by the sum of the monthly average number of
postpaid phone connections during the period. We believe that ABPU provides useful information to investors, analysts and
our management to evaluate average postpaid phone customer billings as it approximates the expected cash collections,
including installment plan billings and lease revenue, per postpaid phone user each month.
Free Cash Flow is the cash provided by operating activities less the cash used in investing activities other than short-term
investments, including changes in restricted cash, if any, and excluding the sale-leaseback of devices and equity method
investments. Adjusted Free Cash Flow is Free Cash Flow plus the proceeds from device financings and sales of receivables,
net of repayments. We believe that Free Cash Flow and Adjusted Free Cash Flow provide useful information to investors,
analysts and our management about the cash generated by our core operations and net proceeds obtained to fund certain
leased devices, respectively, after interest and dividends, if any, and our ability to fund scheduled debt maturities and other
financing activities, including discretionary refinancing and retirement of debt and purchase or sale of investments.
Net Debt is consolidated debt, including current maturities, less cash and cash equivalents, short-term investments and, if
any, restricted cash. We believe that Net Debt provides useful information to investors, analysts and credit rating agencies
about the capacity of the company to reduce the debt load and improve its capital structure.
Financial Measures
| 29
Sprint Quarterly Investor Update – Fiscal 1Q17
SAFE HARBOR
This release includes “forward-looking statements” within the meaning of the securities laws. The words “may,” “could,”
“should,” “estimate,” “project,” “forecast,” “intend,” “expect,” “anticipate,” “believe,” “target,” “plan”, “outlook,” “providing
guidance,” and similar expressions are intended to identify information that is not historical in nature. All statements that
address operating performance, events or developments that we expect or anticipate will occur in the future — including
statements relating to our network, cost reductions, connections growth, and liquidity; and statements expressing general
views about future operating results — are forward-looking statements. Forward-looking statements are estimates and
projections reflecting management’s judgment based on currently available information and involve a number of risks and
uncertainties that could cause actual results to differ materially from those suggested by the forward-looking statements.
With respect to these forward-looking statements, management has made assumptions regarding, among other things,
the development and deployment of new technologies and services; efficiencies and cost savings of new technologies
and services; customer and network usage; connection growth and retention; service, speed, coverage and quality;
availability of devices; availability of various financings, including any leasing transactions; the timing of various events and
the economic environment. Sprint believes these forward-looking statements are reasonable; however, you should not
place undue reliance on forward-looking statements, which are based on current expectations and speak only as of the
date when made. Sprint undertakes no obligation to publicly update or revise any forward-looking statements, whether as
a result of new information, future events or otherwise, except as required by law. In addition, forward-looking statements
are subject to certain risks and uncertainties that could cause actual results to differ materially from our company's
historical experience and our present expectations or projections. Factors that might cause such differences include, but
are not limited to, those discussed in Sprint Corporation’s Annual Report on Form 10-K for the fiscal year ended March 31,
2017. You should understand that it is not possible to predict or identify all such factors. Consequently, you should not
consider any such list to be a complete set of all potential risks or uncertainties.
About Sprint:
Sprint (NYSE: S) is a communications services company that creates more and better ways to connect its customers to the
things they care about most. Sprint served 53.7 million connections as of June 30, 2017 and is widely recognized for
developing, engineering and deploying innovative technologies, including the first wireless 4G service from a national
carrier in the United States; leading no-contract brands including Virgin Mobile USA, Boost Mobile, and Assurance Wireless;
instant national and international push-to-talk capabilities; and a global Tier 1 Internet backbone. Sprint has been named
to the Dow Jones Sustainability Index (DJSI) North America for the past five years. You can learn more and visit Sprint at
www.sprint.com or www.facebook.com/sprint and www.twitter.com/sprint.
Safe Harbor