S
$6.13
Sprint
$.01
.16%
Earnings Details
1st Quarter June 2018
Wednesday, August 1, 2018 7:30:00 AM
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Summary

Sprint Beats

Sprint (S) reported 1st Quarter June 2018 earnings of $0.04 per share on revenue of $8.1 billion. The consensus estimate was a loss of $0.01 per share on revenue of $8.0 billion. The Earnings Whisper number was for a loss of $0.01 per share. Revenue fell 0.4% compared to the same quarter a year ago.

Sprint Corp is a communications company offering wireless and wireline communications products and services to individual consumers, businesses, government subscribers and resellers.

Results
Reported Earnings
$0.04
Earnings Whisper
($0.01)
Consensus Estimate
($0.01)
Reported Revenue
$8.13 Bil
Revenue Estimate
$8.04 Bil
Growth
Earnings Growth
Revenue Growth
Power Rating
Grade
Earnings Release

Sprint Reports Inflection In Wireless Service Revenue With Fiscal Year 2018 First Quarter Results

OVERLAND PARK, Kan., Aug 1, 2018 /PRNewswire/ --

  • Wireless service revenue grew sequentially for the first time in more than four years, excluding the impact of the new revenue recognition standard
    • Postpaid ARPU grew sequentially for the first time in nearly five years
  • Net income of $176 million, operating income of $815 million, and adjusted EBITDA* of $3.3 billion
    • Third consecutive quarter of net income
    • 10th consecutive quarter of operating income
    • Highest adjusted EBITDA* in more than 11 years
  • Net cash provided by operating activities of $2.4 billion and adjusted free cash flow* of $8 million
    • Positive adjusted free cash flow* in five of the last six quarters
  • Retail phone net additions for the sixth consecutive quarter
    • Postpaid phone net additions of 87,000 were the 12th consecutive quarter of postpaid phone net additions
    • Seven consecutive quarters of postpaid phone net additions in the business market
    • Prepaid net additions for the sixth consecutive quarter, including the lowest prepaid churn in more than three years

Sprint Corp. Logo (PRNewsfoto/Sprint Corp.)

Sprint Corporation (NYSE: S) today reported an inflection in wireless service revenue and the sixth consecutive quarter of retail phone net additions as part of results for the first quarter of fiscal year 2018.

"Sprint continued to deliver solid results this quarter while embarking on our transformative merger with T-Mobile," said Sprint CEO Michel Combes, "By balancing growth and profitability, we were able to grow wireless service revenue sequentially, continue to add retail phone customers, generate net income for the third consecutive quarter, and improve the network." 

Wireless Service Revenue Returns to Sequential Growth
Sprint reported sequential growth in wireless service revenue for the first time in more than four years, when excluding the impact of the new revenue recognition standard, as postpaid and prepaid ARPU grew sequentially. The company continues to expect year-over-year growth in wireless service revenue to occur by the end of fiscal year 2018, excluding the impact of the new revenue recognition standard.

Several other revenue metrics showed improvement in the quarter, excluding the impact of the new revenue recognition standard.

  • Postpaid ARPU grew sequentially for the first time in nearly five years.
  • Postpaid service revenue grew sequentially for first time in more than four years.
  • Prepaid service revenue grew both sequentially and year-over-year.

Continued Focus on Profitability
Sprint reported its third consecutive quarter of net income, its 10th consecutive quarter of operating income, and its highest adjusted EBITDA* in more than 11 years, all excluding the positive impact of the new revenue recognition standard. The new revenue recognition standard had a positive impact of $152 million on reported net income and $192 million on reported operating income and adjusted EBITDA* in the quarter.

Operating income of $815 million would have been relatively flat year-over-year when adjusting for the new revenue recognition standard and $135 million of merger and other non-recurring costs this quarter and a net benefit of $364 million from non-recurring items in the year ago period. Similarly, net income of $176 million would also have been relatively flat year-over-year when adjusting for the aforementioned items on a tax-adjusted basis.

(Millions, except per share data)

Fiscal 1Q18

Fiscal 1Q17

Change

Net income

$176

$206

($30)

Basic income per share

$0.04

$0.05

($0.01)

Operating income

$815

$1,163

($348)

Adjusted EBITDA*

$3,280

$2,853

$427

Net cash provided by operating activities

$2,430

$1,924

$506

Adjusted free cash flow*

$8

$368

($360)

Sprint Continues to Add Retail Phone Customers and Launches New Unlimited Plans
Sprint's focus on both its postpaid and prepaid businesses resulted in the sixth consecutive quarter of retail phone net additions.

  • Postpaid phone net additions of 87,000 marked the 12th consecutive quarter of net additions, including net additions in the business market for the seventh consecutive quarter.
  • Prepaid net additions of 3,000 were the sixth consecutive quarter of net additions, as continued strength in Boost Mobile was partially offset by losses in other brands. Prepaid churn was the lowest in more than three years and Boost Mobile gross additions grew year-over-year for the fourth consecutive quarter.

Sprint recently introduced several new plans that offer more choice and features for an incredible value. The new Unlimited Plus, Unlimited Basic, Unlimited Military, and Unlimited 55+ plans are available to new and existing customers and are just the beginning of "Unlimited for All," the company's initiative to tailor plans so customers can get the best choice for them.

Driving Growth in Digital
Sprint also plans to offer the best digital customer experience, including leveraging artificial intelligence to improve customer care interactions, utilizing deep dive analytics to identify customer issues, and boosting the mix of sales in digital channels. Postpaid phone gross additions in digital channels grew more than 50 percent year-over-year in the quarter and the mix of gross additions in digital channels was also up year-over-year.

Network Built for Unlimited Keeps Getting Better
With more than 200 MHz of sub-6 GHz spectrum, Sprint has the Network Built for Unlimited and made continued progress on executing its Next-Gen Network plan in the quarter.

  • Completed thousands of tri-band upgrades and now has 2.5 GHz spectrum deployed on nearly two-thirds of its macro sites.
  • Added thousands of new outdoor small cells and currently has more than 15,000 deployed including both mini-macros and strand mounts.
  • Distributed more than 65,000 Sprint Magic Boxes, bringing the total to more than 260,000 nationwide.

These deployments are contributing to Sprint providing customers with a better network experience. In fact, Sprint is the most improved network according to Ookla as shown in Speedtest Intelligence data1, and PCMag's 2018 Fastest Mobile Networks. In both, the company's year-over-year increase in national average download speeds outpaced the competitors, including an 87 percent lift reported in PCMag's annual tests.

Sprint's deployment of Massive MIMO radios, a key technology for 5G, is underway and the company continues to expect to launch the first mobile 5G network in the U.S. in the first half of 2019.

Fiscal Year 2018 Outlook

  • The company is increasing adjusted EBITDA* expectations on a reported basis to a range of $12.0 billion to $12.5 billion, as impacts of the new revenue recognition standard were higher than preliminary estimates. The previous expectation was $11.6 billion to $12.1 billion.
  • Excluding the impact of the new revenue recognition standard, the company continues to expect adjusted EBITDA* to be $11.3 billion to $11.8 billion.
  • The company continues to expect cash capital expenditures excluding leased devices to be $5 billion to $6 billion.

Conference Call and Webcast

  • Date/Time: 8:30 a.m. (ET) Wednesday, August 1, 2018
  • Call-in Information
    • U.S./Canada: 866-360-1063 (ID: 9665377)
    • International: 443-961-0242 (ID: 9665377)
  • Webcast available at www.sprint.com/investors
  • Additional information about results is available on our Investor Relations website

____________________________________
1  http://www.speedtest.net/reports/united-states/

Wireless Operating Statistics (Unaudited)



 Quarter To Date 



6/30/18

3/31/18

6/30/17

Net additions (losses) (in thousands)




Postpaid(a)

123

39

(39)

Postpaid phone (a)

87

55

88

Prepaid(b)

3

170

35

Wholesale and affiliate(b)

(69)

(165)

65

Total wireless net additions

57

44

61





End of period connections (in thousands)




Postpaid(a) (c) (d) 

32,187

32,119

31,518

Postpaid phone(a) (c)

26,847

26,813

26,153

Prepaid(a) (b) (c)

9,033

8,989

8,719

Wholesale and affiliate (b) (c) (e)

13,347

13,517

13,461

Total end of period connections

54,567

54,625

53,698





Churn




Postpaid

1.63%

1.78%

1.65%

Postpaid phone

1.55%

1.68%

1.50%

Prepaid

4.17%

4.30%

4.57%





Supplemental data - connected devices




End of period connections (in thousands)




Retail postpaid

2,429

2,335

2,091

Wholesale and affiliate

10,963

11,162

11,100

Total

13,392

13,497

13,191





ARPU(f)




Postpaid

$           43.55

$           44.40

$           47.30

Postpaid phone

$           49.57

$           50.44

$           53.92

Prepaid

$           36.27

$           37.15

$           38.24









NON-GAAP RECONCILIATION - ABPA* AND ABPU* (Unaudited)

(Millions, except accounts, connections, ABPA*, and ABPU*)


Quarter To Date


6/30/18

3/31/18

6/30/17

ABPA*




Postpaid service revenue

$           4,188

$           4,270

$           4,466

Add: Installment plan and non-operating lease billings 

352

368

368

Add: Equipment rentals

1,212

1,136

899

Total for postpaid connections

$           5,752

$           5,774

$           5,733





Average postpaid accounts (in thousands)

11,176

11,259

11,312

Postpaid ABPA*(g)

$         171.57

$         171.38

$         168.95






Quarter To Date


6/30/18

3/31/18

6/30/17

Postpaid phone ABPU*




Postpaid phone service revenue

$           3,977

$           4,048

$           4,214

Add: Installment plan and non-operating lease billings 

307

324

332

Add: Equipment rentals

1,204

1,126

887

Total for postpaid phone connections

$           5,488

$           5,498

$           5,433





Postpaid average phone connections (in thousands)

26,745

26,754

26,052

Postpaid phone ABPU* (h)

$           68.41

$           68.51

$           69.51






(a)During the three-month period ended March 31, 2018, a non-Sprint branded postpaid offering was introduced allowing prepaid customers to purchase a device under our installment billing program. As a result of the extension of credit, approximately 167,000 prepaid subscribers were migrated from the prepaid subscriber base into the postpaid subscriber base. During the three-month period ended June 30, 2018, we ceased selling devices in our installment billing program under one of our brands and as a result, 45,000 subscribers were migrated back to prepaid.

(b)Sprint is no longer reporting Lifeline subscribers due to 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 MVNOs.

(c)  As a result of our affiliate agreement with Shentel, certain subscribers have been transferred from postpaid and prepaid to affiliates. During the three-month period ended June 30, 2018, 10,000 and 4,000 subscribers were transferred from postpaid and prepaid, respectively, to affiliates. During the three-month period ended March 31, 2018, 29,000 and 11,000 subscribers were transferred from postpaid and prepaid, respectively, to affiliates. During the three-month period ended June 30, 2017, 17,000 and 4,000 subscribers were transferred from postpaid and prepaid, respectively, to affiliates.

(d)  During the three-month period ended June 30, 2017, 2,000 Wi-Fi connections were adjusted from the postpaid subscriber base.

(e)  On April 1, 2018, approximately 115,000 wholesale subscribers were removed from the subscriber base with no impact to revenue.

(f)  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.

(g)  Postpaid ABPA* is calculated by dividing postpaid service revenue earned from postpaid customers plus billings from installment plans and non-operating leases, as well as equipment rentals, by the sum of the monthly average number of postpaid accounts during the period. Installment plan billings represent the substantial majority of the total billings in the table above for all periods presented.

(h)  Postpaid phone ABPU* is calculated by dividing service revenue earned from postpaid phone customers plus billings from installment plans and non-operating leases, as well as equipment rentals, by the sum of the monthly average number of postpaid phone connections during the period. Installment plan billings represent the substantial majority of the total billings in the table above for all periods presented.

 

Wireless Device Financing Summary (Unaudited)

(Millions, except sales, connections, and leased devices in property, plant and equipment)



 Quarter To Date 



6/30/18

3/31/18

6/30/17





Postpaid activations (in thousands)

3,473

3,737

3,668

Postpaid activations financed

83%

84%

85%

Postpaid activations - operating leases

70%

70%

55%





Installment plans




Installment sales financed

$              213

$              214

$              553

Installment billings

$              325

$              342

$              368

Installment receivables, net

$              983

$           1,149

$           1,792





Equipment rentals and depreciation - equipment rentals




Equipment rentals   

$           1,212

$           1,136

$              899

Depreciation - equipment rentals

$           1,136

$           1,060

$              854





Leased device additions




Cash paid for capital expenditures - leased devices

$           1,817

$           1,928

$           1,359





Leased devices  




Leased devices in property, plant and equipment, net

$           6,213

$           6,012

$           4,336





Leased device units




Leased devices in property, plant and equipment (units in thousands)

15,169

14,543

12,223





Leased device and receivables financings net proceeds




Proceeds

$           1,356

$                  -

$              765

Repayments

(1,070)

(555)

(273)

Net proceeds (repayments) of financings related to devices and receivables

$              286

$            (555)

$              492

 

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)

(Millions, except per share data)


Quarter To Date


6/30/18

3/31/18

6/30/17

Net operating revenues




Service revenue

$           5,740

$           5,866

$           6,071

Equipment sales

1,173

1,081

1,187

Equipment rentals

1,212

1,136

899

Total net operating revenues

8,125

8,083

8,157

Net operating expenses




Cost of services (exclusive of depreciation and amortization below)

1,677

1,661

1,709

Cost of equipment sales

1,270

1,487

1,545

Cost of equipment rentals (exclusive of depreciation below)

124

146

112

Selling, general and administrative

1,867

2,028

1,938

Depreciation - network and other

1,023

1,015

977

Depreciation - equipment rentals

1,136

1,060

854

Amortization

171

184

223

Other, net

42

266

(364)

Total net operating expenses

7,310

7,847

6,994

Operating income

815

236

1,163

Interest expense

(637)

(576)

(613)

Other income (expense), net

42

(9)

(52)

Income (loss) before income taxes

220

(349)

498

Income tax (expense) benefit

(47)

412

(292)

Net income

173

63

206

Less: Net loss attributable to noncontrolling interests

3

6

-

Net income attributable to Sprint Corporation

$             176

$               69

$             206





Basic net income per common share

$            0.04

$            0.02

$            0.05

Diluted net income per common share

$            0.04

$            0.02

$            0.05

Weighted average common shares outstanding

4,010

4,004

3,993

Diluted weighted average common shares outstanding

4,061

4,055

4,076





Effective tax rate

21.4%

118.1%

58.6%







NON-GAAP RECONCILIATION - NET INCOME TO ADJUSTED EBITDA* (Unaudited)

(Millions)


Quarter To Date


6/30/18

3/31/18

6/30/17





Net income

$             173

$               63

$             206

Income tax expense (benefit)

47

(412)

292

Income (loss) before income taxes

220

(349)

498

Other (income) expense, net

(42)

9

52

Interest expense

637

576

613

Operating income

815

236

1,163

Depreciation - network and other

1,023

1,015

977

Depreciation - equipment rentals

1,136

1,060

854

Amortization

171

184

223

EBITDA*(1)

3,145

2,495

3,217

Loss (gain) from asset dispositions, exchanges, and other, net(2)

-

189

(304)

Severance and exit costs (3)

8

67

-

Contract terminations (4)

34

-

(5)

Merger costs (5)

93

-

-

Litigation and other contingencies(6)

-

10

(55)

Hurricanes (7)

-

7

-

Adjusted EBITDA*(1)

$           3,280

$           2,768

$           2,853





Adjusted EBITDA margin*

57.1%

47.2%

47.0%









Selected items:




Cash paid for capital expenditures - network and other

$           1,132

$             780

$           1,151

Cash paid for capital expenditures - leased devices

$           1,817

$          1,928

$           1,359

 

WIRELESS STATEMENTS OF OPERATIONS (Unaudited)

(Millions)


Quarter To Date


6/30/18

3/31/18

6/30/17

Net operating revenues




Service revenue




Postpaid

$           4,188

$           4,270

$           4,466

Prepaid

982

989

999

Wholesale, affiliate and other

290

314

259

Total service revenue

5,460

5,573

5,724





Equipment sales

1,173

1,081

1,187

Equipment rentals

1,212

1,136

899

Total net operating revenues

7,845

7,790

7,810





Net operating expenses




Cost of services (exclusive of depreciation and amortization below)

1,429

1,401

1,412

Cost of equipment sales

1,270

1,487

1,545

Cost of equipment rentals (exclusive of depreciation below)

124

146

112

Selling, general and administrative

1,704

1,947

1,875

Depreciation - network and other

972

968

925

Depreciation - equipment rentals

1,136

1,060

854

Amortization

171

184

223

Other, net

37

258

(314)

Total net operating expenses

6,843

7,451

6,632

Operating income

$           1,002

$             339

$           1,178









WIRELESS NON-GAAP RECONCILIATION (Unaudited)

(Millions)


Quarter To Date


6/30/18

3/31/18

6/30/17





Operating income

$           1,002

$             339

$           1,178

Loss (gain) from asset dispositions, exchanges, and other, net(2)

-

189

(304)

Severance and exit costs (3)

3

59

(5)

Contract terminations (4)

34

-

(5)

Litigation and other contingencies (6)

-

10

-

Hurricanes (7)

-

7

-

Depreciation - network and other

972

968

925

Depreciation - equipment rentals

1,136

1,060

854

Amortization

171

184

223

Adjusted EBITDA*(1)

$           3,318

$           2,816

$           2,866





Adjusted EBITDA margin*

60.8%

50.5%

50.1%









Selected items:




Cash paid for capital expenditures - network and other

$           1,019

$             681

$             965

Cash paid for capital expenditures - leased devices

$           1,817

$          1,928

$          1,359

 

WIRELINE STATEMENTS OF OPERATIONS (Unaudited)

(Millions)


Quarter To Date


6/30/18

3/31/18

6/30/17





Net operating revenues

$             338

$             344

$             433





Net operating expenses




Cost of services (exclusive of depreciation and amortization below)

311

316

387

Selling, general and administrative

69

76

57

Depreciation and amortization

49

50

51

Other, net

5

9

5

Total net operating expenses

434

451

500

Operating loss

$              (96)

$            (107)

$              (67)









WIRELINE NON-GAAP RECONCILIATION (Unaudited)




(Millions)





Quarter To Date


6/30/18

3/31/18

6/30/17





Operating loss

$              (96)

$            (107)

$              (67)

Loss from asset dispositions, exchanges, and other, net(2)

-

1

-

Severance and exit costs (3)

5

8

5

Depreciation and amortization

49

50

51

Adjusted EBITDA*

$              (42)

$              (48)

$              (11)





Adjusted EBITDA margin*

-12.4%

-14.0%

-2.5%









Selected items:




Cash paid for capital expenditures - network and other

$               51

$               34

$               62

 

CONDENSED CONSOLIDATED CASH FLOW INFORMATION (Unaudited)

(Millions)


Quarter To Date


6/30/18

3/31/18

6/30/17

Operating activities




Net income

$             173

$               63

$             206

Depreciation and amortization

2,330

2,259

2,054

Provision for losses on accounts receivable

57

50

102

Share-based and long-term incentive compensation expense 

40

45

41

Deferred income tax expense (benefit)

39

(412)

282

Gains from asset dispositions and exchanges

-

-

(479)

Loss on early extinguishment of debt

-

-

66

Amortization of long-term debt premiums, net

(33)

(33)

(51)

Loss on disposal of property, plant and equipment

124

335

293

Deferred purchase price from sale of receivables

(170)

(231)

(375)

Other changes in assets and liabilities:




Accounts and notes receivable

273

157

(53)

Inventories and other current assets 

421

175

181

Accounts payable and other current liabilities 

(766)

121

(474)

Non-current assets and liabilities, net 

(197)

11

73

Other, net 

139

113

58

Net cash provided by operating activities

2,430

2,653

1,924





Investing activities




Capital expenditures - network and other

(1,132)

(780)

(1,151)

Capital expenditures - leased devices

(1,817)

(1,928)

(1,359)

Expenditures relating to FCC licenses

(59)

(23)

(13)

Change in short-term investments, net

(1,654)

(2,181)

1,095

Proceeds from sales of assets and FCC licenses

133

160

101

Proceeds from deferred purchase price from sale of receivables

170

231

375

Other, net

(10)

2

(1)

Net cash used in investing activities 

(4,369)

(4,519)

(953)





Financing activities




Proceeds from debt and financings

1,370

5,456

902

Repayments of debt, financing and capital lease obligations

(1,415)

(1,359)

(2,121)

Debt financing costs

(248)

(74)

-

Call premiums paid on debt redemptions

-

(2)

(129)

Other, net

(2)

9

(15)

Net cash (used in) provided by financing activities 

(295)

4,030

(1,363)





Net (decrease) increase in cash, cash equivalents and restricted cash

(2,234)

2,164

(392)





Cash, cash equivalents and restricted cash, beginning of period

6,659

4,495

2,942

Cash, cash equivalents and restricted cash, end of period

$           4,425

$           6,659

$           2,550









RECONCILIATION TO CONSOLIDATED FREE CASH FLOW* (NON-GAAP) (Unaudited)




(Millions)





Quarter To Date


6/30/18

3/31/18

6/30/17





Net cash provided by operating activities

$           2,430

$           2,653

$           1,924





Capital expenditures - network and other

(1,132)

(780)

(1,151)

Capital expenditures - leased devices

(1,817)

(1,928)

(1,359)

Expenditures relating to FCC licenses, net

(59)

(23)

(13)

Proceeds from sales of assets and FCC licenses

133

160

101

Proceeds from deferred purchase price from sale of receivables

170

231

375

Other investing activities, net

(3)

2

(1)

Free cash flow*

$            (278)

$             315

$            (124)





Net proceeds (repayments) of financings related to devices and receivables

286

(555)

492

Adjusted free cash flow*

$                 8

$            (240)

$             368

 

CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)

(Millions)


6/30/18

3/31/18

ASSETS



Current assets



Cash and cash equivalents

$           4,378

$           6,610

Short-term investments

4,008

2,354

Accounts and notes receivable, net

3,492

3,711

Device and accessory inventory

622

1,003

Prepaid expenses and other current assets

895

575

Total current assets

13,395

14,253




Property, plant and equipment, net

20,538

19,925

Costs to acquire a customer contract

1,294

-

Goodwill

6,586

6,586

FCC licenses and other

41,368

41,309

Definite-lived intangible assets, net

2,245

2,465

Other assets

1,023

921

Total assets

$         86,449

$         85,459




LIABILITIES AND EQUITY



Current liabilities



Accounts payable

$           3,143

$           3,409

Accrued expenses and other current liabilities

3,658

3,962

Current portion of long-term debt, financing and capital lease obligations

4,846

3,429

Total current liabilities

11,647

10,800




Long-term debt, financing and capital lease obligations

35,771

37,463

Deferred tax liabilities

7,704

7,294

Other liabilities

3,382

3,483

Total liabilities 

58,504

59,040




Stockholders' equity



Common stock

40

40

Treasury shares, at cost

(4)

-

Paid-in capital

27,938

27,884

Retained earnings (accumulated deficit)

236

(1,255)

Accumulated other comprehensive loss

(317)

(313)

Total stockholders' equity

27,893

26,356

Noncontrolling interests

52

63

Total equity

27,945

26,419

Total liabilities and equity

$         86,449

$         85,459







NET DEBT* (NON-GAAP) (Unaudited)



(Millions)




6/30/18

3/31/18

Total debt

$         40,617

$         40,892

Less: Cash and cash equivalents

(4,378)

(6,610)

Less: Short-term investments

(4,008)

(2,354)

Net debt*

$         32,231

$         31,928

 

SCHEDULE OF DEBT (Unaudited)

(Millions)



6/30/18

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

7.625% Senior notes due 2026

03/01/2026

1,500

Sprint Corporation


12,000




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

2,843

4.738% Senior secured notes due 2025

03/20/2025

2,100

5.152% Senior secured notes due 2028

03/20/2028

1,838

Sprint Spectrum Co LLC, Sprint Spectrum Co II LLC, and Sprint Spectrum Co III LLC


6,781




Sprint Communications, Inc.



Export Development Canada secured loan

12/12/2019

300

9% Guaranteed notes due 2018

11/15/2018

1,753

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% Debentures due 2022

04/15/2022

200

6% Senior notes due 2022

11/15/2022

2,280

Sprint Communications, Inc.


8,033




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




Credit facilities



PRWireless secured term loan

06/28/2020

182

Secured equipment credit facilities

2020 - 2021

462

Secured term loan

02/03/2024

3,950

Credit facilities


4,594




Accounts receivable facility

2020

2,697




Financing obligations

2021

139




Capital leases and other obligations

2018 - 2026

507

Total principal


40,955




Net premiums and debt financing costs


(338)

Total debt


$            40,617

 

RECONCILIATION OF ADJUSTMENTS FROM THE ADOPTION OF TOPIC 606 RELATIVE TO TOPIC 605 ON CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)

(Millions, except per share data)


Three Months Ended June 30, 2018


As reported

Balances
without adoption
of Topic 606

Change

Net operating revenues




Service revenue

$           5,740

$            5,883

$            (143)

Equipment sales

1,173

892

281

Equipment rentals

1,212

1,228

(16)

Total net operating revenues

8,125

8,003

122

Net operating expenses




Cost of services (exclusive of depreciation and amortization below)

1,677

1,688

(11)

Cost of equipment sales

1,270

1,248

22

Cost of equipment rentals (exclusive of depreciation below)

124

124

-

Selling, general and administrative

1,867

1,948

(81)

Depreciation - network and other

1,023

1,023

-

Depreciation - equipment rentals

1,136

1,136

-

Amortization

171

171

-

Other, net

42

42

-

Total net operating expenses

7,310

7,380

(70)

Operating income

815

623

192

Total other expense

(595)

(595)

-

Income before income taxes

220

28

192

Income tax expense

(47)

(7)

(40)

Net income

173

21

152

Less: Net loss attributable to noncontrolling interests

3

3

-

Net income attributable to Sprint Corporation

$             176

$                 24

$             152





Basic net income per common share

$            0.04

$              0.01

$            0.03

Diluted net income per common share

$            0.04

$              0.01

$            0.03

Weighted average common shares outstanding

4,010

4,010

-

Diluted weighted average common shares outstanding

4,061

4,061

-

 

RECONCILIATION OF ADJUSTMENTS FROM THE ADOPTION OF TOPIC 606 RELATIVE TO TOPIC 605 ON CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)

(Millions)


June 30, 2018


As reported

Balances
without adoption
of Topic 606

Change

ASSETS




Current assets




   Accounts and notes receivable, net

$           3,492

$            3,404

$               88

   Device and accessory inventory

622

644

(22)

   Prepaid expenses and other current assets

895

557

338

Costs to acquire a customer contract

1,294

-

1,294

Other assets

1,023

919

104





LIABILITIES AND STOCKHOLDERS' EQUITY




Current liabilities




   Accrued expenses and other current liabilities

$           3,658

$            3,690

$              (32)

Deferred tax liabilities

7,704

7,298

406

Other liabilities

3,382

3,413

(31)





Stockholders' equity




   Retained earnings (accumulated deficit)

236

(1,223)

1,459

 

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 equipment sales 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 revenue from equipment sales at the point of sale and the cost of the device is recognized as cost of equipment sales. During the three-month period ended June 30, 2018, we leased devices through our Sprint direct channels totaling approximately $1,163 million, which would have increased cost of equipment sales and reduced EBITDA* if they had been purchased under our subsidized program.

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 in our indirect channels from the time value of money element related to the imputed interest on the installment receivable.

(2)

During the fourth and first quarters 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)

During the first quarter of fiscal year 2018 and fourth quarter of fiscal year 2017, 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 2018, contract termination costs are primarily due to the purchase of certain leased spectrum assets, which upon termination of the spectrum leases resulted in the accelerated recognition of the unamortized favorable lease balances. 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).

(5)

During the first quarter of fiscal year 2018, we recorded $93 million of merger costs due to the proposed Business Combination Agreement with T-Mobile.

(6)

During the fourth and first quarters of fiscal year 2017, litigation and other contingencies consist of reductions associated with legal settlements or favorable developments in pending legal proceedings. In addition, the first quarter of fiscal year 2017 includes non-recurring charges of $51 million related to a regulatory fee matter.

(7)

During the fourth quarter of fiscal year 2017 we recorded estimated hurricane-related charges of $7 million, consisting of incremental roaming costs, network repairs and replacements.

*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 billings from installment plans and non-operating leases, as well as equipment rentals, 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 billings from installment plans and non-operating leases, as well as equipment rentals, 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 billings from installment plans and non-operating leases, as well as equipment rentals 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 billings from installment plans and non-operating leases, as well as equipment rentals, 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 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 and short-term investments. 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.

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, 2018. 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 54.6 million connections as of June 30, 2018 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. Today, Sprint's legacy of innovation and service continues with an increased investment to dramatically improve coverage, reliability, and speed across its nationwide network and commitment to launching the first 5G mobile network in the U.S. You can learn more and visit Sprint at www.sprint.com or www.facebook.com/sprint and www.twitter.com/sprint.

 

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SOURCE Sprint