S
$6.15
Sprint
$.07
1.15%
Earnings Details
2nd Quarter September 2017
Wednesday, October 25, 2017 8:00:07 AM
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Summary

Sprint (S) Recent Earnings

Sprint (S) reported a 2nd Quarter September 2017 loss of $0.01 per share on revenue of $7.9 billion. The consensus estimate was a loss of $0.02 per share on revenue of $8.1 billion. The Earnings Whisper number was for breakeven results. Revenue fell 3.9% 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
($0.01)
Earnings Whisper
$0.00
Consensus Estimate
($0.02)
Reported Revenue
$7.93 Bil
Revenue Estimate
$8.11 Bil
Growth
Earnings Growth
Revenue Growth
Power Rating
Grade
Earnings Release

Sprint Reports Highest Retail Phone Net Additions in More Than Two Years with Fiscal 2017 Second Quarter Results

Postpaid phone net additions of 279,000 were the ninth consecutive quarter of net additions

Prepaid net additions of 95,000 compared to net losses of 449,000 in the prior year Third consecutive quarter of net additions and improved by 544,000 year-over-year

--Prepaid gross additions grew year-over-year for the first time in two years

Net loss of $48 million, operating income of $601 million, and adjusted EBITDA* of $2.7 billion Seventh consecutive quarter of operating income

--Highest fiscal second quarter adjusted EBITDA* in 10 years

Net cash provided by operating activities of $2 billion and adjusted free cash flow* of $420 million More than $650 million of adjusted free cash flow* in the first half of fiscal year 2017

--Positive adjusted free cash flow* in seven of the last eight quarters

Sprint Corporation (S) today reported operating results for the second quarter of fiscal year 2017, including its highest share of postpaid phone gross additions in company history and its third consecutive quarter of net additions in both postpaid phones and prepaid with 279,000 and 95,000 net additions, respectively. The company also reported operating income of $601 million and its highest fiscal second quarter adjusted EBITDA* in 10 years at $2.7 billion.

Net cash provided by operating activities of $2 billion improved by $251 million year-over-year, bringing the year-to-date total to $3.2 billion, an improvement of $1 billion compared to a year ago. Adjusted free cash flow* was $420 million in the quarter, bringing the year-to-date total to more than $650 million. The company now expects adjusted free cash flow* for fiscal year 2017 to be around break-even.

"Sprint was able to deliver net additions in both its postpaid phone and prepaid business for the third consecutive quarter," said Sprint CEO Marcelo Claure. "I’m even more proud that the team was able to deliver this customer growth while continuing to attack the cost structure, improve the network, and maintain positive adjusted free cash flow*."

Highest Retail Phone Net Additions in More Than Two Years

Sprint’s execution in both its postpaid and prepaid business resulted in the highest retail phone net additions in more than two years. The company continued to add postpaid phone customers with 279,000 net additions in the quarter, its ninth consecutive quarter of net additions. Postpaid phone gross additions grew 10 percent year-over-year, including 30 percent year-over-year growth in digital channels, and Sprint’s share of postpaid phone gross additions was the highest in company history.

The recent turnaround of the prepaid business resulted in 95,000 net additions in the quarter, its third consecutive quarter of net additions and a 544,000 improvement compared to the prior year. Prepaid gross additions grew year-over-year for the first time in two years, and prepaid churn improved year-over-year for the fifth consecutive quarter.

Total company net additions were 378,000 in the quarter, including postpaid net additions of 168,000, prepaid net additions of 95,000, and wholesale and affiliate net additions of 115,000.

Cost Reduction Program Contributes to Improved Profitability

Sprint continued to make progress on its multiyear plan to transform the way it does business and improve its cost structure. The company delivered nearly $400 million of combined year-over-year reductions in cost of services and SG&A expenses in the quarter, bringing the year-to-date total reduction to more than $750 million, primarily driven by changes to the device insurance program. Lower network and customer care expenses also contributed to the year-to-date reduction.

Sprint continues to expect $1.3 billion to $1.5 billion of year-over-year net reductions in cost of services and SG&A expenses in fiscal year 2017. Although the gross reductions are expected to be higher, the company plans to reinvest some of the savings into future growth initiatives.

The cost reduction program has contributed to improved profitability, as the company has now reported seven consecutive quarters of operating income and $158 million of net income year-to-date.

Operating income and net loss in the quarter were negatively impacted by $34 million of hurricane-related charges and future quarters may be impacted by additional charges.

The company also reported the following financial results:

(Millions, except per share data)
Fiscal 2Q17
Fiscal 2Q16
Change
Net loss
($48)
($142)
$94
Basic loss per share
($0.01)
($0.04)
$0.03
Operating income
$601
$622
($21)
Adjusted EBITDA*
$2,729
$2,347
$382
Net cash provided by operating activities
$1,959
$1,708
$251
Adjusted free cash flow*
$420
$707
($287)

Sprint Magic Box Contributes to Network Speed Improvements

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 tens of thousands of small cell solutions, including the Sprint Magic Box, which recently won the 2017 Mobile Breakthrough Award for Small Cell Technology Innovation of the Year. As the world’s first all-wireless small cell, Sprint Magic Box improves data coverage and increases download and upload speeds on average by 200 percent.(1)

Sprint’s extended network toolbox is improving the experience for customers across the country. Based on Ookla’s Speedtest Intelligence data, Sprint is the most improved network with national average download speeds up 33 percent year-over-year.(2) And in more than 25 of 99 top markets, the company’s average download speeds increased anywhere from 40 percent to more than 100 percent, including Chicago, Los Angeles, Seattle, and Houston.(3)

Fiscal Year 2017 Outlook

The company continues to expect adjusted EBITDA* of $10.8 billion to $11.2 billion.

The company continues to expect operating income of $2.1 billion to $2.5 billion.

The company continues to expect cash capital expenditures, excluding devices leased through indirect channels, of $3.5 billion to $4 billion.

-- The company expects adjusted free cash flow* to be around break-even.

_________________________
(1) Signal and speeds based on optimal conditions for most
Sprint devices.
(2) Average download speed increase based on Ookla’s
analysis of Speedtest Intelligence data comparing Sept. 2016 to
Sept. 2017 for all mobile results.
(3) Average download speed increase based on Sprint’s
analysis of Ookla Speedtest Intelligence data comparing Sept. 2016
to Sept. 2017 for all mobile results.

Additional Information

Additional information about results, including a message from management, is available on the Investor Relations website at www.sprint.com/investors

Wireless Operating Statistics (Unaudited)
Quarter To Date
Year To Date
9/30/17
6/30/17
9/30/16
9/30/17
9/30/16
Net additions (losses) (in thousands)
Postpaid
168
(39 )
344
129
524
Postpaid phone
279
88
347
367
520
Prepaid (f)
95
35
(449 )
130
(755 )
Wholesale and affiliate (f)
115
65
704
180
1,432
Total wireless net additions
378
61
599
439
1,201
End of period connections (in thousands)
Postpaid (d)
31,686
31,518
31,289
31,686
31,289
Postpaid phone (d)
26,432
26,153
25,669
26,432
25,669
Prepaid (d) (e) (f) (h)
8,765
8,719
10,187
8,765
10,187
Wholesale and affiliate (d) (e) (f)
13,576
13,461
12,486
13,576
12,486
Total end of period connections
54,027
53,698
53,962
54,027
53,962
Churn (g)
Postpaid
1.72 %
1.65 %
1.52 %
1.69 %
1.54 %
Postpaid phone
1.59 %
1.50 %
1.37 %
1.55 %
1.38 %
Prepaid (e)
4.83 %
4.57 %
5.59 %
4.70 %
5.49 %
Supplemental data - connected devices
End of period connections (in thousands)
Retail postpaid
2,158
2,091
1,874
2,158
1,874
Wholesale and affiliate
11,221
11,100
9,951
11,221
9,951
Total
13,379
13,191
11,825
13,379
11,825
ARPU (a)
Postpaid
$
46.00
$
47.30
$
50.54
$
46.65
$
51.04
Postpaid phone
$
52.34
$
53.92
$
58.03
$
53.13
$
58.61
Prepaid (e)
$
37.83
$
38.24
$
33.15
$
38.04
$
33.07
NON-GAAP RECONCILIATION - ABPA* AND ABPU* (Unaudited)
(Millions, except accounts, connections, ABPA*, and ABPU*)
Quarter To Date
Year To Date
9/30/17
6/30/17
9/30/16
9/30/17
9/30/16
ABPA*
Postpaid service revenue
$
4,363
$
4,466
$
4,720
$
8,829
$
9,498
Add: Installment plan and non-operating lease billings
397
368
274
765
538
Add: Lease revenue - operating
966
899
811
1,865
1,566
Total for postpaid connections
$
5,726
$
5,733
$
5,805
$
11,459
$
11,602
Average postpaid accounts (in thousands)
11,277
11,312
11,363
11,295
11,346
Postpaid ABPA* (b)
$
169.25
$
168.95
$
170.29
$
169.10
$
170.43
Quarter To Date
Year To Date
9/30/17
6/30/17
9/30/16
9/30/17
9/30/16
Postpaid phone ABPU*
Postpaid phone service revenue
$
4,132
$
4,214
$
4,441
$
8,346
$
8,930
Add: Installment plan and non-operating lease billings
358
332
248
690
491
Add: Lease revenue - operating
953
887
797
1,840
1,538
Total for postpaid phone connections
$
5,443
$
5,433
$
5,486
$
10,876
$
10,959
Postpaid average phone connections (in thousands)
26,312
26,052
25,514
26,182
25,394
Postpaid phone ABPU* (c)
$
68.95
$
69.51
$
71.69
$
69.23
$
71.93
(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.
(b) Postpaid ABPA* is calculated by dividing service
revenue earned from connections plus billings from installment
plans and non-operating leases, as well as, operating lease
revenue by the sum of the monthly average number of accounts
during the period. Installment plan billings represent the
substantial majority of the total billings in the table above for
all periods presented.
(c) Postpaid phone ABPU* is calculated by dividing
postpaid phone service revenue earned from postpaid phone
connections plus billings from installment plans and non-operating
leases, as well as, operating lease revenue 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.
(d) As part of the Shentel transaction, 186,000 and
92,000 subscribers were transferred from postpaid and prepaid,
respectively, to affiliates, of which 18,000 prepaid subscribers
were subsequently excluded from our customer base as a result of
the Lifeline regulatory change as noted in (f) below. 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.
(e) During the three-month period ended June 30, 2017,
2,000 Wi-Fi connections were adjusted from the postpaid subscriber
base.
(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.
(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.
(h) During the three-month period ended September 30,
2017, the Prepaid Data Share platform It’s On was decommissioned as
the Company continues to focus on higher value contribution
offerings resulting in the reduction of 49,000 to prepaid end of
period subscribers.
Wireless Device Financing Summary (Unaudited)
(Millions, except sales, connections, and leased devices in
property, plant and equipment)
Quarter To Date
Year To Date
9/30/17
6/30/17
9/30/16
9/30/17
9/30/16
Postpaid activations (in thousands)
3,917
3,668
3,747
7,585
7,015
Postpaid activations financed
85 %
85 %
73 %
85 %
71 %
Postpaid activations - operating leases
68 %
55 %
39 %
62 %
41 %
Installment plans
Installment sales financed
$
268
$
553
$
745
$
821
$
1,152
Installment billings
$
373
$
368
$
274
$
741
$
538
Installment receivables, net
$
1,583
$
1,792
$
-
$
1,583
$
-
Leasing revenue and depreciation
Lease revenue - operating
$
966
$
899
$
811
$
1,865
$
1,566
Lease depreciation
$
888
$
854
$
724
$
1,742
$
1,368
Leased device additions
Cash paid for capital expenditures - leased devices
$
608
$
497
$
358
$
1,105
$
763
Transfers from inventory - leased devices
$
1,060
$
850
$
645
$
1,910
$
1,186
Leased devices
Leased devices in property, plant and equipment, net
$
4,709
$
4,336
$
3,759
$
4,709
$
3,759
Leased device units
Leased devices in property, plant and equipment (units in thousands)
13,019
12,223
9,366
13,019
9,366
Leased device and receivables financings net proceeds
Proceeds
$
789
$
765
$
-
$
1,554
$
1,055
Repayments
(1,148 )
(273 )
(184 )
(1,421 )
(424 )
Net (repayments) proceeds of financings related to devices and
$
(359 )
$
492
$
(184 )
$
133
$
631
receivables
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
(Millions, except per share data)
Quarter To Date
Year To Date
9/30/17
6/30/17
9/30/16
9/30/17
9/30/16
Net operating revenues
Service revenue
$
5,967
$
6,071
$
6,413
$
12,038
$
12,929
Equipment revenue
1,960
2,086
1,834
4,046
3,330
Total net operating revenues
7,927
8,157
8,247
16,084
16,259
Net operating expenses
Cost of services (exclusive of depreciation and amortization below)
1,698
1,709
2,101
3,407
4,200
Cost of products (exclusive of depreciation and amortization below)
1,404
1,545
1,693
2,949
3,112
Selling, general and administrative
2,013
1,938
1,995
3,951
3,912
Depreciation - network and other
997
977
986
1,974
2,022
Depreciation - leased devices
888
854
724
1,742
1,368
Amortization
209
223
271
432
558
Other, net
117
(252 )
(145 )
(135 )
104
Total net operating expenses
7,326
6,994
7,625
14,320
15,276
Operating income
601
1,163
622
1,764
983
Interest expense
(595 )
(613 )
(630 )
(1,208 )
(1,245 )
Other income (expense), net
44
(52 )
(15 )
(8 )
(7 )
Income (loss) before income taxes
50
498
(23 )
548
(269 )
Income tax expense
(98 )
(292 )
(119 )
(390 )
(175 )
Net (loss) income
$
(48 )
$
206
$
(142 )
$
158
$
(444 )
Basic net (loss) income per common share
$
(0.01 )
$
0.05
$
(0.04 )
$
0.04
$
(0.11 )
Diluted net (loss) income per common share
$
(0.01 )
$
0.05
$
(0.04 )
$
0.04
$
(0.11 )
Weighted average common shares outstanding
3,998
3,993
3,979
3,996
3,977
Diluted weighted average common shares outstanding
3,998
4,076
3,979
4,080
3,977
Effective tax rate
196.0 %
58.6 %
-517.4 %
71.2 %
-65.1 %
NON-GAAP RECONCILIATION - NET (LOSS) INCOME TO ADJUSTED EBITDA*
(Unaudited)
(Millions)
Quarter To Date
Year To Date
9/30/17
6/30/17
9/30/16
9/30/17
9/30/16
Net (loss) income
$
(48 )
$
206
$
(142 )
$
158
$
(444 )
Income tax expense
98
292
119
390
175
Income (loss) before income taxes
50
498
(23 )
548
(269 )
Other (income) expense, net
(44 )
52
15
8
7
Interest expense
595
613
630
1,208
1,245
Operating income
601
1,163
622
1,764
983
Depreciation - network and other
997
977
986
1,974
2,022
Depreciation - leased devices
888
854
724
1,742
1,368
Amortization
209
223
271
432
558
EBITDA* (1)
2,695
3,217
2,603
5,912
4,931
Gain from asset dispositions, exchanges, and other, net (2)
-
(304 )
(354 )
(304 )
(354 )
Severance and exit costs (3)
-
-
(5 )
-
11
Contract terminations (4)
-
(5 )
-
(5 )
113
Litigation and other contingencies (5)
-
(55 )
103
(55 )
103
Hurricanes (6)
34
-
-
34
-
Adjusted EBITDA* (1)
$
2,729
$
2,853
$
2,347
$
5,582
$
4,804
Adjusted EBITDA margin*
45.7 %
47.0 %
36.6 %
46.4 %
37.2 %
Selected items:
Cash paid for capital expenditures - network and other
$
682
$
1,121
$
470
$
1,803
$
943
Cash paid for capital expenditures - leased devices
$
608
$
497
$
358
$
1,105
$
763
WIRELESS STATEMENTS OF OPERATIONS (Unaudited)
(Millions)
Quarter To Date
Year To Date
9/30/17
6/30/17
9/30/16
9/30/17
9/30/16
Net operating revenues
Service revenue
Postpaid
$
4,363
$
4,466
$
4,720
$
8,829
$
9,498
Prepaid (7)
990
999
1,037
1,989
2,111
Wholesale, affiliate and other (7)
296
259
260
555
509
Total service revenue
5,649
5,724
6,017
11,373
12,118
Equipment revenue
1,960
2,086
1,834
4,046
3,330
Total net operating revenues
7,609
7,810
7,851
15,419
15,448
Net operating expenses
Cost of services (exclusive of depreciation and amortization below)
1,422
1,412
1,793
2,834
3,577
Cost of products (exclusive of depreciation and amortization below)
1,404
1,545
1,693
2,949
3,112
Selling, general and administrative
1,936
1,875
1,931
3,811
3,765
Depreciation - network and other
944
925
936
1,869
1,921
Depreciation - leased devices
888
854
724
1,742
1,368
Amortization
209
223
271
432
558
Other, net
117
(202 )
(151 )
(85 )
98
Total net operating expenses
6,920
6,632
7,197
13,552
14,399
Operating income
$
689
$
1,178
$
654
$
1,867
$
1,049
WIRELESS NON-GAAP RECONCILIATION (Unaudited)
(Millions)
Quarter To Date
Year To Date
9/30/17
6/30/17
9/30/16
9/30/17
9/30/16
Operating income
$
689
$
1,178
$
654
$
1,867
$
1,049
Gain from asset dispositions, exchanges, and other, net (2)
-
(304 )
(354 )
(304 )
(354 )
Severance and exit costs (3)
-
(5 )
(11 )
(5 )
5
Contract terminations (4)
-
(5 )
-
(5 )
113
Litigation and other contingencies (5)
-
-
103
-
103
Hurricanes (6)
34
-
-
34
-
Depreciation - network and other
944
925
936
1,869
1,921
Depreciation - leased devices
888
854
724
1,742
1,368
Amortization
209
223
271
432
558
Adjusted EBITDA* (1)
$
2,764
$
2,866
$
2,323
$
5,630
$
4,763
Adjusted EBITDA margin*
48.9 %
50.1 %
38.6 %
49.5 %
39.3 %
Selected items:
Cash paid for capital expenditures - network and other
$
539
$
938
$
358
$
1,477
$
734
Cash paid for capital expenditures - leased devices
$
608
$
497
$
358
$
1,105
$
763
WIRELINE STATEMENTS OF OPERATIONS (Unaudited)
(Millions)
Quarter To Date
Year To Date
9/30/17
6/30/17
9/30/16
9/30/17
9/30/16
Net operating revenues
Voice
$
109
$
124
$
172
$
233
$
353
Data
33
34
43
67
86
Internet
256
255
288
511
590
Other
11
20
18
31
37
Total net operating revenues
409
433
521
842
1,066
Net operating expenses
Cost of services (exclusive of depreciation and amortization below)
372
387
436
759
884
Selling, general and administrative
66
57
62
123
140
Depreciation and amortization
49
51
48
100
97
Other, net
-
5
7
5
7
Total net operating expenses
487
500
553
987
1,128
Operating loss
$
(78 )
$
(67 )
$
(32 )
$
(145 )
$
(62 )
WIRELINE NON-GAAP RECONCILIATION (Unaudited)
(Millions)
Quarter To Date
Year To Date
9/30/17
6/30/17
9/30/16
9/30/17
9/30/16
Operating loss
$
(78 )
$
(67 )
$
(32 )
$
(145 )
$
(62 )
Severance and exit costs (3)
-
5
7
5
7
Depreciation and amortization
49
51
48
100
97
Adjusted EBITDA*
$
(29 )
$
(11 )
$
23
$
(40 )
$
42
Adjusted EBITDA margin*
-7.1 %
-2.5 %
4.4 %
-4.8 %
3.9 %
Selected items:
Cash paid for capital expenditures - network and other
$
40
$
62
$
31
$
102
$
51
CONDENSED CONSOLIDATED CASH FLOW INFORMATION (Unaudited)
(Millions)
Year to Date
9/30/17
9/30/16
Operating activities
Net income (loss)
$
158
$
(444 )
Depreciation and amortization
4,148
3,948
Provision for losses on accounts receivable
199
232
Share-based and long-term incentive compensation expense
87
29
Deferred income tax expense
364
157
Gains from asset dispositions and exchanges
(479 )
(354 )
Call premiums paid on debt redemptions
(129 )
-
Loss on early extinguishment of debt
65
-
Amortization of long-term debt premiums, net
(90 )
(159 )
Loss on disposal of property, plant and equipment
410
231
Contract terminations
(5 )
96
Other changes in assets and liabilities:
Accounts and notes receivable
(179 )
(126 )
Inventories and other current assets
(1,459 )
(892 )
Deferred purchase price from sale of receivables
-
(400 )
Accounts payable and other current liabilities
(161 )
(195 )
Non-current assets and liabilities, net
183
(205 )
Other, net
127
332
Net cash provided by operating activities
3,239
2,250
Investing activities
Capital expenditures - network and other
(1,803 )
(943 )
Capital expenditures - leased devices
(1,105 )
(763 )
Expenditures relating to FCC licenses
(19 )
(32 )
Change in short-term investments, net
3,834
(1,650 )
Proceeds from sales of assets and FCC licenses
218
66
Other, net
(1 )
(36 )
Net cash provided by (used in) investing activities
1,124
(3,358 )
Financing activities
Proceeds from debt and financings
1,860
3,278
Repayments of debt, financing and capital lease obligations
(4,261 )
(667 )
Debt financing costs
(9 )
(175 )
Other, net
(21 )
37
Net cash (used in) provided by financing activities
(2,431 )
2,473
Net increase in cash and cash equivalents
1,932
1,365
Cash and cash equivalents, beginning of period
2,870
2,641
Cash and cash equivalents, end of period
$
4,802
$
4,006
RECONCILIATION TO CONSOLIDATED FREE CASH FLOW* (NON-GAAP)
(Unaudited)
(Millions)
Quarter To Date
Year to Date
9/30/17
6/30/17
9/30/16
9/30/17
9/30/16
Net cash provided by operating activities
$
1,959
$
1,280
$
1,708
$
3,239
$
2,250
Capital expenditures - network and other
(682 )
(1,121 )
(470 )
(1,803 )
(943 )
Capital expenditures - leased devices
(608 )
(497 )
(358 )
(1,105 )
(763 )
Expenditures relating to FCC licenses, net
(6 )
(13 )
(17 )
(19 )
(32 )
Proceeds from sales of assets and FCC licenses
117
101
39
218
66
Other investing activities, net
(1 )
(3 )
(11 )
(4 )
(36 )
Free cash flow*
$
779
$
(253 )
$
891
$
526
$
542
Net (repayments) proceeds of financings related to devices and
(359 )
492
(184 )
133
631
receivables
Adjusted free cash flow*
$
420
$
239
$
707
$
659
$
1,173
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
(Millions)
9/30/17
3/31/17
ASSETS
Current assets
Cash and cash equivalents
$
4,802
$
2,870
Short-term investments
1,610
5,444
Accounts and notes receivable, net
4,118
4,138
Device and accessory inventory
751
1,064
Prepaid expenses and other current assets
654
601
Total current assets
11,935
14,117
Property, plant and equipment, net
18,901
19,209
Goodwill
6,578
6,579
FCC licenses and other
41,072
40,585
Definite-lived intangible assets, net
2,848
3,320
Other assets
1,132
1,313
Total assets
$
82,466
$
85,123
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Accounts payable
$
2,947
$
3,281
Accrued expenses and other current liabilities
3,808
4,141
Current portion of long-term debt, financing and capital lease
4,142
5,036
obligations
Total current liabilities
10,897
12,458
Long-term debt, financing and capital lease obligations
34,236
35,878
Deferred tax liabilities
14,780
14,416
Other liabilities
3,533
3,563
Total liabilities
63,446
66,315
Stockholders’ equity
Common stock
40
40
Treasury shares, at cost
(9 )
-
Paid-in capital
27,807
27,756
Accumulated deficit
(8,426 )
(8,584 )
Accumulated other comprehensive loss
(392 )
(404 )
Total stockholders’ equity
19,020
18,808
Total liabilities and stockholders’ equity
$
82,466
$
85,123
NET DEBT* (NON-GAAP) (Unaudited)
(Millions)
9/30/17
3/31/17
Total debt
$
38,378
$
40,914
Less: Cash and cash equivalents
(4,802 )
(2,870 )
Less: Short-term investments
(1,610 )
(5,444 )
Net debt*
$
31,966
$
32,600
SCHEDULE OF DEBT (Unaudited)
(Millions)
9/30/17
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
3,500
Spectrum Co III LLC
Sprint Communications, Inc.
Export Development Canada secured loan
12/17/2019
300
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.
8,080
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
552
Secured term loan
02/03/2024
3,980
Credit facilities
4,532
Accounts receivable facility
11/19/2018
2,393
Financing obligations
2017 - 2021
2,011
Capital leases and other obligations
2017 - 2024
533
Total principal
38,382
Net premiums and debt financing costs
(4 )
Total debt
$
38,378
(a) $629 million Clearwire 8.25% Exchangeable Notes due
2040 have both a par call and put in December 2017.
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 and six-month
periods ended September 30, 2017, we leased devices through our
Sprint direct channels totaling approximately $1,060 million and
$1,910 million, respectively, which would have increased cost of
products 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 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. During the second quarter of
fiscal year 2016 the company recorded a pre-tax non-cash gain of
$354 million 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 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 second 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)
During the second quarter of fiscal year 2017 we recorded estimated
hurricane-related charges of $34 million, consisting of customer
service credits, incremental roaming costs, network repairs and
replacements.
(7)
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 $92 million and $183
million for the three and six-month periods ended September 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.

*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, operating 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 billings from installment plans and non-operating leases, as well as, operating 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 billings from installment plans and non-operating leases, as well as, operating 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 billings from installment plans and non-operating leases, as well as, operating 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.

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 (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 million connections as of Sept. 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.

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SOURCE: Sprint Corporation

Sprint
Media:
Dave Tovar
David.Tovar@sprint.com
or
Investors:
Jud Henry
Investor.Relations@sprint.com