May 07, 2019

OVERLAND PARK, Kan., May 7, 2019 /PRNewswire/ --

  • Fiscal year 2018 wireless service revenue stabilized year-over-year, excluding the impact of the new revenue recognition standard
    • Fiscal fourth quarter wireless service revenue grew 1 percent year-over-year
  • Fiscal year 2018 net loss of $1.9 billion and operating income of $398 million both include a preliminary non-cash charge of $2 billion; Adjusted EBITDA* of $12.8 billion
    • Fiscal fourth quarter net loss of $2.2 billion, operating loss of $1.7 billion, and adjusted EBITDA* of $3.1 billion
  • Fiscal year 2018 postpaid net additions of 710,000 improved by 286,000 year-over-year
    • Data device net additions of 872,000 were partially offset by phone net losses of 162,000
    • Fiscal fourth quarter postpaid net additions of 169,000 driven by data device net additions of 358,000 and phone net losses of 189,000
  • Continued progress on Next-Gen Network deployment
    • Mobile 5G network to launch in select cities in the coming weeks
  • Strong momentum on digitalization initiatives
    • Postpaid gross additions in digital channels increased approximately 60 percent year-over-year in both the fourth quarter and for the full year

Sprint Corporation (NYSE: S) today reported results for the fiscal year 2018 fourth quarter and full year, including a stabilization of wireless service revenue and continued growth in postpaid net additions. The company reported a net loss of $1.9 billion and operating income of $398 million, both of which included a preliminary non-cash charge of $2 billion, along with adjusted EBITDA* of $12.8 billion in fiscal year 2018. 

"Sprint delivered on its plan for fiscal 2018, as we met all of our financial guidance for the year," said Sprint CEO Michel Combes. "While we’ve made progress, there are certainly continued challenges to address, which will continue to put pressure on our service revenue and retail customer growth." 

 

 

Wireless Service Revenue Stabilized and Cost Reduction Targets Achieved
Sprint has focused on growing revenue per customer with additional devices and value-added services. This strategy produced 710,000 postpaid net additions for the year, an improvement of 286,000 year-over-year that was driven by growth in data devices, which offset losses in postpaid phone customers. This growth, along with a slowing decline in postpaid ARPU, contributed to the stabilization of wireless service revenue at $22.5 billion for the year, excluding the impact of the new revenue recognition standard.

Sprint achieved both its gross and net cost reduction targets in fiscal year 2018. Excluding the impact of the new revenue recognition standard and approximately $350 million of merger-related costs, the company delivered approximately $1.2 billion of combined year-over-year gross reductions in cost of services and selling, general and administrative (SG&A) expenses during fiscal year 2018 and approximately $330 million of net reductions after reinvestments in network and other operational initiatives. While the company continues to look for opportunities to improve operational and cost efficiencies in fiscal 2019, these improvements are expected to be fully offset by incremental costs associated with network and customer experience initiatives.

Net loss of $1.9 billion for the year compared to net income of $7.4 billion in the prior year, as fiscal year 2018 included a preliminary non-cash goodwill impairment charge of $2 billion and fiscal year 2017 results included a $7.1 billion non-cash benefit from tax reform.

The new revenue recognition standard had a positive impact on reported net income of $146 million and $678 million in the fiscal year 2018 fourth quarter and full year, respectively. The new standard also had a positive impact on reported operating income and adjusted EBITDA* of $185 million and $858 million in the fiscal year 2018 fourth quarter and full year, respectively.

(Millions, except per share data)

Fiscal 4Q18

Fiscal 4Q17

Change

 

Fiscal 2018

Fiscal 2017

Change

Net (loss) income attributable to Sprint

($2,174)

$69

($2,243)

 

($1,943)

$7,389

($9,332)

Basic (loss) income per share

($0.53)

$0.02

($0.55)

 

($0.48)

$1.85

($2.33)

Operating (loss) income

($1,674)

$236

($1,910)

 

$398

$2,727

($2,329)

Adjusted EBITDA*

$3,136

$2,768

$368

 

$12,773

$11,069

$1,704

Net cash provided by operating activities

$2,847

$2,653

$194

 

$10,429

$10,062

$367

Adjusted free cash flow*

($539)

($240)

($299)

 

($914)

$945

($1,859)

 

Network Deployment Continues with Mobile 5G Launch Coming Soon  
Sprint made continued progress in the quarter on executing its Next-Gen Network plan.

  • Sprint now has 2.5 GHz spectrum deployed on approximately 80 percent of its macro sites.
  • Sprint currently has approximately 30,000 outdoor small cells deployed including both mini macros and strand mounts.
  • Sprint has deployed approximately 1,500 Massive MIMO radios, which increase the speed and capacity of the LTE network and, with a software upgrade, will provide mobile 5G service in select cities in the coming weeks.

Standards-based 5G is currently on-air in select locations, with commercial service expected to launch in the coming weeks. Chicago, Atlanta, Dallas and Kansas City are expected to be among the first cities to offer commercial 5G service; with Houston, Los Angeles, New York City, Phoenix and Washington D.C. slated to launch by the end of June. The total initial 5G coverage footprint across all nine cities is expected to be more than 1,000 square miles. The company has also announced standards-based 5G devices from LG, HTC, and Samsung that will be available soon.

Building a Digital Disruptor
Sprint continued to leverage digital capabilities to transform the way it engages with customers. 

  • Postpaid gross additions in digital channels increased approximately 60 percent year-over-year in both the fiscal fourth quarter and for the full fiscal year. Additionally, the company exited the year with nearly 20 percent of postpaid upgrades occurring in a digital channel.
  • Approximately 30 percent of all Sprint customer care chats are now performed by virtual agents using artificial intelligence.
  • Web conversions improved while online media spend and cost per click were down year-over-year.

Conference Call and Webcast

  • Date/Time: 4:30 p.m. (ET) Tuesday, May 7, 2019
  • Call-in Information
    • U.S./Canada: 866-360-1063 ID: 4660559
    • International: 443-961-0242 ID: 4660559
  • Webcast available at www.sprint.com/investors
  • Additional information about results is available on our Investor Relations website

 

Wireless Operating Statistics (Unaudited)

   

 Quarter To Date 

   

 Year To Date 

 

3/31/19

12/31/18

3/31/18

 

3/31/19

3/31/18

Net additions (losses) (in thousands)

           

Postpaid(a)

169

309

39

 

710

424

Postpaid phone(a)

(189)

(26)

55

 

(162)

606

Prepaid

(30)

(173)

170

 

(214)

363

Wholesale and affiliate

(147)

(88)

(165)

 

(419)

81

Total wireless net (losses) additions

(8)

48

44

 

77

868

             

End of period connections (in thousands)

           

Postpaid(a) (b) (d) (e) 

32,774

32,605

32,119

 

32,774

32,119

Postpaid phone(a) (b) (d)

26,598

26,787

26,813

 

26,598

26,813

Prepaid(a) (b) (c) (d) (f) (g)

8,816

8,846

8,989

 

8,816

8,989

Wholesale and affiliate (c) (d) (h)

12,897

13,044

13,517

 

12,897

13,517

Total end of period connections

54,487

54,495

54,625

 

54,487

54,625

             

Churn

           

Postpaid

1.81%

1.85%

1.78%

 

1.77%

1.74%

Postpaid phone

1.82%

1.84%

1.68%

 

1.74%

1.62%

Prepaid

4.37%

4.83%

4.30%

 

4.53%

4.58%

             

Supplemental data - connected devices

           

End of period connections (in thousands)

           

Retail postpaid

3,121

2,821

2,335

 

3,121

2,335

Wholesale and affiliate

10,384

10,563

11,162

 

10,384

11,162

Total

13,505

13,384

13,497

 

13,505

13,497

             

ARPU(i)

           

Postpaid

$           43.25

$           43.64

$           44.40

 

$           43.60

$           45.70

Postpaid phone

$           50.18

$           50.01

$           50.44

 

$           49.98

$           51.98

Prepaid

$           33.67

$           34.53

$           37.15

 

$           34.98

$           37.67

             

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

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

 

Quarter To Date

 

 Year To Date 

 

3/31/19

12/31/18

3/31/18

 

3/31/19

3/31/18

ABPA*

           

Postpaid service revenue

$           4,231

$           4,236

$           4,270

 

$         16,910

$         17,396

Add: Installment plan and non-operating lease billings 

273

306

368

 

1,257

1,512

Add: Equipment rentals

1,359

1,313

1,136

 

5,137

4,048

Total for postpaid connections

$           5,863

$           5,855

$           5,774

 

$         23,304

$         22,956

             

Average postpaid accounts (in thousands)

11,184

11,196

11,259

 

11,191

11,260

Postpaid ABPA*(j)

$         174.75

$         174.32

$         171.38

 

$         173.54

$         169.99

             
 

Quarter To Date

 

 Year To Date 

 

3/31/19

12/31/18

3/31/18

 

3/31/19

3/31/18

Postpaid phone ABPU*

           

Postpaid phone service revenue

$           4,012

$           4,014

$           4,048

 

$         16,041

$         16,463

Add: Installment plan and non-operating lease billings 

213

253

324

 

1,052

1,349

Add: Equipment rentals

1,354

1,307

1,126

 

5,112

4,003

Total for postpaid phone connections

$           5,579

$           5,574

$           5,498

 

$         22,205

$         21,815

             

Postpaid average phone connections (in thousands)

26,652

26,751

26,754

 

26,746

26,394

Postpaid phone ABPU* (k)

$           69.79

$           69.45

$           68.51

 

$           69.19

$           68.88

             

(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. In addition, net subscriber additions under the non-Sprint branded postpaid offering were 44,000 during the three-month period ended March 31, 2018.

(b)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.

(c)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.

(d)  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.

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

(f)  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 a 49,000 reduction to prepaid end of period subscribers.

(g)  During the three-month period ended December 31, 2017, prepaid end of period subscribers increased by 169,000 in conjunction with the PRWireless HoldCo, LLC
joint venture.

(h)  On April 1, 2018, approximately 115,000 wholesale subscribers were removed from the subscriber base with no impact to revenue. During the three-month period ended December 31, 2018, an additional 100,000 wholesale subscribers were removed from the subscriber base with no impact to revenue.

(i)  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.

(j)  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.

(k)  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 

   

 Year To Date 

 

3/31/19

12/31/18

3/31/18

 

3/31/19

3/31/18

             

Postpaid activations (in thousands)

3,730

4,462

3,737

 

15,437

16,196

Postpaid activations financed

79%

81%

84%

 

81%

85%

Postpaid activations - operating leases

58%

63%

70%

 

62%

67%

             

Installment plans

           

Installment sales financed

$             368

$             357

$              214

 

$           1,193

$           1,311

Installment billings

$             219

$             251

$              342

 

$           1,087

$           1,436

Installment receivables, net

$             926

$             894

$           1,149

 

$             926

$           1,149

             

Equipment rentals and depreciation - equipment rentals

           

Equipment rentals   

$           1,359

$           1,313

$           1,136

 

$           5,137

$           4,048

Depreciation - equipment rentals

$           1,084

$           1,137

$           1,060

 

$           4,538

$           3,792

             

Leased device additions

           

Cash paid for capital expenditures - leased devices

$           1,702

$           2,215

$           1,928

 

$           7,441

$           7,461

             

Leased devices  

           

Leased devices in property, plant and equipment, net

$           6,612

$           6,683

$           6,012

 

$           6,612

$           6,012

             

Leased device units

           

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

15,889

15,897

14,543

 

15,889

14,543

             

Leased device and receivables financings net proceeds

           

Proceeds

$           1,783

$           2,200

$                  -

 

$           6,866

$           2,679

Repayments

(2,500)

(1,900)

(555)

 

(6,670)

(2,574)

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

$             (717)

$              300

$            (555)

 

$              196

$              105

 

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)

(Millions, except per share data)

 

Quarter To Date

 

Year To Date

 

3/31/19

12/31/18

3/31/18

 

3/31/19

3/31/18

Net operating revenues

           

Service revenue

$           5,656

$           5,699

$           5,866

 

$         22,857

$         23,834

Equipment sales

1,426

1,589

1,081

 

5,606

4,524

Equipment rentals

1,359

1,313

1,136

 

5,137

4,048

Total net operating revenues

8,441

8,601

8,083

 

33,600

32,406

Net operating expenses

           

Cost of services (exclusive of depreciation and amortization below)

1,645

1,648

1,661

 

6,664

6,801

Cost of equipment sales

1,561

1,734

1,487

 

6,082

6,109

Cost of equipment rentals (exclusive of depreciation below)

186

182

146

 

643

493

Selling, general and administrative

2,043

2,003

2,028

 

7,774

8,087

Depreciation - network and other

1,113

1,088

1,015

 

4,245

3,976

Depreciation - equipment rentals

1,084

1,137

1,060

 

4,538

3,792

Amortization

133

145

184

 

608

812

Goodwill impairment (1)

2,000

-

-

 

2,000

-

Other, net

350

185

266

 

648

(391)

Total net operating expenses

10,115

8,122

7,847

 

33,202

29,679

Operating (loss) income

(1,674)

479

236

 

398

2,727

Interest expense

(629)

(664)

(576)

 

(2,563)

(2,365)

Other income (expense), net

34

32

(9)

 

187

(59)

(Loss) income before income taxes

(2,269)

(153)

(349)

 

(1,978)

303

Income tax benefit

91

8

412

 

35

7,074

Net (loss) income

(2,178)

(145)

63

 

(1,943)

7,377

Less: Net loss attributable to noncontrolling interests

4

4

6

 

-

12

Net (loss) income attributable to Sprint Corporation

$          (2,174)

$            (141)

$               69

 

$          (1,943)

$           7,389

             

Basic net (loss) income per common share attributable to Sprint Corporation

$           (0.53)

$           (0.03)

$            0.02

 

$           (0.48)

$            1.85

Diluted net (loss) income per common share attributable to Sprint Corporation

$           (0.53)

$           (0.03)

$            0.02

 

$           (0.48)

$            1.81

Basic weighted average common shares outstanding

4,080

4,078

4,004

 

4,057

3,999

Diluted weighted average common shares outstanding

4,080

4,078

4,055

 

4,057

4,078

             

Effective tax rate

4.0%

5.2%

118.1%

 

1.8%

-2,334.7%

             
             

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

(Millions)

 

Quarter To Date

 

Year To Date

 

3/31/19

12/31/18

3/31/18

 

3/31/19

3/31/18

             

Net (loss) income

$          (2,178)

$            (145)

$               63

 

$          (1,943)

$           7,377

Income tax benefit

(91)

(8)

(412)

 

(35)

(7,074)

(Loss) income before income taxes

(2,269)

(153)

(349)

 

(1,978)

303

Other (income) expense, net

(34)

(32)

9

 

(187)

59

Interest expense

629

664

576

 

2,563

2,365

Operating (loss) income

(1,674)

479

236

 

398

2,727

Depreciation - network and other

1,113

1,088

1,015

 

4,245

3,976

Depreciation - equipment rentals

1,084

1,137

1,060

 

4,538

3,792

Amortization

133

145

184

 

608

812

EBITDA*(2)

656

2,849

2,495

 

9,789

11,307

Loss (gain) from asset dispositions, exchanges, and other, net(3)

304

105

189

 

477

(115)

Severance and exit costs (4)

22

30

67

 

85

80

Contract terminations costs (benefits) (5)

-

-

-

 

34

(5)

Merger costs (6)

130

67

-

 

346

-

Litigation expenses and other contingencies(7)

24

50

10

 

74

(305)

Goodwill impairment (1)

2,000

-

-

 

2,000

-

Hurricanes (8)

-

-

7

 

(32)

107

Adjusted EBITDA*(2)

$           3,136

$           3,101

$           2,768

 

$         12,773

$         11,069

             

Adjusted EBITDA margin*

55.4%

54.4%

47.2%

 

55.9%

46.4%

             
             

Selected items:

           

Cash paid for capital expenditures - network and other

$           1,149

$           1,416

$             780

 

$           4,963

$           3,319

Cash paid for capital expenditures - leased devices

$           1,702

$           2,215

$           1,928

 

$           7,441

$           7,461

 

WIRELESS STATEMENTS OF OPERATIONS (Unaudited)

(Millions)

 

Quarter To Date

 

Year To Date

 

3/31/19

12/31/18

3/31/18

 

3/31/19

3/31/18

Net operating revenues

           

Service revenue

           

Postpaid

$           4,231

$           4,236

$           4,270

 

$         16,910

$         17,396

Prepaid

886

924

989

 

3,746

3,971

Wholesale, affiliate and other

292

289

314

 

1,160

1,198

Total service revenue

5,409

5,449

5,573

 

21,816

22,565

             

Equipment sales

1,426

1,589

1,081

 

5,606

4,524

Equipment rentals

1,359

1,313

1,136

 

5,137

4,048

Total net operating revenues

8,194

8,351

7,790

 

32,559

31,137

             

Net operating expenses

           

Cost of services (exclusive of depreciation and amortization below)

1,462

1,439

1,401

 

5,796

5,701

Cost of equipment sales

1,561

1,734

1,487

 

6,082

6,109

Cost of equipment rentals (exclusive of depreciation below)

186

182

146

 

643

493

Selling, general and administrative

1,854

1,885

1,947

 

7,192

7,782

Depreciation - network and other

1,064

1,035

968

 

4,039

3,768

Depreciation - equipment rentals

1,084

1,137

1,060

 

4,538

3,792

Amortization

133

145

184

 

608

812

Other, net

349

185

258

 

629

(35)

Total net operating expenses

7,693

7,742

7,451

 

29,527

28,422

Operating income

$             501

$             609

$             339

 

$           3,032

$           2,715

             
             
             
             

WIRELESS NON-GAAP RECONCILIATION (Unaudited)

(Millions)

 

Quarter To Date

 

Year To Date

 

3/31/19

12/31/18

3/31/18

 

3/31/19

3/31/18

             

Operating income

$             501

$             609

$             339

 

$           3,032

$           2,715

Loss (gain) from asset dispositions, exchanges, and other, net(3)

304

105

189

 

477

(115)

Severance and exit costs (4)

21

30

59

 

66

58

Contract terminations costs (benefits) (5)

-

-

-

 

34

(5)

Litigation expenses and other contingencies (7)

24

50

10

 

74

73

Hurricanes (8)

-

-

7

 

(32)

107

Depreciation - network and other

1,064

1,035

968

 

4,039

3,768

Depreciation - equipment rentals

1,084

1,137

1,060

 

4,538

3,792

Amortization

133

145

184

 

608

812

Adjusted EBITDA*(2)

$           3,131

$           3,111

$           2,816

 

$         12,836

$         11,205

             

Adjusted EBITDA margin*

57.9%

57.1%

50.5%

 

58.8%

49.7%

             
             

Selected items:

           

Cash paid for capital expenditures - network and other

$             973

$           1,242

$             681

 

$           4,335

$           2,760

Cash paid for capital expenditures - leased devices

$           1,702

$           2,215

$           1,928

 

$           7,441

$           7,461

 

WIRELINE STATEMENTS OF OPERATIONS (Unaudited)

(Millions)

 

Quarter To Date

 

Year To Date

 

3/31/19

12/31/18

3/31/18

 

3/31/19

3/31/18

             

Net operating revenues

$             314

$             316

$             344

 

$           1,296

$           1,579

             

Net operating expenses

           

Cost of services (exclusive of depreciation and amortization below)

255

280

316

 

1,141

1,427

Selling, general and administrative

50

52

76

 

224

270

Depreciation and amortization

46

51

50

 

197

205

Other, net

1

-

9

 

19

(300)

Total net operating expenses

352

383

451

 

1,581

1,602

Operating loss

$              (38)

$              (67)

$            (107)

 

$            (285)

$              (23)

             
             

WIRELINE NON-GAAP RECONCILIATION (Unaudited)

(Millions)

 

Quarter To Date

 

Year To Date

 

3/31/19

12/31/18

3/31/18

 

3/31/19

3/31/18

             

Operating loss

$              (38)

$              (67)

$            (107)

 

$            (285)

$              (23)

Loss from asset dispositions, exchanges, and other, net(3)

-

-

1

 

-

1

Severance and exit costs (4)

1

-

8

 

19

22

Litigation expenses and other contingencies (7)

-

-

-

 

-

(323)

Depreciation and amortization

46

51

50

 

197

205

Adjusted EBITDA*

$                 9

$              (16)

$              (48)

 

$              (69)

$            (118)

             

Adjusted EBITDA margin*

2.9%

-5.1%

-14.0%

 

-5.3%

-7.5%

             
             

Selected items:

           

Cash paid for capital expenditures - network and other

$               72

$               64

$               34

 

$             242

$             166

 

CONDENSED CONSOLIDATED CASH FLOW INFORMATION (Unaudited)

(Millions)

     

Year To Date

         

3/31/19

3/31/18

Operating activities

           

Net (loss) income

       

$          (1,943)

$           7,377

Goodwill impairment (1)

       

2,000

-

Depreciation and amortization

       

9,391

8,580

Provision for losses on accounts receivable

       

394

362

Share-based and long-term incentive compensation expense 

       

132

182

Deferred income tax benefit

       

(85)

(7,119)

Gains from asset dispositions and exchanges

       

-

(479)

Loss on early extinguishment of debt

       

-

65

Amortization of long-term debt premiums, net

       

(112)

(158)

Loss on disposal of property, plant and equipment

       

1,135

868

Litigation and other contingencies

       

74

(13)

Deferred purchase price from sale of receivables

       

(223)

(1,140)

Other changes in assets and liabilities:

           

Accounts and notes receivable

       

(150)

83

Inventories and other current assets 

       

279

745

Accounts payable and other current liabilities 

       

(142)

17

Non-current assets and liabilities, net 

       

(728)

271

Other, net 

       

407

421

Net cash provided by operating activities

       

10,429

10,062

             

Investing activities

           

Capital expenditures - network and other

       

(4,963)

(3,319)

Capital expenditures - leased devices

       

(7,441)

(7,461)

Expenditures relating to FCC licenses

       

(163)

(115)

Change in short-term investments, net

       

2,032

3,090

Proceeds from sales of assets and FCC licenses

       

591

527

Proceeds from deferred purchase price from sale of receivables

       

223

1,140

Proceeds from corporate owned life insurance policies

       

110

2

Other, net

       

69

1

Net cash used in investing activities 

       

(9,542)

(6,135)

             

Financing activities

           

Proceeds from debt and financings

       

9,307

8,529

Repayments of debt, financing and capital lease obligations

       

(9,764)

(8,518)

Debt financing costs

       

(321)

(93)

Call premiums paid on debt redemptions

       

-

(131)

Proceeds from issuance of common stock, net

       

291

21

Other, net

       

4

(18)

Net cash used in financing activities 

       

(483)

(210)

             

Net increase in cash, cash equivalents and restricted cash

       

404

3,717

             

Cash, cash equivalents and restricted cash, beginning of period

       

6,659

2,942

Cash, cash equivalents and restricted cash, end of period

       

$           7,063

$           6,659

             
             

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

(Millions)

 

Quarter To Date

 

Year To Date

 

3/31/19

12/31/18

3/31/18

 

3/31/19

3/31/18

             

Net cash provided by operating activities

$           2,847

$           2,225

$           2,653

 

$         10,429

$         10,062

             

Capital expenditures - network and other

(1,149)

(1,416)

(780)

 

(4,963)

(3,319)

Capital expenditures - leased devices

(1,702)

(2,215)

(1,928)

 

(7,441)

(7,461)

Expenditures relating to FCC licenses, net

(18)

(75)

(23)

 

(163)

(115)

Proceeds from sales of assets and FCC licenses

175

144

160

 

591

527

Proceeds from deferred purchase price from sale of receivables

-

-

231

 

223

1,140

Other investing activities, net

25

129

2

 

214

6

Free cash flow*

$             178

$          (1,208)

$             315

 

$          (1,110)

$             840

             

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

(717)

300

(555)

 

196

105

Adjusted free cash flow*

$            (539)

$            (908)

$            (240)

 

$            (914)

$             945

 

CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)

(Millions)

   

3/31/19

3/31/18

ASSETS

     

Current assets

     

Cash and cash equivalents

 

$           6,982

$           6,610

Short-term investments

 

67

2,354

Accounts and notes receivable, net

 

3,554

3,711

Device and accessory inventory

 

999

1,003

Prepaid expenses and other current assets

 

1,289

575

Total current assets

 

12,891

14,253

       

Property, plant and equipment, net

 

21,201

19,925

Costs to acquire a customer contract

 

1,559

-

Goodwill

 

4,598

6,586

FCC licenses and other

 

41,465

41,309

Definite-lived intangible assets, net

 

1,769

2,465

Other assets

 

1,118

921

Total assets

 

$         84,601

$         85,459

       

LIABILITIES AND EQUITY

     

Current liabilities

     

Accounts payable

 

$           3,961

$           3,409

Accrued expenses and other current liabilities

 

3,597

3,962

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

 

4,557

3,429

Total current liabilities

 

12,115

10,800

       

Long-term debt, financing and capital lease obligations

 

35,366

37,463

Deferred tax liabilities

 

7,556

7,294

Other liabilities

 

3,437

3,483

Total liabilities 

 

58,474

59,040

       

Stockholders’ equity

     

Common stock

 

41

40

Paid-in capital

 

28,306

27,884

Accumulated deficit

 

(1,883)

(1,255)

Accumulated other comprehensive loss

 

(392)

(313)

Total stockholders’ equity

 

26,072

26,356

Noncontrolling interests

 

55

63

Total equity

 

26,127

26,419

Total liabilities and equity

 

$         84,601

$         85,459

       
       

NET DEBT* (NON-GAAP) (Unaudited)

(Millions)

   

3/31/19

3/31/18

Total debt

 

$         39,923

$         40,892

Less: Cash and cash equivalents

 

(6,982)

(6,610)

Less: Short-term investments

 

(67)

(2,354)

Net debt*

 

$         32,874

$         31,928

 

SCHEDULE OF DEBT (Unaudited)

(Millions)

         

3/31/19

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

2,187

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

       

6,125

           

Sprint Communications, Inc.

         

Export Development Canada secured loan

     

12/17/2019

300

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

6% Senior notes due 2022

     

11/15/2022

2,280

Sprint Communications, Inc.

       

6,080

           

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

           

Credit facilities

         

PRWireless secured term loan

     

06/28/2020

198

Secured equipment credit facilities

     

2020 - 2022

661

Secured term loan

     

02/03/2024

3,920

Secured term loan B1

     

02/03/2024

1,995

Credit facilities

       

6,774

           

Accounts receivable facility

     

2020

2,607

           

Financing obligations

     

2021

109

           

Capital leases and other obligations

     

2019 - 2026

429

Total principal

       

40,328

           

Net premiums and debt financing costs

       

(405)

Total debt

       

$            39,923

 

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 March 31, 2019

 

Year Ended March 31, 2019

 

As reported

Balances
without adoption
of Topic 606

Change

 

As reported

Balances
without adoption
of Topic 606

Change

Net operating revenues

             

Service revenue

$         5,656

$            5,869

$           (213)

 

$       22,857

$          23,585

$           (728)

Equipment sales

1,426

1,057

369

 

5,606

4,280

1,326

Equipment rentals

1,359

1,373

(14)

 

5,137

5,200

(63)

Total net operating revenues

8,441

8,299

142

 

33,600

33,065

535

Net operating expenses

             

Cost of services (exclusive of depreciation and amortization below)

1,645

1,669

(24)

 

6,664

6,742

(78)

Cost of equipment sales

1,561

1,506

55

 

6,082

5,937

145

Cost of equipment rentals (exclusive of depreciation below)

186

186

-

 

643

643

-

Selling, general and administrative

2,043

2,117

(74)

 

7,774

8,164

(390)

Depreciation - network and other

1,113

1,113

-

 

4,245

4,245

-

Depreciation - equipment rentals

1,084

1,084

-

 

4,538

4,538

-

Amortization

133

133

-

 

608

608

-

Goodwill impairment (1)

2,000

2,000

-

 

2,000

2,000

-

Other, net

350

350

-

 

648

648

-

Total net operating expenses

10,115

10,158

(43)

 

33,202

33,525

(323)

Operating (loss) income

(1,674)

(1,859)

185

 

398

(460)

858

Total other expenses

(595)

(595)

-

 

(2,376)

(2,376)

-

Loss before income taxes

(2,269)

(2,454)

185

 

(1,978)

(2,836)

858

Income tax benefit

91

130

(39)

 

35

215

(180)

Net loss

(2,178)

(2,324)

146

 

(1,943)

(2,621)

678

Less: Net loss attributable to noncontrolling interests

4

4

-

 

-

-

-

Net loss attributable to Sprint Corporation

$        (2,174)

$           (2,320)

$            146

 

$        (1,943)

$           (2,621)

$            678

               

Basic net loss per common share attributable to Sprint Corporation

$          (0.53)

$             (0.57)

$           0.04

 

$          (0.48)

$             (0.65)

$           0.17

Diluted net loss per common share attributable to Sprint Corporation

$          (0.53)

$             (0.57)

$           0.04

 

$          (0.48)

$             (0.65)

$           0.17

Basic weighted average common shares outstanding

4,080

4,080

-

 

4,057

4,057

-

Diluted weighted average common shares outstanding

4,080

4,080

-

 

4,057

4,057

-

 

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

(Millions)

 

March 31, 2019

 

As reported

Balances
without adoption
of Topic 606

Change

ASSETS

     

Current assets

     

Accounts and notes receivable, net

$           3,554

$            3,443

$             111

Device and accessory inventory

999

1,020

(21)

Prepaid expenses and other current assets

1,289

651

638

Costs to acquire a customer contract

1,559

-

1,559

Other assets

1,118

916

202

       

LIABILITIES AND STOCKHOLDERS’ EQUITY

     

Current liabilities

     

Accrued expenses and other current liabilities

$           3,597

$            3,610

$              (13)

Deferred tax liabilities

7,556

7,010

546

Other liabilities

3,437

3,466

(29)

       

Stockholders’ equity

     

Accumulated deficit

(1,883)

(3,868)

1,985

 

NOTES TO THE FINANCIAL INFORMATION (Unaudited)

   

(1)

As a result of our annual goodwill impairment assessment, we recorded a preliminary non-cash goodwill impairment charge of $2 billion during the fourth quarter of fiscal year 2018. The substantial portion of this impairment charge is not taxable as goodwill is generally not separately deductible for tax purposes.

   

(2)

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 subsidy model, we recognize revenue from the sale of devices as equipment sales at the point of sale and the cost of the device is recognized as cost of equipment sales. During the three and twelve month periods ended March 31, 2019, we leased devices through our Sprint direct channels totaling approximately $1,114 million and $4,931 million, respectively, 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.

   

(3)

During the fourth, third and second quarters of fiscal year 2018 and 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, during the first quarter of fiscal year 2017 the company recorded a pre-tax non-cash gain related to spectrum swaps with other carriers.

   

(4)

For all quarters of fiscal year 2018 and the fourth and third quarters 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.

   

(5)

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).

   

(6)

During the fourth, third, second and first quarters of fiscal year 2018, we recorded merger costs of $130 million, $67 million, $56 million and $93 million, respectively, due to the proposed Business Combination Agreement with T-Mobile.

   

(7)

During the fourth quarter of fiscal year 2018, litigation expenses and other contingencies consist of unfavorable developments associated with legal matters. During the third quarter of fiscal year 2018, litigation expenses and other contingencies consist of tax matters settled with the State of New York. During the fourth, third and first quarters of fiscal year 2017, litigation expenses and other contingencies consist of reductions associated with legal settlements or favorable developments in pending legal proceedings. In addition, the third quarter of fiscal year 2017 included non-recurring charges of $51 million related to a regulatory fee matter.

   

(8)

During the second quarter of fiscal year 2018 we recognized hurricane-related reimbursements of $32 million. During the fourth, third and second quarters of fiscal year 2017 we recorded hurricane-related costs of $7 million, $66 million and $34 million, respectively, consisting of customer service credits, 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, subscriber 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 such as 5G; efficiencies and cost savings of new technologies and services; customer and network usage; subscriber additions and churn rates; service, speed, capacity, coverage and quality; availability of devices; availability of various financings; and 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, our Quarterly Report on Form 10-Q for the quarter ended September 30, 2018 and, when filed, our Annual Report on Form 10-K for the fiscal year ended March 31, 2019. 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 54.5 million connections as of March 31, 2019 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.

SOURCE Sprint