October 31, 2018
  • Wireless service revenue grew year-over-year for the first time in nearly five years, excluding the $173 million impact of the new revenue recognition standard
  • Net income of $196 million, operating income of $778 million, and adjusted EBITDA* of $3.3 billion
    • Fourth consecutive quarter of net income and 11th consecutive quarter of operating income
    • Highest fiscal second quarter adjusted EBITDA* in 12 years and raising fiscal year 2018 adjusted EBITDA* outlook
  • Net cash provided by operating activities of $2.9 billion and adjusted free cash flow* of $525 million
    • Positive adjusted free cash flow* in six of the last seven quarters
  • Retail net additions of 95,000
    • Postpaid net additions for the fifth consecutive quarter
    • Prepaid net additions in the Boost brand for the seventh consecutive quarter
  • Most improved network among national carriers based on average download speeds
    • Further improvement expected with nationwide deployment of LTE Advanced features that offer up to two times faster speeds than before
  • Strong progress on digitalization initiatives
    • Postpaid gross additions in digital channels increased nearly 60 percent year-over-year

Sprint Corporation (NYSE: S) today reported year-over-year growth in wireless service revenue for the first time in nearly five years and positive adjusted free cash flow* for the sixth time in the last seven quarters as part of results for the second quarter of fiscal year 2018. The company also announced an increase to its fiscal year 2018 adjusted EBITDA* outlook.

"Sprint reached an important milestone this quarter by returning to year-over-year growth in wireless service revenue two quarters earlier than promised," said Sprint CEO Michel Combes. "Our strategy of balancing growth and profitability while we increase network investments and add digital capabilities continues to drive solid financial results." 

 

Wireless Service Revenue Inflection Contributes to Improved Profitability
One quarter after reporting sequential growth, Sprint reported year-over-year growth in wireless service revenue for the first time in nearly five years, when excluding the impact of the new revenue recognition standard. Five consecutive quarters of postpaid net additions and seven consecutive quarters of prepaid net additions within the Boost brand, along with stabilizing ARPU, have contributed to improved revenue trends in the business.

  • Postpaid service revenue grew sequentially for the second consecutive quarter.
  • Prepaid service revenue grew year-over-year for the fourth consecutive quarter.

Sprint reported its fourth consecutive quarter of net income, its 11th consecutive quarter of operating income, and its highest fiscal second quarter adjusted EBITDA* in 12 years, all excluding the positive impact of the new revenue recognition standard. The new revenue recognition standard had a positive impact of $178 million on reported net income and $225 million on reported operating income and adjusted EBITDA* in the quarter.

Sprint continued to make progress on its multi-year plan to improve its cost structure. Excluding the impact of the new revenue recognition standard and merger costs, the company reported approximately $200 million of combined year-over-year reductions in cost of services and selling, general and administrative expenses in the first half of fiscal 2018. For the full fiscal year, the company expects to deliver gross reductions of more than $1 billion for the fifth consecutive year, with net reductions of less than $500 million after reinvestments.

(Millions, except per share data)

Fiscal 2Q18

Fiscal 2Q17

Change

Net income (loss)

$196

($48)

$244

Basic income (loss) per share

$0.05

($0.01)

$0.06

Operating income

$778

$601

$177

Adjusted EBITDA*

$3,256

$2,729

$527

Net cash provided by operating activities

$2,927

$2,802

$125

Adjusted free cash flow*

$525

$420

$105

New Premium Option Joins the Best Lineup of Unlimited Plans
Sprint expanded its portfolio of unlimited data, talk and text plans this quarter by introducing Unlimited Premium, a VIP platinum-style wireless plan tailored for the customer who wants it all. The company also recently launched a selection of unlimited plans for customers who want value, a great network and unlimited data, including the Unlimited Plus, Unlimited Basic, Unlimited Military, and Unlimited 55+ plans. All these plans are part of the company’s "Unlimited for All" initiative to design plans so customers can select the best choice for them.

Increased Network Investments Driving a Better Experience
Sprint’s quarterly network investments, or cash capital expenditures excluding leased devices, nearly doubled year-over-year as the company made continued progress on executing its Next-Gen Network plan.

  • Sprint completed thousands of tri-band upgrades and now has 2.5 GHz spectrum deployed on 70 percent of its macro sites.
  • Sprint added thousands of new outdoor small cells and currently has 21,000 deployed including both mini macros and strand mounts.
  • Sprint continued commercial deployment of Massive MIMO radios, which increase the speed and capacity of the LTE network and, with a software upgrade, will provide mobile 5G service launching in the first half of 2019.

These deployments are contributing to Sprint providing customers with a better network experience, as seen in Speedtest Intelligence data from Ookla.

  • Best-ever showing with the fastest average download speed in 123 cities, including Seattle, Pittsburgh, Denver, and Honolulu.1
  • Most improved network among national carriers with national average download speeds up 31.5 percent year-over-year.2

The company has reached nationwide deployment with LTE Advanced features such as 256 QAM, 4X4 MIMO, and two- and three-channel carrier aggregation, a milestone on the road to 5G. These enhancements are expected to deliver up to two times faster speeds than Sprint 4G LTE on capable devices.

Becoming a Digital-First Company
Sprint is leading the U.S. telecommunications industry in leveraging digital capabilities, including boosting sales in digital channels, leveraging artificial intelligence to improve customer care interactions, and utilizing deep dive analytics to identify customer issues.

  • Postpaid gross additions in digital channels increased nearly 60 percent year-over-year.
  • Nearly 20 percent of postpaid upgrades were in digital channels in the quarter.
  • More than 25 percent of all Sprint customer care chats are now performed by virtual agents using artificial intelligence.

Fiscal Year 2018 Outlook

  • Due to strong year-to-date performance, the company is increasing its expectation for adjusted EBITDA* to a range of $12.4 billion to $12.7 billion. The previous expectation was $12.0 billion to $12.5 billion.
  • Excluding the impact of the new revenue recognition standard, the company is also increasing its expectation for adjusted EBITDA* to a range of $11.7 billion to $12.0 billion. The previous expectation was $11.3 billion to $11.8 billion.
  • The company expects cash capital expenditures excluding leased devices to be $5.0 billion to $5.5 billion. The previous expectation was $5.0 billion to $6.0 billion.

Conference Call and Webcast

  • Date/Time: 8:30 a.m. (ET) Wednesday, October 31, 2018
  • Call-in Information
    • U.S./Canada: 866-360-1063 (ID: 6693758)
    • International: 443-961-0242 (ID: 6693758)
  • Webcast available at www.sprint.com/investors
  • Additional information about results is available on our Investor Relations website

 

                   
 

1 Analysis by Ookla® of Speedtest Intelligence® data average download speeds from 7/1/18 to 9/30/18 for all mobile results.

2 Analysis by Ookla® of Speedtest Intelligence® data comparing average download speeds from September 2017 to September 2018 for all mobile results.

 

Wireless Operating Statistics (Unaudited)

 
   

 Quarter To Date 

   

 Year To Date 

 

9/30/18

6/30/18

9/30/17

 

9/30/18

9/30/17

Net additions (losses) (in thousands)

           

Postpaid

109

123

168

 

232

129

Postpaid phone

(34)

87

279

 

53

367

Prepaid

(14)

3

95

 

(11)

130

Wholesale and affiliate

(115)

(69)

115

 

(184)

180

Total wireless net (losses) additions

(20)

57

378

 

37

439

             

End of period connections (in thousands)

           

Postpaid(a) (c) (d) 

32,296

32,187

31,686

 

32,296

31,686

Postpaid phone(a) (c)

26,813

26,847

26,432

 

26,813

26,432

Prepaid(a) (b) (c) (e)

9,019

9,033

8,765

 

9,019

8,765

Wholesale and affiliate (b) (c) (f)

13,232

13,347

13,576

 

13,232

13,576

Total end of period connections

54,547

54,567

54,027

 

54,547

54,027

             

Churn

           

Postpaid

1.78%

1.63%

1.72%

 

1.71%

1.69%

Postpaid phone

1.73%

1.55%

1.59%

 

1.64%

1.55%

Prepaid

4.74%

4.17%

4.83%

 

4.45%

4.70%

             

Supplemental data - connected devices

           

End of period connections (in thousands)

           

Retail postpaid

2,585

2,429

2,158

 

2,585

2,158

Wholesale and affiliate

10,838

10,963

11,221

 

10,838

11,221

Total

13,423

13,392

13,379

 

13,423

13,379

             

ARPU(g)

           

Postpaid

$           43.99

$           43.55

$           46.00

 

$           43.77

$           46.65

Postpaid phone

$           50.16

$           49.57

$           52.34

 

$           49.86

$           53.13

Prepaid

$           35.40

$           36.27

$           37.83

 

$           35.83

$           38.04

             

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

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

 
 

Quarter To Date

 

 Year To Date 

 

9/30/18

6/30/18

9/30/17

 

9/30/18

9/30/17

ABPA*

           

Postpaid service revenue

$           4,255

$           4,188

$           4,363

 

$           8,443

$           8,829

Add: Installment plan and non-operating lease billings 

326

352

397

 

678

765

Add: Equipment rentals

1,253

1,212

966

 

2,465

1,865

Total for postpaid connections

$           5,834

$           5,752

$           5,726

 

$         11,586

$         11,459

             

Average postpaid accounts (in thousands)

11,207

11,176

11,277

 

11,192

11,295

Postpaid ABPA*(h)

$         173.53

$         171.57

$         169.25

 

$         172.55

$         169.10

             
 

Quarter To Date

 

 Year To Date 

 

9/30/18

6/30/18

9/30/17

 

9/30/18

9/30/17

Postpaid phone ABPU*

           

Postpaid phone service revenue

$           4,038

$           3,977

$           4,132

 

$           8,015

$           8,346

Add: Installment plan and non-operating lease billings 

279

307

358

 

586

690

Add: Equipment rentals

1,247

1,204

953

 

2,451

1,840

Total for postpaid phone connections

$           5,564

$           5,488

$           5,443

 

$         11,052

$         10,876

             

Postpaid average phone connections (in thousands)

26,838

26,745

26,312

 

26,792

26,182

Postpaid phone ABPU* (i)

$           69.10

$           68.41

$           68.95

 

$           68.75

$           69.23

 

(a) 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 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)  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.

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

(g)  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.

(h)  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.

(i)  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 

 

9/30/18

6/30/18

9/30/17

 

9/30/18

9/30/17

             

Postpaid activations (in thousands)

3,772

3,473

3,917

 

7,245

7,585

Postpaid activations financed

81%

83%

85%

 

82%

85%

Postpaid activations - operating leases

59%

70%

68%

 

64%

62%

             

Installment plans

           

Installment sales financed

$              255

$             213

$             268

 

$             468

$             821

Installment billings

$              292

$             325

$             373

 

$             617

$             741

Installment receivables, net

$              838

$             983

$           1,583

 

$             838

$           1,583

             

Equipment rentals and depreciation - equipment rentals

           

Equipment rentals   

$           1,253

$           1,212

$             966

 

$           2,465

$           1,865

Depreciation - equipment rentals

$           1,181

$           1,136

$             888

 

$           2,317

$           1,742

             

Leased device additions

           

Cash paid for capital expenditures - leased devices

$           1,707

$           1,817

$           1,706

 

$           3,524

$           3,065

             

Leased devices  

           

Leased devices in property, plant and equipment, net

$           6,184

$           6,213

$           4,709

 

$           6,184

$           4,709

             

Leased device units

           

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

15,392

15,169

13,019

 

15,392

13,019

             

Leased device and receivables financings net proceeds

           

Proceeds

$           1,527

$           1,356

$             789

 

$           2,883

$           1,554

Repayments

(1,200)

(1,070)

(1,148)

 

(2,270)

(1,421)

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

$              327

$             286

$            (359)

 

$             613

$             133

 

 

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)

(Millions, except per share data)

             
 

Quarter To Date

 

Year To Date

 

9/30/18

6/30/18

9/30/17

 

9/30/18

9/30/17

Net operating revenues

           

  Service revenue

$           5,762

$           5,740

$           5,967

 

$         11,502

$         12,038

  Equipment sales

1,418

1,173

994

 

2,591

2,181

  Equipment rentals

1,253

1,212

966

 

2,465

1,865

Total net operating revenues

8,433

8,125

7,927

 

16,558

16,084

Net operating expenses

           

  Cost of services (exclusive of depreciation and amortization below)

1,694

1,677

1,698

 

3,371

3,407

  Cost of equipment sales

1,517

1,270

1,404

 

2,787

2,949

  Cost of equipment rentals (exclusive of depreciation below)

151

124

112

 

275

224

  Selling, general and administrative

1,861

1,867

2,013

 

3,728

3,951

  Depreciation - network and other

1,021

1,023

997

 

2,044

1,974

  Depreciation - equipment rentals

1,181

1,136

888

 

2,317

1,742

  Amortization

159

171

209

 

330

432

  Other, net

71

42

5

 

113

(359)

Total net operating expenses

7,655

7,310

7,326

 

14,965

14,320

Operating income

778

815

601

 

1,593

1,764

  Interest expense

(633)

(637)

(595)

 

(1,270)

(1,208)

  Other income (expense), net

79

42

44

 

121

(8)

Income before income taxes

224

220

50

 

444

548

  Income tax expense

(17)

(47)

(98)

 

(64)

(390)

Net income (loss)

207

173

(48)

 

380

158

  Less: Net (income) loss attributable to noncontrolling interests

(11)

3

-

 

(8)

-

Net income (loss) attributable to Sprint Corporation

$             196

$             176

$              (48)

 

$             372

$             158

             

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

$            0.05

$            0.04

$           (0.01)

 

$            0.09

$            0.04

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

$            0.05

$            0.04

$           (0.01)

 

$            0.09

$            0.04

Basic weighted average common shares outstanding

4,061

4,010

3,998

 

4,036

3,996

Diluted weighted average common shares outstanding

4,124

4,061

3,998

 

4,095

4,080

             

Effective tax rate

7.6%

21.4%

196.0%

 

14.4%

71.2%

             
             

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

(Millions)

 
 

Quarter To Date

 

Year To Date

 

9/30/18

6/30/18

9/30/17

 

9/30/18

9/30/17

             

Net income (loss)

$             207

$             173

$              (48)

 

$             380

$             158

  Income tax expense

17

47

98

 

64

390

Income before income taxes

224

220

50

 

444

548

  Other (income) expense, net

(79)

(42)

(44)

 

(121)

8

  Interest expense

633

637

595

 

1,270

1,208

Operating income

778

815

601

 

1,593

1,764

  Depreciation - network and other

1,021

1,023

997

 

2,044

1,974

  Depreciation - equipment rentals

1,181

1,136

888

 

2,317

1,742

  Amortization

159

171

209

 

330

432

EBITDA*(1)

3,139

3,145

2,695

 

6,284

5,912

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

68

-

-

 

68

(304)

  Severance and exit costs (3)

25

8

-

 

33

-

  Contract terminations (4)

-

34

-

 

34

(5)

  Merger costs (5)

56

93

-

 

149

-

  Litigation and other contingencies(6)

-

-

-

 

-

(55)

  Hurricanes (7)

(32)

-

34

 

(32)

34

Adjusted EBITDA*(1)

$           3,256

$           3,280

$           2,729

 

$           6,536

$           5,582

             

Adjusted EBITDA margin*

56.5%

57.1%

45.7%

 

56.8%

46.4%

             
             

Selected items:

           

  Cash paid for capital expenditures - network and other

$           1,266

$           1,132

$             692

 

$           2,398

$           1,843

  Cash paid for capital expenditures - leased devices

$           1,707

$           1,817

$           1,706

 

$           3,524

$           3,065

 

WIRELESS STATEMENTS OF OPERATIONS (Unaudited)

(Millions)

 
 

Quarter To Date

 

Year To Date

 

9/30/18

6/30/18

9/30/17

 

9/30/18

9/30/17

Net operating revenues

           

Service revenue

           

Postpaid

$           4,255

$           4,188

$           4,363

 

$           8,443

$           8,829

Prepaid

954

982

990

 

1,936

1,989

Wholesale, affiliate and other

289

290

296

 

579

555

Total service revenue

5,498

5,460

5,649

 

10,958

11,373

             

  Equipment sales

1,418

1,173

994

 

2,591

2,181

  Equipment rentals

1,253

1,212

966

 

2,465

1,865

Total net operating revenues

8,169

7,845

7,609

 

16,014

15,419

             

Net operating expenses

           

  Cost of services (exclusive of depreciation and amortization below)

1,466

1,429

1,422

 

2,895

2,834

  Cost of equipment sales

1,517

1,270

1,404

 

2,787

2,949

  Cost of equipment rentals (exclusive of depreciation below)

151

124

112

 

275

224

  Selling, general and administrative

1,749

1,704

1,936

 

3,453

3,811

  Depreciation - network and other

968

972

944

 

1,940

1,869

  Depreciation - equipment rentals

1,181

1,136

888

 

2,317

1,742

  Amortization

159

171

209

 

330

432

  Other, net

58

37

5

 

95

(309)

Total net operating expenses

7,249

6,843

6,920

 

14,092

13,552

Operating income

$             920

$           1,002

$             689

 

$           1,922

$           1,867

             
             
             
             

WIRELESS NON-GAAP RECONCILIATION (Unaudited)

(Millions)

 
 

Quarter To Date

 

Year To Date

 

9/30/18

6/30/18

9/30/17

 

9/30/18

9/30/17

             

Operating income

$             920

$           1,002

$             689

 

$           1,922

$           1,867

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

68

-

-

 

68

(304)

  Severance and exit costs (3)

12

3

-

 

15

(5)

  Contract terminations (4)

-

34

-

 

34

(5)

  Hurricanes (7)

(32)

-

34

 

(32)

34

  Depreciation - network and other

968

972

944

 

1,940

1,869

  Depreciation - equipment rentals

1,181

1,136

888

 

2,317

1,742

  Amortization

159

171

209

 

330

432

Adjusted EBITDA*(1)

$           3,276

$           3,318

$           2,764

 

$           6,594

$           5,630

             

Adjusted EBITDA margin*

59.6%

60.8%

48.9%

 

60.2%

49.5%

             
             

Selected items:

           

  Cash paid for capital expenditures - network and other

$           1,101

$           1,019

$             549

 

$           2,120

$           1,514

  Cash paid for capital expenditures - leased devices

$           1,707

$           1,817

$           1,706

 

$           3,524

$           3,065

 

WIRELINE STATEMENTS OF OPERATIONS (Unaudited)

(Millions)

 
 

Quarter To Date

 

Year To Date

 

9/30/18

6/30/18

9/30/17

 

9/30/18

9/30/17

             

Net operating revenues

$             328

$             338

$             409

 

$             666

$             842

             

Net operating expenses

           

  Cost of services (exclusive of depreciation and amortization below)

295

311

372

 

606

759

  Selling, general and administrative

53

69

66

 

122

123

  Depreciation and amortization

51

49

49

 

100

100

  Other, net

13

5

-

 

18

5

Total net operating expenses

412

434

487

 

846

987

Operating loss

$              (84)

$              (96)

$              (78)

 

$            (180)

$            (145)

             
             

WIRELINE NON-GAAP RECONCILIATION (Unaudited)

(Millions)

 
 

Quarter To Date

 

Year To Date

 

9/30/18

6/30/18

9/30/17

 

9/30/18

9/30/17

             

Operating loss

$              (84)

$              (96)

$              (78)

 

$            (180)

$            (145)

  Severance and exit costs (3)

13

5

-

 

18

5

  Depreciation and amortization

51

49

49

 

100

100

Adjusted EBITDA*

$              (20)

$              (42)

$              (29)

 

$              (62)

$              (40)

             

Adjusted EBITDA margin*

-6.1%

-12.4%

-7.1%

 

-9.3%

-4.8%

             
             

Selected items:

           

  Cash paid for capital expenditures - network and other

$               55

$               51

$               40

 

$             106

$             102

 

CONDENSED CONSOLIDATED CASH FLOW INFORMATION (Unaudited)

(Millions)

 
     

Year To Date

         

9/30/18

9/30/17

Operating activities

           

  Net income

       

$             380

$             158

  Depreciation and amortization

       

4,691

4,148

  Provision for losses on accounts receivable

       

166

199

  Share-based and long-term incentive compensation expense 

       

68

87

  Deferred income tax expense

       

39

364

  Gains from asset dispositions and exchanges

       

-

(479)

  Loss on early extinguishment of debt

       

-

65

  Amortization of long-term debt premiums, net

       

(67)

(90)

  Loss on disposal of property, plant and equipment

       

343

410

  Deferred purchase price from sale of receivables

       

(223)

(640)

  Other changes in assets and liabilities:

           

    Accounts and notes receivable

       

85

(179)

    Inventories and other current assets 

       

168

541

    Accounts payable and other current liabilities 

       

(95)

(161)

    Non-current assets and liabilities, net 

       

(384)

183

  Other, net 

       

186

120

Net cash provided by operating activities

       

5,357

4,726

             

Investing activities

           

  Capital expenditures - network and other

       

(2,398)

(1,843)

  Capital expenditures - leased devices

       

(3,524)

(3,065)

  Expenditures relating to FCC licenses

       

(70)

(19)

  Change in short-term investments, net

       

(832)

3,834

  Proceeds from sales of assets and FCC licenses

       

272

218

  Proceeds from deferred purchase price from sale of receivables

       

223

640

  Other, net

       

42

(2)

Net cash used in investing activities 

       

(6,287)

(237)

             

Financing activities

           

  Proceeds from debt and financings

       

2,944

1,860

  Repayments of debt, financing and capital lease obligations

       

(2,928)

(4,261)

  Debt financing costs

       

(248)

(9)

  Call premiums paid on debt redemptions

       

-

(129)

  Proceeds from issuance of common stock, net

       

276

1

  Other, net

       

-

(22)

Net cash provided by (used in) financing activities 

       

44

(2,560)

             

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

       

(886)

1,929

             

Cash, cash equivalents and restricted cash, beginning of period

       

6,659

2,942

Cash, cash equivalents and restricted cash, end of period

       

$           5,773

$           4,871

             
             

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

(Millions)

 
 

Quarter To Date

 

Year To Date

 

9/30/18

6/30/18

9/30/17

 

9/30/18

9/30/17

             

Net cash provided by operating activities

$           2,927

$           2,430

$           2,802

 

$           5,357

$           4,726

             

  Capital expenditures - network and other

(1,266)

(1,132)

(692)

 

(2,398)

(1,843)

  Capital expenditures - leased devices

(1,707)

(1,817)

(1,706)

 

(3,524)

(3,065)

  Expenditures relating to FCC licenses, net

(11)

(59)

(6)

 

(70)

(19)

  Proceeds from sales of assets and FCC licenses

139

133

117

 

272

218

  Proceeds from deferred purchase price from sale of receivables

53

170

265

 

223

640

  Other investing activities, net

63

(3)

(1)

 

60

(2)

Free cash flow*

$             198

$            (278)

$             779

 

$              (80)

$             655

             

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

327

286

(359)

 

613

133

Adjusted free cash flow*

$             525

$                 8

$             420

 

$             533

$             788

 

CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)

(Millions)

 
 

9/30/18

3/31/18

ASSETS

   

Current assets

   

Cash and cash equivalents

$           5,726

$           6,610

Short-term investments

3,186

2,354

Accounts and notes receivable, net

3,555

3,711

Device and accessory inventory

859

1,003

Prepaid expenses and other current assets

1,121

575

Total current assets

14,447

14,253

     

Property, plant and equipment, net

20,816

19,925

Costs to acquire a customer contract

1,379

-

Goodwill

6,598

6,586

FCC licenses and other

41,373

41,309

Definite-lived intangible assets, net

2,075

2,465

Other assets

1,163

921

Total assets

$         87,851

$         85,459

     

LIABILITIES AND EQUITY

   

Current liabilities

   

Accounts payable

$           4,210

$           3,409

Accrued expenses and other current liabilities

3,370

3,962

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

5,346

3,429

Total current liabilities

12,926

10,800

     

Long-term debt, financing and capital lease obligations

35,329

37,463

Deferred tax liabilities

7,704

7,294

Other liabilities

3,428

3,483

Total liabilities 

59,387

59,040

     

Stockholders’ equity

   

Common stock

41

40

Treasury shares, at cost

(15)

-

Paid-in capital

28,251

27,884

Retained earnings (accumulated deficit)

432

(1,255)

Accumulated other comprehensive loss

(308)

(313)

Total stockholders’ equity

28,401

26,356

Noncontrolling interests

63

63

Total equity

28,464

26,419

Total liabilities and equity

$         87,851

$         85,459

     
     

NET DEBT* (NON-GAAP) (Unaudited)

(Millions)

 
 

9/30/18

3/31/18

Total debt

$         40,675

$         40,892

Less: Cash and cash equivalents

(5,726)

(6,610)

Less: Short-term investments

(3,186)

(2,354)

Net debt*

$         31,763

$         31,928

 

SCHEDULE OF DEBT (Unaudited)

(Millions)

 
   

9/30/18

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

2,625

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

 

6,563

     

Sprint Communications, Inc.

   

Export Development Canada secured loan

12/17/2019

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

181

Secured equipment credit facilities

2021 - 2022

461

Secured term loan

02/03/2024

3,940

  Credit facilities

 

4,582

     

Accounts receivable facility

2020

3,024

     

Financing obligations

2021

129

     

Capital leases and other obligations

2019 - 2026

478

Total principal

 

41,013

     

Net premiums and debt financing costs

 

(338)

Total debt

 

$            40,675

 

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 September 30, 2018

 

Six Months Ended September 30, 2018

 

As reported

Balances
without adoption
of Topic 606

Change

 

As reported

Balances
without adoption
of Topic 606

Change

Net operating revenues

             

  Service revenue

$         5,762

$            5,935

$           (173)

 

$       11,502

$          11,818

$           (316)

  Equipment sales

1,418

1,067

351

 

2,591

1,959

632

  Equipment rentals

1,253

1,270

(17)

 

2,465

2,498

(33)

Total net operating revenues

8,433

8,272

161

 

16,558

16,275

283

Net operating expenses

             

  Cost of services (exclusive of depreciation and amortization below)

1,694

1,714

(20)

 

3,371

3,402

(31)

  Cost of equipment sales

1,517

1,468

49

 

2,787

2,716

71

  Cost of equipment rentals (exclusive of depreciation below)

151

151

-

 

275

275

-

  Selling, general and administrative

1,861

1,954

(93)

 

3,728

3,902

(174)

  Depreciation - network and other

1,021

1,021

-

 

2,044

2,044

-

  Depreciation - equipment rentals

1,181

1,181

-

 

2,317

2,317

-

  Amortization

159

159

-

 

330

330

-

  Other, net

71

71

-

 

113

113

-

Total net operating expenses

7,655

7,719

(64)

 

14,965

15,099

(134)

Operating income

778

553

225

 

1,593

1,176

417

Total other expense

(554)

(554)

-

 

(1,149)

(1,149)

-

Income (loss) before income taxes

224

(1)

225

 

444

27

417

Income tax (expense) benefit

(17)

30

(47)

 

(64)

23

(87)

Net income

207

29

178

 

380

50

330

  Less: Net income attributable to noncontrolling interests

(11)

(11)

-

 

(8)

(8)

-

Net income attributable to Sprint Corporation

$            196

$                 18

$            178

 

$            372

$                 42

$            330

               

Basic net income per common share attributable to Sprint Corporation

$           0.05

$                    -

$           0.05

 

$           0.09

$              0.01

$           0.08

Diluted net income per common share attributable to Sprint Corporation

$           0.05

$                    -

$           0.05

 

$           0.09

$              0.01

$           0.08

Basic weighted average common shares outstanding

4,061

4,061

-

 

4,036

4,036

-

Diluted weighted average common shares outstanding

4,124

4,124

-

 

4,095

4,095

-

 

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

(Millions)

 

September 30, 2018

 

As reported

Balances
without adoption
of Topic 606

Change

ASSETS

     

Current assets

     

Accounts and notes receivable, net

$           3,555

$            3,470

$               85

Device and accessory inventory

859

881

(22)

Prepaid expenses and other current assets

1,121

691

430

Costs to acquire a customer contract

1,379

-

1,379

Other assets

1,163

1,004

159

       

LIABILITIES AND STOCKHOLDERS’ EQUITY

     

Current liabilities

     

Accrued expenses and other current liabilities

$           3,370

$            3,397

$              (27)

Deferred tax liabilities

7,704

7,251

453

Other liabilities

3,428

3,460

(32)

       

Stockholders’ equity

     

Retained earnings (accumulated deficit)

432

(1,205)

1,637

 

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 and six month periods ended September 30, 2018, we leased devices through our Sprint direct channels totaling approximately $1,094 million and $2,257, 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.

   

(2)

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

   

(3)

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

   

(6)

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.

   

(7)

During the second quarter of fiscal year 2018 we recognized hurricane-related reimbursements of $32 million. 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.

   

*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 54.5 million connections as of Sept. 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.

 

 

SOURCE Sprint