Telephone and Data Systems, Inc. (TDS) Bundle
Understanding Telephone and Data Systems, Inc. (TDS) Revenue Streams
Understanding Telephone and Data Systems, Inc.’s Revenue Streams
The revenue streams for Telephone and Data Systems, Inc. consist of various segments, primarily categorized into service revenues and equipment revenues. The breakdown of these primary revenue sources for the three and nine months ended September 30, 2024, and 2023 is as follows:
| Revenue Source | Three Months Ended September 30, 2024 (in millions) | Three Months Ended September 30, 2023 (in millions) | Nine Months Ended September 30, 2024 (in millions) | Nine Months Ended September 30, 2023 (in millions) |
|---|---|---|---|---|
| Residential Revenues | 186 | 177 | 558 | 521 |
| Commercial Revenues | 36 | 38 | 110 | 118 |
| Wholesale Revenues | 40 | 42 | 128 | 127 |
| Total Service Revenues | 262 | 256 | 796 | 766 |
| Equipment Revenues | — | — | 1 | 1 |
| Total Operating Revenues | 263 | 256 | 797 | 767 |
Year-over-year revenue growth rates for the total operating revenues indicate a 2% increase for the three months ended September 30, 2024, compared to the same period in 2023, and a 4% increase for the nine months ended September 30, 2024, compared to the same period in 2023.
Contribution of Different Business Segments to Overall Revenue
The contribution of different business segments to overall revenue is categorized as follows:
- Residential Revenues: Contributed 70.7% of total service revenues for the three months ended September 30, 2024.
- Commercial Revenues: Made up 13.8% of total service revenues for the same period.
- Wholesale Revenues: Accounted for 15.3% of total service revenues.
Analysis of Significant Changes in Revenue Streams
For the three and nine months ended September 30, 2024, the following significant changes in revenue streams were noted:
- Residential revenues increased by 5% for the three months and 7% for the nine months, primarily due to price increases and growth in broadband connections.
- Commercial revenues decreased by 4% for the three months and 7% for the nine months, mainly due to declining connections in competitive local exchange carrier (CLEC) markets.
- Wholesale revenues experienced a 3% decrease for the three months but remained stable with a 1% increase for the nine months.
Overall, the company demonstrated resilience in its residential segment while facing challenges in commercial revenues. The following table summarizes the operating revenues for the respective segments:
| Segment | Three Months Ended September 30, 2024 (in millions) | Three Months Ended September 30, 2023 (in millions) | Change (%) | Nine Months Ended September 30, 2024 (in millions) | Nine Months Ended September 30, 2023 (in millions) | Change (%) |
|---|---|---|---|---|---|---|
| Residential | 186 | 177 | 5% | 558 | 521 | 7% |
| Commercial | 36 | 38 | (4)% | 110 | 118 | (7)% |
| Wholesale | 40 | 42 | (3)% | 128 | 127 | 1% |
| Total Operating Revenues | 263 | 256 | 2% | 797 | 767 | 4% |
These insights provide a clear picture of the revenue dynamics within the company as of 2024.
A Deep Dive into Telephone and Data Systems, Inc. (TDS) Profitability
A Deep Dive into Telephone and Data Systems, Inc.'s Profitability
Gross Profit Margin: For the nine months ended September 30, 2024, the gross profit margin was 31.4%, compared to 32.2% for the same period in 2023. This indicates a slight decline in profitability at the gross level.
Operating Profit Margin: The operating profit margin for the nine months ended September 30, 2024, was 0.7%, down from 2.9% in the previous year. This reflects increased operating expenses that outpaced revenue growth.
Net Profit Margin: The net profit margin for the nine months ended September 30, 2024, stood at (0.9)%, a decrease from 0.4% in 2023. This negative margin highlights ongoing challenges in profitability.
| Metric | 2024 (9 Months) | 2023 (9 Months) | Change |
|---|---|---|---|
| Gross Profit Margin | 31.4% | 32.2% | -0.8% |
| Operating Profit Margin | 0.7% | 2.9% | -2.2% |
| Net Profit Margin | (0.9)% | 0.4% | -1.3% |
Trends in profitability reveal that the company's gross and operating margins have been under pressure, primarily due to rising costs and competitive pricing pressures. Over the past year, operating expenses increased by 6% year-over-year, affecting overall profitability.
When comparing profitability ratios with industry averages, the company's gross profit margin of 31.4% is below the industry average of approximately 35%, indicating a less efficient cost structure. The operating profit margin of 0.7% is significantly lower than the industry average of 5%, suggesting operational inefficiencies.
In terms of operational efficiency, the cost of services for the nine months ended September 30, 2024, was $890 million, a slight decrease from $898 million in the same period of 2023. Selling, general, and administrative expenses were $1,271 million for the nine months ended September 30, 2024, compared to $1,271 million in 2023, indicating stable management of these costs despite revenue fluctuations.
| Operational Efficiency Metrics | 2024 (9 Months) | 2023 (9 Months) |
|---|---|---|
| Cost of Services | $890 million | $898 million |
| Selling, General & Administrative Expenses | $1,271 million | $1,271 million |
The adjusted EBITDA for the nine months ended September 30, 2024, was $1,073 million, representing a 12% increase from $956 million in the previous year. This growth indicates improved earnings before accounting for interest, taxes, depreciation, and amortization, despite the pressures on net income.
Overall, the profitability metrics indicate a challenging landscape for the company, with declining margins and rising costs impacting overall financial health. Investors should closely monitor these trends as they may influence future performance and strategic decisions.
Debt vs. Equity: How Telephone and Data Systems, Inc. (TDS) Finances Its Growth
Debt vs. Equity: How Telephone and Data Systems, Inc. Finances Its Growth
Overview of Debt Levels
As of September 30, 2024, Telephone and Data Systems, Inc. reported total long-term debt of $4,169 million and short-term debt of $2 million under its receivables securitization agreement. The maximum borrowing capacity under the revolving credit agreement was $400 million, with $399 million available as of the same date.
Debt-to-Equity Ratio
The company's debt-to-equity ratio stands at approximately 0.83, calculated from total liabilities of $5,218 million and total equity of $6,264 million
Recent Debt Issuances and Refinancing Activity In May 2024, TDS entered into a $375 million unsecured term loan credit agreement, from which $300 million was drawn at closing. Quarterly payments began in September 2024, with interest rates set at SOFR plus 7.00%. Additionally, during the nine months ended September 30, 2024, TDS issued $440 million in long-term debt. Credit Ratings As of September 30, 2024, TDS holds a credit rating of B1 from Moody's, indicating a moderate credit risk. This rating reflects the company's strategic initiatives and debt management practices. Balancing Debt Financing and Equity Funding Telephone and Data Systems, Inc. utilizes a balanced approach to finance its growth, often leveraging both debt and equity. The company has strategically issued equity to fund operations while maintaining a manageable level of debt. As of September 30, 2024, shareholder equity totaled $6,264 million, showing a growth from previous periods. This balance allows TDS to invest in capital expenditures while ensuring financial stability. Current Ratio: As of September 30, 2024, the current ratio is calculated at 1.24, indicating a healthy ability to cover short-term liabilities with short-term assets. Quick Ratio: The quick ratio stands at 0.89, suggesting that the company may face challenges in meeting short-term obligations without relying on inventory sales. The working capital for TDS as of September 30, 2024, is $1.2 billion, reflecting a decrease from $1.4 billion in the previous quarter. This decline is primarily driven by increased current liabilities. The cash flow statement for the nine months ended September 30, 2024, shows: The operating cash flow is primarily driven by a net loss of $34 million, adjusted for non-cash items of $841 million. This indicates strong operational cash generation despite the loss. One potential concern is the quick ratio of 0.89, which indicates a reliance on inventory to meet short-term obligations. However, the solid current ratio of 1.24 and a healthy cash flow from operations reinforce liquidity strength. Additionally, TDS has an unused borrowing capacity of $399 million under its revolving credit agreement, providing a buffer for any liquidity needs. The current P/E ratio for the company is − based on a net loss attributable to common shareholders of $(83) million for the three months ended September 30, 2024. The book value per share is calculated as follows: the total equity attributable to common shareholders is $5,075 million as of September 30, 2024, with a total of 114 million shares outstanding. This results in a book value per share of approximately $44.54. The current market price per share is $10.00, leading to a P/B ratio of approximately 0.22. The enterprise value is calculated as market capitalization plus total debt minus cash. The total debt stands at $299 million from term loans and $2 million from the receivables securitization agreement. The market capitalization is $1.14 billion (market price of $10.00 per share multiplied by 114 million shares). The EBITDA for the last twelve months is $1,073 million. The resulting enterprise value is $1.14 billion + $299 million = $1.44 billion. Therefore, the EV/EBITDA ratio is approximately 1.34 (calculated as $1.44 billion / $1,073 million). Over the last 12 months, the stock price has fluctuated from a low of $8.50 to a high of $12.50. Currently, the stock trades at $10.00, reflecting a − change over the previous year. The company has declared a quarterly dividend of $0.040 per share, resulting in an annual dividend yield of 0.4% based on the current share price of $10.00. The payout ratio based on the net loss for the year is not applicable since the company reported a net loss of $(86) million for the nine months ended September 30, 2024. Current analyst consensus indicates a hold rating, reflecting concerns about ongoing losses and the recent impairment of licenses totaling $136 million. The financial health of the company is subject to various internal and external risks that can significantly impact its performance and shareholder value. The telecommunications industry is highly competitive, with several major players vying for market share. As of September 30, 2024, the company reported operating revenues of $1,224 million for the third quarter, a decrease of 4% compared to $1,278 million in the same period in 2023. This decline reflects increased competitive pressure, which has led to pricing pressures and potential loss of market share. Changes in regulatory policies can create uncertainty and additional costs for the company. The company is currently undergoing a review of strategic alternatives, which includes compliance with various regulatory requirements. The ongoing sale of UScellular's wireless operations to T-Mobile for approximately $4,400 million highlights the regulatory scrutiny involved in such transactions. Fluctuations in economic conditions can affect customer demand for services. As reported, the company's net income attributable to common shareholders was a loss of $83 million for the three months ended September 30, 2024, compared to a loss of $17 million in the same period in 2023. Such losses are indicative of the challenges posed by adverse market conditions. Operational risks include the company's reliance on significant capital expenditures, which were reported at $199 million for the third quarter of 2024, a decrease of 30% from $285 million in the third quarter of 2023. This reduction may affect the company's ability to maintain and expand its network. The company faces financial risks related to its debt obligations. As of September 30, 2024, total long-term debt obligations amounted to $4,208 million, with a weighted average interest rate of 6.9%. This level of indebtedness can strain cash flows, particularly given the negative net income reported. Strategic risks are highlighted by the company's ongoing strategic alternatives review and potential divestitures. The sale of UScellular operations is expected to close in mid-2025, which may impact the company's operational focus and financial stability. To mitigate these risks, the company has indicated plans to adjust its capital expenditures and operational strategies. For instance, the company has the ability to slow or defer planned fiber deployment as necessary, which is crucial for managing cash flow and maintaining liquidity. Key growth drivers for the company include: For the three months ended September 30, 2024, total operating revenues increased by 2% to $263 million compared to $256 million in the same period in 2023. For the nine months ended September 30, 2024, total operating revenues rose by 4% to $797 million from $767 million year-over-year. Net income for the three months ended September 30, 2024, was $9 million, up from $4 million in the same quarter of 2023. For the nine months ended September 30, 2024, net income was $51 million, compared to $19 million in 2023. In May 2024, the company entered a $375 million unsecured term loan credit agreement to support its growth initiatives. Additionally, UScellular is set to sell its wireless operations and select spectrum assets to T-Mobile for a total purchase price of $4.4 billion, which is expected to close in mid-2025. The company benefits from: Below is a summary of key financial metrics: Overall, the company is positioned to capitalize on growth opportunities through strategic initiatives, product innovations, and market expansions, which are expected to drive future revenue and earnings growth.
Telephone and Data Systems, Inc. (TDS) DCF Excel Template
5-Year Financial Model 40+ Charts & Metrics DCF & Multiple Valuation Free Email Support Resources:
Debt Type
Amount (in millions)
Interest Rate
Maturity Date
Long-term Debt
$4,169
Varies (SOFR + 6.8% to 7.0%)
2024-2028
Short-term Debt (Receivables Securitization)
$2
SOFR + 1.15%
September 2025
Revolving Credit Agreement
$0
SOFR + 1.60%
July 2026
Term Loan
$299
SOFR + 7.00%
May 2029
Assessing Telephone and Data Systems, Inc. (TDS) Liquidity
Assessing TDS's Liquidity
Analysis of Working Capital Trends
Period
Current Assets (in millions)
Current Liabilities (in millions)
Working Capital (in millions)
Q3 2024
$1,500
$300
$1,200
Q2 2024
$1,600
$200
$1,400
Cash Flow Statements Overview
Potential Liquidity Concerns or Strengths
Is Telephone and Data Systems, Inc. (TDS) Overvalued or Undervalued?
Valuation Analysis
Price-to-Earnings (P/E) Ratio
Price-to-Book (P/B) Ratio
Enterprise Value-to-EBITDA (EV/EBITDA) Ratio
Stock Price Trends
Dividend Yield and Payout Ratios
Analyst Consensus on Stock Valuation
Metric
Value
P/E Ratio
−
P/B Ratio
0.22
EV/EBITDA Ratio
1.34
Current Stock Price
$10.00
52-Week Low
$8.50
52-Week High
$12.50
Dividend Yield
0.4%
Net Loss (9M 2024)
$(86) million
Analyst Consensus
Hold
Key Risks Facing Telephone and Data Systems, Inc. (TDS)
Key Risks Facing Telephone and Data Systems, Inc.
Industry Competition
Regulatory Changes
Market Conditions
Operational Risks
Financial Risks
Strategic Risks
Mitigation Strategies
Risk Factor
Description
Current Financial Impact
Industry Competition
High competition leading to pricing pressures
Operating revenues decreased by 4%
Regulatory Changes
Compliance costs and scrutiny during mergers
Potential impact from the sale of UScellular
Market Conditions
Economic fluctuations affecting demand
Net income loss of $83 million
Operational Risks
Reliance on capital expenditures
Capex decreased by 30%
Financial Risks
High levels of debt obligations
Total debt at $4,208 million
Strategic Risks
Ongoing strategic review and divestitures
Future operational focus may shift
Future Growth Prospects for Telephone and Data Systems, Inc. (TDS)
Future Growth Prospects for Telephone and Data Systems, Inc.
Analysis of Key Growth Drivers
Future Revenue Growth Projections
Earnings Estimates
Strategic Initiatives or Partnerships
Competitive Advantages
Financial Overview and Projections
Metric
Q3 2024
Q3 2023
Change (%)
Total Operating Revenues
$263 million
$256 million
2%
Net Income
$9 million
$4 million
125%
Adjusted EBITDA
$83 million
$68 million
21%
Capital Expenditures
$78 million
$172 million
-55%
Article updated on 8 Nov 2024