EX-99.1 2 sprintq2fy18earningsrelease.htm PRESS RELEASE ANNOUNCING SECOND FISCAL QUARTER OF 2018 Exhibit
News Release
 
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SPRINT REPORTS YEAR-OVER-YEAR GROWTH IN WIRELESS SERVICE REVENUE WITH FISCAL YEAR 2018 SECOND QUARTER RESULTS

•
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

OVERLAND PARK, Kan. - Oct 31, 2018 - 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.






 
 
 


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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.
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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.










______________________________
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.



 
 
 


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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
Contact Information
•
Media contact: Dave Tovar, David.Tovar@sprint.com
•
Investor contact: Jud Henry, Investor.Relations@sprint.com




 
 
 


News Release
 
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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.


 
 
 
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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



 
 
 
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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


 
 
 
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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


 
 
 
News Release
 
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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


 
 
 
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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




 
 
 
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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




 
 
 
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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


 
 
 
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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

—



 
 
 
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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



 
 
 
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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.

 
 
 
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*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.




 
 
 


News Release
 
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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.



















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