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Press Release -- November 5th, 2019
Source: Sprint Nextel
Tags:

Sprint Reports Fiscal Year 2019 Second Quarter Results

  • Wireless service revenue of $5.0 billion
    • Postpaid wireless service revenue of $4.2 billion was stable sequentially and year-over-year
    • Postpaid average revenue per account (ARPA) of $124.81 and postpaid phone average revenue per user (ARPU) of $50.10 were stable sequentially and year-over-year
  • Net loss of $274 million, operating income of $237 million, and adjusted EBITDA* of $2.6 billion
  • Postpaid net additions of 273,000
    • Data device net additions of 364,000 were partially offset by phone net losses of 91,000
    • Average postpaid accounts were stable sequentially and year-over-year for the second consecutive quarter
  • Continued execution of Next-Gen Network plan including True Mobile 5G available in parts of nine major metro areas covering 16 million people
  • Further progress on digitalization initiatives with postpaid gross additions in digital channels increasing more than 40 percent year-over-year

OVERLAND PARK, Kan., Nov. 4, 2019 /PRNewswire/ — Sprint Corporation (NYSE:S, news, filings) today reported results for the fiscal year 2019 second quarter, including stability in postpaid wireless service revenue and continued growth in postpaid net additions. The company also reported a net loss of $274 million, operating income of $237 million, and adjusted EBITDA* of $2.6 billion.

“I am proud of the resiliency of the Sprint team as they work to deliver results in a challenging environment,” said Sprint CEO Michel Combes. “However, I remain convinced that merging with T-Mobile and building one of the world’s most advanced 5G networks is the best outcome for all consumers, employees, and shareholders.”

Stable Postpaid Wireless Service Revenue and Continued Focus on Costs
Sprint has focused on growing its relationship with customers by promoting its feature-rich Unlimited Plus and Unlimited Premium rate plans and selling additional devices and value-added services. This strategy delivered postpaid net additions of 273,000 driven by growth in data devices and partially offset by postpaid phone customer losses. Postpaid wireless service revenue of $4.2 billion was relatively flat sequentially and year-over-year, as the company works to stabilize postpaid ARPA and average postpaid accounts.

Total wireless service revenue of $5.0 billion was negatively impacted by lower Lifeline revenue as a result of estimated reimbursements to federal and state governments for subsidies claimed contrary to Sprint’s usage policy and the continued amortization of prepaid contract balances as a result of adopting the new revenue standard last year. Excluding these impacts, total wireless service revenue was relatively stable sequentially and year-over-year.

Net loss of $274 million, operating income of $237 million, and adjusted EBITDA* of $2.6 billion were also negatively impacted by the aforementioned estimated reimbursements to federal and state governments.

The company continued its focus on cost optimization during the quarter by driving year-over-year gross reductions in cost of services and selling, general and administrative expenses, with most of the reductions coming from network optimization and more efficient sales and marketing spend. These reductions have been offset by incremental costs associated with network coverage and capacity improvements, along with other customer experience initiatives.

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

Sprint Completes Initial Launch of True Mobile 5G Network
Sprint made continued progress on executing its Next-Gen Network plan.

  • Sprint has 2.5 GHz spectrum deployed on approximately 85 percent of its macro sites.
  • Sprint has approximately 35,000 outdoor small cells deployed including both mini macros and strand mounts.
  • Sprint has continued the rollout of Massive MIMO, a breakthrough technology that improves network capacity, enhances LTE performance, and allows for simultaneous use of spectrum for LTE and 5G. The company has thousands of Massive MIMO sites on-air across the country.

Sprint completed the initial launch of its True Mobile 5G network and recently announced that the service now covers approximately 16 million people within nine metropolitan areas – Atlanta, Chicago, Dallas-Fort Worth, Houston, Kansas City, Los Angeles, New York City, Phoenix and Washington, D.C. In these areas, customers with 5G devices are experiencing dramatically faster speeds, with initial 5G performance results showing a nearly 6X increase in average download speed compared to Sprint LTE.[1] The company is offering 5G capable smartphones from LG, Samsung, and OnePlus, along with a hotspot device from HTC.

Sprint continues to advocate for its merger with T-Mobile to deploy a ubiquitous, nationwide 5G network that includes coverage in rural locations. Sprint’s existing 5G deployment shows the potential of 5G, and the combined company is expected to have the resources and technology to bring that potential to reality by building a 5G network that fuels innovation across every industry, dramatically increasing competition, unleashing new economic growth, and creating thousands of jobs and billions of dollars in U.S. economic value. Together, the combined company is expected to lead the world in next-generation technology services and applications, bringing 5G service to nearly all Americans.

Creating a Digital Disruptor
Sprint continued to enhance its digital capabilities and transform the way it engages with customers.

  • Postpaid gross additions in digital channels increased more than 40 percent year-over-year.
  • Approximately one of every five postpaid upgrades occurred in digital channels.
  • More than 30 percent of all Sprint customer care web chats are performed by virtual agents using artificial intelligence.
  • The company continued to launch voice-to-digital tools that allow customers calling with specific issues to use a digital self-service option.
  • Web conversions improved and year-to-date orders from digital media more than doubled compared to the same time period last year.

____________________________________
1 Based on analysis by Ookla® of Speedtest Intelligence® data average download speeds for Q3 2019 of 4G LTE and 5G Beta NR results. Ookla® trademarks used under license and reprinted with permission.

Wireless Operating Statistics (Unaudited)

 Quarter To Date 

 Year To Date 

9/30/19

6/30/19

9/30/18

9/30/19

9/30/18

Net additions (losses) (in thousands)

Postpaid(a)

273

134

109

407

232

Postpaid phone

(91)

(128)

(34)

(219)

53

Prepaid(a)

(207)

(169)

(14)

(376)

(11)

Wholesale and affiliate

(462)

(140)

(115)

(602)

(184)

Total wireless net (losses) additions

(396)

(175)

(20)

(571)

37

End of period connections (in thousands)

Postpaid(a) (b)(c)(d)

33,348

33,075

32,296

33,348

32,296

Postpaid phone(b) (c)

26,379

26,470

26,813

26,379

26,813

Prepaid(a) (b) (c)

8,440

8,647

9,019

8,440

9,019

Wholesale and affiliate (c) (d) (e)

12,128

12,590

13,232

12,128

13,232

Total end of period connections

53,916

54,312

54,547

53,916

54,547

Churn

Postpaid

1.87%

1.74%

1.78%

1.81%

1.71%

Postpaid phone

1.91%

1.78%

1.73%

1.84%

1.64%

Prepaid

4.94%

4.23%

4.74%

4.58%

4.45%

Supplemental data – connected devices

End of period connections (in thousands)

Retail postpaid

3,718

3,453

2,585

3,718

2,585

Wholesale and affiliate

9,585

9,968

10,838

9,585

10,838

Total

13,303

13,421

13,423

13,303

13,423

ARPU(f)

Postpaid

$           42.30

$           42.57

$           43.99

$           42.43

$           43.77

Postpaid phone

$           50.10

$           49.87

$           50.16

$           49.98

$           49.86

Prepaid

$           30.97

$           32.15

$           35.40

$           31.57

$           35.83

ARPA(g)

Average postpaid accounts (in thousands)

11,265

11,208

11,207

11,236

11,192

Postpaid ARPA

$         124.81

$         124.89

$         126.55

$         124.85

$         125.74

(a)During the three-month periods ended September 30, 2019 and June 30, 2019, net subscriber additions under the non-Sprint branded postpaid plan offering were 107,000 and 116,000, respectively, and are included in total retail postpaid subscribers above. During the three-month periods ended September 30, 2019 and June 30, 2019, end of period subscribers under the non-Sprint branded postpaid plan offering were 777,000 and 670,000, respectively, and are included in total retail postpaid subscribers above.

(b)During the three-month period ended June 30, 2018, we ceased selling devices in our installment billing program under one of our brands and as a result, 45,000 subscribers were migrated back to prepaid from postpaid.

(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.

(d)  During the three-month period ended June 30, 2019,  one of our postpaid customers purchased a wholesale MVNO and as a result, 167,000 subscribers were transferred from the wholesale to postpaid subscriber base.

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

(f)  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.

(g)  ARPA is calculated by dividing postpaid service revenue by the sum of the monthly average number of retail postpaid accounts.

Wireless Device Financing Summary (Unaudited)

(Millions, except sales, connections, and leased devices in property, plant and equipment)

 Quarter To Date 

 Year To Date 

9/30/19

6/30/19

9/30/18

9/30/19

9/30/18

Postpaid activations (in thousands)

3,983

3,475

3,772

7,458

7,245

Postpaid activations financed

78%

79%

81%

79%

82%

Postpaid activations – operating leases

59%

59%

59%

59%

64%

Installment plans

Installment sales financed

$             433

$              417

$             255

$              850

$              468

Installment billings

$             214

$              209

$             292

$              423

$              617

Installment receivables, net

$          1,110

$           1,024

$             838

$           1,110

$              838

Equipment rentals and depreciation – equipment rentals

Equipment rentals   

$           1,330

$           1,359

$           1,253

$           2,689

$           2,465

Depreciation – equipment rentals

$           1,056

$           1,029

$           1,181

$           2,085

$           2,317

Leased device additions

Cash paid for capital expenditures – leased devices

$           1,786

$           1,516

$           1,707

$           3,302

$           3,524

Leased devices  

Leased devices in property, plant and equipment, net

$           6,378

$           6,424

$           6,184

$           6,378

$           6,184

Leased device units

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

15,566

15,762

15,392

15,566

15,392

Leased device and receivables financings net proceeds

Proceeds

$          2,080

$           1,120

$           1,527

$           3,200

$           2,883

Repayments

(2,210)

(890)

(1,200)

(3,100)

(2,270)

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

$            (130)

$              230

$              327

$              100

$              613

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)

(Millions, except per share data)

Quarter To Date

Year To Date

9/30/19

6/30/19

9/30/18

9/30/19

9/30/18

Net operating revenues

Service revenue

$           5,273

$           5,563

$           5,762

$         10,836

$         11,502

Equipment sales

1,192

1,220

1,418

2,412

2,591

Equipment rentals

1,330

1,359

1,253

2,689

2,465

Total net operating revenues

7,795

8,142

8,433

15,937

16,558

Net operating expenses

Cost of services (exclusive of depreciation and amortization below)

1,775

1,710

1,694

3,485

3,371

Cost of equipment sales

1,359

1,341

1,517

2,700

2,787

Cost of equipment rentals (exclusive of depreciation below)

240

225

151

465

275

Selling, general and administrative

1,936

1,907

1,861

3,843

3,728

Depreciation – network and other

1,065

1,120

1,021

2,185

2,044

Depreciation – equipment rentals

1,056

1,029

1,181

2,085

2,317

Amortization

106

118

159

224

330

Other, net

21

237

71

258

113

Total net operating expenses

7,558

7,687

7,655

15,245

14,965

Operating income

237

455

778

692

1,593

Interest expense

(594)

(619)

(633)

(1,213)

(1,270)

Other income, net

14

28

79

42

121

(Loss) income before income taxes

(343)

(136)

224

(479)

444

Income tax benefit (expense)

64

22

(17)

86

(64)

Net (loss) income

(279)

(114)

207

(393)

380

Less: Net loss (income) attributable to noncontrolling interests

5

3

(11)

8

(8)

Net (loss) income attributable to Sprint Corporation

$            (274)

$            (111)

$             196

$            (385)

$             372

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

$           (0.07)

$           (0.03)

$            0.05

$           (0.09)

$            0.09

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

$           (0.07)

$           (0.03)

$            0.05

$           (0.09)

$            0.09

Basic weighted average common shares outstanding

4,098

4,087

4,061

4,092

4,036

Diluted weighted average common shares outstanding

4,098

4,087

4,124

4,092

4,095

Effective tax rate

18.7%

16.2%

7.6%

18.0%

14.4%

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

(Millions)

Quarter To Date

Year To Date

9/30/19

6/30/19

9/30/18

9/30/19

9/30/18

Net (loss) income

$            (279)

$            (114)

$             207

$            (393)

$             380

Income tax (benefit) expense

(64)

(22)

17

(86)

64

(Loss) income before income taxes

(343)

(136)

224

(479)

444

Other income, net

(14)

(28)

(79)

(42)

(121)

Interest expense

594

619

633

1,213

1,270

Operating income

237

455

778

692

1,593

Depreciation – network and other

1,065

1,120

1,021

2,185

2,044

Depreciation – equipment rentals

1,056

1,029

1,181

2,085

2,317

Amortization

106

118

159

224

330

EBITDA*(1)

2,464

2,722

3,139

5,186

6,284

Asset impairments (2)

2

210

–

212

–

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

–

–

68

–

68

Severance and exit costs (4)

19

27

25

46

33

Contract terminations costs (5)

–

–

–

–

34

Merger costs (6)

69

83

56

152

149

Hurricanes (7)

–

–

(32)

–

(32)

Adjusted EBITDA*(1)

$           2,554

$           3,042

$           3,256

$           5,596

$           6,536

Adjusted EBITDA margin*

48.4%

54.7%

56.5%

51.6%

56.8%

Selected items:

Cash paid for capital expenditures – network and other

$           1,109

$           1,189

$           1,266

$           2,298

$           2,398

Cash paid for capital expenditures – leased devices

$           1,786

$           1,516

$           1,707

$           3,302

$           3,524

WIRELESS STATEMENTS OF OPERATIONS (Unaudited)

(Millions)

Quarter To Date

Year To Date

9/30/19

6/30/19

9/30/18

9/30/19

9/30/18

Net operating revenues

Service revenue

Postpaid

$           4,218

$           4,199

$           4,255

$           8,417

$           8,443

Prepaid

792

843

954

1,635

1,936

Wholesale, affiliate and other

35

280

289

315

579

Total service revenue

5,045

5,322

5,498

10,367

10,958

Equipment sales

1,192

1,220

1,418

2,412

2,591

Equipment rentals

1,330

1,359

1,253

2,689

2,465

Total net operating revenues

7,567

7,901

8,169

15,468

16,014

Net operating expenses

Cost of services (exclusive of depreciation and amortization below)

1,591

1,519

1,466

3,110

2,895

Cost of equipment sales

1,359

1,341

1,517

2,700

2,787

Cost of equipment rentals (exclusive of depreciation below)

240

225

151

465

275

Selling, general and administrative

1,815

1,779

1,749

3,594

3,453

Depreciation – network and other

1,023

1,070

968

2,093

1,940

Depreciation – equipment rentals

1,056

1,029

1,181

2,085

2,317

Amortization

106

118

159

224

330

Other, net

20

230

58

250

95

Total net operating expenses

7,210

7,311

7,249

14,521

14,092

Operating income

$             357

$             590

$             920

$             947

$           1,922

WIRELESS NON-GAAP RECONCILIATION (Unaudited)

(Millions)

Quarter To Date

Year To Date

9/30/19

6/30/19

9/30/18

9/30/19

9/30/18

Operating income

$             357

$             590

$             920

$             947

$           1,922

Asset impairments (2)

1

203

–

204

–

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

–

–

68

–

68

Severance and exit costs (4)

19

27

12

46

15

Contract terminations costs (5)

–

–

–

–

34

Hurricanes (7)

–

–

(32)

–

(32)

Depreciation – network and other

1,023

1,070

968

2,093

1,940

Depreciation – equipment rentals

1,056

1,029

1,181

2,085

2,317

Amortization

106

118

159

224

330

Adjusted EBITDA*(1)

$           2,562

$           3,037

$           3,276

$           5,599

$           6,594

Adjusted EBITDA margin*

50.8%

57.1%

59.6%

54.0%

60.2%

Selected items:

Cash paid for capital expenditures – network and other

$             963

$           1,027

$           1,101

$           1,990

$           2,120

Cash paid for capital expenditures – leased devices

$           1,786

$           1,516

$           1,707

$           3,302

$           3,524

WIRELINE STATEMENTS OF OPERATIONS (Unaudited)

(Millions)

Quarter To Date

Year To Date

9/30/19

6/30/19

9/30/18

9/30/19

9/30/18

Net operating revenues

$             300

$             307

$             328

$             607

$             666

Net operating expenses

Cost of services (exclusive of depreciation and amortization below)

256

262

295

518

606

Selling, general and administrative

49

45

53

94

122

Depreciation and amortization

42

47

51

89

100

Other, net

1

7

13

8

18

Total net operating expenses

348

361

412

709

846

Operating loss

$              (48)

$              (54)

$              (84)

$            (102)

$            (180)

WIRELINE NON-GAAP RECONCILIATION (Unaudited)

(Millions)

Quarter To Date

Year To Date

9/30/19

6/30/19

9/30/18

9/30/19

9/30/18

Operating loss

$              (48)

$              (54)

$              (84)

$            (102)

$            (180)

Asset impairments (2)

1

7

–

8

–

Severance and exit costs (4)

–

–

13

–

18

Depreciation and amortization

42

47

51

89

100

Adjusted EBITDA*

$                (5)

$                –

$              (20)

$                (5)

$              (62)

Adjusted EBITDA margin*

-1.7%

0.0%

-6.1%

-0.8%

-9.3%

Selected items:

Cash paid for capital expenditures – network and other

$               30

$               28

$               55

$               58

$             106

CONDENSED CONSOLIDATED CASH FLOW INFORMATION (Unaudited)

(Millions)

Year To Date

9/30/19

9/30/18

Operating activities

Net (loss) income

$            (393)

$             380

Asset impairments (2)

212

–

Depreciation and amortization

4,494

4,691

Provision for losses on accounts receivable

266

166

Share-based and long-term incentive compensation expense 

63

68

Deferred income tax (benefit) expense

(106)

39

Amortization of long-term debt premiums, net

(31)

(67)

Loss on disposal of property, plant and equipment

465

343

Deferred purchase price from sale of receivables

–

(223)

Other changes in assets and liabilities:

Accounts and notes receivable

(435)

85

Inventories and other current assets 

503

168

Operating lease right-of-use assets

849

–

Accounts payable and other current liabilities 

(111)

(95)

Current and long-term operating lease liabilities

(955)

–

Non-current assets and liabilities, net 

(132)

(384)

Other, net 

121

186

Net cash provided by operating activities

4,810

5,357

Investing activities

Capital expenditures – network and other

(2,298)

(2,398)

Capital expenditures – leased devices

(3,302)

(3,524)

Expenditures relating to FCC licenses

(16)

(70)

Change in short-term investments, net

6

(832)

Proceeds from sales of assets and FCC licenses

599

272

Proceeds from deferred purchase price from sale of receivables

–

223

Other, net

(9)

42

Net cash used in investing activities 

(5,020)

(6,287)

Financing activities

Proceeds from debt and financings

3,364

2,944

Repayments of debt, financing and finance lease obligations

(5,826)

(2,928)

Debt financing costs

(12)

(248)

Proceeds from issuance of common stock, net

(33)

276

Net cash (used in) provided by financing activities 

(2,507)

44

Net decrease in cash, cash equivalents and restricted cash

(2,717)

(886)

Cash, cash equivalents and restricted cash, beginning of period

7,063

6,659

Cash, cash equivalents and restricted cash, end of period

$           4,346

$           5,773

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

(Millions)

Quarter To Date

Year To Date

9/30/19

6/30/19

9/30/18

9/30/19

9/30/18

Net cash provided by operating activities

$           2,566

$           2,244

$           2,927

$           4,810

$           5,357

Capital expenditures – network and other

(1,109)

(1,189)

(1,266)

(2,298)

(2,398)

Capital expenditures – leased devices

(1,786)

(1,516)

(1,707)

(3,302)

(3,524)

Expenditures relating to FCC licenses, net

(7)

(9)

(11)

(16)

(70)

Proceeds from sales of assets and FCC licenses

417

182

139

599

272

Proceeds from deferred purchase price from sale of receivables

–

–

53

–

223

Other investing activities, net

4

–

63

4

60

Free cash flow*

$               85

$            (288)

$             198

$            (203)

$              (80)

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

(130)

230

327

100

613

Adjusted free cash flow*

$              (45)

$              (58)

$             525

$            (103)

$             533

CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)

(Millions)

9/30/19

3/31/19

ASSETS

Current assets

Cash and cash equivalents

$           4,262

$           6,982

Short-term investments

61

67

Accounts and notes receivable, net

3,723

3,554

Device and accessory inventory

963

999

Prepaid expenses and other current assets

1,197

1,289

Total current assets

10,206

12,891

Property, plant and equipment, net

20,562

21,201

Costs to acquire a customer contract

1,712

1,559

Operating lease right-of-use assets

6,885

–

Goodwill

4,598

4,598

FCC licenses and other

41,481

41,465

Definite-lived intangible assets, net

1,413

1,769

Other assets

1,071

1,118

Total assets

$         87,928

$         84,601

LIABILITIES AND EQUITY

Current liabilities

Accounts payable

$           3,918

$           3,961

Accrued expenses and other current liabilities

3,198

3,597

Current operating lease liabilities

1,835

–

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

4,101

4,557

Total current liabilities

13,052

12,115

Long-term debt, financing and finance lease obligations

33,268

35,366

Long-term operating lease liabilities

5,667

–

Deferred tax liabilities

7,489

7,556

Other liabilities

2,555

3,437

Total liabilities 

62,031

58,474

Stockholders’ equity

Common stock

41

41

Treasury shares, at cost

(16)

–

Paid-in capital

28,349

28,306

Accumulated deficit

(2,106)

(1,883)

Accumulated other comprehensive loss

(418)

(392)

Total stockholders’ equity

25,850

26,072

Noncontrolling interests

47

55

Total equity

25,897

26,127

Total liabilities and equity

$         87,928

$         84,601

NET DEBT* (NON-GAAP) (Unaudited)

(Millions)

9/30/19

3/31/19

Total debt

$         37,369

$         39,923

Less: Cash and cash equivalents

(4,262)

(6,982)

Less: Short-term investments

(61)

(67)

Net debt*

$         33,046

$         32,874

SCHEDULE OF DEBT (Unaudited)

(Millions)

9/30/19

ISSUER

 MATURITY 

 PRINCIPAL 

Sprint Corporation

7.25% Senior notes due 2021

09/15/2021

$              2,250

7.875% Senior notes due 2023

09/15/2023

4,250

7.125% Senior notes due 2024

06/15/2024

2,500

7.625% Senior notes due 2025

02/15/2025

1,500

7.625% Senior notes due 2026

03/01/2026

1,500

Sprint Corporation

12,000

Sprint Spectrum Co LLC, Sprint Spectrum Co II LLC, and Sprint Spectrum Co III LLC

3.36% Senior secured notes due 2021

09/20/2021

1,750

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

5,688

Sprint Communications, Inc.

7% Guaranteed notes due 2020

03/01/2020

1,000

7% Senior notes due 2020

08/15/2020

1,500

11.5% Senior notes due 2021

11/15/2021

1,000

6% Senior notes due 2022

11/15/2022

2,280

Sprint Communications, Inc.

5,780

Sprint Capital Corporation

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

4,475

Credit facilities

PRWireless secured term loan

06/28/2020

199

Secured equipment credit facilities

2021 – 2022

624

Secured term loans due 2024

02/03/2024

5,885

Credit facilities

6,708

Accounts receivable facility

2021

2,707

Financing obligations, finance lease and other obligations

2020 – 2026

396

Total principal

37,754

Net premiums and debt financing costs

(385)

Total debt

$            37,369

NOTES TO THE FINANCIAL INFORMATION (Unaudited)

(1)

For customers that elect to lease a device rather than purchasing one under our subsidized program, there is a positive impact to EBITDA* and Adjusted EBITDA* from direct channel sales primarily due to the fact the cost of the device is not recorded as cost of equipment sales but rather is depreciated over the customer lease term. Under our device leasing program for the direct channel, devices are transferred from inventory to property and equipment and the cost of the leased device is recognized as depreciation expense over the customer lease term to an estimated residual value. The customer payments are recognized as revenue over the term of the lease. Under our subsidy model, we recognize revenue from the sale of devices as equipment sales at the point of sale and the cost of the device is recognized as cost of equipment sales. During the three and six month periods ended September 30, 2019, we leased devices through our Sprint direct channels totaling approximately $1,309 million and $2,329 million, respectively, which would have increased cost of equipment sales and reduced EBITDA* if they had been purchased under our subsidized program.

The impact to EBITDA* and Adjusted EBITDA* resulting from the sale of devices under our installment billing program is generally neutral except for the impact in our indirect channels from the time value of money element related to the imputed interest on the installment receivable.

(2)

During the second and first quarters of fiscal year 2019, the company recorded non-cash asset impairments primarily related to the sale and leaseback of our Overland Park, Kansas campus.

(3)

During the second quarter of fiscal year 2018, 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.

(4)

During the second and first quarters of fiscal year 2019 and second and first quarters of fiscal year 2018, severance and exit costs consist of severance costs associated with reductions in our work force, and primarily exit costs related to payments that will continue to be made under our backhaul access contracts for which we will no longer receive any economic benefit.

(5)

During the first quarter of fiscal year 2018, contract termination costs are primarily due to the purchase of certain leased spectrum assets, which upon termination of the spectrum leases resulted in the accelerated recognition of the unamortized favorable lease balances. 

(6)

During the second and first quarters of fiscal year 2019 and second and first quarters of fiscal year 2018, we recorded merger costs of $69 million, $83 million, $56 million and $93 million, respectively, due to the proposed Business Combination Agreement with T-Mobile.

(7)

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

*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.

Free Cash Flow is the cash provided by operating activities less the cash used in investing activities other than short-term investments and equity method investments. Adjusted Free Cash Flow is Free Cash Flow plus the proceeds from device financings and sales of receivables, net of repayments. We believe that Free Cash Flow and Adjusted Free Cash Flow provide useful information to investors, analysts and our management about the cash generated by our core operations and net proceeds obtained to fund certain leased devices, respectively, after interest and dividends, if any, and our ability to fund scheduled debt maturities and other financing activities, including discretionary refinancing and retirement of debt and purchase or sale of investments.

Net Debt is consolidated debt, including current maturities, less cash and cash equivalents and short-term investments. We believe that Net Debt provides useful information to investors, analysts and credit rating agencies about the capacity of the company to reduce the debt load and improve its capital structure.

SAFE HARBOR
This release includes “forward-looking statements” within the meaning of the securities laws. The words “may,” “could,” “should,” “estimate,” “project,” “forecast,” “intend,” “expect,” “anticipate,” “believe,” “target,” “plan”, “outlook,” “providing guidance,” and similar expressions are intended to identify information that is not historical in nature. All statements that address operating performance, events or developments that we expect or anticipate will occur in the future — including statements relating to our network, subscriber growth, and liquidity; and statements expressing general views about future operating results — are forward-looking statements. Forward-looking statements are estimates and projections reflecting management’s judgment based on currently available information and involve a number of risks and uncertainties that could cause actual results to differ materially from those suggested by the forward-looking statements. With respect to these forward-looking statements, management has made assumptions regarding, among other things, the development and deployment of new technologies and services such as 5G; efficiencies and cost savings of new technologies and services; customer and network usage; subscriber additions and churn rates; service, speed, capacity, coverage and quality; availability of devices; availability of various financings; and the timing of various events and the economic environment. Sprint believes these forward-looking statements are reasonable; however, you should not place undue reliance on forward-looking statements, which are based on current expectations and speak only as of the date when made. Sprint undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law. In addition, forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from our company’s historical experience and our present expectations or projections. Factors that might cause such differences include, but are not limited to, those discussed in Sprint Corporation’s Annual Report on Form 10-K for the fiscal year ended March 31, 2019 and, when filed, our Quarterly Report on Form 10-Q for the quarter ended September 30, 2019.  You should understand that it is not possible to predict or identify all such factors. Consequently, you should not consider any such list to be a complete set of all potential risks or uncertainties.

About Sprint:
Sprint (NYSE: S) is a communications services company that creates more and better ways to connect its customers to the things they care about most. Sprint served 53.9 million connections as of September 30, 2019 and is widely recognized for developing, engineering and deploying innovative technologies, including the first wireless 4G service from a national carrier in the United States; leading no-contract brands including Virgin Mobile USA, Boost Mobile, and Assurance Wireless; instant national and international push-to-talk capabilities; and a global Tier 1 Internet backbone. Today, Sprint’s legacy of innovation and service continues with an increased investment to dramatically improve coverage, reliability, and speed across its nationwide network and commitment to launching a 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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