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FY4Q14 Results
Conference Call
May 5, 2015
©2015 Sprint. This information is subject to Sprint policies regarding use and is the property of Sprint and/or its relevant affiliates. Any review, use, distribution or disclosure is prohibited
without authorization.
Cautionary Statement
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,” “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, 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; 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 Transition Report on Form 10-K for the period ended March 31,
2014, and, when filed, our Form 10-K for the fiscal year ended March 31, 2015. 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.
©2015 Sprint. This information is subject to Sprint policies regarding use and is the property of Sprint and/or its relevant affiliates. Any review, use, distribution or disclosure is prohibited
without authorization.
2
*Non-GAAP Financial Measures
Financial results in the enclosed tables include a predecessor period related to the results of operations of Sprint Communications, Inc. (formerly Sprint Nextel) prior to the closing of the
SoftBank transaction on July 10, 2013, and the applicable successor periods. In order to present financial results in a way that offers investors a more meaningful comparison of the
year-to-date results, we have combined the 2013 results of operations for the predecessor and successor periods. For additional information, please reference the section titled
Financial Measures. Trended financial performance metrics on a combined basis can also be found at our Investor Relations website at www.sprint.com/investors.
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. Other than the use of non-GAAP combined results as described above, 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.
ABPU is average billings per user and calculated by dividing service revenue earned from customers plus installment plan billings and lease revenue by the sum of the average
number of connections during the period. We believe that ABPU provides useful information to investors, analysts and our management to evaluate average Sprint platform postpaid
customer billings as it approximates the expected cash collections, including installment plan billings and lease revenue, per 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, including changes in restricted cash, if any, and
amounts included as investments in Clearwire and Sprint Communications, Inc. during the period, if applicable. We believe that Free Cash Flow provides useful information to
investors, analysts and our management about the cash generated by our core operations 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, short-term investments and, if any, restricted cash. 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.
©2015 Sprint. This information is subject to Sprint policies regarding use and is the property of Sprint and/or its relevant affiliates. Any review, use, distribution or disclosure is prohibited
without authorization.
3
Earnings
Reported net loss per share
4QFY13
4QFY14
($0.04)
($0.06)
©2015 Sprint. This information is subject to Sprint policies regarding use and is the property of Sprint and/or its relevant affiliates. Any review, use, distribution or disclosure is prohibited
without authorization.
4
Sprint Transformation Strategy
Phase 1
Stop the
Decline
Jan-Sep 2014
Oct-Dec 2014
Jan-Mar 2015
Going Forward
 Acquisition
Decline
 Acquisition
Growth
 Acquisition
Growth
 Continuous Postpaid Phone
Growth
 Postpaid
Churn Rising
 Postpaid
Churn Peak
 Postpaid
Churn
Improving
 Continuous Postpaid Churn
Improvement
 Network in
Place
4th
 Network
Improves to
3rd Place
Phase 3
Profitable
Growth
Phase 2
Improving the Basics and Operational
Effectiveness
 Network
Improving
 Network Winning in Major
Markets
 Unique and
Differentiated
Value
Proposition
 Network
Densification
and Migration
to all-LTE
©2015 Sprint. This information is subject to Sprint policies regarding use and is the property of Sprint and/or its relevant affiliates. Any review, use, distribution or disclosure is prohibited
without authorization.
5
Customer Acquisition
^ indicates results specific to Sprint Platform
©2015 Sprint. This information is subject to Sprint policies regarding use and is the property of Sprint and/or its relevant affiliates. Any review, use, distribution or disclosure is prohibited
without authorization.
6
Making Progress vs Competition
^results for Sprint represent Sprint platform
©2015 Sprint. This information is subject to Sprint policies regarding use and is the property of Sprint and/or its relevant affiliates. Any review, use, distribution or disclosure is prohibited
without authorization.
7
Customer Retention
Shifting Focus To Retention
46 bp
q/q
•
Sprint postpaid churn of 1.84%
•
Biggest sequential improvement in
nearly seven years
•
Voluntary churn shows best sequential
improvement in nearly eleven years
due to network improvement
Customer-Centric Approach
•
Higher engagement from base with
postpaid upgrades up year-over-year
Results for Sprint represent Sprint platform
©2015 Sprint. This information is subject to Sprint policies regarding use and is the property of Sprint and/or its relevant affiliates. Any review, use, distribution or disclosure is prohibited
without authorization.
8
Network
Continued Improvement
•
LTE coverage to nearly 280M pops.
Including expansion of LTE on 800 MHz
and 2.5 GHz
•
Improved to 3rd overall in 2H14
RootMetrics® testing
•
Now winning in major markets including
shared RootMetrics® award for best
overall network in Las Vegas for 1H15
Free Wi-Fi Calling
•
Embracing Wi-Fi as additional coverage
layer
•
Wi-Fi calling now available on iPhone®
complementing rich Android portfolio to
reach 27 total Wi-Fi calling devices
©2015 Sprint. This information is subject to Sprint policies regarding use and is the property of Sprint and/or its relevant affiliates. Any review, use, distribution or disclosure is prohibited
without authorization.
9
Customer Experience
Developing A Customer-First Culture
20%
y/y
•
Sprint’s Net Promoter Score highest in
nearly two years
•
Focused on serving and satisfying our
customers
Record Low Calls To Care
•
Postpaid and Prepaid calls per customer
both reached record lows
•
Postpaid calls per customer down 20%
year-over-year showing improved
satisfaction
©2015 Sprint. This information is subject to Sprint policies regarding use and is the property of Sprint and/or its relevant affiliates. Any review, use, distribution or disclosure is prohibited
without authorization.
10
Building Foundation For Growth
Eligible countries for International Value Roaming are Argentina, Brazil, Chile,
Costa Rica, El Salvador, Germany, Guatemala, Japan, Mexico, Nicaragua,
Panama, Russia, South Korea, Spain and the United Kingdom
©2015 Sprint. This information is subject to Sprint policies regarding use and is the property of Sprint and/or its relevant affiliates. Any review, use, distribution or disclosure is prohibited
without authorization.
11
Increasing Focus on Hispanic Market
Projected population growth 2010 to 2050^
Growing Market Opportunity
+1%
+42%
Total
White NonHispanic
74%
+56%
+142%
+167%
Black
Asian
Hispanic
Hispanic contribution to total U.S.
labor force growth 2010-2020
•
Hispanic market is incredible
opportunity with 54M and
growing
•
Will continue to fuel over half of
the US total population growth
•
Roger Solé to lead new Hispanic
business unit and build worldclass, winning team
^Source: U.S. Census Bureau. HH income growth 2000-2011, via Nielsen. Bureau of Labor Statistics
©2015 Sprint. This information is subject to Sprint policies regarding use and is the property of Sprint and/or its relevant affiliates. Any review, use, distribution or disclosure is prohibited
without authorization.
12
Revenue and ABPU*
Consolidated Net Operating Revenue
•
Wireless service revenue declines yearover-year due to postpaid phone losses
and migration to device financing plans
•
Partially offset by growth in equipment
revenue
•
Wireline revenue down year-over-year
Postpaid Billings Per User
•
Total billings per customer declining
slightly as a result of tablet mix
•
Continued migration to device financing
options shift more of monthly bill to
equipment
©2015 Sprint. This information is subject to Sprint policies regarding use and is the property of Sprint and/or its relevant affiliates. Any review, use, distribution or disclosure is prohibited
without authorization.
13
Adjusted EBITDA* & Operating Income
Consolidated Adjusted EBITDA* of
$1.74 Billion
•
Operating revenue declines year-overyear partially offset by cost reductions
Operating Income of $318 Million
•
Down slightly year-over-year due to
higher depreciation expense
©2015 Sprint. This information is subject to Sprint policies regarding use and is the property of Sprint and/or its relevant affiliates. Any review, use, distribution or disclosure is prohibited
without authorization.
14
Cap Ex, FCF, & Liquidity
Cash Capex of $2 Billion
•
Increase primarily related to leased
devices in Indirect channels
•
Investment in network remains steady
Maintaining Strong Liquidity of $7.5
Billion
•
Also have network vendor financing
availability of $1.4 billion
•
Recently expanded receivables
financing facility to $3.3 billion
•
No significant maturities due until
December 2016
©2015 Sprint. This information is subject to Sprint policies regarding use and is the property of Sprint and/or its relevant affiliates. Any review, use, distribution or disclosure is prohibited
without authorization.
15
Fiscal 2015 Guidance
• Consolidated Adjusted EBITDA* between $6.5B $6.9B
• Accrued Capex of approximately $5B excluding
impact of leased devices sold through indirect
channels
©2015 Sprint. This information is subject to Sprint policies regarding use and is the property of Sprint and/or its relevant affiliates. Any review, use, distribution or disclosure is prohibited
without authorization.
16
Questions & Answers
©2015 Sprint. This information is subject to Sprint policies regarding use and is the property of Sprint and/or its relevant affiliates. Any review, use, distribution or disclosure is prohibited
without authorization.
Non-GAAP Reconciliations - Consolidated
(Millions)
Successor
Quarter
To
Date
3/31/15
Net Loss
Income tax expense (benefit)
(Loss) Income before Income Taxes
Equity in earnings of unconsolidated investments and other, net
Interest expense
Operating Income (Loss)
Depreciation and amortization
EBITDA*
Severance and exit costs (7)
Impairments (6)
Litigation (8)
Business combinations (9)
Partial pension settlement (10)
Release of assumed liability - U.S. Cellular asset acquisition (11)
Hurricane Sandy (12)
Adjusted EBITDA*
$
$
Adjusted EBITDA Margin*
Selected items:
Increase in deferred tax asset valuation allowance
Accrued capital expenditures
Cash paid for capital expenditures
$
$
$
(224) $
27
(197)
(8)
523
318
1,454
1,772
(29)
1,743 $
Quarter
To
Date
12/31/14
(2,379) $
(657)
(3,036)
(10)
506
(2,540)
1,320
(1,220)
22
2,133
91
59
(41)
1,044 $
Quarter
To
Date
3/31/14
(151) $
56
(95)
(1)
516
420
1,297
1,717
52
75
1,844 $
Predecessor
Year
To
Date
3/31/15
(3,345) $
(574)
(3,919)
(27)
2,051
(1,895)
5,349
3,454
304
2,133
91
59
(41)
6,000 $
Year
To
Date
3/31/14
(2,002)
100
(1,902)
(68)
1,434
(536)
4,231
3,695
361
75
100
(7)
4,224
24.4%
14.4%
23.4%
20.3%
18.4%
114 $
1,422 $
2,047 $
500 $
1,827 $
1,568 $
82 $
1,057 $
1,488 $
911 $
6,182 $
6,004 $
790
4,624
5,335
Combined
Year
To
Date
3/31/14
101 Days
Ended
7/10/13
$
$
(515)
1,563
1,048
(2,665)
703
(914)
1,753
839
627
53
1,519
$
$
(2,517)
1,663
(854)
(2,733)
2,137
(1,450)
5,984
4,534
988
75
153
(7)
5,743
17.0%
$
$
$
©2015 Sprint. This information is subject to Sprint policies regarding use and is the property of Sprint and/or its relevant affiliates. Any review, use, distribution or disclosure is prohibited
without authorization.
1,145
2,072
1,759
(1)
18.0%
$
$
$
1,935
6,696
7,094
18
Non-GAAP Reconciliations - Wireless
(Millions)
Successor
Quarter
To
Date
3/31/15
Operating Income (Loss)
Severance and exit costs (7)
Impairments (6)
Litigation (8)
Business combinations (9)
Partial pension settlement (10)
Release of assumed liability - U.S. Cellular asset acquisition
Hurricane Sandy (12)
Depreciation and amortization
Adjusted EBITDA*
$
(11)
$
Adjusted EBITDA Margin*
Selected items:
Accrued capital expenditures
Cash paid for capital expenditures
$
$
320 $
(29)
1,406
1,697 $
Quarter
To
Date
12/31/14
(2,232) $
21
1,900
84
43
(41)
1,259
1,034 $
Quarter
To
Date
3/31/14
490 $
51
72
1,224
1,837 $
Predecessor
Year
To
Date
3/31/15
(1,464) $
263
1,900
84
43
(41)
5,109
5,894 $
Year
To
Date
3/31/14
(438)
331
72
25
(7)
4,032
4,015
25.6%
15.4%
25.3%
21.6%
19.0%
1,343 $
1,957 $
1,616 $
1,376 $
930 $
1,343 $
5,589 $
5,442 $
4,173
4,878
Combined
Year
To
Date
3/31/14
101 Days
Ended
7/10/13
$
$
(888)
627
1,636
1,375
$
$
(1,326)
958
72
25
(7)
5,668
5,390
16.9%
$
$
©2015 Sprint. This information is subject to Sprint policies regarding use and is the property of Sprint and/or its relevant affiliates. Any review, use, distribution or disclosure is prohibited
without authorization.
1,884
1,570
(1)
18.4%
$
$
6,057
6,448
19
Non-GAAP Reconciliations - Wireline
(Millions)
Successor
Quarter
To
Date
3/31/15
Operating (Loss) Income
Severance and exit costs (7)
Impairments (6)
Litigation (8)
Partial pension settlement (10)
Depreciation and amortization
Adjusted EBITDA*
$
$
Adjusted EBITDA Margin*
Selected items:
Accrued capital expenditures
Cash paid for capital expenditures
Quarter
To
Date
12/31/14
(4) $
(2)
46
40 $
6.0%
$
$
68 $
70 $
Quarter
To
Date
3/31/14
(305) $
2
233
6
16
59
11 $
1.6%
70 $
81 $
Predecessor
Year
To
Date
3/31/15
(62) $
2
3
69
12 $
1.6%
72 $
79 $
Year
To
Date
3/31/14
(413) $
39
233
6
16
232
113 $
7
32
3
192
234
4.0%
9.7%
278 $
275 $
227
232
Combined
Year
To
Date
3/31/14
101 Days
Ended
7/10/13
$
$
29
115
144
$
36
32
3
307
378
$
14.3%
$
$
©2015 Sprint. This information is subject to Sprint policies regarding use and is the property of Sprint and/or its relevant affiliates. Any review, use, distribution or disclosure is prohibited
without authorization.
104
110
(1)
11.1%
$
$
331
342
20
Non-GAAP Reconciliations – ABPU*
(Millions, except ABPU*)
Successor
Quarter
To
Date
3/31/15
ABPU* (c)
Sprint platform service revenue
Add: Installment plan billings and lease revenue
Total for Sprint platform postpaid connections
Sprint platform ABPU*
$
Quarter
To
Date
12/31/14
Quarter
To
Date
3/31/14
Year
To
Date
3/31/15
$
5,049 $
423
5,472 $
5,202 $
288
5,490 $
5,719 $
55
5,774 $
21,181
1,041
22,222
$
61.71 $
62.16 $
64.13 $
62.55
©2015 Sprint. This information is subject to Sprint policies regarding use and is the property of Sprint and/or its relevant affiliates. Any review, use, distribution or disclosure is prohibited
without authorization.
21