UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_______________________________________
FORM 8-K
_______________________________________
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) October 25, 2017
_______________________________________
SPRINT CORPORATION
(Exact name of Registrant as specified in its charter)
_______________________________________
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Delaware | | 1-04721 | | 46-1170005 |
(State of Incorporation) | | (Commission File Number) | | (I.R.S. Employer Identification No.) |
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6200 Sprint Parkway, Overland Park, Kansas | | 66251 |
(Address of principal executive offices) | | (Zip Code) |
Registrant’s telephone number, including area code (855) 848-3280
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
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o | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
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o | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
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o | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
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o | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (17 CFR §230.405) or Rule 12b-2 of the Securities Exchange Act of 1934 (17 CFR §240.12b-2).
Emerging growth company o
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
Item 2.02 Results of Operations and Financial Condition.
On October 25, 2017, Sprint Corporation announced its results for the second quarter ended September 30, 2017. The press release is furnished as Exhibit 99.1, its Quarterly Investor Update is attached as Exhibit 99.2, and the Message from Management is attached as Exhibit 99.3.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits
The following exhibits are furnished with this report:
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Exhibit No. | | Description |
| | Press Release Announcing Results for the Second Quarter Ended September 30, 2017 |
| | Quarterly Investor Update |
| | Message from Management |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
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| | | SPRINT CORPORATION |
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Date: October 25, 2017 | | | | | | /s/ Stefan K. Schnopp |
| | | | | | By: | | Stefan K. Schnopp |
| | | | | | | | Corporate Secretary |
EXHIBIT INDEX
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Number | | Exhibit |
99.1 |
| | Press Release Announcing Results for the Second Quarter Ended September 30, 2017 |
99.2 |
| | Quarterly Investor Update |
99.3 |
| | Message from Management |
SPRINT REPORTS HIGHEST RETAIL PHONE NET ADDITIONS IN MORE THAN TWO YEARS WITH FISCAL 2017 SECOND QUARTER RESULTS
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• | Highest share of postpaid phone gross additions in company history |
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◦ | Postpaid phone gross additions grew 10 percent year-over-year |
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• | Postpaid phone net additions of 279,000 were the ninth consecutive quarter of net additions |
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• | Prepaid net additions of 95,000 compared to net losses of 449,000 in the prior year |
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◦ | Third consecutive quarter of net additions and improved by 544,000 year-over-year |
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◦ | Prepaid gross additions grew year-over-year for the first time in two years |
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• | Net loss of $48 million, operating income of $601 million, and adjusted EBITDA* of $2.7 billion |
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◦ | Seventh consecutive quarter of operating income |
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◦ | Highest fiscal second quarter adjusted EBITDA* in 10 years |
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• | Net cash provided by operating activities of $2 billion and adjusted free cash flow* of $420 million |
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◦ | More than $650 million of adjusted free cash flow* in the first half of fiscal year 2017 |
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◦ | Positive adjusted free cash flow* in seven of the last eight quarters |
OVERLAND PARK, Kan. - Oct. 25, 2017 - Sprint Corporation (NYSE: S) today reported operating results for the second quarter of fiscal year 2017, including its highest share of postpaid phone gross additions in company history and its third consecutive quarter of net additions in both postpaid phones and prepaid with 279,000 and 95,000 net additions, respectively. The company also reported operating income of $601 million and its highest fiscal second quarter adjusted EBITDA* in 10 years at $2.7 billion.
Net cash provided by operating activities of $2 billion improved by $251 million year-over-year, bringing the year-to-date total to $3.2 billion, an improvement of $1 billion compared to a year ago. Adjusted free cash flow* was $420 million in the quarter, bringing the year-to-date total to more than $650 million. The company now expects adjusted free cash flow* for fiscal year 2017 to be around break-even.
“Sprint was able to deliver net additions in both its postpaid phone and prepaid business for the third consecutive quarter,” said Sprint CEO Marcelo Claure. “I’m even more proud that the team was able to deliver this customer growth while continuing to attack the cost structure, improve the network, and maintain positive adjusted free cash flow*.”
Highest Retail Phone Net Additions in More Than Two Years
Sprint’s execution in both its postpaid and prepaid business resulted in the highest retail phone net additions in more than two years. The company continued to add postpaid phone customers with 279,000 net additions in the quarter, its ninth consecutive quarter of net additions. Postpaid phone gross additions grew 10 percent year-over-year, including 30 percent year-over-year growth in digital channels, and Sprint’s share of postpaid phone gross additions was the highest in company history.
The recent turnaround of the prepaid business resulted in 95,000 net additions in the quarter, its third consecutive quarter of net additions and a 544,000 improvement compared to the prior year. Prepaid gross additions grew year-over-year for the first time in two years, and prepaid churn improved year-over-year for the fifth consecutive quarter.
Total company net additions were 378,000 in the quarter, including postpaid net additions of 168,000, prepaid net additions of 95,000, and wholesale and affiliate net additions of 115,000.
Cost Reduction Program Contributes to Improved Profitability
Sprint continued to make progress on its multiyear plan to transform the way it does business and improve its cost structure. The company delivered nearly $400 million of combined year-over-year reductions in cost of services and SG&A expenses in the quarter, bringing the year-to-date total reduction to more than $750 million, primarily driven by changes to the device insurance program. Lower network and customer care expenses also contributed to the year-to-date reduction.
Sprint continues to expect $1.3 billion to $1.5 billion of year-over-year net reductions in cost of services and SG&A expenses in fiscal year 2017. Although the gross reductions are expected to be higher, the company plans to reinvest some of the savings into future growth initiatives.
The cost reduction program has contributed to improved profitability, as the company has now reported seven consecutive quarters of operating income and $158 million of net income year-to-date.
Operating income and net loss in the quarter were negatively impacted by $34 million of hurricane-related charges and future quarters may be impacted by additional charges.
The company also reported the following financial results:
Sprint Magic Box Contributes to Network Speed Improvements
Sprint is unlocking the value of the largest spectrum holdings in the U.S. by densifying and optimizing its network. The company has already deployed tens of thousands of small cell solutions, including the Sprint Magic Box, which recently won the 2017 Mobile Breakthrough Award for Small Cell Technology Innovation of the Year. As the world’s first all-wireless small cell, Sprint Magic Box improves data coverage and increases download and upload speeds on average by 200 percent.1
Sprint’s extended network toolbox is improving the experience for customers across the country. Based on Ookla’s Speedtest Intelligence data, Sprint is the most improved network with national average download speeds up 33 percent year-over-year.2 And in more than 25 of 99 top markets, the company’s average download speeds increased anywhere from 40 percent to more than 100 percent, including Chicago, Los Angeles, Seattle, and Houston.3
Fiscal Year 2017 Outlook
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• | The company continues to expect adjusted EBITDA* of $10.8 billion to $11.2 billion. |
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• | The company continues to expect operating income of $2.1 billion to $2.5 billion. |
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1 Signal and speeds based on optimal conditions for most Sprint devices.
2 Average download speed increase based on Ookla’s analysis of Speedtest Intelligence data comparing Sept. 2016 to Sept. 2017 for all mobile results.
3 Average download speed increase based on Sprint’s analysis of Ookla Speedtest Intelligence data comparing Sept. 2016 to Sept. 2017 for all mobile results.
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• | The company continues to expect cash capital expenditures, excluding devices leased through indirect channels, of $3.5 billion to $4 billion. |
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• | The company expects adjusted free cash flow* to be around break-even. |
Additional Information
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• | Additional information about results, including a message from management, is available on the Investor Relations website at www.sprint.com/investors |
Contact Information
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• | Media contact: Dave Tovar, David.Tovar@sprint.com |
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• | Investor contact: Jud Henry, Investor.Relations@sprint.com |
Wireless Operating Statistics (Unaudited) |
| | | | | | | | | | | | | | | | |
| Quarter To Date | | Year To Date |
| 9/30/17 | 6/30/17 | 9/30/16 | | 9/30/17 | 9/30/16 |
Net additions (losses) (in thousands) | | | | | | |
Postpaid | 168 |
| (39 | ) | 344 |
| | 129 |
| 524 |
|
Postpaid phone | 279 |
| 88 |
| 347 |
| | 367 |
| 520 |
|
Prepaid (f) | 95 |
| 35 |
| (449 | ) | | 130 |
| (755 | ) |
Wholesale and affiliate (f) | 115 |
| 65 |
| 704 |
| | 180 |
| 1,432 |
|
Total wireless net additions | 378 |
| 61 |
| 599 |
| | 439 |
| 1,201 |
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End of period connections (in thousands) | | | | | | |
Postpaid (d) | 31,686 |
| 31,518 |
| 31,289 |
| | 31,686 |
| 31,289 |
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Postpaid phone (d) | 26,432 |
| 26,153 |
| 25,669 |
| | 26,432 |
| 25,669 |
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Prepaid (d) (e) (f) (h) | 8,765 |
| 8,719 |
| 10,187 |
| | 8,765 |
| 10,187 |
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Wholesale and affiliate (d) (e) (f) | 13,576 |
| 13,461 |
| 12,486 |
| | 13,576 |
| 12,486 |
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Total end of period connections | 54,027 |
| 53,698 |
| 53,962 |
| | 54,027 |
| 53,962 |
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Churn (g) | | | | | | |
Postpaid | 1.72 | % | 1.65 | % | 1.52 | % | | 1.69 | % | 1.54 | % |
Postpaid phone | 1.59 | % | 1.50 | % | 1.37 | % | | 1.55 | % | 1.38 | % |
Prepaid (e) | 4.83 | % | 4.57 | % | 5.59 | % | | 4.70 | % | 5.49 | % |
| | | | | | |
Supplemental data - connected devices | | | | | | |
End of period connections (in thousands) | | | | | | |
Retail postpaid | 2,158 |
| 2,091 |
| 1,874 |
| | 2,158 |
| 1,874 |
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Wholesale and affiliate | 11,221 |
| 11,100 |
| 9,951 |
| | 11,221 |
| 9,951 |
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Total | 13,379 |
| 13,191 |
| 11,825 |
| | 13,379 |
| 11,825 |
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| | | | | | |
ARPU (a) | | | | | | |
Postpaid | $ | 46.00 |
| $ | 47.30 |
| $ | 50.54 |
| | $ | 46.65 |
| $ | 51.04 |
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Postpaid phone | $ | 52.34 |
| $ | 53.92 |
| $ | 58.03 |
| | $ | 53.13 |
| $ | 58.61 |
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Prepaid (e) | $ | 37.83 |
| $ | 38.24 |
| $ | 33.15 |
| | $ | 38.04 |
| $ | 33.07 |
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NON-GAAP RECONCILIATION - ABPA* AND ABPU* (Unaudited)
(Millions, except accounts, connections, ABPA*, and ABPU*) |
| | | | | | | | | | | | | | | | |
| Quarter to Date | | Year to Date |
| 9/30/17 | 6/30/17 | 9/30/16 | | 9/30/17 | 9/30/16 |
ABPA* | | | | | | |
Postpaid service revenue | $ | 4,363 |
| $ | 4,466 |
| $ | 4,720 |
| | $ | 8,829 |
| $ | 9,498 |
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Add: Installment plan and non-operating lease billings | 397 |
| 368 |
| 274 |
| | 765 |
| 538 |
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Add: Lease revenue - operating | 966 |
| 899 |
| 811 |
| | 1,865 |
| 1,566 |
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Total for postpaid connections | $ | 5,726 |
| $ | 5,733 |
| $ | 5,805 |
| | $ | 11,459 |
| $ | 11,602 |
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| | | | | | |
Average postpaid accounts (in thousands) | 11,277 |
| 11,312 |
| 11,363 |
| | 11,295 |
| 11,346 |
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Postpaid ABPA* (b) | $ | 169.25 |
| $ | 168.95 |
| $ | 170.29 |
| | $ | 169.10 |
| $ | 170.43 |
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| Quarter to Date | | Year to Date |
| 9/30/17 | 6/30/17 | 9/30/16 | | 9/30/17 | 9/30/16 |
Postpaid phone ABPU* | | | | | | |
Postpaid phone service revenue | $ | 4,132 |
| $ | 4,214 |
| $ | 4,441 |
| | $ | 8,346 |
| $ | 8,930 |
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Add: Installment plan and non-operating lease billings | 358 |
| 332 |
| 248 |
| | 690 |
| 491 |
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Add: Lease revenue - operating | 953 |
| 887 |
| 797 |
| | 1,840 |
| 1,538 |
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Total for postpaid phone connections | $ | 5,443 |
| $ | 5,433 |
| $ | 5,486 |
| | $ | 10,876 |
| $ | 10,959 |
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Postpaid average phone connections (in thousands) | 26,312 |
| 26,052 |
| 25,514 |
| | 26,182 |
| 25,394 |
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Postpaid phone ABPU* (c) | $ | 68.95 |
| $ | 69.51 |
| $ | 71.69 |
| | $ | 69.23 |
| $ | 71.93 |
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(a) 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.
(b) Postpaid ABPA* is calculated by dividing service revenue earned from connections plus billings from installment plans and non-operating leases, as well as, operating lease revenue by the sum of the monthly average number of accounts during the period. Installment plan billings represent the substantial majority of the total billings in the table above for all periods presented.
(c) Postpaid phone ABPU* is calculated by dividing postpaid phone service revenue earned from postpaid phone connections plus billings from installment plans and non-operating leases, as well as, operating lease revenue 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.
(d) As part of the Shentel transaction, 186,000 and 92,000 subscribers were transferred from postpaid and prepaid, respectively, to affiliates, of which 18,000 prepaid subscribers were subsequently excluded from our customer base as a result of the Lifeline regulatory change as noted in (f) below. An additional 270,000 of nTelos' subscribers are now part of our affiliate relationship with Shentel and were reported in wholesale and affiliate subscribers beginning with the quarter ended June 30, 2016. In addition, during the three-month period ended June 30, 2017, 17,000 and 4,000 subscribers were transferred from postpaid and prepaid, respectively, to affiliates as a result of a the transfer of additional subscribers to Shentel.
(e) During the three-month period ended June 30, 2017, 2,000 Wi-Fi connections were adjusted from the postpaid subscriber base.
(f) Sprint is no longer reporting Lifeline subscribers due to recent 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 MVNO's.
(g) In the quarter ended June 30, 2017, the Company enhanced subscriber reporting to better align certain early-life gross activations and deactivations. This enhancement had no impact to net additions, but did result in reporting lower gross additions and lower deactivations in the quarter. Without this enhancement, total postpaid churn in the quarter would have been 1.73 percent versus 1.65 percent.
(h) 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 the reduction of 49,000 to prepaid end of period subscribers.
Wireless Device Financing Summary (Unaudited)
(Millions, except sales, connections, and leased devices in property, plant and equipment)
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| | | | | | | | | | | | | | | | |
| Quarter To Date | | Year To Date |
| 9/30/17 | 6/30/17 | 9/30/16 | | 9/30/17 | 9/30/16 |
| | | | | | |
Postpaid activations (in thousands) | 3,917 |
| 3,668 |
| 3,747 |
| | 7,585 |
| 7,015 |
|
Postpaid activations financed | 85 | % | 85 | % | 73 | % | | 85 | % | 71 | % |
Postpaid activations - operating leases | 68 | % | 55 | % | 39 | % | | 62 | % | 41 | % |
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Installment plans | | | | | | |
Installment sales financed | $ | 268 |
| $ | 553 |
| $ | 745 |
| | $ | 821 |
| $ | 1,152 |
|
Installment billings | $ | 373 |
| $ | 368 |
| $ | 274 |
| | $ | 741 |
| $ | 538 |
|
Installment receivables, net | $ | 1,583 |
| $ | 1,792 |
| $ | — |
| | $ | 1,583 |
| $ | — |
|
| | | | | | |
Leasing revenue and depreciation | | | | | | |
Lease revenue - operating | $ | 966 |
| $ | 899 |
| $ | 811 |
| | $ | 1,865 |
| $ | 1,566 |
|
Lease depreciation | $ | 888 |
| $ | 854 |
| $ | 724 |
| | $ | 1,742 |
| $ | 1,368 |
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| | | | | | |
Leased device additions | | | | | | |
Cash paid for capital expenditures - leased devices | $ | 608 |
| $ | 497 |
| $ | 358 |
| | $ | 1,105 |
| $ | 763 |
|
Transfers from inventory - leased devices | $ | 1,060 |
| $ | 850 |
| $ | 645 |
| | $ | 1,910 |
| $ | 1,186 |
|
| | | | | | |
Leased devices | | | | | | |
Leased devices in property, plant and equipment, net | $ | 4,709 |
| $ | 4,336 |
| $ | 3,759 |
| | $ | 4,709 |
| $ | 3,759 |
|
| | | | | | |
Leased device units | | | | | | |
Leased devices in property, plant and equipment (units in thousands) | 13,019 |
| 12,223 |
| 9,366 |
| | 13,019 |
| 9,366 |
|
| | | | | | |
Leased device and receivables financings net proceeds | | | | | | |
Proceeds | $ | 789 |
| $ | 765 |
| $ | — |
| | $ | 1,554 |
| $ | 1,055 |
|
Repayments | (1,148 | ) | (273 | ) | (184 | ) | | (1,421 | ) | (424 | ) |
Net (repayments) proceeds of financings related to devices and receivables | $ | (359 | ) | $ | 492 |
| $ | (184 | ) | | $ | 133 |
| $ | 631 |
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CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
(Millions, except per share data)
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| | | | | | | | | | | | | | | | |
| Quarter to Date | | Year to Date |
| 9/30/17 | 6/30/17 | 9/30/16 | | 9/30/17 | 9/30/16 |
| | | | | | |
Net operating revenues | | | | | | |
Service revenue | $ | 5,967 |
| $ | 6,071 |
| $ | 6,413 |
| | $ | 12,038 |
| $ | 12,929 |
|
Equipment revenue | 1,960 |
| 2,086 |
| 1,834 |
| | 4,046 |
| 3,330 |
|
Total net operating revenues | 7,927 |
| 8,157 |
| 8,247 |
| | 16,084 |
| 16,259 |
|
Net operating expenses | | | | | | |
Cost of services (exclusive of depreciation and amortization below) | 1,698 |
| 1,709 |
| 2,101 |
| | 3,407 |
| 4,200 |
|
Cost of products (exclusive of depreciation and amortization below) | 1,404 |
| 1,545 |
| 1,693 |
| | 2,949 |
| 3,112 |
|
Selling, general and administrative | 2,013 |
| 1,938 |
| 1,995 |
| | 3,951 |
| 3,912 |
|
Depreciation - network and other | 997 |
| 977 |
| 986 |
| | 1,974 |
| 2,022 |
|
Depreciation - leased devices | 888 |
| 854 |
| 724 |
| | 1,742 |
| 1,368 |
|
Amortization | 209 |
| 223 |
| 271 |
| | 432 |
| 558 |
|
Other, net | 117 |
| (252 | ) | (145 | ) | | (135 | ) | 104 |
|
Total net operating expenses | 7,326 |
| 6,994 |
| 7,625 |
| | 14,320 |
| 15,276 |
|
Operating income | 601 |
| 1,163 |
| 622 |
| | 1,764 |
| 983 |
|
Interest expense | (595 | ) | (613 | ) | (630 | ) | | (1,208 | ) | (1,245 | ) |
Other income (expense), net | 44 |
| (52 | ) | (15 | ) | | (8 | ) | (7 | ) |
Income (loss) before income taxes | 50 |
| 498 |
| (23 | ) | | 548 |
| (269 | ) |
Income tax expense | (98 | ) | (292 | ) | (119 | ) | | (390 | ) | (175 | ) |
Net (loss) income | $ | (48 | ) | $ | 206 |
| $ | (142 | ) | | $ | 158 |
| $ | (444 | ) |
| | | | | | |
Basic net (loss) income per common share | $ | (0.01 | ) | $ | 0.05 |
| $ | (0.04 | ) | | $ | 0.04 |
| $ | (0.11 | ) |
Diluted net (loss) income per common share | $ | (0.01 | ) | $ | 0.05 |
| $ | (0.04 | ) | | $ | 0.04 |
| $ | (0.11 | ) |
Weighted average common shares outstanding | 3,998 |
| 3,993 |
| 3,979 |
| | 3,996 |
| 3,977 |
|
Diluted weighted average common shares outstanding | 3,998 |
| 4,076 |
| 3,979 |
| | 4,080 |
| 3,977 |
|
| | | | | | |
Effective tax rate | 196.0 | % | 58.6 | % | -517.4 | % | | 71.2 | % | -65.1 | % |
NON-GAAP RECONCILIATION - NET (LOSS) INCOME TO ADJUSTED EBITDA* (Unaudited)
(Millions) |
| | | | | | | | | | | | | | | | |
| Quarter to Date | | Year to Date |
| 9/30/17 | 6/30/17 | 9/30/16 | | 9/30/17 | 9/30/16 |
| | | | | | |
Net (loss) income | $ | (48 | ) | $ | 206 |
| $ | (142 | ) | | $ | 158 |
| $ | (444 | ) |
Income tax expense | 98 |
| 292 |
| 119 |
| | 390 |
| 175 |
|
Income (loss) before income taxes | 50 |
| 498 |
| (23 | ) | | 548 |
| (269 | ) |
Other (income) expense, net | (44 | ) | 52 |
| 15 |
| | 8 |
| 7 |
|
Interest expense | 595 |
| 613 |
| 630 |
| | 1,208 |
| 1,245 |
|
Operating income | 601 |
| 1,163 |
| 622 |
| | 1,764 |
| 983 |
|
Depreciation - network and other | 997 |
| 977 |
| 986 |
| | 1,974 |
| 2,022 |
|
Depreciation - leased devices | 888 |
| 854 |
| 724 |
| | 1,742 |
| 1,368 |
|
Amortization | 209 |
| 223 |
| 271 |
| | 432 |
| 558 |
|
EBITDA* (1) | 2,695 |
| 3,217 |
| 2,603 |
| | 5,912 |
| 4,931 |
|
Gain from asset dispositions, exchanges, and other, net (2) | — |
| (304 | ) | (354 | ) | | (304 | ) | (354 | ) |
Severance and exit costs (3) | — |
| — |
| (5 | ) | | — |
| 11 |
|
Contract terminations (4) | — |
| (5 | ) | — |
| | (5 | ) | 113 |
|
Litigation and other contingencies (5) | — |
| (55 | ) | 103 |
| | (55 | ) | 103 |
|
Hurricanes (6) | 34 |
| — |
| — |
| | 34 |
| — |
|
Adjusted EBITDA* (1) | $ | 2,729 |
| $ | 2,853 |
| $ | 2,347 |
| | $ | 5,582 |
| $ | 4,804 |
|
| | | | | | |
Adjusted EBITDA margin* | 45.7 | % | 47.0 | % | 36.6 | % | | 46.4 | % | 37.2 | % |
| | | | | | |
Selected items: | | | | | | |
Cash paid for capital expenditures - network and other | $ | 682 |
| $ | 1,121 |
| $ | 470 |
| | $ | 1,803 |
| $ | 943 |
|
Cash paid for capital expenditures - leased devices | $ | 608 |
| $ | 497 |
| $ | 358 |
| | $ | 1,105 |
| $ | 763 |
|
WIRELESS STATEMENTS OF OPERATIONS (Unaudited)
(Millions)
|
| | | | | | | | | | | | | | | | |
| Quarter to Date | | Year to Date |
| 9/30/17 | 6/30/17 | 9/30/16 | | 9/30/17 | 9/30/16 |
| | | | | | |
Net operating revenues | | | | | | |
Service revenue | | | | | | |
Postpaid | $ | 4,363 |
| $ | 4,466 |
| $ | 4,720 |
| | $ | 8,829 |
| $ | 9,498 |
|
Prepaid (7) | 990 |
| 999 |
| 1,037 |
| | 1,989 |
| 2,111 |
|
Wholesale, affiliate and other (7) | 296 |
| 259 |
| 260 |
| | 555 |
| 509 |
|
Total service revenue | 5,649 |
| 5,724 |
| 6,017 |
| | 11,373 |
| 12,118 |
|
| | | | | | |
Equipment revenue | 1,960 |
| 2,086 |
| 1,834 |
| | 4,046 |
| 3,330 |
|
Total net operating revenues | 7,609 |
| 7,810 |
| 7,851 |
| | 15,419 |
| 15,448 |
|
| | | | | | |
Net operating expenses | | | | | | |
Cost of services (exclusive of depreciation and amortization below) | 1,422 |
| 1,412 |
| 1,793 |
| | 2,834 |
| 3,577 |
|
Cost of products (exclusive of depreciation and amortization below) | 1,404 |
| 1,545 |
| 1,693 |
| | 2,949 |
| 3,112 |
|
Selling, general and administrative | 1,936 |
| 1,875 |
| 1,931 |
| | 3,811 |
| 3,765 |
|
Depreciation - network and other | 944 |
| 925 |
| 936 |
| | 1,869 |
| 1,921 |
|
Depreciation - leased devices | 888 |
| 854 |
| 724 |
| | 1,742 |
| 1,368 |
|
Amortization | 209 |
| 223 |
| 271 |
| | 432 |
| 558 |
|
Other, net | 117 |
| (202 | ) | (151 | ) | | (85 | ) | 98 |
|
Total net operating expenses | 6,920 |
| 6,632 |
| 7,197 |
| | 13,552 |
| 14,399 |
|
Operating income | $ | 689 |
| $ | 1,178 |
| $ | 654 |
| | $ | 1,867 |
| $ | 1,049 |
|
| | | | | | |
WIRELESS NON-GAAP RECONCILIATION (Unaudited)
(Millions) |
| | | | | | | | | | | | | | | | |
| Quarter to Date | | Year to Date |
| 9/30/17 | 6/30/17 | 9/30/16 | | 9/30/17 | 9/30/16 |
| | | | | | |
Operating income | $ | 689 |
| $ | 1,178 |
| $ | 654 |
| | $ | 1,867 |
| $ | 1,049 |
|
Gain from asset dispositions, exchanges, and other, net (2) | — |
| (304 | ) | (354 | ) | | (304 | ) | (354 | ) |
Severance and exit costs (3) | — |
| (5 | ) | (11 | ) | | (5 | ) | 5 |
|
Contract terminations (4) | — |
| (5 | ) | — |
| | (5 | ) | 113 |
|
Litigation and other contingencies (5) | — |
| — |
| 103 |
| | — |
| 103 |
|
Hurricanes (6) | 34 |
| — |
| — |
| | 34 |
| — |
|
Depreciation - network and other | 944 |
| 925 |
| 936 |
| | 1,869 |
| 1,921 |
|
Depreciation - leased devices | 888 |
| 854 |
| 724 |
| | 1,742 |
| 1,368 |
|
Amortization | 209 |
| 223 |
| 271 |
| | 432 |
| 558 |
|
Adjusted EBITDA* (1) | $ | 2,764 |
| $ | 2,866 |
| $ | 2,323 |
| | $ | 5,630 |
| $ | 4,763 |
|
| | | | | | |
Adjusted EBITDA margin* | 48.9 | % | 50.1 | % | 38.6 | % | | 49.5 | % | 39.3 | % |
| | | | | | |
Selected items: | | | | | | |
Cash paid for capital expenditures - network and other | $ | 539 |
| $ | 938 |
| $ | 358 |
| | $ | 1,477 |
| $ | 734 |
|
Cash paid for capital expenditures - leased devices | $ | 608 |
| $ | 497 |
| $ | 358 |
| | $ | 1,105 |
| $ | 763 |
|
WIRELINE STATEMENTS OF OPERATIONS (Unaudited)
(Millions)
|
| | | | | | | | | | | | | | | | |
| Quarter to Date | | Year to Date |
| 9/30/17 | 6/30/17 | 9/30/16 | | 9/30/17 | 9/30/16 |
Net operating revenues | | | | | | |
Voice | $ | 109 |
| $ | 124 |
| $ | 172 |
| | $ | 233 |
| $ | 353 |
|
Data | 33 |
| 34 |
| 43 |
| | 67 |
| 86 |
|
Internet | 256 |
| 255 |
| 288 |
| | 511 |
| 590 |
|
Other | 11 |
| 20 |
| 18 |
| | 31 |
| 37 |
|
Total net operating revenues | 409 |
| 433 |
| 521 |
| | 842 |
| 1,066 |
|
| | | | | | |
Net operating expenses | | | | | | |
Cost of services (exclusive of depreciation and amortization below) | 372 |
| 387 |
| 436 |
| | 759 |
| 884 |
|
Selling, general and administrative | 66 |
| 57 |
| 62 |
| | 123 |
| 140 |
|
Depreciation and amortization | 49 |
| 51 |
| 48 |
| | 100 |
| 97 |
|
Other, net | — |
| 5 |
| 7 |
| | 5 |
| 7 |
|
Total net operating expenses | 487 |
| 500 |
| 553 |
| | 987 |
| 1,128 |
|
Operating loss | $ | (78 | ) | $ | (67 | ) | $ | (32 | ) | | $ | (145 | ) | $ | (62 | ) |
WIRELINE NON-GAAP RECONCILIATION (Unaudited)
(Millions)
|
| | | | | | | | | | | | | | | | |
| Quarter to Date | | Year to Date |
| 9/30/17 | 6/30/17 | 9/30/16 | | 9/30/17 | 9/30/16 |
| | | | | | |
Operating loss | $ | (78 | ) | $ | (67 | ) | $ | (32 | ) | | $ | (145 | ) | $ | (62 | ) |
Severance and exit costs (3) | — |
| 5 |
| 7 |
| | 5 |
| 7 |
|
Depreciation and amortization | 49 |
| 51 |
| 48 |
| | 100 |
| 97 |
|
Adjusted EBITDA* | $ | (29 | ) | $ | (11 | ) | $ | 23 |
| | $ | (40 | ) | $ | 42 |
|
| | | | | | |
Adjusted EBITDA margin* | -7.1 | % | -2.5 | % | 4.4 | % | | -4.8 | % | 3.9 | % |
| | | | | | |
Selected items: | | | | | | |
Cash paid for capital expenditures - network and other | $ | 40 |
| $ | 62 |
| $ | 31 |
| | $ | 102 |
| $ | 51 |
|
CONDENSED CONSOLIDATED CASH FLOW INFORMATION (Unaudited)
(Millions)
|
| | | | | | |
| Year to Date |
| 9/30/17 | 9/30/16 |
Operating activities | | |
Net income (loss) | $ | 158 |
| $ | (444 | ) |
Depreciation and amortization | 4,148 |
| 3,948 |
|
Provision for losses on accounts receivable | 199 |
| 232 |
|
Share-based and long-term incentive compensation expense | 87 |
| 29 |
|
Deferred income tax expense | 364 |
| 157 |
|
Gains from asset dispositions and exchanges | (479 | ) | (354 | ) |
Call premiums paid on debt redemptions | (129 | ) | — |
|
Loss on early extinguishment of debt | 65 |
| — |
|
Amortization of long-term debt premiums, net | (90 | ) | (159 | ) |
Loss on disposal of property, plant and equipment | 410 |
| 231 |
|
Contract terminations | (5 | ) | 96 |
|
Other changes in assets and liabilities: | | |
Accounts and notes receivable | (179 | ) | (126 | ) |
Inventories and other current assets | (1,459 | ) | (892 | ) |
Deferred purchase price from sale of receivables | — |
| (400 | ) |
Accounts payable and other current liabilities | (161 | ) | (195 | ) |
Non-current assets and liabilities, net | 183 |
| (205 | ) |
Other, net | 127 |
| 332 |
|
Net cash provided by operating activities | 3,239 |
| 2,250 |
|
| | |
Investing activities | | |
Capital expenditures - network and other | (1,803 | ) | (943 | ) |
Capital expenditures - leased devices | (1,105 | ) | (763 | ) |
Expenditures relating to FCC licenses | (19 | ) | (32 | ) |
Change in short-term investments, net | 3,834 |
| (1,650 | ) |
Proceeds from sales of assets and FCC licenses | 218 |
| 66 |
|
Other, net | (1 | ) | (36 | ) |
Net cash provided by (used in) investing activities | 1,124 |
| (3,358 | ) |
| | |
Financing activities | | |
Proceeds from debt and financings | 1,860 |
| 3,278 |
|
Repayments of debt, financing and capital lease obligations | (4,261 | ) | (667 | ) |
Debt financing costs | (9 | ) | (175 | ) |
Other, net | (21 | ) | 37 |
|
Net cash (used in) provided by financing activities | (2,431 | ) | 2,473 |
|
| | |
Net increase in cash and cash equivalents | 1,932 |
| 1,365 |
|
| | |
Cash and cash equivalents, beginning of period | 2,870 |
| 2,641 |
|
Cash and cash equivalents, end of period | $ | 4,802 |
| $ | 4,006 |
|
RECONCILIATION TO CONSOLIDATED FREE CASH FLOW* (NON-GAAP) (Unaudited)
(Millions) |
| | | | | | | | | | | | | | | | |
| Quarter to Date | | Year to Date |
| 9/30/17 | 6/30/17 | 9/30/16 | | 9/30/17 | 9/30/16 |
| | | | | | |
Net cash provided by operating activities | $ | 1,959 |
| $ | 1,280 |
| $ | 1,708 |
| | $ | 3,239 |
| $ | 2,250 |
|
| | | | |
|
|
Capital expenditures - network and other | (682 | ) | (1,121 | ) | (470 | ) | | (1,803 | ) | (943 | ) |
Capital expenditures - leased devices | (608 | ) | (497 | ) | (358 | ) | | (1,105 | ) | (763 | ) |
Expenditures relating to FCC licenses, net | (6 | ) | (13 | ) | (17 | ) | | (19 | ) | (32 | ) |
Proceeds from sales of assets and FCC licenses | 117 |
| 101 |
| 39 |
| | 218 |
| 66 |
|
Other investing activities, net | (1 | ) | (3 | ) | (11 | ) | | (4 | ) | (36 | ) |
Free cash flow* | $ | 779 |
| $ | (253 | ) | $ | 891 |
| | $ | 526 |
| $ | 542 |
|
| | | | | | |
Net (repayments) proceeds of financings related to devices and receivables | (359 | ) | 492 |
| (184 | ) | | 133 |
| 631 |
|
Adjusted free cash flow* | $ | 420 |
| $ | 239 |
| $ | 707 |
| | $ | 659 |
| $ | 1,173 |
|
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
(Millions)
|
| | | | | | |
| 9/30/17 | 3/31/17 |
ASSETS | | |
Current assets | | |
Cash and cash equivalents | $ | 4,802 |
| $ | 2,870 |
|
Short-term investments | 1,610 |
| 5,444 |
|
Accounts and notes receivable, net | 4,118 |
| 4,138 |
|
Device and accessory inventory | 751 |
| 1,064 |
|
Prepaid expenses and other current assets | 654 |
| 601 |
|
Total current assets | 11,935 |
| 14,117 |
|
| | |
Property, plant and equipment, net | 18,901 |
| 19,209 |
|
Goodwill | 6,578 |
| 6,579 |
|
FCC licenses and other | 41,072 |
| 40,585 |
|
Definite-lived intangible assets, net | 2,848 |
| 3,320 |
|
Other assets | 1,132 |
| 1,313 |
|
Total assets | $ | 82,466 |
| $ | 85,123 |
|
| | |
LIABILITIES AND STOCKHOLDERS' EQUITY | | |
Current liabilities | | |
Accounts payable | $ | 2,947 |
| $ | 3,281 |
|
Accrued expenses and other current liabilities | 3,808 |
| 4,141 |
|
Current portion of long-term debt, financing and capital lease obligations | 4,142 |
| 5,036 |
|
Total current liabilities | 10,897 |
| 12,458 |
|
| | |
Long-term debt, financing and capital lease obligations | 34,236 |
| 35,878 |
|
Deferred tax liabilities | 14,780 |
| 14,416 |
|
Other liabilities | 3,533 |
| 3,563 |
|
Total liabilities | 63,446 |
| 66,315 |
|
| | |
Stockholders' equity | | |
Common stock | 40 |
| 40 |
|
Treasury shares, at cost | (9 | ) | — |
|
Paid-in capital | 27,807 |
| 27,756 |
|
Accumulated deficit | (8,426 | ) | (8,584 | ) |
Accumulated other comprehensive loss | (392 | ) | (404 | ) |
Total stockholders' equity | 19,020 |
| 18,808 |
|
Total liabilities and stockholders' equity | $ | 82,466 |
| $ | 85,123 |
|
NET DEBT* (NON-GAAP) (Unaudited)
(Millions)
|
| | | | | | |
| 9/30/17 | 3/31/17 |
| | |
Total debt | $ | 38,378 |
| $ | 40,914 |
|
Less: Cash and cash equivalents | (4,802 | ) | (2,870 | ) |
Less: Short-term investments | (1,610 | ) | (5,444 | ) |
Net debt* | $ | 31,966 |
| $ | 32,600 |
|
SCHEDULE OF DEBT (Unaudited)
(Millions)
|
| | | | |
| | 9/30/17 |
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 |
|
Sprint Corporation | | 10,500 |
|
| | |
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 | 3,500 |
|
Sprint Spectrum Co LLC, Sprint Spectrum Co II LLC, and Sprint Spectrum Co III LLC | | 3,500 |
|
| | |
Sprint Communications, Inc. | | |
Export Development Canada secured loan | 12/17/2019 | 300 |
|
9% Guaranteed notes due 2018 | 11/15/2018 | 1,800 |
|
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% Secured debentures due 2022 | 04/15/2022 | 200 |
|
6% Senior notes due 2022 | 11/15/2022 | 2,280 |
|
Sprint Communications, Inc. | | 8,080 |
|
| | |
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 |
|
| | |
Clearwire Communications LLC | | |
8.25% Exchangeable notes due 2040 (a) | 12/01/2017 | 629 |
|
Clearwire Communications LLC | | 629 |
|
| | |
Credit facilities | | |
Secured equipment credit facilities | 2020 - 2021 | 552 |
|
Secured term loan | 02/03/2024 | 3,980 |
|
Credit facilities | | 4,532 |
|
| | |
Accounts receivable facility | 11/19/2018 | 2,393 |
|
| | |
Financing obligations | 2017 - 2021 | 2,011 |
|
| | |
Capital leases and other obligations | 2017 - 2024 | 533 |
|
Total principal | | 38,382 |
|
| | |
Net premiums and debt financing costs | | (4 | ) |
Total debt | | $ | 38,378 |
|
(a) $629 million Clearwire 8.25% Exchangeable Notes due 2040 have both a par call and put in December 2017.
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 products 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 equipment revenue at the point of sale and the cost of the device is recognized as cost of products. During the three and six-month periods ended September 30, 2017, we leased devices through our Sprint direct channels totaling approximately $1,060 million and $1,910 million, respectively, which would have increased cost of products 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 from the time value of money element related to the imputed interest on the installment receivable.
| |
(2) | During 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, the company recorded a pre-tax non-cash gain related to spectrum swaps with other carriers. During the second quarter of fiscal year 2016 the company recorded a pre-tax non-cash gain of $354 million related to spectrum swaps with other carriers. |
| |
(3) | 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 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). During the first quarter of fiscal year 2016, contract terminations primarily relate to the termination of our pre-existing wholesale arrangement with NTELOS Holding Corp. |
| |
(5) | 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. During the second quarter of fiscal year 2016, litigation and other contingencies consist of unfavorable developments associated with legal matters as well as federal and state matters such as sales, use or property taxes. |
| |
(6) | 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. |
| |
(7) | Sprint is no longer reporting Lifeline subscribers due to recent 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 mobile virtual network operators (MVNO). The table reflects the reclassification of the related Assurance Wireless prepaid revenue from Prepaid service revenue to Wholesale, affiliate and other revenue of $92 million and $183 million for the three and six-month periods ended September 30, 2016, respectively. Revenue associated with subscribers through our wholesale Lifeline MVNO's continue to remain in Wholesale, affiliate and other revenue following this change. |
*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, operating lease revenue 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, operating lease revenue, 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, operating lease revenue 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, operating lease revenue, 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, including changes in restricted cash, if any, and excluding the sale-leaseback of devices 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, 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.
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, 2017. 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 million connections as of Sept. 30, 2017 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. Sprint has been named to the Dow Jones Sustainability Index (DJSI) North America for the past five years. You can learn more and visit Sprint at www.sprint.com or www.facebook.com/sprint and www.twitter.com/sprint.
###
599
564
368
61
378
54.0
53.3
53.6 53.7
54.0
2QFY16 3QFY16 4QFY16 1QFY17 2QFY17
Net Additions - In Thousands End of Period - In Millions
The company had 378,000 net additions in the current quarter compared with 599,000 in the year-
ago period and 61,000 net additions in the prior quarter.
Sprint ended the quarter with just over 54.0 million connections, including 31.7 million postpaid, 8.7
million prepaid, and 13.6 million wholesale and affiliate connections.
The company has had nearly 1.4 million net additions over the last four quarters.
344
405
(118)
(39)
168
2QFY16 3QFY16 4QFY16 1QFY17 2QFY17
Postpaid Net Additions (Losses)
In Thousands
Postpaid net additions were
168,000 during the quarter
compared to net additions of
344,000 in the year-ago period
and net losses of 39,000 in the
prior quarter. The year-over-year
decline was primarily driven by
higher tablet net losses, while the
sequential increase was primarily
driven by higher phone net
additions.
1.37%
1.57% 1.58%
1.50%
1.59%
1.52%
1.67%
1.75%
1.65%
1.72%
2QFY16 3QFY16 4QFY16 1QFY17 2QFY17
Postpaid Phone Churn Postpaid Total Churn
Postpaid Total Churn and Postpaid Phone Churn
Postpaid phone churn of 1.59 percent
compared to 1.37 percent in the year-ago period
and 1.50 percent in the prior quarter. The year-
over-year increase was driven by the company’s
decision to selectively manage customers
rolling off device commitments and taking new
unlimited data offers in the market in order to
maximize the net present value of the base
versus managing to the lowest churn rate. The
sequential increase was impacted by typical
seasonality.
Postpaid total churn of 1.72 percent for
the quarter compared to 1.52 percent in
the year-ago period and 1.65 percent in the
prior quarter. Both the year-over-year and
sequential increases were primarily driven
by higher postpaid phone churn. The year-
over-year increase was also impacted by
higher tablet churn as customers rolled off
promotional offers.
347 368
42
88
279
2QFY16 3QFY16 4QFY16 1QFY17 2QFY17
Postpaid Phone Net Additions
In Thousands
Postpaid phone net additions of
279,000 compared to net
additions of 347,000 in the year-
ago period and 88,000 in the
prior quarter. The year-over-year
decrease was driven by higher
phone churn and partially offset
by higher gross additions, while
the sequential improvement was
primarily driven by higher gross
additions. The company ended
the quarter with 26.4 million
phone connections.
Tablet and other device net losses of 111,000 in the quarter compared to 3,000 in the year-ago
period and 127,000 in the prior quarter. The current quarter included 145,000 tablet net losses,
compared to 50,000 in the year-ago period and 171,000 in the prior quarter. The year-over-year
increase in tablet net losses was due to lower gross additions and higher churn, as the company
continues to focus on growing phone connections.
25.7 26.0 26.1 26.2 26.4
5.6 5.7 5.5 5.3 5.3
31.3 31.7 31.6 31.5 31.7
2QFY16 3QFY16 4QFY16 1QFY17 2QFY17
Phones Tablets and Other DevicesPostpaid Connections
In Millions
2.74 2.75
2.77 2.78
2.80
2QFY16 3QFY16 4QFY16 1QFY17 2QFY17
Average Postpaid Connections per AccountAverage postpaid connections
per account of 2.80 at quarter
end compared to 2.74 in the year-
ago period and 2.78 in the prior
quarter. The growth has been
driven by higher phones per
account, partially offset by tablet
pressure.
Wholesale & affiliate net
additions were 115,000 in the
quarter compared to 704,000 in
the year-ago period and 65,000
in the prior quarter. The year-
over-year decline was primarily
impacted by lower connected
device net additions, which
generally have a lower ARPU
than other wholesale & affiliate
customers.
Prepaid net additions of 95,000 during the quarter compared to net losses of 449,000 in the year-
ago period and net additions of 35,000 in the prior quarter. The year-over-year improvement was
mostly driven by lower churn and higher gross additions in the Boost brand. Sequentially, the
increase was mostly driven by seasonally higher Boost gross additions.
Prepaid churn was 4.83 percent compared to 5.59 percent for the year-ago period and 4.57 percent
for the prior quarter. The year-over-year improvement was due to lower churn in both the Boost and
Virgin brands. Seasonally higher churn in both the Boost and Virgin brands drove the sequential
increase.
(449) (460)
195
35
95
2QFY16 3QFY16 4QFY16 1QFY17 2QFY17
Prepaid Net Additions
In Thousands
3.7
4.8
3.5 3.7 3.9
2.5
2.3
2.5 2.3
2.5
6.2
7.1
6.0 6.0
6.4
2QFY16 3QFY16 4QFY16 1QFY17 2QFY17
Postpaid PrepaidRetail Activations
In Millions
Retail activations were 6.4
million during the quarter
compared to 6.2 million in the
year-ago period and 6.0 million in
the prior quarter. Year-over-year,
the increase was primarily driven
by higher postpaid phone
upgrades and gross additions.
Sequentially, the increase was due
to higher postpaid phone and
prepaid gross additions.
6.4%
9.0%
6.1%
6.8% 6.7%
2QFY16 3QFY16 4QFY16 1QFY17 2QFY17
Postpaid Upgrades as a Percent of Total Postpaid Subscribers
Postpaid upgrade rate was 6.7 percent during the quarter compared to 6.4 percent for the year-
ago period and 6.8 percent for the prior quarter. The year-over-year increase was mostly driven by
a higher percent of the base being eligible to upgrade.
67%
71%
74% 76%
78%
2QFY16 3QFY16 4QFY16 1QFY17 2QFY17
Postpaid Phone Connections on Unsubsidized Service PlansPostpaid phone connections
on unsubsidized service plans
represented 78 percent of the
base at the end of the quarter,
compared to 67 percent in the
year-ago period and 76 percent
in the prior quarter.
Postpaid device financing rate was 85 percent of postpaid activations for the quarter compared
to 73 percent for the year-ago period and 85 percent in the prior quarter. At the end of the quarter,
42 percent of the postpaid connection base was active on a leasing agreement compared to 37
percent in the year-ago quarter and 39 percent in the prior quarter.
Postpaid phone financing rate was 89 percent of phone activations for the quarter compared to
78 percent for the year-ago period and 89 percent in the prior quarter.
Postpaid carrier aggregation
capable phones, which allow
for higher download data
speeds, were 85 percent of
postpaid phones activated
during the quarter, increasing
the number of these phones
within the phone base to 66
percent.
73%
80% 82% 85% 85%
78%
84% 86%
89% 89%
2QFY16 3QFY16 4QFY16 1QFY17 2QFY17
Total Financed Percentage of Activations
Phone Financed Percentage of Phone Activations
Postpaid Device
Financing
Sprint is unlocking the value of the largest spectrum
holdings in the U.S. by densifying and optimizing its
network. The company has already deployed tens of
thousands of small cell solutions, including the Sprint Magic
Box, which recently won the 2017 Mobile Breakthrough
Award for Small Cell Technology Innovation of the Year. As
the world’s first all–wireless small cell, Sprint Magic Box
improves data coverage and increases download and
upload speeds on average by 200 percent.1
1 Signal and speeds based on optimal conditions for most Sprint devices.
2 Average download speed increase based on Ookla’s analysis of Speedtest Intelligence data comparing Sept. 2016 to Sept. 2017 for all mobile
results.
3 Average download speed increase based on Sprint’s analysis of Ookla Speedtest Intelligence data comparing Sept. 2016 to Sept. 2017 for all
mobile results.
Sprint’s extended network toolbox is improving the experience for customers across the country.
Based on Ookla’s Speedtest Intelligence data, Sprint is the most improved network with national
average download speeds up 33 percent year-over-year.2 And in more than 25 of 99 top markets,
the company’s average download speeds increased anywhere from 40 percent to more than 100
percent, including Chicago, Los Angeles, Seattle, and Houston.3
$8.2 $8.5 $8.5 $8.2 $7.9
2QFY16 3QFY16 4QFY16 1QFY17 2QFY17
Net Operating Revenues
Dollars In Billions
Net operating revenues of $7.9 billion for the quarter declined $320 million year-over-year and
declined $230 million sequentially. The year-over-year decrease was mostly driven by lower wireless
and wireline service revenue, partially offset by higher equipment revenue. Sequentially, the
decrease was driven by lower equipment revenue as well as wireless and wireline service revenue.
Wireless service revenue of $5.6 billion declined $368 million year-over-year and declined $75
million sequentially. Approximately half of the year-over-year decrease was driven by changes to
the company’s device insurance program, which were accretive to Adjusted EBITDA* but resulted in
lower insurance revenue as the program revenue is accounted for and presented on a net basis.
The year-over-year reductions were also driven by lower postpaid phone ARPU, as customers
continued to migrate to rate plans offered in conjunction with device financing, partially offset by
growth in the postpaid phone customer base. The sequential decline was impacted by the
continued customer migration to rate plans offered in conjunction with device financing, in addition
to promotions, lower USF revenue, and hurricane-related credits.
Equipment revenue of $2.0 billion increased $126 million year-over-year and declined $126 million
sequentially. The year-over-year growth was driven by increased sales of used devices to third
parties and higher lease revenue, partially offset by a lower mix of installment billing sales, which
recognize more revenue at the point of sale relative to leasing sales. Sequentially, the decline was
driven by fewer sales of used devices to third parties and a lower mix of installment billing sales,
partially offset by higher leasing revenue. Sales of used devices to third parties, which have a
corresponding impact to cost of products expense and are relatively neutral to Adjusted EBITDA*,
were approximately $200 million in the quarter.
Wireline revenues of $409 million for the quarter declined $112 million year-over-year and $24
million sequentially. The year-over-year and sequential declines were primarily driven by lower voice
volumes, as the company continues to de-emphasize certain voice services. The year-over-year
decline was also impacted by the annual process of resetting the intercompany rate, based on
current market prices for voice and IP services sold to the wireless segment.
$71.69 $71.77
$68.66 $69.51 $68.95
2QFY16 3QFY16 4QFY16 1QFY17 2QFY17
Service Equipment
Postpaid Phone Average Billings Per User
(ABPU)*
Postpaid Phone Average Billings
Per User (ABPU)* of $68.95 for the
quarter decreased 4 percent year-
over-year and less than 1 percent
sequentially. The year-over-year
decline was primarily due to lower
insurance revenue resulting from
the change in the company’s
device insurance program, which
was accretive to Adjusted EBITDA*.
Normalizing for this change, ABPU
was relatively flat year-over-year.
$170.29 $171.28 $165.92 $168.95 $169.25
2QFY16 3QFY16 4QFY16 1QFY17 2QFY17
Service EquipmentPostpaid Average Billings Per Account
(ABPA)*
Postpaid Average Billings Per Account (ABPA)* of
$169.25 for the quarter decreased 1 percent year-over-
year and was relatively flat sequentially. The year-over-year
decline was primarily driven by lower insurance revenue
resulting from the change in the company’s device
insurance program. Normalizing for this change, ABPA
would have increased nearly 3 percent year-over-year.
Prepaid Average Revenue Per
User (ARPU) of $37.83 for the
quarter increased 14 percent
year-over-year and decreased 1
percent sequentially. The year-
over-year increase was primarily
driven by a change in the
company’s churn rules resulting
in the removal of low-
engagement customers from
the base in the third fiscal
quarter of 2016.
Normalized
Normalized
$2.1
$1.9
$1.7 $1.7 $1.7
2QFY16 3QFY16 4QFY16 1QFY17 2QFY17
Cost of Services
Dollars In Billions
Cost of services (CoS) of $1.7
billion for the quarter decreased
$403 million year-over-year and $11
million sequentially. The year-over-
year decrease was primarily driven
by changes to the company’s
device insurance program, as the
program revenue is accounted for
and reported on a net basis and
related expenses are no longer
incurred by Sprint. The year-over-
year decrease was also driven by
lower network labor expenses and
lower wireline expenses.
$2.0
$2.1
$2.0
$1.9
$2.0
2QFY16 3QFY16 4QFY16 1QFY17 2QFY17
Selling, General, and Administrative
Dollars In Billions
Selling, general and administrative
expenses (SG&A) of $2.0 billion for
the quarter increased by $18 million
year-over-year and $75 million
sequentially. The year-over-year
increases in prepaid marketing and
sales expenses were mostly offset
by lower customer care costs and
bad debt expenses related to a
decrease in installment billing sales.
Sequentially, the increases were
mostly driven by higher prepaid
marketing and sales expenses.
$1.0 $1.0 $1.0 $1.0 $1.0
$0.7 $0.8 $0.9 $0.9 $0.9
$0.3 $0.3
$0.2 $0.2 $0.2
$2.0
$2.1 $2.1 $2.1 $2.1
2QFY16 3QFY16 4QFY16 1QFY17 2QFY17
Network and Other
Leased Devices
Amortization
Depreciation and Amortization
Dollars In Billions
$1.7
$2.0 $2.0
$1.5 $1.4
2QFY16 3QFY16 4QFY16 1QFY17 2QFY17
Cost of Products
Dollars In Billions
Cost of products of $1.4 billion for the
quarter decreased $289 million year-
over-year and decreased $141 million
sequentially. The year-over-year
decrease was impacted by a lower mix
of installment billing sales and the
elimination of lease payments
associated with the first sale-leaseback
transaction with Mobile Leasing
Solutions, LLC, and was partially offset
by more sales of used devices to third
parties. The sequential decrease was
impacted by both a lower mix of
installment billing sales as well as lower
sales of used devices to third parties,
which have a corresponding impact to
equipment revenue and are relatively
neutral to Adjusted EBITDA*.
Depreciation and amortization expense of $2.1 billion for the
quarter increased $113 million year-over-year and $40 million
sequentially. Leased device depreciation was $888 million in the
quarter, $724 million in the year-ago period, and $854 million in
the prior quarter.
Other, net expense was
$117 million in the quarter,
including $112 million
related to loss on leased
devices, which impacted
Adjusted EBITDA*.
$0.6
$0.3
$0.5
$1.2
$0.6
2QFY16 3QFY16 4QFY16 1QFY17 2QFY17
Operating Income
Dollars In Billions
Operating income of $601 million
compared to $622 million in the year-
ago period and $1.2 billion in the prior
quarter. The current quarter included
$34 million of estimated hurricane-
related charges, consisting of customer
service credits, incremental roaming
costs, network repairs and
replacements. The year-ago period
included a pre-tax non-cash gain of
$256 million related to spectrum swaps
with other carriers that was partially
offset by litigation and other
contingency expenses. The prior
quarter included a pre-tax non-cash net
gain of $364 million related to spectrum
swap exchanges with other carriers and
a reduction of legal reserves related to
favorable developments in pending
legal proceedings, partially offset by
asset dispositions. Adjusting for items in
each period, operating income would
have improved by approximately $270
million year-over-year and declined
approximately $165 million sequentially.
$2.3
$2.5
$2.7
$2.9
$2.7
2QFY16 3QFY16 4QFY16 1QFY17 2QFY17
Adjusted EBITDA*
Dollars In Billions
Adjusted EBITDA* was $2.7 billion
for the quarter, compared to $2.3
billion in the year-ago period and
$2.9 billion in the prior quarter. The
year-over-year improvement was
primarily due to lower cost of
services and cost of products
expenses, partially offset by lower
operating revenues. The sequential
decrease was mostly driven by
lower operating revenues.
Net loss of $48 million for the quarter compared to
a net loss of $142 million in the year-ago period and
a net income of $206 million in the prior quarter.
$1.7
$0.7
$1.3 $1.3
$2.0
2QFY16 3QFY16 4QFY16 1QFY17 2QFY17
Cash Provided by Operating Activities
Dollars In Billions
Adjusted free cash flow* of $420
million for the quarter compared
to $707 million in the year-ago
period and $239 million in the
prior quarter. The year-over-year
decrease was primarily driven by
higher network and leased device
capital expenditures, partially
offset by higher cash provided by
operating activities. Sequentially,
the increase was driven by higher
cash provided by operating
activities and lower network
capital expenditures, partially
offset by lower net proceeds of
financings related to devices and
receivables.
Cash provided by operating
activities of $2.0 billion for the
quarter compared to $1.7 billion in
the year-ago period and $1.3 billion
in the prior quarter. Year-over-year,
the increase was driven primarily by
improvements in Adjusted EBITDA*,
while the sequential increase was
driven by favorable working capital
changes, partially offset by lower
Adjusted EBITDA*.
Cash capital expenditures were $1.3 billion in the quarter compared to $828 million in the year-
ago period and $1.6 billion in the prior quarter. The year-over-year increase was driven by higher
capital expenditures for network equipment and leased devices. The sequential decrease was
primarily driven by the timing of cash payments for network activities. Capital expenditures for
leased devices were $608 million in the current quarter compared to $358 million in the year-ago
period and $497 million in the prior quarter.
$707
($646)
$80
$239
$420
2QFY16 3QFY16 4QFY16 1QFY17 2QFY17
Adjusted Free Cash Flow *
Dollars In Millions
1.5
6.4
1.8
0.4
3.2
1.8
0.9
Liquidity as of
09/30/17
Current
Maturities **
Cash, Cash Equiv, Short-Term Investments Revolver
Network Equipment Financing
Receivables/Device FinancingVendor Financing Note Maturities
Other
** Includes maturities due through September 2018.
*** During the current quarter, the company entered into a commitment letter with a group of banks to
provide an unsecured credit facility in an aggregate principal amount up to $3.2 billion. As of September
30, 2017, the unsecured credit facility has not been executed, and thus no amounts have been drawn.
Liquidity and Debt
Dollars In Billions
$11.4 of
General
Purpose
Liquidity
$ 4.2
$ 12.3
Unsecured Credit Facility ***
Total general purpose liquidity was $11.4 billion at the end of the quarter, including $6.4 billion
of cash, cash equivalents and short-term investments. Additionally, the company has approximately
$855 million of availability under vendor financing agreements that can be used toward the
purchase of 2.5GHz network equipment.
Wireless Operating Statistics (Unaudited)
Quarter To Date
9/30/17 6/30/17 9/30/16 9/30/17 9/30/16
Net additions (losses) (in thousands)
Postpaid 168 (39) 344 129 524
Postpaid phone 279 88 347 367 520
Prepaid (f ) 95 35 (449) 130 (755)
Wholesale and affiliate (f ) 115 65 704 180 1,432
Total wireless net additions 378 61 599 439 1,201
End of period connections (in thousands)
Postpaid (d) 31,686 31,518 31,289 31,686 31,289
Postpaid phone (d) 26,432 26,153 25,669 26,432 25,669
Prepaid (d) (e) (f ) (h) 8,765 8,719 10,187 8,765 10,187
Wholesale and affiliate (d) (e) (f ) 13,576 13,461 12,486 13,576 12,486
Total end of period connections 54,027 53,698 53,962 54,027 53,962
Churn (g)
Postpaid 1.72% 1.65% 1.52% 1.69% 1.54%
Postpaid phone 1.59% 1.50% 1.37% 1.55% 1.38%
Prepaid (e) 4.83% 4.57% 5.59% 4.70% 5.49%
Supplemental data - connected devices
End of period connections (in thousands)
Retail postpaid 2,158 2,091 1,874 2,158 1,874
Wholesale and affiliate 11,221 11,100 9,951 11,221 9,951
Total 13,379 13,191 11,825 13,379 11,825
ARPU (a)
Postpaid 46.00$ 47.30$ 50.54$ 46.65$ 51.04$
Postpaid phone 52.34$ 53.92$ 58.03$ 53.13$ 58.61$
Prepaid (e) 37.83$ 38.24$ 33.15$ 38.04$ 33.07$
NON-GAAP RECONCILIATION - ABPA* AND ABPU* (Unaudited)
(Millions, except accounts, connections, ABPA*, and ABPU*)
9/30/17 6/30/17 9/30/16 9/30/17 9/30/16
ABPA*
Postpaid service revenue 4,363$ 4,466$ 4,720$ 8,829$ 9,498$
Add: Installment plan and non-operating lease billings 397 368 274 765 538
Add: Lease revenue - operating 966 899 811 1,865 1,566
Total for postpaid connections $ 5,726 $ 5,733 $ 5,805 $ 11,459 $ 11,602
Average postpaid accounts (in thousands) 11,277 11,312 11,363 11,295 11,346
Postpaid ABPA* (b) 169.25$ 168.95$ 170.29$ 169.10$ 170.43$
9/30/17 6/30/17 9/30/16 9/30/17 9/30/16
Postpaid phone ABPU*
Postpaid phone service revenue 4,132$ 4,214$ 4,441$ 8,346$ 8,930$
Add: Installment plan and non-operating lease billings 358 332 248 690 491
Add: Lease revenue - operating 953 887 797 1,840 1,538
Total for postpaid phone connections $ 5,443 $ 5,433 $ 5,486 $ 10,876 $ 10,959
Postpaid average phone connections (in thousands) 26,312 26,052 25,514 26,182 25,394
Postpaid phone ABPU* (c) 68.95$ 69.51$ 71.69$ 69.23$ 71.93$
(a) 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.
Year To Date
Quarter To Date Year To Date
Quarter To Date Year To Date
(h) 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 the reduction of 49,000 to prepaid end of period subscribers.
(g) In the quarter ended June 30, 2017, the Company enhanced subscriber reporting to better align certain early-life gross activations and deactivations. This
enhancement had no impact to net additions, but did result in reporting lower gross additions and lower deactivations in the quarter. Without this enhancement, total
postpaid churn in the quarter would have been 1.73 percent versus 1.65 percent.
(e) During the three-month period ended June 30, 2017, 2,000 Wi-Fi connections were adjusted from the postpaid subscriber base.
(b) Postpaid ABPA* is calculated by dividing service revenue earned from connections plus billings from installment plans and non-operating leases, as well as,
operating lease revenue by the sum of the monthly average number of accounts during the period. Installment plan billings represent the substantial majority of the
total billings in the table above for all periods presented.
(c) Postpaid phone ABPU* is calculated by dividing postpaid phone service revenue earned from postpaid phone connections plus billings from installment plans and
non-operating leases, as well as, operating lease revenue 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.
(d) As part of the Shentel transaction, 186,000 and 92,000 subscribers were transferred from postpaid and prepaid, respectively, to affiliates, of which 18,000 prepaid
subscribers were subsequently excluded from our customer base as a result of the Lifeline regulatory change as noted in (f) below. An additional 270,000 of nTelos'
subscribers are now part of our affiliate relationship with Shentel and were reported in wholesale and affiliate subscribers beginning with the quarter ended June 30,
2016. In addition, during the three-month period ended June 30, 2017, 17,000 and 4,000 subscribers were transferred from postpaid and prepaid, respectively, to
affiliates as a result of a the transfer of additional subscribers to Shentel.
(f ) Sprint is no longer reporting Lifeline subscribers due to recent 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 MVNO's.
Wireless Device Financing Summary (Unaudited)
(Millions, except sales, connections, and leased devices in property, plant and equipment)
Quarter To Date
9/30/17 6/30/17 9/30/16 9/30/17 9/30/16
Postpaid activations (in thousands) 3,917 3,668 3,747 7,585 7,015
Postpaid activations financed 85% 85% 73% 85% 71%
Postpaid activations - operating leases 68% 55% 39% 62% 41%
Installment plans
Installment sales financed 268$ 553$ 745$ 821$ 1,152$
Installment billings 373$ 368$ 274$ 741$ 538$
Installment receivables, net 1,583$ 1,792$ -$ 1,583$ -$
Leasing revenue and depreciation
Lease revenue - operating 966$ 899$ 811$ 1,865$ 1,566$
Lease depreciation 888$ 854$ 724$ 1,742$ 1,368$
Leased device additions
Cash paid for capital expenditures - leased devices 608$ 497$ 358$ 1,105$ 763$
Transfers from inventory - leased devices 1,060$ 850$ 645$ 1,910$ 1,186$
Leased devices
Leased devices in property, plant and equipment, net 4,709$ 4,336$ 3,759$ 4,709$ 3,759$
Leased device units
Leased devices in property, plant and equipment (units in thousands) 13,019 12,223 9,366 13,019 9,366
Leased device and receivables financings net proceeds
Proceeds 789$ 765$ -$ 1,554$ 1,055$
Repayments (1,148) (273) (184) (1,421) (424)
Net (repayments) proceeds of financings related to devices and
receivables (359)$ 492$ (184)$ 133$ 631$
55
56
57
58
59
60
61
62
63
64
65
66
67
68
69
70
71
72
73
74
75
76
77
78
79
80
Year To Date
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
(Millions, except per share data)
9/30/17 6/30/17 9/30/16 9/30/17 9/30/16
Net operating revenues
Service revenue 5,967$ 6,071$ 6,413$ 12,038$ 12,929$
Equipment revenue 1,960 2,086 1,834 4,046 3,330
Total net operating revenues 7,927 8,157 8,247 16,084 16,259
Net operating expenses
Cost of services (exclusive of depreciation and amortization below) 1,698 1,709 2,101 3,407 4,200
Cost of products (exclusive of depreciation and amortization below) 1,404 1,545 1,693 2,949 3,112
Selling, general and administrative 2,013 1,938 1,995 3,951 3,912
Depreciation - network and other 997 977 986 1,974 2,022
Depreciation - leased devices 888 854 724 1,742 1,368
Amortization 209 223 271 432 558
Other, net 117 (252) (145) (135) 104
Total net operating expenses 7,326 6,994 7,625 14,320 15,276
Operating income 601 1,163 622 1,764 983
Interest expense (595) (613) (630) (1,208) (1,245)
Other income (expense), net 44 (52) (15) (8) (7)
Income (loss) before income taxes 50 498 (23) 548 (269)
Income tax expense (98) (292) (119) (390) (175)
Net (loss) income (48)$ 206$ (142)$ 158$ (444)$
Basic net (loss) income per common share (0.01)$ 0.05$ (0.04)$ 0.04$ (0.11)$
Diluted net (loss) income per common share (0.01)$ 0.05$ (0.04)$ 0.04$ (0.11)$
Weighted average common shares outstanding 3,998 3,993 3,979 3,996 3,977
Diluted weighted average common shares outstanding 3,998 4,076 3,979 4,080 3,977
Effective tax rate 196.0% 58.6% -517.4% 71.2% -65.1%
NON-GAAP RECONCILIATION - NET (LOSS) INCOME TO ADJUSTED EBITDA* (Unaudited)
(Millions)
9/30/17 6/30/17 9/30/16 9/30/17 9/30/16
Net (loss) income (48)$ 206$ (142)$ 158$ (444)$
Income tax expense 98 292 119 390 175
Income (loss) before income taxes 50 498 (23) 548 (269)
Other (income) expense, net (44) 52 15 8 7
Interest expense 595 613 630 1,208 1,245
Operating income 601 1,163 622 1,764 983
Depreciation - network and other 997 977 986 1,974 2,022
Depreciation - leased devices 888 854 724 1,742 1,368
Amortization 209 223 271 432 558
EBITDA* (1) 2,695 3,217 2,603 5,912 4,931
Gain from asset dispositions, exchanges, and other, net (2) - (304) (354) (304) (354)
Severance and exit costs (3) - - (5) - 11
Contract terminations (4) - (5) - (5) 113
Litigation and other contingencies (5) - (55) 103 (55) 103
Hurricanes (6) 34 - - 34 -
Adjusted EBITDA* (1) 2,729$ 2,853$ 2,347$ 5,582$ 4,804$
Adjusted EBITDA margin* 45.7% 47.0% 36.6% 46.4% 37.2%
Selected items:
Cash paid for capital expenditures - network and other 682$ 1,121$ 470$ 1,803$ 943$
Cash paid for capital expenditures - leased devices 608$ 497$ 358$ 1,105$ 763$
Quarter To Date Year To Date
Quarter To Date Year To Date
WIRELESS STATEMENTS OF OPERATIONS (Unaudited)
(Millions)
9/30/17 6/30/17 9/30/16 9/30/17 9/30/16
Net operating revenues
Service revenue
Postpaid 4,363$ 4,466$ 4,720$ 8,829$ 9,498$
Prepaid (7) 990 999 1,037 1,989 2,111
Wholesale, affiliate and other (7) 296 259 260 555 509
Total service revenue 5,649 5,724 6,017 11,373 12,118
Equipment revenue 1,960 2,086 1,834 4,046 3,330
Total net operating revenues 7,609 7,810 7,851 15,419 15,448
Net operating expenses
Cost of services (exclusive of depreciation and amortization below) 1,422 1,412 1,793 2,834 3,577
Cost of products (exclusive of depreciation and amortization below) 1,404 1,545 1,693 2,949 3,112
Selling, general and administrative 1,936 1,875 1,931 3,811 3,765
Depreciation - network and other 944 925 936 1,869 1,921
Depreciation - leased devices 888 854 724 1,742 1,368
Amortization 209 223 271 432 558
Other, net 117 (202) (151) (85) 98
Total net operating expenses 6,920 6,632 7,197 13,552 14,399
Operating income 689$ 1,178$ 654$ 1,867$ 1,049$
WIRELESS NON-GAAP RECONCILIATION (Unaudited)
(Millions)
9/30/17 6/30/17 9/30/16 9/30/17 9/30/16
Operating income 689$ 1,178$ 654$ 1,867$ 1,049$
Gain from asset dispositions, exchanges, and other, net (2) - (304) (354) (304) (354)
Severance and exit costs (3) - (5) (11) (5) 5
Contract terminations (4) - (5) - (5) 113
Litigation and other contingencies (5) - - 103 - 103
Hurricanes (6) 34 - - 34 -
Depreciation - network and other 944 925 936 1,869 1,921
Depreciation - leased devices 888 854 724 1,742 1,368
Amortization 209 223 271 432 558
Adjusted EBITDA* (1) 2,764$ 2,866$ 2,323$ 5,630$ 4,763$
Adjusted EBITDA margin* 48.9% 50.1% 38.6% 49.5% 39.3%
Selected items:
Cash paid for capital expenditures - network and other 539$ 938$ 358$ 1,477$ 734$
Cash paid for capital expenditures - leased devices 608$ 497$ 358$ 1,105$ 763$
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68
69
70
71
72
73
74
75
76
77
78
79
80
Quarter To Date Year To Date
Quarter To Date Year To Date
WIRELINE STATEMENTS OF OPERATIONS (Unaudited)
(Millions)
9/30/17 6/30/17 9/30/16 9/30/17 9/30/16
Net operating revenues
Voice 109$ 124$ 172$ 233$ 353$
Data 33 34 43 67 86
Internet 256 255 288 511 590
Other 11 20 18 31 37
Total net operating revenues 409 433 521 842 1,066
Net operating expenses
Cost of services (exclusive of depreciation and amortization below) 372 387 436 759 884
Selling, general and administrative 66 57 62 123 140
Depreciation and amortization 49 51 48 100 97
Other, net - 5 7 5 7
Total net operating expenses 487 500 553 987 1,128
Operating loss (78)$ (67)$ (32)$ (145)$ (62)$
WIRELINE NON-GAAP RECONCILIATION (Unaudited)
(Millions)
9/30/17 6/30/17 9/30/16 9/30/17 9/30/16
Operating loss (78)$ (67)$ (32)$ (145)$ (62)$
Severance and exit costs (3) - 5 7 5 7
Depreciation and amortization 49 51 48 100 97
Adjusted EBITDA* (29)$ (11)$ 23$ (40)$ 42$
Adjusted EBITDA margin* -7.1% -2.5% 4.4% -4.8% 3.9%
Selected items:
Cash paid for capital expenditures - network and other 40$ 62$ 31$ 102$ 51$
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70
71
72
73
74
75
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77
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79
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Quarter To Date Year To Date
Quarter To Date Year To Date
CONDENSED CONSOLIDATED CASH FLOW INFORMATION (Unaudited)
(Millions)
9/30/17 9/30/16
Operating activities
Net income (loss) 158$ (444)$
Depreciation and amortization 4,148 3,948
Provision for losses on accounts receivable 199 232
Share-based and long-term incentive compensation expense 87 29
Deferred income tax expense 364 157
Gains from asset dispositions and exchanges (479) (354)
Call premiums paid on debt redemptions (129) -
Loss on early extinguishment of debt 65 -
Amortization of long-term debt premiums, net (90) (159)
Loss on disposal of property, plant and equipment 410 231
Contract terminations (5) 96
Other changes in assets and liabilities:
Accounts and notes receivable (179) (126)
Inventories and other current assets (1,459) (892)
Deferred purchase price from sale of receivables - (400)
Accounts payable and other current liabilities (161) (195)
Non-current assets and liabilities, net 183 (205)
Other, net 127 332
Net cash provided by operating activities 3,239 2,250
Investing activities
Capital expenditures - network and other (1,803) (943)
Capital expenditures - leased devices (1,105) (763)
Expenditures relating to FCC licenses (19) (32)
Change in short-term investments, net 3,834 (1,650)
Proceeds from sales of assets and FCC licenses 218 66
Other, net (1) (36)
Net cash provided by (used in) investing activities 1,124 (3,358)
Financing activities
Proceeds from debt and financings 1,860 3,278
Repayments of debt, financing and capital lease obligations (4,261) (667)
Debt financing costs (9) (175)
Other, net (21) 37
Net cash (used in) provided by financing activities (2,431) 2,473
Net increase in cash and cash equivalents 1,932 1,365
Cash and cash equivalents, beginning of period 2,870 2,641
Cash and cash equivalents, end of period 4,802$ 4,006$
RECONCILIATION TO CONSOLIDATED FREE CASH FLOW* (NON-GAAP) (Unaudited)
(Millions)
9/30/17 6/30/17 9/30/16 9/30/17 9/30/16
Net cash provided by operating activities 1,959$ 1,280$ 1,708$ 3,239$ 2,250$
Capital expenditures - network and other (682) (1,121) (470) (1,803) (943)
Capital expenditures - leased devices (608) (497) (358) (1,105) (763)
Expenditures relating to FCC licenses, net (6) (13) (17) (19) (32)
Proceeds from sales of assets and FCC licenses 117 101 39 218 66
Other investing activities, net (1) (3) (11) (4) (36)
Free cash flow* 779$ (253)$ 891$ 526$ 542$
Net (repayments) proceeds of financings related to devices and receivables (359) 492 (184) 133 631
Adjusted free cash flow* 420$ 239$ 707$ 659$ 1,173$
Year to Date
Quarter To Date Year to Date
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
(Millions)
9/30/17 3/31/17
ASSETS
Current assets
Cash and cash equivalents 4,802$ 2,870$
Short-term investments 1,610 5,444
Accounts and notes receivable, net 4,118 4,138
Device and accessory inventory 751 1,064
Prepaid expenses and other current assets 654 601
Total current assets 11,935 14,117
Property, plant and equipment, net 18,901 19,209
Goodwill 6,578 6,579
FCC licenses and other 41,072 40,585
Definite-lived intangible assets, net 2,848 3,320
Other assets 1,132 1,313
Total assets 82,466$ 85,123$
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable 2,947$ 3,281$
Accrued expenses and other current liabilities 3,808 4,141
Current portion of long-term debt, financing and capital lease obligations 4,142 5,036
Total current liabilities 10,897 12,458
Long-term debt, financing and capital lease obligations 34,236 35,878
Deferred tax liabilities 14,780 14,416
Other liabilities 3,533 3,563
Total liabilities 63,446 66,315
Stockholders' equity
Common stock 40 40
Treasury shares, at cost (9) -
Paid-in capital 27,807 27,756
Accumulated deficit (8,426) (8,584)
Accumulated other comprehensive loss (392) (404)
Total stockholders' equity 19,020 18,808
Total liabilities and stockholders' equity 82,466$ 85,123$
NET DEBT* (NON-GAAP) (Unaudited)
(Millions)
9/30/17 3/31/17
Total debt 38,378$ 40,914$
Less: Cash and cash equivalents (4,802) (2,870)
Less: Short-term investments (1,610) (5,444)
Net debt* 31,966$ 32,600$
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SCHEDULE OF DEBT (Unaudited)
(Millions)
9/30/17
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
Sprint Corporation 10,500
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 3,500
Sprint Spectrum Co LLC, Sprint Spectrum Co II LLC, and Sprint Spectrum Co III LLC 3,500
Sprint Communications, Inc.
Export Development Canada secured loan 12/17/2019 300
9% Guaranteed notes due 2018 11/15/2018 1,800
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% Secured debentures due 2022 04/15/2022 200
6% Senior notes due 2022 11/15/2022 2,280
Sprint Communications, Inc. 8,080
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
Clearwire Communications LLC
8.25% Exchangeable notes due 2040 (a) 12/01/2017 629
Clearwire Communications LLC 629
Credit facilities
Secured equipment credit facilities 2020 - 2021 552
Secured term loan 02/03/2024 3,980
Credit facilities 4,532
Accounts receivable facility 11/19/2018 2,393
Financing obligations 2017 - 2021 2,011
Capital leases and other obligations 2017 - 2024 533
Total principal 38,382
Net premiums and debt financing costs (4)
Total debt 38,378$
(a) $629 million Clearwire 8.25% Exchangeable Notes due 2040 have both a par call and put in December 2017.
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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 products
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 equipment revenue at the point of sale and the cost of the device is recognized as cost
of products. During the three and six-month periods ended September 30, 2017, we leased devices through our Sprint direct channels totaling
approximately $1,060 million and $1,910 million, respectively, which would have increased cost of products 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 from the time value of money element related to the imputed interest on the installment receivable.
(2) During 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, the company recorded
a pre-tax non-cash gain related to spectrum swaps with other carriers. During the second quarter of fiscal year 2016 the company recorded a pre-
tax non-cash gain of $354 million related to spectrum swaps with other carriers.
(3) 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 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). During the first quarter of fiscal year 2016, contract terminations primarily
relate to the termination of our pre-existing wholesale arrangement with NTELOS Holding Corp.
(5) 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. During the second quarter of fiscal year 2016, litigation and other contingencies consist of unfavorable developments associated with
legal matters as well as federal and state matters such as sales, use or property taxes.
(6) 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.
(7) Sprint is no longer reporting Lifeline subscribers due to recent 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 mobile virtual network operators (MVNO). The table reflects the reclassification of the related Assurance Wireless prepaid revenue from
Prepaid service revenue to Wholesale, affiliate and other revenue of $92 million and $183 million for the three and six-month periods ended
September 30, 2016, respectively. Revenue associated with subscribers through our wholesale Lifeline MVNO's continue to remain in Wholesale,
affiliate and other revenue following this change.
*FINANCIAL MEASURES
*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, operating lease revenue 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, operating lease
revenue, 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, operating lease revenue
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, operating lease revenue, 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, including changes in restricted cash, if any, and excluding the sale-leaseback of devices 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, 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.
SAFE
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,
2017. 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 54.0 million connections as of September 30, 2017 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. Sprint has been named
to the Dow Jones Sustainability Index (DJSI) North America for the past five years. You can learn more and visit Sprint at
www.sprint.com or www.facebook.com/sprint and www.twitter.com/sprint.
FY 2017
RESULTS
October 25, 2017
Message from Management Q2
Q2 Fiscal 2017 Results | October 25, 2017
Message from Management
| 2
©2017 Sprint. This information is subject to Sprint policies regarding use and is the property of Sprint and/or its relevant affiliates and may contain restricted, confidential or privileged materials intended for the sole use of
the intended recipient. Any review, use, distribution or disclosure is prohibited without authorization.
Marcelo Claure
President, Chief Executive Officer
2Q Highlights
Our thoughts and prayers are with those impacted by the recent hurricanes. While the
hurricanes did have some negative impacts to the business, our focus is on our employees and
customers as we work swiftly to restore our network and retail distribution.
For obvious reasons, given the noise in the media and in the market about potential strategic
opportunities for Sprint, we are taking a non-traditional approach to sharing our results with you
this quarter.
And it was a special quarter because we delivered an estimated 22% of industry postpaid phone
gross additions, which is the highest in company history and speaks volumes to the
improvement in our brand and our product when you compare to our estimated 10% share in
mid-2014. Most impressively, we are growing in all three segments of the market – consumer
postpaid, business, and prepaid.
We remain focused on executing on our turnaround plan to simultaneously grow customers,
take costs out of the business, improve our network, and grow our cash flows.
• This momentum continued with our fiscal second quarter results, which includes the highest
quarterly adjusted EBITDA* for a fiscal second quarter in a decade, and the seventh
consecutive quarter of operating income.
• This improving profitability was driven by continued year-over-year reduction in our
operating expenses.
• Furthermore, we have now delivered positive adjusted free cash flow* in seven of the last
eight quarters.
• We have grown our postpaid phone base for nine consecutive quarters and we delivered our
third consecutive quarter of prepaid net additions.
• Our network also continues to perform at best ever levels as we execute our densification
and optimization program, and I am excited that the best is yet to come with further
improvements and investments ahead.
Growing Connections
We delivered the highest retail phone net additions in more than two years, which drives the
future profitability of the business.
• This growth was led by our strong acquisition momentum delivering postpaid phone gross
additions that were up 10% year-over-year, and were the highest for a fiscal second quarter in
six years.
• This led to postpaid phone net additions of 279,000, which marked the ninth consecutive
quarter of growth.
www.sprint.com/investors
Q2 Fiscal 2017 Results | October 25, 2017
Message from Management
| 3
©2017 Sprint. This information is subject to Sprint policies regarding use and is the property of Sprint and/or its relevant affiliates and may contain restricted, confidential or privileged materials intended for the sole use of
the intended recipient. Any review, use, distribution or disclosure is prohibited without authorization.
• Our postpaid phone churn was 1.59% on typical industry seasonality.
• We also saw 6.7% of our postpaid base upgrading in the quarter compared to 6.4% a year
ago. This increase reflects a higher eligible base as well as the optionality for consumers to
have access to the latest iconic devices under our iPhone Forever and Samsung Forever
programs.
• Furthermore, we have made significant improvement in the business markets as well, with
phone gross additions from business customers up more than 30% from a year ago.
• I am also proud to report that we maintained our prepaid momentum in the fiscal second
quarter with 95,000 net additions, which improved by 544,000 year-over-year.
o This marked the highest net additions for a fiscal second quarter in the last five years,
and our prepaid gross additions returned to year-over-year growth.
o Continued strength in our Boost Mobile brand was partially offset by losses from our
legacy Virgin Mobile offers, which we look to improve in the future.
o Prepaid churn was 4.83% compared to 5.59% for the year-ago period as we see
improved customer quality and engagement from our new offers.
Network Getting Better Every Day
Our network continues to improve and perform at best ever levels and we are delivering on our
goal of unlocking the value of our spectrum holdings by densifying and optimizing our network
to improve the customer experience.
• Ookla Speedtest data shows Sprint is the most improved network so far in 2017 with average
download speeds up 33% year-over-year, and we expect to improve even more with our
densification and optimization strategy.
o In more than 25 of the top markets, our average download speeds increased
anywhere from 40% to more than 100%, including Chicago, Los Angeles, Seattle, and
Houston.
o Furthermore, Sprint now ranks #1 for fastest average download speed in 15 cities
including Seattle, Salt Lake City, and Louisville. We're also putting pressure on the
competition with a #2 speed ranking in markets such as Atlanta, Chicago and many
more.
• The more 2.5 GHz spectrum we deploy, the more our data performance and speeds improve.
What's exciting is that we now have more tools to bring this spectrum to customers.
o Our LTE Plus densification and optimization toolkit includes technologies such as
multiple carrier aggregation, beamforming, and High Performance User Equipment
(HPUE), along with various small cell solutions.
o We have already deployed tens of thousands of small cell solutions, including the
Sprint Magic Box, which recently won the 2017 Mobile Breakthrough Award for Small
Cell Technology Innovation of the Year.
o This broad toolkit enables us to quickly roll out targeted, capital efficient capacity in
our network to improve service and meet customers’ growing demand for unlimited
data.
• In addition, we expect to continue to expand our LTE coverage and capacity by expanding
our 800 MHz and 2.5 GHz footprints through additional macro tower upgrades as well as
new macro site additions.
www.sprint.com/investors
Q2 Fiscal 2017 Results | October 25, 2017
Message from Management
| 4
©2017 Sprint. This information is subject to Sprint policies regarding use and is the property of Sprint and/or its relevant affiliates and may contain restricted, confidential or privileged materials intended for the sole use of
the intended recipient. Any review, use, distribution or disclosure is prohibited without authorization.
• We will soon add Massive MIMO to the Sprint toolbox with field testing underway and
deployment slated for next year. As demonstrated a few weeks ago in Seattle, Massive MIMO
is expected to bring even more capacity and performance to the Sprint network - up to 10
times more capacity than current LTE networks. And in high-band TDD-LTE networks this can
be done by simply exchanging antennas on cell sites.
• We are also preparing our network for the growing IoT ecosystem as we completed our
deployment of LTE Cat 1 technology across our nationwide network.
• Lastly, we are also preparing for 5G. We continue to partner across the global 2.5GHz,
ecosystem including SoftBank, Qualcomm, China Mobile, and others towards rapidly
developing the 5G NR standards to make 2.5GHz a key band in global 5G deployments.
Enhancing our Value Proposition
We continue to improve our value proposition and distribution to deliver what works for
customers. This includes simplifying our offers and the way we transact with our customers.
• We launched Sprint Flex and Sprint Deals at the beginning of the quarter - programs that
simplify the wireless experience and offer customers the best way to get the latest device
and give them the opportunity to receive annual upgrades for all smartphones.
o With Sprint Flex, we offer customers one primary way to get a phone, with more
flexibility than ever before. Combined with our Unlimited Freedom rate plan, Sprint
Flex makes it much easier for our frontline employees to sell our products, but more
importantly, much easier for our customers to understand why Sprint is the best
choice.
o Second, with Sprint Deals, cost-conscious customers have responded well to both
the flexibility and savings on a "value menu" of affordable smartphones. By grouping
similarly priced devices, we have simplified the pricing for the customer to either $5
or $10 a month with a small down payment of less than $30.
• We continue to optimize our service pricing in the market as well to grow profitability, and
we recently removed all discounts on the first two lines of our Unlimited Freedom plan to
return to rack rate pricing of $100. Now our only promotional pricing is on lines three
through five, which has the accretive benefits of attracting larger family accounts, and even
the additional lines return to rack rate prices after one year. We expect to continue to
optimize our service offers going forward to enhance the company's profitability, with
another rate card increase likely next quarter.
• Likewise, we continue to grow our digital sales capabilities with postpaid phone gross
additions in the digital channel up 30% year-over-year, and postpaid upgrades through the
digital channel up 20% compared to a year ago.
• Furthermore, we are optimizing and expanding our retail distribution to lower the average
cost per transaction, increase our brand presence, and better serve our customers. We have
opened over 400 Sprint branded doors year-to-date, including converting approximately
350 of the best performing RadioShack stores to full Sprint retail stores in just a couple of
months.
• In addition, we have opened hundreds of new Boost Mobile stores this year, and have
updated some older stores to the latest format and furnishings which have proven to deliver
greater productivity on a same store basis. We will continue to add more Sprint and Boost
www.sprint.com/investors
Q2 Fiscal 2017 Results | October 25, 2017
Message from Management
| 5
©2017 Sprint. This information is subject to Sprint policies regarding use and is the property of Sprint and/or its relevant affiliates and may contain restricted, confidential or privileged materials intended for the sole use of
the intended recipient. Any review, use, distribution or disclosure is prohibited without authorization.
Mobile doors this year, while also updating more existing stores to be more productive and
appealing.
Tarek A. Robbiati
Chief Financial Officer
Stable Revenue Trends
Consolidated net operating revenues of $7.9 billion for the quarter were down slightly year-over-
year with the increased mix of leasing transactions deferring more equipment revenue to future
periods relative to the higher equipment installment plan mix last year.
• Wireless service revenue of $5.6 billion declined only 3% year-over-year when normalizing for
the change in our device insurance program, which is the lowest year-over-year decline in
the last fourteen quarters.
• Postpaid Phone Average Billings per User*, or ABPU, of $68.95 was relatively flat year-over-
year when normalizing for the change in recognition for device insurance revenues.
Meanwhile, Postpaid Average Billings Per Account*, or ABPA, of $169.25 for the quarter
increased nearly 3% year-over-year when normalizing for the change in device insurance
revenues.
• 85% of postpaid device activations in the quarter were financed, while 89% of postpaid
phone activations were financed. We saw an increase in the mix of postpaid device
activations on operating leases at 68%, driven by the launch of Sprint Flex in July to simplify
our device financing options for our frontline and consumers.
• At the end of the quarter, 78% of our postpaid phone base was on unsubsidized rate plans.
This leaves about 10% of our postpaid phone base to be transitioned to unsubsidized rate
plans assuming that penetration will level off around 90% due to business and other legacy
plans.
• Meanwhile, our prepaid ARPU grew year-over-year to $37.83 in the fiscal second quarter.
This included almost one month of Boost Mobile's taxes and fees inclusive plans that
launched in early September, which may have a dilutive impact to ARPU sequentially this
quarter, but has been well received in the market.
Reducing Operating Expenses
We continued to execute on our cost transformation in the fiscal second quarter.
• We have realized over $750 million in net reductions in combined operating expenses year-
to-date across cost of services and selling, general, and administrative expenses.
• Cost of services for the quarter of $1.7 billion was down 19% year-over-year, primarily driven
by changes to our device insurance program, as the program revenue and costs are
accounted for and reported on a net basis, while lower network labor and backhaul expenses
and lower wireline expenses also contributed to the decline.
• Selling, general, and administrative expenses were $2.0 billion in the quarter and were
relatively flat compared to a year ago, as the year-over-year increases in prepaid marketing
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Q2 Fiscal 2017 Results | October 25, 2017
Message from Management
| 6
©2017 Sprint. This information is subject to Sprint policies regarding use and is the property of Sprint and/or its relevant affiliates and may contain restricted, confidential or privileged materials intended for the sole use of
the intended recipient. Any review, use, distribution or disclosure is prohibited without authorization.
and sales expenses were mostly offset by lower customer care costs and bad debt
expenses.
• Cost of products of $1.4 billion for the quarter decreased by 17% from a year ago, mostly
driven by a lower mix of installment billing sales and the elimination of lease payments
associated with the first sale-leaseback transaction with Mobile Leasing Solutions in the year-
ago period.
• We remain focused on our cost transformation as we expect roughly $1.3 to $1.5 billion in net
cost reductions year-over-year in fiscal 2017, after reinvestments into growth platforms for
the business including retail distribution, network densification, digitalization of sales and
care, and prepaid growth initiatives.
• Furthermore, we are already developing initiatives for additional expense reductions in 2018
and beyond to further improve margins in the future.
Improving Profitability
• Sprint reported a net loss this quarter of $48 million, or $0.01 per share, and improved by
66% compared to a net loss of $142 million, or $0.04 per share, in the year-ago period.
• Excluding the after-tax benefit of the non-recurring items in the year-ago period and the
hurricane charges in the current quarter, our net loss improved nearly $200 million, or $0.05
per share, year-over-year and would have been close to breakeven for the quarter. On a
year-to-date basis, net income is $158 million.
• Operating income of $601 million in fiscal second quarter was relatively flat compared to the
year-ago quarter. However, the year-ago quarter included a pre-tax non-cash gain of $256
million related to spectrum swaps that was partially offset by litigation and other
contingency expenses, while the current quarter included approximately $34 million of
hurricane related charges. Adjusting for these special items, our operating income was up
approximately $270 million year-over-year.
• Our adjusted EBITDA* of $2.7 billion for the quarter was the highest fiscal second quarter in
ten years and improved by 16% compared to a year ago, primarily driven by the expense
reductions previously discussed.
Increasing Capex
• Total cash capital expenditures were $1.3 billion in fiscal second quarter compared to $828
million a year ago. Excluding capitalized device leases, cash capital expenditures were $682
million in the quarter compared to $470 million in the year-ago period, with the year-over-
year increase driven by the ramp up of our network improvement initiatives and our
densification program.
Growing Cash Flows
• Net cash provided by operating activities was $2.0 billion for the quarter compared to $1.7
billion a year ago. Year-to-date, our net cash flow provided by operating activities is $3.2
billion, which is up 44% year-over-year.
www.sprint.com/investors
Q2 Fiscal 2017 Results | October 25, 2017
Message from Management
| 7
©2017 Sprint. This information is subject to Sprint policies regarding use and is the property of Sprint and/or its relevant affiliates and may contain restricted, confidential or privileged materials intended for the sole use of
the intended recipient. Any review, use, distribution or disclosure is prohibited without authorization.
• Adjusted free cash flow* was $420 million for fiscal second quarter, and $659 million on a
year-to-date basis. We have now reported positive adjusted free cash flow* in seven of the
last eight quarters.
• While we expect adjusted free cash flow* to be negative in fiscal third quarter due to
seasonally higher working capital for devices, we are making strong progress in consistent
adjusted free cash flow* generation, and we are aiming to be close to breakeven for the full
fiscal year.
Guidance
• We continue to expect adjusted EBITDA* to be $10.8 to $11.2 billion in fiscal 2017, primarily
driven by a continued focus on significant cost reductions.
• Likewise, we continue to expect Operating Income to be between $2.1 to $2.5 billion in fiscal
year 2017. This guidance includes expected depreciation for leased devices of $3.5 to $4
billion for fiscal 2017.
• Regarding our guidance for cash capital expenditures, excluding leased devices through
indirect channels, we continue to expect spending to double year-over-year to
approximately $3.5 to $4 billion as we ramp up our densification and utilize the expanded
toolbox of cost efficient coverage and capacity options.
• Lastly, based on our improved cash flows in the first half of the fiscal year, we now expect
adjusted free cash flow* to be close to breakeven for the full fiscal year 2017 as the improved
cash flows from operations funds our increased capital investments in our network.
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Q2 Fiscal 2017 Results | October 25, 2017
Message from Management
| 8
©2017 Sprint. This information is subject to Sprint policies regarding use and is the property of Sprint and/or its relevant affiliates and may contain restricted, confidential or privileged materials intended for the sole use of
the intended recipient. Any review, use, distribution or disclosure is prohibited without authorization.
*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,
operating lease revenue 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, operating lease
revenue, 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, operating lease revenue 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,
operating lease revenue, 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, including changes in restricted cash, if any, and excluding the sale-
leaseback of devices 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.
www.sprint.com/investors
Q2 Fiscal 2017 Results | October 25, 2017
Message from Management
| 9
©2017 Sprint. This information is subject to Sprint policies regarding use and is the property of Sprint and/or its relevant affiliates and may contain restricted, confidential or privileged materials intended for the sole use of
the intended recipient. Any review, use, distribution or disclosure is prohibited without authorization.
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, 2017.
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.
www.sprint.com/investors
This regulatory filing also includes additional resources:
fiscal2q17sprintquarterlyinv.pdf
fiscal2q17messagefrommanagem.pdf
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