UZD Q3 2026 earnings call transcript, November 6, 2026

question and answer session. If you would like to ask a question, please raise your hand. If you have dialed in to today's call, please press star 9 to raise your hand and star 6 to unmute. I will now hand the conference over to John Toomey. Treasurer, Vice President, and Head of Corporate Relations. Please go ahead.

And good morning, everyone. TDS made progress during the third quarter on our mission to transform the organization. Over the past several years, we have taken many strategic actions that position us well, both for today and the future. Those include exiting the wireless business, monetizing spectrum at attractive values, retaining tower assets that can benefit from future demand, investing in fiber without the burden of high leverage in a period of rising interest rates, and repurchasing shares at prices we believe. are attractive. Today, I am pleased to share TDS and Arrayed Digital Infrastructure's third quarter results, which reflect the progress we are making. TDS Telecom delivered record construction. activity and strong fiber customer growth, but has more work to do to offset pressures on profitability. Array delivered strong revenue growth as it continues to optimize the portfolio. Across both businesses, we remain confident in our strategy and the investments we are making to create long-term value. Turning to slide three and our 2026 enterprise priorities, our objectives remain clear. Grow and strengthen our fiber business. Maximize the value of our tower portfolio, maintain disciplined capital allocation, and continue transforming our business for the future. As Ken Dixon and Chris Botfeld will explain, TDS Telecom continues. To expand its fiber footprint while increasing its focus on converting those addresses to customers. As Anthony Carlson will describe, Array is advancing its strategic priorities through increased tower collaboration.

Locations and continued efforts to monetize its C-band spectrum. I do want to briefly comment on TDS's withdrawal of the previously announced offer to acquire the minority interest of Array in an all- stock transaction. As we noted in our September 1st press release, we continue to believe there could be strategic benefits to such a combination. However, after extensive review on both sides, the two parties were unable to reach agreement on value and form of. consideration. With that process behind us, TDS continues to be laser focused on supporting both Array and TDS Telecom as they advance their respective strategic objectives and build shareholder value. I continue to be encouraged by the progress being made in both business units and by the work underway to strengthen our culture during this period of transformation. I would like to personally thank every. and associate across the enterprise for their continued commitment and contributions. I will now turn the call over to Vicki.

...as future flexibility, the TDS Board has approved an additional $250 million share repurchase authorization. This is an open authorization that is not time-bound. ...and allows us to remain opportunistic as market and business conditions evolve. Finally, in the quarter, we completed the acquisition of Granite State Communications, a tuck-in market in the UZD. in New Hampshire that brings nearly 13,000 fully-fibered service addresses to the portfolio, strengthening our Northeast fiber cluster.

Thank you, and now I will turn the call over to Ken Dixon to discuss TDS's fiber.

As a result, we have a large pipeline of addresses in various stages of construction and investment across many markets. This pipeline positions us well to meet our goals, both this year and long term. In summary, our build teams are delivering at a record pace, giving us confidence in the construction plan and the opportunity. Ahead. Turning to sales, we ended the third quarter with approximately 17,000 fiber net ads. Our highest quarterly result in company history, up approximately 50 percent. Year over year. We also saw improvement in our fiber churn when compared to last year's third quarter, which is typically the industry's highest quarter for churn. We are seeing the benefits. of our new sales leadership and expanded capabilities. We have additional door to door vendors to attack the record open for sale opportunities to complement our existing teams. We have all. Also increased capacity in our multi dwelling space to accelerate sales for those units. In terms of customer acquisition, we have shifted a significant portion of volume toward the dot com channel, which is our lowest cost. Cost of acquisition. We are excited by the sales opportunities we see as we close out 2026 and move into 2027. In our cable markets, subscriber trends. Continue to stabilize during the third quarter. As you know, 22% of our cable addresses today are served with fiber. As we continue to become a more fiber centric company.

I'm pleased to share that we are beginning activities to convert another 30,000 coax addresses to fiber. Our operational transformation is centered on efficiency, improving the customer experience, and simplification. As I've noted before, we continue to make progress, modernizing our systems, and remain on track with our transformation roadmap, making it easier for customers to do business with us. Turning to slide eight, our long-term goals reflect the scale and long-term value we expect to create through our fiber growth strategy. We believe fiber is the superior broadband technology, not only for today, but well into the future. With the delivery of approximately 76,000 fiber addresses in the quarter, we now serve over 1.2 million fiber source. Service addresses representing 63% of our total footprint and with 82% of addresses capable of gig speeds. We are building at a record pace, improving. Our execution and steadily shifting the business toward fiber. We know there is more work ahead, but the progress we're making reinforces our confidence in our strategy. And long-term value of the fiber-centric business we are creating. Before I turn it over to Chris, I want to comment briefly on our third quarter financial results. We are very bullish.

Thanks, Ken.

Turning to slide nine, the chart on the left shows our quarterly fiber service address delivery over the past seven quarters and reflects the build momentum we are experiencing. As Ken highlighted, we had company record address delivery in the. Third quarter representing an 82% increase year over year and the momentum continues as we head into the fourth quarter. For the full year, we remain on track to deliver between 250,000 and 300,000 new fiber service. The chart on the right illustrates the continued expansion of our fiber footprint. Over the past three years, we have increased the number of fiber service addresses across our markets by approximately 77% demonstrating steady and meaningful progress toward our long term fiber goals. On slide 10, residential fiber net ads were approximately 17,000 in the third quarter, a 50% increase compared to prior year, driven by continued footprint. Print expansion and ongoing copper to fiber conversions. Residential fiber connections have grown 81% over the past three years, outpacing our fiber footprint growth. We expect continued fiber connection growth as we expand our. footprint. Turning to slide 11, the chart on the left depicts our residential revenue per connection, which increased 2% year over year. This growth reflects annual price increases partially offset. by promotional activity. The chart on the right highlights total residential revenue between copper cable and fiber. You'll see that fiber revenue is up 14% or 12 million versus prior year, which largely offsets the legacy revenue stream pressures we are experiencing.

In cable, revenues are down 7% versus the third quarter of 2025, reflecting continued market pressures partially offset by a one-time benefit in the quarter. Adjusting for this benefit, cable revenues would have been down 10%. As Ken highlighted, we are increasing investment and sales capacity in our cable markets and are starting to see progress. Overall, total residential revenue declined $3 million compared to prior year. Excluding the impact of divestitures, residential revenues were relatively flat. As Ken noted, we are deploying fiber across our footprint at a record pace to help mitigate legacy headwinds. Slide 12 summarized our financial performance. Total operating revenues declined 3% in the quarter, or 1%, excluding the impact of divestitures. The remaining decline reflects continued legacy revenue stream pressures, partially offset by fiber revenue growth. Cash expenses increased 4% as costs to support our growing expansion markets, along with inflationary cost increases, including fuel and people-related costs, were not fully offset by our transformation and ongoing costs. Containment initiatives. Also note that the third quarter cash expenses include $4.2 million of strategic alternatives costs primarily related to workforce reductions. This compares to $3.5 million incurred in the prior year. We continue to drive efficiencies in the organization to help offset inflationary increases and costs associated with expanding service and growing our footprint.

The decline in adjusted EBITDA for the quarter reflects these cost pressures as well as top-line headwinds from divestitures and legacy revenue streams. Capital expenditures totaled $251 million in the quarter, reflecting higher address delivery, a higher mix of buried versus aerial builds, and a record level of addresses under construction. across our fiber markets that will be delivered in future quarters. We are seeing higher costs to complete our EACAM builds in certain areas, as we need to use more costly construction techniques and more miles of fiber required. Despite these higher costs, we believe the economics of our EACAM program remain attractive. Slide 13 reflects our guidance for 2026, which has been updated. We are projecting total telecom revenues of $990 million to $1.8 million. down from our prior guidance. We were anticipating fiber revenues to more than offset legacy declines during the second half of 2026, but continue to work toward that inflection point. We also moved our agenda. Trusted EBITDA guidance ranged downward to $290 million to $310 million as the lower revenue expectations fall to the bottom line, and we are experiencing higher costs to support our extended hours to service customers. In areas where we are building fiber. From a capital perspective, we have increased our guidance by $100 million from our prior midpoint to approximately $750 million. As Vicki and Ken both

funds. Highlighted. Delivery of fiber addresses at a record pace requires that we have a large funnel of addresses and the flexibility to pivot when delays arise from permitting and other factors. Nearly half of this increased capex is driven by a. Pull forward of future spend, which we expect will contribute to address delivery in 2027. The remaining increase is largely due to higher EACAM build costs and a pivot to construct more of the buried addresses in our. expansion markets, as I mentioned earlier. Before turning over the call, I want to thank the entire TDS team for their continued execution and focus. Their efforts across fiber delivery, customer growth, and operational transformation are critical to the progress we're making toward achieving our long-term. objectives. I'll now turn the call over to Anthony.

The third quarter represented another meaningful step in executing our strategy to optimize tower operations. Our year-over-year results are now becoming increasingly comparable as Q3 2025 marked both the launch of Array as a standalone tower company and the commencement of the T-Mobile MLA. As highlighted on slide 18, when adjusting for DISH and excluding T-Mobile interim site revenue, cash site rental revenue increased 20% euro. After also fully excluding the impact of the T-Mobile MLA, cash site rental revenue grew 7% year-over-year, demonstrating the strong organic growth of our tower portfolio. As T-Mobile continues its network integration activities, we are continuing to see the expected reduction. and interim site revenue as those sites are terminated. Importantly, our leasing pipeline and sustained application activity continue to support healthy revenue growth, which is expected to partially offset the impact of declining interim site revenue over time. Turning to slide 19, we continue to gain greater visibility into the expected population of tenantless towers following T-Mobile's integration process. Based on the information available today, we've refined our estimate to 1,200 to 1,600 tenantless towers. As a reminder, however, T-Mobile has until January 2028 to designate its committed sites under the new MLA. Given the likelihood that a meaningful number of towers will remain without tenants in the near term, we remain intensely focused on our ground lease optimization initiative.

While this is a multi-year effort, we have made progress in reducing lease costs on towers that are likely to become tenantless and identifying the most uneconomic sites for decommissioning. More broadly, we are accelerating our ground lease buyout program, which expands

Thanks, guys.

Power level margins while further reducing portfolio risk. Moving to slide 20, there has been minimal change since last quarter, with a notable exception that we received regulatory approval for the sale of certain 600 megahertz and 700 megahertz spectrum licenses. Subject to FCC finale.

and we remain confident in its value as a highly attractive 5G asset, and the absence of near-term build-out requirements allows us to remain disciplined and avoid being forced sellers. Slide 21 summarizes the results of our partnership or non-controlling investment interests. As a reminder, But the last day of November 2020, investment income and distributions were impacted by several one-time factors, including the impact of the Iowa partnership selling their wireless operations to T-Mobile, and distributions received from Verizon related to their transactions with Vertical Bridge. Equity income for the nine months endings of T-Mobile. September 30th was $116 million. Turning to slide 23, Array delivered a strong quarter, with year-over-year revenue growth driven primarily by the T-Mobile MLA, complemented by solid growth from the rest of our customer. As discussed in prior quarters, the year-over-year increase in cost of operations reflects the reclassification of certain property tax and insurance expenses from SG&A into cost of operations. This change also contributed to the year-over-year reduction in SG&A. SG&A continued to include costs associated with winding down the legacy wireless operations, although those expenses declined further during the quarter. In addition, SG&A remained elevated due to strategic alternatives-related costs incurred in evaluating the proposal.

Received from TDS to acquire the remaining publicly-held shares of Array. Consistent with their classification, these costs are excluded from adjusted OIBDA. With the withdrawal of the TDS proposal, we do not expect these costs to return. On slide 24, our outlook remains unchanged. We expect total operating revenue of $205 to $215 million, adjusted OIBDA of $60 to $75 million, and adjusted EBITDA of $220 million to $235 million. Capital expenditure are expected to be $25 to $35 million, driven by an expected increase in ground lease buyout activity during the remainder of the year. In closing, Array continues to make meaningful progress on its journey to becoming a leading tower company. I want to personally thank our team for their... dedication, execution, and contributions throughout the year. We remain firmly focused on completing the T-Mobile integration, expanding our customer relationships, and optimizing our ground lease portfolio. The momentum across the business is clear. And I am excited about the opportunities ahead and the progress we will continue to achieve together. I will now turn the call back to Walter.

As I noted in my opening remarks, TDS continues to make solid progress. Advancing our strategic priorities. The momentum we are seeing across the businesses positions us well as we come into the last two months of 2026 and look forward to 2027. I'd like to again thank all of the outstanding associates.

Your first question comes from the line of Rick Prentiss with Raymond James. Your line is open. Please go ahead.

Thank you for attending.