AD — Array Digital Infrastructure, Inc.

Earnings Call Summary for TDS and Array (Q2 2025)

1. Key Financial Results and Metrics

• Revenue: Total operating revenues decreased by 1% year-over-year. Excluding divestitures, revenue increased by 1%, driven by growth in fiber subscribers and higher residential revenue per connection.
• Adjusted EBITDA: Expected to be between $320 million to $350 million for 2025.
• Capital Expenditures: Increased due to investments in the E-ACAM program, with over 80% of full-year CapEx focused on fiber.
• Debt Management: T-Mobile transaction resulted in $1.7 billion in debt being assumed, leaving $364 million on Array's balance sheet. TDS plans to redeem approximately $1.1 billion in debt, reducing annual interest expenses by about $80 million.

2. Strategic Updates and Business Highlights

• T-Mobile Transaction: Completed the $4.3 billion sale of UScellular's wireless business, enabling a focus on tower and fiber operations under the new name, Array Digital Infrastructure.
• Leadership Changes: Ken Dixon appointed as CEO of TDS Telecom, expected to drive growth in the fiber business.
• Fiber Expansion: 27,000 new fiber service addresses added in Q2, with a target of 150,000 for the year. E-ACAM construction is underway, expected to contribute significantly to fiber growth.
• Tower Business: Array has 4,400 towers and a new master license agreement with T-Mobile that includes 2,015 colocation sites, enhancing revenue potential.

3. Forward Guidance and Outlook

• Revenue Projections: TDS expects revenues between $1.03 billion and $1.05 billion for 2025.
• Adjusted EBITDA Guidance: Projected between $320 million and $350 million.
• Fiber Goals: Targeting 1.8 million marketable fiber service addresses, with an aim to reach 1 million addresses by year-end.
• Dividend Plans: Anticipation of a regular dividend post-spectrum transactions, with special dividends expected from proceeds of upcoming spectrum sales.

4. Challenges and Points of Concern

• Tenancy Rate Decline: Following the divestiture of UScellular, Array's reported tenancy rate is expected to drop from 1.57 to approximately 1.0, impacting reported metrics.
• Operational Transition Costs: Additional wind-down costs expected as Array transitions from a wireless service provider to an independent tower company, potentially affecting profitability in the near term.
• Competitive Pressures: Concerns about the competitive landscape in fiber markets, especially with aggressive pricing strategies from competitors.

5. Notable Q&A Insights

• Fiber Expansion Strategy: Management expressed confidence in achieving fiber net additions, emphasizing aggressive presales models and targeted market selections.
• M&A Opportunities: TDS is exploring fiber acquisition opportunities that align with existing operations, though specifics are still under consideration.
• Market Dynamics: The competitive backdrop for fiber expansion remains favorable, with a focus on Tier 2 and Tier 3 communities that are less prioritized by larger competitors.
• Future Reporting: Expectations for more detailed financial metrics and operational updates in Q3, including AFFO and dividend sizing.

Overall, the call highlighted a significant transition for TDS and Array, focusing on enhancing their financial position and operational capabilities while navigating challenges associated with market competition and organizational changes.