Telephone and Data Systems, Inc. (TDS) Earnings Call Transcript

Good morning, ladies and gentlemen. I'm Walter Carlson, and I will be chairing this meeting. At this time, I call the meeting to order. I would like to thank everyone present for attending this meeting. I would also like to welcome everyone listening on the webcast. It is now 9:00 on May 22, 2024. As of this date and time, the polls are open for voting on the matters before the annual meeting as set forth in the notice of annual meeting and proxy statement and on the agenda for the meeting. The rules of conduct that we will follow for this meeting are set forth on the reverse side of the agenda. If you do not have a copy of the agenda and rules of conduct and would like a copy, please raise your hand and one will be brought to you. Okay. Everybody has what they need. I would like to take the opportunity to introduce the directors, officers and special guests of TDS who are present. When I call your name, will you please rise. First, I would like to introduce the other directors of TDS who are present: James W. Butman, Director of TDS and President and Chief Executive Officer of TDS Telecommunications LLC; LeRoy T. Carlson, Jr., Director, President and Chief Executive Officer of TDS and Chair and Director of United States Cellular Corporation and TDS Telecommunications LLC. Now attending by phone because she contracted COVID, but I'm going to introduce her anyway is Dr. Letitia G. Carlson, Director of TDS and physician and clinical professor at George Washington University Medical Center; Prudence E. Carlson, Director of TDS; Kimberly D. Dixon, Director of TDS former Executive Vice President and Chief Operating Officer of FedEx Office; Christopher D. O'Leary, Director of TDS and Senior Adviser at Twin Ridge Capital Management; George W. Off, Director of TDS and former Chair and CEO of Checkpoint Systems; Wade Oosterman, Director of TDS and former President, Bell Media, and Vice Chair of BCE and Bell; Vicki L. Villacrez, Director of TDS and Executive Vice President and Chief Financial Officer at TDS; Dirk S. Woessner, Director of TDS and Senior Vice President at Warburg Pincus LLC. I want to take a moment before we go on to recognize officers to acknowledge the significant contributions of Clarence Davis, who passed away in December. Clarence brought great insight into our boardroom and his work on behalf of the Audit Committee, Compensation and Human Resources Committee was impactful. We miss him. We have a search underway to identify a new Board member to bring relevant expertise and experience to TDS. We would also like to take this time to introduce the other officers of the company who are present today: John N. Greene, Vice President, Human Resources Development, Joseph R. Hanley, Senior Vice President, Strategy and Corporate Development; Jane W. McCann, Vice President, Corporate Secretary; Colleen Thompson, Vice President, Corporate Relations; Anita Jay Kroll, Vice President and Controller and Chief Accounting Officer. Pay attention there, she's the Chief Accounting Officer; special call out here, Laurie A. Ruchti, Vice President and CIO; John M. Toomey, Vice President and Treasurer; Thomas S. Weber, Vice President, Internal Audit. For just a few more days -- and Tom, we're delighted that you're hearing delighted that you've been in service to TDS into UScellular for so many years. Thank you. John Kelsh, General Counsel of TDS and partner of Sidley Austin LLP. Now we have an item here for special guests and Elsa Ansani, Director Internal Audit, Tom Weber's successor and pay attention to her, too. Okay. Anybody else I should mention to pay attention to? Okay. I would also like to take this opportunity to introduce Sean Goldfarb, PricewaterhouseCoopers LLP. We pay attention to him, our independent registered public accountants of TDS. Mr. Goldfarb, do you wish to make a statement at this time. Are there any questions for Mr. Goldfarb? Delighted that you're here. Thank you. Let me now proceed with the matters on the agenda of the meeting. To act as inspectors of election, I have appointed Julie Mathews of Telephone and Data Systems, Inc. Julie where are you? Okay. And Jeff Seiders of Computershare Investor Services, who I understand is on the phone. Jeff? Okay. Our independent transfer agent and registrar. Will the holders of any undelivered proxies, please hold them up so that they may be picked up by the inspectors of election at this time? If you are voting by ballot, please raise your hand so that our inspectors of election can see you. All nominations and proposals by the TDS Board of Directors will be introduced from the chair. Following such business, a proposal by a shareholder may be considered as a representative peers to this point, no representative for that shareholder has appeared because the proposal needs to be properly presented. If any shareholder with a proper purpose would like to address the business at hand, I would ask you to raise your hand and address the chair, identifying yourself and disclosing the nature of your business. In addition, shareholders will have an opportunity following the formal part of the meeting and management presentation to ask any questions they may have. In the interest of time, we will dispense with the reading of the notice of meeting and the affidavit of mailing of the notice. We will also dispense with the reading of the minutes of the Annual Meeting of Shareholders held on May 18 of 2023. Secretary has copies of these documents if any shareholder would like to examine them after the meeting. The Board of Directors set April 11, 2024 as the record date for this shareholders' meeting. Secretary has a record of shareholders as of that date. By order of the Board of Directors, management of the company distributed a notice of annual meeting and proxy statement on April 19, 2024, to shareholders of TDS, which solicited proxies from the shareholders. The inspectors have tabulated the proxies received before this meeting and advised me of the voting results immediately prior to the commencement of this meeting. Virtually all votes are received through proxies and the voting results with respect to all matters are generally known before the meeting starts. Accordingly, the inspectors of election have been instructed to advise me prior to the announcement of such results only in the event that there are any changes in outcome considering any votes delivered, changed or revoked after the commencement of this meeting and prior to the closing of polls for voting. Subject to formal certification by the inspectors of election, I have been informed that a majority of the voting power of each requisite voting group of TDS shares issued and outstanding on April 11, 2024. The record date for this annual meeting is represented at today's meeting. Accordingly, the formal business of the meeting will proceed on the basis that a quorum is present. The only matters which may properly come before the meeting involving a vote of shareholders are those that were set forth in the notice of annual meeting and proxy statement. The 5 proposals in the notice of annual meeting and proxy statement are: number one, one, election of directors; number two, ratification of auditors; number three, approval of an amendment for the 2022 long-term incentive plan to authorize additional common shares available for issuance under the plan; number four, advisory vote on executive compensation; number five, a proposal submitted by a shareholder if properly presented. The first item of business is the election of directors nominated by the Board of Directors. As indicated in the notice of annual meeting and proxy statement, 4 directors will be elected by the holders of common shares and 7 directors will be elected by the holders of Series A common shares. The Board of Directors has nominated Kimberly D. Dixon, George W. Off, Wade Oosterman and Dirk S. Woessner for election as directors by the holders of common shares. The Board of Directors has also nominated James W. Butman, LeRoy T. Carlson, Jr.; Letitia G. Carlson, Prudence E. Carlson, Walter C. D. Carlson, Christopher D. O'Leary and Vicki L. Villacrez for election as directors by the holders of Series A common shares. The Board of Directors unanimously recommends a vote for each of the nominees for election as directors. The second item of business is the proposal to ratify the selection of PricewaterhouseCoopers LLP as the company's independent registered public accountants for 2024. This item of business was proposed by the Board of Directors. This proposal will be voted on by the Series A common shares and common shares voting as a group, present in person or represented by proxy at this meeting. The Board of Directors unanimously recommends a vote for this proposal. The third item of business is the proposal to approve an amendment to the 2022 long-term incentive plan to authorize additional common shares available for issuance under the plan. This item of business was proposed by the Board of Directors. This proposal will be voted on by the Series A common shares and common shares voting as a group, present in person or represented by proxy at this meeting. Board of Directors unanimously recommends a vote for this proposal. The fourth item of business is the proposal to approve, on an advisory basis, the compensation of our named executive officers. This item of business was proposed by the Board of Directors pursuant to regulations of the SEC. This proposal will be voted on by the holders of Series A common shares and common shares voting as one group, present in person or represented by proxy at this meeting. The Board of Directors unanimously recommends a vote for this proposal. The last item of business is the proposal submitted by a shareholder. Kenneth Steiner, the shareholder who submitted the proposal. I'm now asking the audience, is there anybody here to present the proposal on behalf of Mr. Steiner. If not, the proposal is not properly presented and will not be considered. No proponent has appeared at this meeting to present Mr. Steiner's shareholder proposal, is therefore not been properly presented and will not be brought before the meeting. Now to the next point. In the election of 4 directors, the holders of common shares are entitled to 1 vote for each common share registered in their names. In matters other than the election of directors, the holders of common shares are entitled to 0.545350 votes for each common share registered in their names at this meeting. The holders of Series A common shares are entitled to 10 votes for each Series A common share registered in their names. The Series A common shares vote with respect to all matters accept the election of the 4 directors elected solely by the holders of common shares. If you have not yet completed delivery of your proxies or ballots, please do so now since we will be closing the polls for voting at this time. It is now 9:14 a.m. on May 22, 2024, and the polls are closed for voting. Since the inspector of election has not informed me of any changes in outcome on any of the proposals, we will proceed with the announcement of the voting results at this time. With respect to the election of the directors, each of them received at least a plurality of the votes of the class of stock voting for such director. Accordingly, each of such persons has been elected as a Director of Telephone and Data Systems, Inc. for a term expiring at the 2025 Annual Meeting Shareholders or until his or her successor shall have been elected and qualified. The proposal to ratify the selection of PricewaterhouseCoopers LLP as independent registered public accountants for 2024 and has received the affirmative vote of holders of a substantial majority of the combined voting power of the Series A common shares and common shares entitled to vote on this matter and present in person were represented by proxy at this annual meeting. This proposal is therefore also approved. The proposal to approve an amendment to the 2022 long-term incentive plan to authorize additional common shares available for issuance under the plan has received the affirmative vote holders of a substantial majority of the combined voting power of the Series A common shares and common shares entitled to vote on this matter and present in person or represented by proxy at this annual meeting. This proposal is therefore also approved. The proposal to approve on an advisory basis the compensation of our named executive officers has received the affirmative vote of holders of a substantial majority of the combined voting power of the Series A common shares and common shares entitled to vote on this matter and present in person or represented by proxy at this annual meeting. This proposal is therefore also approved. As noted above, the shareholder proposal was not properly presented at this meeting. The inspector of election will tally any additional votes received after the commencement of this meeting and prior to the closing of the polls and furnish a written report of the final vote count with respect to the matters voted on today, which will be included in the minutes of the meeting. These voting results will also be reported on a Form 8-K that will be filed within 4 business days of today. Since there is no further business to come before this meeting, the meeting is adjourned. At this time, LeRoy T. Carlson, Jr., will make a brief presentation. Ted?

Thank you, Walter, and good morning, ladies and gentlemen. It's great to see you all here today for this annual meeting. The information set forth in the presentation contain statements about expected future events and financial results that are forward-looking and subject to risks and uncertainties. Please review the safe harbor paragraphs in our press releases and the extended version included in our SEC filings. At TDS, our mission is to provide outstanding communication services to our customers and to meet the needs of our shareholders, our associates and our communities. In pursuing this mission, we are investing in the TDS family of businesses to bring our customers higher-quality wireless and broadband services that will position the company for long-term sustainability and growth. 2023 was a dynamic year for the TDS family of businesses. As UScellular celebrated its 40th anniversary in 2023, I am pleased to report on its 2023 accomplishments. UScellular increased postpaid average revenue per user by 2%. We also grew the number of fixed wireless connections, and we surpassed $100 million per year in third-party tower rental revenues, making a significant milestone for the company. UScellular also completed its network monetization -- modernization, excuse me, and began its multiyear mid-band deployment. And while facing challenges in mobility subscriber growth, UScellular successfully balanced subscriber objectives with financial goals and enhanced profitability in 2023 and with year-over-year increases in profitability. This accomplishment was made possible through disciplined expense management and a focus on operational efficiency across every major category. In August of 2023, the Boards of Directors of TDS and UScellular decided to initiate a process to explore strategic alternatives for UScellular. At this time, the review remains active and ongoing. The management of both companies and the Board's remain committed to pursuing the path that is in the best interest of the company and its shareholders. Given the nature of the process, we don't expect to have updates until it is concluded. Looking ahead, UScellular remains steadfast in its commitment to connecting people to what matters most. UScellular's operational priorities continue to focus on balancing subscriber growth with financial discipline. Retention officers retention officer -- retention offers, are a priority ensuring that our valued customers receive the best possible experience as we continue leaning into our Built for US brand. Additionally, UScellular is committed to continuing network enhancements through a multiyear mid-band spectrum deployment. As it is deployed, the addition of mid-band spectrum will enable us to provide an even better experience for our mobility and fixed wireless customers. Building on the success of our fiber growth strategy, TDS Telecom also made significant strides in expanding its network capabilities and delivering high-speed broadband services to communities across the nation. In 2023, TDS Telecom achieved a record year by completing 217,000 new marketable fiber service addresses and expanding its footprint by 12%, a testament to the dedication and hard work of our telecom team. Furthermore, total broadband connections grew by 6%, driven primarily by expansion markets. To address the broadband needs of our most rural markets, TDS Telecom also secured Enhanced A-CAM funding, providing $90 million of annual regulatory revenue support for the next 15 years in exchange for delivering high-speed broadband through approximately 270,000 service addresses. This initiative reaffirms our commitment to bridging the digital divide and ensuring that all communities have access to essential broadband services. Looking forward, TDS Telecom remains focused on transforming itself into a fiber broadband company. Investments in our strategic priorities will drive profitability and improved returns over time. TDS Telecom is growing scale and revenue while continuously optimizing its cost structure. In 2024, we are prioritizing projects to ensure prudent capital management while continuing to deliver on our commitment to expanding our fiber footprint and driving penetration rates in the markets we have already launched. We are planning to deliver approximately 125,000 new marketable fiber service addresses in 2024, demonstrating our ongoing dedication to providing cutting-edge connectivity solutions to our customers. I'd like to thank each of our shareholders, our debt holders and our associates for your support, which enables TDS to continue to serve our customers and provide them with essential communication services at this time of great need. Are there any questions from our shareholders? If not, I will turn the floor back over to Walter.

Well, thank you very much to everybody here in the room in Chicago. Thank you to those on the webcast for attending. We very much look forward to reporting back to you next year at our next Annual Meeting. So until then, be well. Have a great day.