Sprint Q3 Loss Narrows, Raises FY15 Adj. EBITDA View; Stock Up

(RTTNews) - Sprint Corp. (S) reported a loss for the third-quarter of 2015 that narrowed from last year. It raised its fiscal year 2015 Adjusted EBITDA guidance.

In addition, the company's preliminary estimate for fiscal year 2016 Adjusted EBITDA is approximately $9.5 billion to $10 billion.

In pre-market trade, S is currently trading $2.94, up $0.42 or 16.67%.

Sprint said it continues to progress toward a sustainable reduction of $2 billion or more of run rate operating expenses exiting fiscal 2016 and expects approximately $1 billion of transformation program costs, which are expected to be split relatively evenly between operating expenses and capital expenditures, to be incurred across fiscal 2015 and 2016 to achieve that run rate benefit.

It reported operating results for the third fiscal quarter of 2015, including growth in postpaid phone customers for the second consecutive quarter with the highest net additions in three years at 366,000, the lowest-ever postpaid churn for a third quarter at 1.62 percent, and the highest postpaid net ports on record.

Net loss for the third fiscal quarter of 2015 narrowed to $836 million or $0.21 per share from $2.4 billion, or $0.60 per share, in the year-ago period. Adjusting for the severance and exit costs and impairment charge, net loss would have improved by approximately $300 million year-over-year, or $0.08 per share.

It reported operating loss of $197 million included $209 million of severance and exit costs and compared to an operating loss of $2.5 billion in the year-ago quarter, an improvement of approximately $2.3 billion. Adjusting for the $209 million of severance and exit costs in the latest-quarter and a non-cash impairment charge of approximately $2.1 billion in the prior year quarter, operating loss would have improved by approximately $400 million year-over-year.

Total net additions were 491,000 compared to 967,000 in the prior year quarter - a decline of 476,000 year-over-year. Postpaid net additions was 501,000 compared to 30,000 in the prior year quarter - an improvement of 471,000 year-over-year.

Consolidated Adjusted EBITDA of $1.9 billion improved from the prior year period, as expense reductions more than offset the decline in operating revenues. Total expenses improved primarily because of lower cost of product expenses related to device leasing options for which the associated cost was recorded as depreciation expense, and $500 million of lower selling, general, and administrative expenses.

Net operating revenues of $8.1 billion decreased 10 percent year-over-year. The year-over-year decline was due to lower wireless service revenues, primarily related to customer shifts to rate plans associated with device financing options, and lower equipment revenues due to a shift from installment billing and subsidized sales, which recognize more revenue at the point of sale, to leasing sales, which recognize revenues over time.

Wireless service revenues plus installment plan billings and lease revenue of $7.1 billion increased one percent from the prior year period, primarily because of higher lease revenue and growth in postpaid phone customers.

Sprint said it remains on track to exceed its cost reduction target for fiscal 2015 and has realized a nearly $800 million reduction in cost of service and selling, general, and administrative expenses year-to-date, including $500 million in the third quarter.

Sprint noted that it continues to progress toward a sustainable reduction of $2 billion or more of run rate operating expenses exiting fiscal 2016 and expects approximately $1 billion of transformation program costs, which are expected to be split relatively evenly between operating expenses and capital expenditures, to be incurred across fiscal 2015 and 2016 to achieve that run rate benefit.

Sprint said it continues to use its assets to help fund the business and fuel future growth. Together with SoftBank and its partners, the company is establishing a network-related financing entity that could provide $3 billion to $5 billion of incremental funding in fiscal 2016. This entity is expected to raise proceeds from Sprint's existing radio access equipment, as well as a combination of new assets associated with the network densification and a small portion of its spectrum portfolio.

As a result of accelerated cost reductions, the company raised its guidance for fiscal year 2015 Adjusted EBITDA to a range of $7.7 billion to $8 billion from its previous expectation of $6.8 billion to $7.1 billion.

The company also raised its guidance for fiscal year 2015 operating income from its previous expectation of an operating loss of $50 million to $250 million to operating income of $100 million to $300 million.

The company continues to expect fiscal year 2015 cash capital expenditures to be approximately $5 billion, excluding the impact of leased devices sold through indirect channels.