Records for Service Revenues, Net Cash
Provided by Operating Activities and Free Cash Flow with Strong Net
Income of $550 Million, and Record Q3 Adjusted EBITDA of $2.8
Billion
T-Mobile US, Inc. (NASDAQ: TMUS):
Strong Financial Performance (all
percentages year-over-year):
- Record service revenues of $7.6
billion, up 7% — expect to lead industry in growth for 14th quarter
in a row
- $10.0 billion total revenues, up 8% —
expect to lead the industry in growth for 17th time in last 18
quarters
- Strong net income of $550 million, up
50%. Diluted earnings per share ("EPS") of $0.63, up 50%
- Record Q3 $2.8 billion Adjusted EBITDA,
up 5%(1). Adjusted EBITDA excluding spectrum gains up 12%
- Record net cash provided by operating
activities of $2.4 billion, up 36%
- Record free cash flow of $921 million,
up 59%(1)
Customer Growth Expected to Lead the
Industry:
- 1.3 million total net additions — 18
straight quarters of adding more than 1 million
- 817,000 total branded postpaid net
additions — expect to lead industry for the 7th consecutive
quarter
- 595,000 branded postpaid phone net
additions — expect to lead the industry for the 15th consecutive
quarter
- 226,000 branded prepaid net additions —
led by the success of MetroPCS
- 1.23% postpaid phone churn — down 9 bps
YoY
Strong Network and Distribution
Expansion:
- 316 million Americans covered today and
targeting 321 million by the end of 2017
- 15 quarters in a row with the fastest
download and upload speeds — widening the gap versus the
competition
- 600 MHz deployment underway, more than
1.2 million sq mi to be clear in 2017, first sites lit up in Q3,
first handset hit the market in October with another device
expected to be ready for the 2017 Holiday season
- 3,000 total new stores planned for
2017, with 1,200 new T-Mobile and 1,300 net new MetroPCS stores
opened year-to-date
Continued strong outlook for
2017:
- Raising and narrowing guidance range
for branded postpaid net customer additions to 3.3 - 3.6 million
from 3.0 - 3.6 million
- Net income is not available on a
forward-looking basis(2)
- Raising and narrowing Adjusted EBITDA
target for the second time this year to $10.8 - $11.0 billion from
$10.5 - $10.9 billion, which includes unchanged guidance on leasing
revenues of $0.85 - $0.95 billion(1)
- Maintaining guidance of $4.8 - $5.1
billion of cash purchases of property and equipment, excluding
capitalized interest; expect to be at the high end of our guidance
range
- Three-year compound annual growth rates
(CAGRs) for net cash provided by operating activities and free cash
flow from FY 2016 to FY 2019 remain unchanged at 15% - 18% and 45%
- 48%, respectively(1)
(1) Adjusted EBITDA is a
non-GAAP financial measure and Free Cash Flow is a non-GAAP
financial metric. These non-GAAP financial items should be
considered in addition to, but not as a substitute for, the
information provided in accordance with GAAP. Reconciliations for
these non-GAAP financial items to the most directly comparable GAAP
financial items are provided in the financial tables on pages 7-10.
(2)
T-Mobile is not able to forecast net
income on a forward-looking basis without unreasonable efforts due
to the high variability and difficulty in predicting certain items
that affect GAAP net income, including, but not limited to, income
tax expense, stock-based compensation expense and interest expense.
Adjusted EBITDA should not be used to predict net income as the
difference between the two measures is variable.
T-Mobile US, Inc. (NASDAQ: TMUS) reported record financial
results in the third quarter of 2017 with best-ever service
revenues, net cash provided by operating activities and free cash
flow. The Un-carrier also posted strong net income and record Q3
Adjusted EBITDA. These results demonstrate our ability to translate
customer growth into financial growth as we continue to generate
momentum. In Q3, we delivered strong customer results across the
board, including 1.3 million total net customer additions. That
marks 18 consecutive quarters that T-Mobile has added more than 1
million total customers and we expect to continue leading the
industry in postpaid phone growth again in Q3. As a result of this
continued strong performance, we are raising our guidance for 2017
— again.
Customers are continuing to choose T-Mobile over the competition
because they get more value for their hard-earned dollar. Q3 was no
different as we unveiled our latest industry changing move: Netflix
On Us. The carriers focus on pushing bigger, fatter, pricier
packages of content and services on their customers, while T-Mobile
partnered with Netflix to give customers what they want — at no
extra cost. In addition, customers are finding out that America’s
Best Unlimited Network just keeps getting better. We continue to
expand the depth and breadth of our network, and started rolling
out 600 MHz spectrum in Q3 well ahead of schedule. The network
expansion has enabled our distribution expansion, which is
progressing ahead of schedule, and will bring real competition to
every corner of the U.S. and sets T-Mobile up for more growth in
the future.
"Just step back and look at these financial results — they’re
incredible! Record service revenues, record free cash flow, record
Q3 Adjusted EBITDA — and that’s on top of 18 quarters in a row with
more than one million customers added," said John Legere, President
and CEO of T-Mobile. "We’re delivering results that no one else can
match and have proven time and time again that we know how to fight
for customers and win for shareholders. We won’t stop!"
Strong Financial
Performance
Our strong financial performance in Q3 2017 continues to prove
T-Mobile's Un-carrier strategy is a winning formula.
(in millions, except Diluted EPS)
Quarter
Nine Months Ended
September 30,
Q3 2017
vs.
Q2 2017
Q3 2017
vs.
Q3 2016
2017
vs.
2016
Q3 2017 Q2 2017 Q3
2016 2017 2016 Total service
revenues $ 7,629 $ 7,445 $ 7,133 $ 22,403 $ 20,599 2 % 7 % 9 %
Total revenues(1)
10,019 10,213 9,305 29,845 27,256 (2 )% 8 % 9 % Net income 550 581
366 1,829 1,070 (5 )% 50 % 71 % Diluted EPS 0.63 0.67 0.42 2.10
1.24 (6 )% 50 % 69 %
Adjusted EBITDA(1)
2,822 3,012 2,689 8,502 8,032 (6 )% 5 % 6 % Cash purchases of
property and equipment, including capitalized interest 1,441 1,347
1,159 4,316 3,843 7 % 24 % 12 % Net cash provided by operating
activities 2,362 1,829 1,740 5,904 4,533 29 % 36 % 30 % Free Cash
Flow 921 482 581 1,588 690 91 % 59 % 130 % (1)
The amortized imputed discount on EIP receivables previously
recognized as Interest income has been retrospectively reclassified
as Other revenues. The effects of this change in accounting
principle are provided in the financial tables.
- Total service revenues increased
7% year-over-year in Q3 2017 to $7.6 billion which is expected to
mark the 14th quarter in a row that T-Mobile has led the industry
in year-over-year service revenue percentage growth. The negative
impact from hurricanes was $31 million in Q3 2017.
- Total revenues increased 8% in
Q3 2017 to $10.0 billion which is expected to mark the 17th time in
the last 18 quarters that T-Mobile has led the industry in total
revenue percentage growth year-over-year. The negative impact from
hurricanes was $39 million in Q3 2017.
- Branded postpaid phone Average
Revenue per User (ARPU) was $46.93 in Q3 2017, down 0.3% from
Q2 2017 and down 2.5% from Q3 2016 primarily due to the continued
adoption of T-Mobile ONE including taxes and fees, dilution from
promotional activities and negative hurricane related impacts of
$0.19, partially offset by the impact of the MVNO transaction and
Data Stash for the year-over-year period. T-Mobile continues to
expect that branded postpaid phone ARPU in full-year 2017 will be
generally stable compared to full-year 2016, with some quarterly
variations driven by the actual migrations to T-Mobile ONE rate
plans, inclusive of Un-carrier Next.
- Branded prepaid ARPU was a
record-high $38.93 in Q3 2017, up 2.4% from Q3 2016, primarily due
to continued growth of MetroPCS customers who generate higher ARPU,
partially offset by negative hurricane related impacts of
$0.18.
- Net income increased 50%
year-over-year in Q3 2017 to $550 million. Net income as a
percentage of service revenue was 7% in Q3 2017, up from 5% in Q3
2016. The negative impact on net income from hurricane related
losses in Texas, Florida and Puerto Rico from lost revenue, assets
damaged or destroyed and other costs incurred was $90 million in Q3
2017. As of September 30, 2017, our assessment of losses is ongoing
and we expect additional expenses to be incurred and customer
activity to be impacted in Q4 2017 primarily related to our
operations in Puerto Rico. We have not recognized any potential
insurance recoveries related to those hurricane losses as we
continue to assess the damage and work with our insurance
carriers.
- Diluted EPS increased 50%
year-over-year in Q3 2017 to $0.63. The negative impact from
hurricanes for Q3 2017 was $0.10.
- Adjusted EBITDA increased 5%
year-over-year in Q3 2017 to a Q3 record-high of $2.8 billion
primarily from higher service revenues and lower losses on
equipment, partially offset by higher SG&A costs, higher cost
of services expense, lower gains on disposal of spectrum licenses
and a $148 million negative impact from hurricanes. Excluding
spectrum gains from all periods, Adjusted EBITDA growth was 12%
year-over-year. Adjusted EBITDA margin as a percentage of service
revenue was 37% in Q3 2017, down from 38% in Q3 2016. The decrease
was primarily driven by lower gains on disposal of spectrum
licenses compared to prior year period.
- Cash purchases of property and
equipment increased 24% year-over-year in Q3 2017 to $1.4
billion and included capitalized interest of $29 million in Q3 2017
compared to $17 million in Q3 2016.
- Net cash provided by operating
activities increased 36% year-over-year in Q3 2017 to $2.4
billion. The increase was primarily due to higher net income and
higher non-cash adjustments to net income and a lower net use from
working capital changes.
- Free cash flow increased 59%
year-over-year in Q3 2017 to a record $921 million. The increase
was primarily due to the increase in net cash provided by operating
activities, partially offset by an increase in cash purchases of
property and equipment.
Customer Growth Expected to Lead the
Industry
We listen to customers, solve their pain points and give them
unmatched service on America's Best Unlimited Network. Our formula
is simple, but our straightforward approach has completely
disrupted the wireless industry for nearly half a decade and forced
the competition to respond to our moves.
Quarter
Nine Months Ended
September 30,
(in thousands, except churn) Q3 2017
Q2 2017 Q3 2016
2017 2016 Total net customer
additions 1,329 1,333 1,970 3,804 6,072 Branded postpaid net
customer additions 817 817 969 2,548 2,900
Branded postpaid phone net customer
additions(1)
595 533 851 1,926 2,374
Branded postpaid other customers(1)
222 284 118 622 526 Branded prepaid net customer additions 226 94
684 706 1,967
Total customers, end of period(2)
70,731 69,562 69,354 70,731 69,354 Branded postpaid phone churn
1.23 % 1.10 % 1.32 % 1.18 % 1.30 % (1) During
the third quarter of 2017, we retitled our “Branded postpaid mobile
broadband customers” category to “Branded postpaid other customers”
and reclassified 253,000 DIGITS customer net additions from our
“Branded postpaid phone customers” category for the second quarter
of 2017, when the DIGITS product was released. (2) We believe
current and future regulatory changes have made the Lifeline
program offered by our wholesale partners uneconomical. We will
continue to support our wholesale partners offering the Lifeline
program, but have excluded the Lifeline customers from our reported
wholesale subscriber base, resulting in the removal of 160,000 and
4,368,000 reported wholesale customers as of the beginning of the
third quarter of 2017 and the second quarter of 2017, respectively.
No further Lifeline adjustments are expected in future periods.
- Total net customer additions
were 1.3 million in Q3 2017, bringing our total customer count to
70.7 million. Q3 2017 marks 18 straight quarters in which T-Mobile
generated more than 1 million total net customer additions.
- Branded postpaid net customer
additions were 817,000 in Q3 2017, which is expected to lead
the industry for the 7th consecutive quarter.
- Branded postpaid phone net customer
additions were 595,000 in Q3 2017, driven by back to school
seasonality and strong customer response to promotional activities
and Un-carrier initiatives, including Netflix On Us. Q3 2017 is
expected to mark the 15th consecutive quarter that T-Mobile has led
the industry in this category. While growth accelerated
sequentially, the increase was less than last year primarily due to
lower gross customer additions from increased competitive activity
in the marketplace, the split and shift in iPhone launch timing and
the negative impact from hurricanes.
- Branded postpaid phone churn was
1.23% in Q3 2017, down 9 basis points from Q3 2016.
- Branded prepaid net customer
additions were 226,000 in Q3 2017, down year-over-year due to
higher deactivations from a growing customer base and increased
competitive activity in the marketplace. Branded prepaid net
customer additions were up sequentially primarily due to the
success of MetroPCS promotions in the quarter and lower churn for
legacy T-Mobile prepaid customers, partially offset by higher
MetroPCS deactivations from increased competitive activity in the
marketplace.
- Branded prepaid churn was 4.25%
in Q3 2017, up 34 basis points compared to Q2 2017 and up 43 basis
points compared to Q3 2016.
Strong Network and Distribution
Expansion
Our network and distribution expansion is allowing us to bring
America's Best Unlimited Network to every coverable inch of the
country and provide rural America with real wireless choice. Our
network remains the fastest in America, a title we have held for
the last 15 quarters in a row. With more spectrum being cleared and
deployed and the implementation of new technology, we will continue
to broaden and deepen our coverage for the benefit of all
customers.
During Q3 2017, we have continued to make investments to expand
and improve our network including:
- Clearing and deploying 600 MHz
spectrum. At least 10 MHz covering more than 1.2 million square
miles will be clear and ready to deploy in 2017, with one
compatible device out already and another expected to be ready for
the 2017 Holiday season. We also expect the majority of new devices
introduced in 2018 to be compatible with our 600 MHz spectrum. We
have deployed 600 MHz spectrum in Cheyenne, Wyoming, and
Scarborough, Maine, and expect to have additional cities and areas
in multiple states come online in 2017. We will also use a portion
of our 600 MHz spectrum holdings to deploy America’s first
nationwide 5G network in the 2019 / 2020 time frame.
- Expanding our 4G LTE coverage breadth
to 316 million people. We are targeting 4G LTE coverage of 321
million people by the end of 2017.
- Growing our distribution footprint by
30 to 40 million POPs from the beginning of 2016 through year-end
2017. We plan to open 3,000 stores in 2017, including 1,500
T-Mobile stores and 1,500 MetroPCS stores. To date, we have built
1,200 new T-Mobile stores and 1,300 net new MetroPCS stores.
Continued strong outlook for
2017
We are raising and narrowing our postpaid net customer additions
guidance to 3.3 - 3.6 million from 3.0 - 3.6 million.
Net income is not available on a forward-looking basis.
We are raising and narrowing our Adjusted EBITDA target for the
second time this year to between $10.8 and $11.0 billion, up from
the prior guidance range of $10.5 - $10.9 billion. Our Adjusted
EBITDA target includes unchanged guidance on leasing revenues of
$0.85 - $0.95 billion.
The guidance for cash purchases of property and equipment,
excluding capitalized interest, is unchanged at $4.8 - $5.1
billion, but we expect to be at the high end of the guidance
range.
The three-year CAGRs guidance for net cash provided by operating
activities and Free Cash Flow from full-year 2016 to full-year 2019
also remains unchanged at 15% - 18% and 45% - 48%,
respectively.
Financial Results
For more details on T-Mobile’s Q3 2017 financial results,
including the Investor Factbook with detailed financial tables and
reconciliations of certain historical non-GAAP measures disclosed
in this release to the most comparable measures under GAAP, please
visit T-Mobile US, Inc.'s Investor Relations website at
http://investor.T-Mobile.com.
Check out the video blog from John Legere, covering our
quarterly results here newsroom.t-mobile.com/q3-2017.
T-Mobile Social Media
Investors and others should note that we announce material
financial and operational information to our investors using our
investor relations website, press releases, SEC filings and public
conference calls and webcasts. We also intend to use the @TMobileIR
Twitter account (https://twitter.com/TMobileIR) and the @JohnLegere
Twitter (https://twitter.com/JohnLegere), Facebook and
Periscope accounts, which Mr. Legere also uses as a means for
personal communications and observations, as means of disclosing
information about the Company and its services and for complying
with its disclosure obligations under Regulation FD. The
information we post through these social media channels may be
deemed material. Accordingly, investors should monitor these social
media channels in addition to following our press releases, SEC
filings and public conference calls and webcasts. The social media
channels that we intend to use as a means of disclosing the
information described above may be updated from time to time as
listed on our investor relations website.
About T-Mobile US, Inc.
As America's Un-carrier, T-Mobile US, Inc. (NASDAQ: TMUS) is
redefining the way consumers and businesses buy wireless services
through leading product and service innovation. Our advanced
nationwide 4G LTE network delivers outstanding wireless experiences
to 70.7 million customers who are unwilling to compromise on
quality and value. Based in Bellevue, Washington, T-Mobile US
provides services through its subsidiaries and operates its
flagship brands, T-Mobile and MetroPCS. For more information,
please visit http://www.t-mobile.com or join the conversation on
Twitter using $TMUS.
Forward-Looking
Statements
This news release includes "forward-looking statements" within
the meaning of the U.S. federal securities laws. Any statements
made herein that are not statements of historical fact, including
statements about T-Mobile US, Inc.'s plans, outlook,
beliefs, opinions, projections, guidance, strategy, store openings,
deployment of spectrum and expected network modernization and other
advancements, are forward-looking statements. Generally,
forward-looking statements may be identified by words such as
"anticipate," "expect," "suggests," "plan," “project,” "believe,"
"intend," "estimates," "targets," "views," "may," "will,"
"forecast," and other similar expressions. The forward-looking
statements speak only as of the date made, are based on current
assumptions and expectations, and involve a number of risks and
uncertainties. Important factors that could affect future results
and cause those results to differ materially from those expressed
in the forward-looking statements include, among others, the
following: adverse economic or political conditions in the U.S. and
international markets; competition in the wireless services market,
including new competitors entering the industry as technologies
converge; the effects any future merger or acquisition involving
us, as well as the effects of mergers or acquisitions in the
technology, media and telecommunications industry; challenges in
implementing our business strategies or funding our wireless
operations, including payment for additional spectrum or network
upgrades; the possibility that we may be unable to renew our
spectrum licenses on attractive terms or acquire new spectrum
licenses at reasonable costs and terms; difficulties in managing
growth in wireless data services, including network quality;
material changes in available technology; the timing, scope and
financial impact of our deployment of advanced network and business
technologies; the impact on our networks and business from major
technology equipment failures; breaches of our and/or our third
party vendors’ networks, information technology and data security;
natural disasters, terrorist attacks or similar incidents; existing
or future litigation; any changes in the regulatory environments in
which we operate, including any increase in restrictions on the
ability to operate our networks; any disruption or failure of our
third parties’ or key suppliers’ provisioning of products or
services; material adverse changes in labor matters, including
labor campaigns, negotiations or additional organizing activity,
and any resulting financial, operational and/or reputational
impact; the ability to make payments on our debt or to repay our
existing indebtedness when due; adverse change in the ratings of
our debt securities or adverse conditions in the credit markets;
changes in accounting assumptions that regulatory agencies,
including the Securities and Exchange Commission (“SEC”), may
require, which could result in an impact on earnings; and changes
in tax laws, regulations and existing standards and the resolution
of disputes with any taxing jurisdictions; and other risks
described in our filings with the SEC, including those
described in our most recently filed Annual Report on Form 10-K.
You should not place undue reliance on these forward-looking
statements. We do not undertake to update forward-looking
statements, whether as a result of new information, future events
or otherwise, except as required by law.
T-Mobile US, Inc.Effect of Change in
Accounting Principle(Unaudited)
Effective January 1, 2017, we began presenting the amortization
of the imputed discount on our Equipment Installment Plan (“EIP”)
receivables as Other revenue on our Condensed Consolidated
Statements of Comprehensive Income. Prior to the change, the
imputed interest was presented as Interest income. We made this
change to provide a better representation of amounts earned from
our major ongoing operations, align with industry practice and
enhance comparability. We have applied this change in accounting
principle retrospectively and presented the effect of the change in
the table below. For additional information, see Note 1 - Basis of
Presentation of the Notes to the Consolidated Financial Statements
included in Part I, Item 1 of our Form 10-Q to be filed on or about
October 23, 2017.
(in millions, except for margin %'s and Net Debt Ratios)
Quarter
Nine Months Ended
September 30,
Q1 2016 Q2 2016 Q3
2016 Q4 2016 Q1 2017
Q2 2017 Q3 2017
2016 2017 EIP imputed discount $ 65 $
65 $ 59 $ 59 $ 62 $ 68 $ 74 $ 189 $ 204 Other revenue - as
adjusted $ 235 $ 211 $ 224 $ 249 $ 241 $ 262 $ 272 $ 670 $ 775
Other revenues - unadjusted 170 146 165 190 179 194 198 481 571
Total revenues - as adjusted $ 8,664 $ 9,287 $ 9,305 $
10,234 $ 9,613 $ 10,213 $ 10,019 $ 27,256 $ 29,845 Total revenues -
unadjusted 8,599 9,222 9,246 10,175 9,551 10,145 9,945 27,067
29,641 Operating income - as adjusted $ 1,168 $ 833 $ 1,048
$ 1,001 $ 1,037 $ 1,416 $ 1,323 $ 3,049 $ 3,776 Operating income -
unadjusted 1,103 768 989 942 975 1,348 1,249 2,860 3,572
Interest income - as adjusted $ 3 $ 3 $ 3 $ 4 $ 7 $ 6 $ 2 $ 9 $ 15
Interest income - unadjusted 68 68 62 63 69 74 76 198 219
Total other expense, net - as adjusted $ (417 ) $ (461 ) $ (450 ) $
(395 ) $ (430 ) $ (482 ) $ (417 ) $ (1,328 ) $ (1,329 ) Total other
expense, net - unadjusted (352 ) (396 ) (391 ) (336 ) (368 ) (414 )
(343 ) (1,139 ) (1,125 ) Net income - as adjusted $ 479 $
225 $ 366 $ 390 $ 698 $ 581 $ 550 $ 1,070 $ 1,829 Net income -
unadjusted 479 225 366 390 698 581 550 1,070 1,829 Adjusted
EBITDA - as adjusted $ 2,814 $ 2,529 $ 2,689 $ 2,607 $ 2,668 $
3,012 $ 2,822 $ 8,032 $ 8,502 Adjusted EBITDA - unadjusted 2,749
2,464 2,630 2,548 2,606 2,944 2,748 7,843 8,298 Net income
margin - as adjusted 7 % 3 % 5 % 5 % 10 % 8 % 7 % 5 % 8 % Net
income margin - unadjusted 7 % 3 % 5 % 5 % 10 % 8 % 7 % 5 % 8 %
Adjusted EBITDA margin - as adjusted 43 % 37 % 38 % 36 % 36
% 40 % 37 % 39 % 38 % Adjusted EBITDA margin - unadjusted 42 % 36 %
37 % 35 % 36 % 40 % 36 % 38 % 37 % Last twelve months Net
income - as adjusted $ 1,275 $ 1,139 $ 1,367 $ 1,460 $ 1,679 $
2,035 $ 2,219 N/A N/A Last twelve months Net income - unadjusted
1,275 1,139 1,367 1,460 1,679 2,035 2,219 N/A N/A Last
twelve months Adjusted EBITDA - as adjusted (1) $ 9,124 $ 9,723 $
10,396 $ 10,639 $ 10,493 $ 10,976 $ 11,109 N/A N/A Last twelve
months Adjusted EBITDA - unadjusted (1) 8,754 9,401 10,123 10,391
10,248 10,728 10,846 N/A N/A Net Debt (excluding Tower
Obligations) to Last Twelve Months Net income - as adjusted 15.6
19.2 16.4 15.3 13.5 13.9 12.4 N/A N/A Net Debt (excluding Tower
Obligations) to Last Twelve Months Net income - unadjusted 15.6
19.2 16.4 15.3 13.5 13.9 12.4 N/A N/A Net Debt (excluding
Tower Obligations) to LTM Adjusted EBITDA Ratio - as adjusted 2.2
2.3 2.2 2.1 2.2 2.6 2.5 N/A N/A Net Debt (excluding Tower
Obligations) to LTM Adjusted EBITDA Ratio - unadjusted 2.3 2.3 2.2
2.1 2.2 2.6 2.5 N/A N/A
(1) For purposes of Last twelve months
Adjusted EBITDA, prior quarterly adjustments were as follows:
Quarter (in millions) Q2 2015
Q3 2015
Q4 2015 EIP imputed discount $ 113 $ 108 $ 84
Net income - as adjusted $ 361 $ 138 $ 297 Net income -
unadjusted 361 138 297 Adjusted EBITDA - as adjusted $ 1,930
$ 2,016 $ 2,364 Adjusted EBITDA - unadjusted 1,817 1,908 2,280
T-Mobile US, Inc.Reconciliation of
Non-GAAP Financial Measures to GAAP Financial
Measures(Unaudited)
This Press Release includes non-GAAP financial measures. The
non-GAAP financial measures should be considered in addition to,
but not as a substitute for, the information provided in accordance
with GAAP. Reconciliations for the non-GAAP financial measures to
the most directly comparable GAAP financial measures are provided
below. T-Mobile is not able to forecast net income on a
forward-looking basis without unreasonable efforts due to the high
variability and difficulty in predicting certain items that affect
GAAP net income, including, but not limited to, income tax expense,
stock-based compensation expense and interest expense. Adjusted
EBITDA should not be used to predict net income as the difference
between the two measures is variable. We made an accounting change
in 2017 to include imputed interest associated with EIP receivables
in Other revenues which will be included in Adjusted EBITDA.
Adjusted EBITDA is reconciled to net income as follows:
Quarter
Nine Months Ended
September 30,
(in millions)
Q2
2015
Q3
2015
Q4
2015
Q1
2016
Q2
2016
Q3
2016
Q4
2016
Q1
2017
Q2
2017
Q3
2017
2016 2017 Net income $ 361 $ 138 $ 297
$ 479 $ 225 $ 366 $ 390 $ 698 $ 581 $ 550 $ 1,070 $ 1,829
Adjustments: Interest expense 257 262 305 339 368 376 335 339 265
253 1,083 857 Interest expense to affiliates 92 121 134 79 93 76 64
100 131 167 248 398
Interest income(1)
(1 ) (1 ) (1 ) (3 ) (3 ) (3 ) (4 ) (7 ) (6 ) (2 ) (9 ) (15 ) Other
(income) expense, net (1 ) 1 3 2 3 1 — (2 ) 92 (1 ) 6 89 Income tax
expense (benefit) 2 100 184 272 147
232 216 (91 ) 353 356 651
618
Operating income(1)
710 621 922 1,168 833 1,048 1,001 1,037 1,416 1,323 3,049 3,776
Depreciation and Amortization 1,075 1,157 1,369 1,552 1,575 1,568
1,548 1,564 1,519 1,416 4,695 4,499
Cost of MetroPCS business
combination(2)
34 193 21 36 59 15 (6 ) — — — 110 —
Stock-based compensation(3)
71 43 52 53 61 57 64 67 72 83 171 222
Other, net(3)
40 2 — 5 1 1 — —
5 — 7 5
Adjusted EBITDA(1)
$ 1,930 $ 2,016 $ 2,364 $ 2,814 $ 2,529
$ 2,689 $ 2,607 $ 2,668 $ 3,012
$ 2,822 $ 8,032 $ 8,502 (1)
The amortized imputed discount on EIP receivables previously
recognized as Interest income has been retrospectively reclassified
as Other revenues. See the Effect of Change in Accounting Principle
table for further detail. (2) Beginning Q1 2017, we will no longer
separately present Cost of MetroPCS business combination as it is
insignificant. (3) Stock-based compensation includes payroll tax
impacts and may not agree to stock-based compensation expense in
the condensed consolidated financial statements. Other, net may not
agree to the Condensed Consolidated Statements of Comprehensive
Income primarily due to certain non-routine operating activities,
such as other special items that would not be expected to reoccur,
and are therefore excluded in Adjusted EBITDA.
Adjusted EBITDA - Earnings before Interest expense, net of
Interest income, Income tax expense, Depreciation and amortization
expense, non-cash Stock-based compensation and certain expenses not
reflective of T-Mobile's ongoing operating performance. Adjusted
EBITDA margin represents Adjusted EBITDA divided by service
revenues. Adjusted EBITDA is a non-GAAP financial measure utilized
by T-Mobile's management to monitor the financial performance of
our operations. T-Mobile uses Adjusted EBITDA internally as a
metric to evaluate and compensate its personnel and management for
their performance, and as a benchmark to evaluate T-Mobile's
operating performance in comparison to its competitors. Management
believes analysts and investors use Adjusted EBITDA as a
supplemental measure to evaluate overall operating performance and
facilitate comparisons with other wireless communications companies
because it is indicative of T-Mobile's ongoing operating
performance and trends by excluding the impact of interest expense
from financing, non-cash depreciation and amortization from capital
investments, non-cash stock-based compensation, network
decommissioning costs as they are not indicative of T-Mobile's
ongoing operating performance and certain other nonrecurring
expenses. Adjusted EBITDA has limitations as an analytical tool and
should not be considered in isolation or as a substitute for income
from operations, net income or any other measure of financial
performance reported in accordance with GAAP.
T-Mobile US, Inc.Reconciliation of
Non-GAAP Financial Measures to GAAP Financial Measures
(continued)(Unaudited)
Net debt (excluding Tower Obligations) to last twelve months Net
income and Adjusted EBITDA ratios are calculated as follows:
(in millions, except net debt ratio)
Mar 31,2016 Jun 30,
2016 Sep 30, 2016
Dec 31,2016 Mar
31, 2017 Jun 30, 2017
Sep 30,2017 Short-term debt $
365 $ 258 $ 325 $ 354 $ 7,542 $ 522 $ 558 Short-term debt to
affiliates — — — — — 680 — Long-term debt 20,505 21,574 21,825
21,832 13,105 13,206 13,163 Long-term debt to affiliates 5,600
5,600 5,600 5,600 9,600 14,086 14,586 Less: Cash and cash
equivalents (3,647 ) (5,538 ) (5,352 ) (5,500 ) (7,501 ) (181 )
(739 ) Less: Short-term investments (2,925 )
—
— — — — — Net debt
(excluding Tower Obligations) $ 19,898 $ 21,894 $
22,398 $ 22,286 $ 22,746 $ 28,313 $
27,568 Divided by: Last twelve months Net income $ 1,275
$ 1,139 $ 1,367 $ 1,460 $ 1,679
$ 2,035 $ 2,219 Net Debt (excluding Tower
Obligations) to last twelve months Net income 15.6 19.2
16.4 15.3 13.5 13.9 12.4
Divided by: Last twelve months Adjusted
EBITDA(1)
$ 9,124 $ 9,723 $ 10,396 $ 10,639 $
10,493 $ 10,976 $ 11,109
Net Debt (excluding Tower Obligations) to
last twelve months Adjusted EBITDA Ratio(1)
2.2 2.3 2.2 2.1 2.2 2.6
2.5 (1) The amortized imputed discount
on EIP receivables previously recognized as Interest income has
been retrospectively reclassified as Other revenues. See Change in
Accounting Principle table for further detail.
Net debt - Short-term debt, short-term debt to affiliates,
long-term debt (excluding tower obligations), and long-term debt to
affiliates, less cash and cash equivalents and short-term
investments.
Free cash flow is calculated as follows:
Quarter
Nine Months Ended
September 30,
(in millions) Q1 2016 Q2
2016 Q3 2016
Q4 2016 Q1 2017
Q2 2017 Q3 2017
2016 2017 Net cash provided by
operating activities $ 1,025 $ 1,768 $ 1,740 $ 1,602 $ 1,713 $
1,829 $ 2,362 $ 4,533 $ 5,904 Cash purchases of property and
equipment (1,335 ) (1,349 ) (1,159 ) (859 ) (1,528 ) (1,347
) (1,441 ) (3,843 ) (4,316 ) Free Cash Flow $ (310 ) $ 419
$ 581 $ 743 $ 185 $ 482 $ 921
$ 690 $ 1,588 Net cash used in investing
activities $ (1,860 ) $ (667 ) $ (1,859 ) $ (1,294 ) $
(1,550 ) $ (7,133 ) $ (1,455 ) $ (4,386 ) $ (10,138 ) Net cash
(used in) provided by financing activities $ (100 ) $ 790
$ (67 ) $ (160 ) $ 1,838 $ (2,016 ) $ (349 ) $ 623
$ (527 )
Free Cash Flow - Net cash provided by operating activities less
cash purchases of property and equipment. Free Cash Flow is
utilized by T-Mobile's management, investors, and analysts to
evaluate cash available to pay debt and provide further investment
in the business.
Free cash flow three-year CAGR is calculated as follows:
FY
FY
(in millions, except CAGR Range)
2016 2019 Guidance Range CAGR Range Net cash
provided by operating activities $ 6,135 $ 9,400
$ 10,000 15 % 18 % Cash purchases of property and equipment
(4,702 ) (5,000 ) (5,400 ) 2 % 5 % Free Cash Flow $ 1,433 $
4,400 $ 4,600 45 % 48 %
T-Mobile US, Inc.Reconciliation of
Operating Measures to Branded Postpaid Service
Revenues(Unaudited)
The following tables illustrate the calculation of our operating
measures ARPU and ABPU and reconcile these measures to the related
service revenues:
(in millions, except average number of customers, ARPU and
ABPU) Quarter
Nine Months Ended
September 30,
Q1 2016 Q2 2016
Q3 2016 Q4 2016
Q1 2017 Q2 2017
Q3 2017 2016
2017 Calculation of Branded Postpaid Phone
ARPU Branded postpaid service revenues $ 4,302 $ 4,509 $ 4,647
$ 4,680 $ 4,725 $ 4,820 $ 4,920 $ 13,458 $ 14,465 Less: Branded
postpaid other revenues (182 ) (193 ) (193 ) (205 ) (225 )
(255 ) (294 ) (568 ) (774 ) Branded postpaid phone service revenues
$ 4,120 $ 4,316 $ 4,454 $ 4,475
$ 4,500 $ 4,565 $ 4,626 $ 12,890 $
13,691 Divided by: Average number of branded postpaid phone
customers (in thousands) and number of months in period 29,720
30,537 30,836 30,842 31,564 32,329 32,852 30,364 32,248
Branded postpaid phone ARPU(1)
$ 46.21 $ 47.11 $ 48.15 $ 48.37
$ 47.53 $ 47.07 $ 46.93 $ 47.17 $ 47.17
Calculation of Branded Postpaid ABPU Branded
postpaid service revenues $ 4,302 $ 4,509 $ 4,647 $ 4,680 $ 4,725 $
4,820 $ 4,920 $ 13,458 $ 14,465 EIP billings 1,324 1,344 1,394
1,370 1,402 1,402 1,481 4,062 4,285 Lease revenues 342
367 353 354 324 234 159
1,062 717 Total billings for branded postpaid
customers $ 5,968 $ 6,220 $ 6,394 $
6,404 $ 6,451 $ 6,456 $ 6,560 $ 18,582
$ 19,467 Divided by: Average number of branded
postpaid customers (in thousands) and number of months in period
32,140 33,125 33,632 33,839 34,740 35,636 36,505 32,966
35,627 Branded postpaid ABPU $ 61.90 $ 62.59 $
63.38 $ 63.08 $ 61.89 $ 60.40 $ 59.89
$ 62.63 $ 60.71
Calculation of
Branded Prepaid ARPU Branded prepaid service revenues $ 2,025 $
2,119 $ 2,182 $ 2,227 $ 2,299 $ 2,334 $ 2,376 $ 6,326 $ 7,009
Divided by: Average number of branded prepaid customers (in
thousands) and number of months in period 17,962
18,662 19,134 19,431 19,889 20,131
20,336 18,586 20,119 Branded prepaid
ARPU $ 37.58 $ 37.86 $ 38.01 $ 38.20
$ 38.53 $ 38.65 $ 38.93 $ 37.82
$ 38.71 (1) Branded postpaid phone ARPU
includes the reclassification of 43,000 DIGITS average customers
and related revenue to the "Branded postpaid other customers"
category for the second quarter of 2017.
Average Revenue Per User (ARPU) - Average monthly service
revenues earned from customers. Service revenues for the specified
period divided by the average customers during the period, further
divided by the number of months in the period.
Branded postpaid phone ARPU excludes mobile broadband and DIGITS
customers and related revenues.
Average Billings per User (ABPU) - Average monthly branded
postpaid service revenues earned from customers plus monthly EIP
billings and lease revenues divided by the average branded postpaid
customers during the period, further divided by the number of
months in the period. T-Mobile believes branded postpaid ABPU is
indicative of estimated cash collections, including device
financing payments, from T-Mobile's postpaid customers each
month.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20171023005499/en/
T-Mobile US, Inc.Press Contact:Media
Relationsmediarelations@t-mobile.comhttp://newsroom.t-mobile.comorInvestor
Relations Contact:Nils Paellmann877-281-TMUS or
212-358-3210investor.relations@t-mobile.comhttp://investor.t-mobile.com
T Mobile US (NASDAQ:TMUS)
Historical Stock Chart
From Mar 2024 to Apr 2024
T Mobile US (NASDAQ:TMUS)
Historical Stock Chart
From Apr 2023 to Apr 2024