Customer Net Additions of 1.7M and
Record-Low Postpaid Phone Churn of 0.88%; Record Service Revenue of
$8.3B, Record Q1 Net Income of $908M and Record Adjusted EBITDA of
$3.3B
T-Mobile US, Inc. (NASDAQ: TMUS):
Accelerated Customer
Growth
- 1.7 million total net additions in Q1
2019, up 15% YoY
- 1.0 million branded postpaid net
additions in Q1 2019, expect to be best in the industry
- 656,000 branded postpaid phone net
additions in Q1 2019, expect to be best in the industry
- 69,000 branded prepaid net additions in
Q1 2019
- Record-low branded postpaid phone churn
of 0.88% in Q1 2019, down 19 bps YoY
Record Q1 Financial Performance (all
percentages year-over-year)
- Record Service revenues of $8.3
billion, up 6% in Q1 2019 with Branded postpaid service revenues up
8%
- Record Q1 Total revenues of $11.1
billion, up 6% in Q1 2019
- Record Q1 Net income of $908 million,
up 35% in Q1 2019
- Record Q1 Diluted earnings per share
(“EPS”) of $1.06, up 36% in Q1 2019
- Record Adjusted EBITDA(1) of $3.3
billion, up 11% in Q1 2019
- Strong Net cash provided by operating
activities of $1.4 billion, up 81% in Q1 2019 due to higher Net
income and lower net cash outflows from changes in working
capital
- Free Cash Flow(1) of $618 million, down
7% in Q1 2019 due to accelerated capital expenditures and the
impact of merger-related costs
Industry Leading Network
Performance
- 99% of Americans now covered with a 4G
LTE network that is second to none
- Fastest combined average of download
and upload speeds for 21 quarters in a row
- Aggressive deployment of 600 MHz using
5G ready equipment, now reaching nearly 3,500 cities and towns
- On track to have the first nationwide
5G network available next year
Continued Strong Outlook for
2019
- Branded postpaid net additions of 3.1
to 3.7 million, up from prior guidance of 2.6 to 3.6 million
- Net income is not available on a
forward-looking basis(2)
- Adjusted EBITDA target of $12.7 to
$13.2 billion, which includes leasing revenues of $0.6 to $0.7
billion(1)
- Cash purchases of property and
equipment, excluding capitalized interest of approximately $400
million, of $5.4 to $5.7 billion and cash purchases of property and
equipment, including capitalized interest, of $5.8 to $6.1
billion
- Three-year compound annual growth rate
(“CAGR”) from FY 2016 to FY 2019 for Net cash provided by operating
activities, excluding payments for merger-related costs, is
expected to be at 32% to 35%, up from prior guidance of 17% to 21%
driven primarily by improvements in the contractual terms of
factoring agreements which led to an accounting geography change
but do not impact overall cash flow
- Three-year CAGR from FY 2016 to FY 2019
for Free Cash Flow, excluding payments for merger-related costs, is
unchanged at 46% to 48%(1)
________________________________________________________________
(1) Adjusted EBITDA and Free Cash Flow are non-GAAP
financial measures. These 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
these non-GAAP financial measures to the most directly comparable
financial measures are provided in the Reconciliation of Non-GAAP
Financial Measures to GAAP Financial Measures tables. (2) We are
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 another record quarter
in Q1 2019, with customer growth that accelerated year-over-year,
all-time record-low postpaid phone churn, and record first quarter
financials. The Un-carrier is off to a fast start to the year,
delivering record-high Service revenues, record Q1 Net income and
record Adjusted EBITDA - all while expecting to lead the industry
in postpaid phone growth for the 21st consecutive quarter. This is
further proof that doing right by customers is also good for
business.
T-Mobile continues to give more value to customers without
asking more from them, and customers responded once again this
quarter. Q1 marks the 24th quarter in a row where T-Mobile
delivered greater than 1 million total customer net additions, and
another quarter with customer growth that accelerated
year-over-year. The company also posted postpaid phone churn of
0.88% - an all-time record low for T-Mobile.
Investments that began years ago in new geographies, new
customer segments and customer care continue to fuel T-Mobile’s
momentum. The company continued to see strong response from new
customer segments and rate plans, including T-Mobile for Business.
Customer care continues to contribute to the strong results with
T-Mobile’s Team of Experts continuing to drive record high levels
of customer satisfaction while delivering operational efficiencies.
T-Mobile isn’t stopping there and continues to make investments in
future growth.
“Our results speak for themselves and our business continues to
fire on all cylinders! Record Service revenues, record Q1 Net
income and record Adjusted EBITDA - all while we continue to share
the story and lay out the facts that our game changing merger with
Sprint will be a win for consumers,” said John Legere, CEO of
T-Mobile. “We’re off to a fast start in 2019 with customer growth
that accelerated year-over-year, record low churn and we expect to
lead the industry in postpaid phone growth. We’re executing on our
business plan and our guidance shows that we expect our momentum to
continue.”
Accelerated Customer
Growth
T-Mobile continues to deliver strong customer growth, and Q1
2019 was no different. We expect to once again lead the industry in
branded postpaid phone customer net additions and capture
approximately 88% of industry growth.
Quarter (in thousands, except churn)
Q1 2019 Q4 2018 Q1
2018 Total net customer additions 1,650 2,402 1,433 Branded
postpaid net customer additions 1,019 1,358 1,005 Branded postpaid
phone net customer additions 656 1,020 617 Branded postpaid other
customer additions 363 338 388 Branded prepaid net customer
additions 69 135 199 Total customers, end of period 81,301 79,651
74,040 Branded postpaid phone churn 0.88 % 0.99 % 1.07 % Branded
prepaid churn 3.85 % 3.99 % 3.94 %
- Total net customer additions
were 1.7 million in Q1 2019, bringing our total customer count to
81.3 million, and marking the 24th straight quarter in which
T-Mobile generated more than 1 million total net customer
additions.
- Branded postpaid net customer
additions were 1.0 million in Q1 2019.
- Branded postpaid phone net customer
additions were 656,000 in Q1 2019, up 39,000 from Q1 2018, and
Q1 2019 is expected to be the 21st consecutive quarter in which
T-Mobile leads the industry in this category. Branded postpaid
phone net customer additions increased year-over-year primarily due
to record-low churn.
- Branded postpaid other net customer
additions were 363,000 in Q1 2019 primarily due to continued
strength in gross customer additions driven by wearables.
- Branded postpaid phone churn was
a record low of 0.88% in Q1 2019, down 19 basis points
year-over-year. This improvement was primarily due to increased
customer satisfaction and loyalty from ongoing improvements to
network quality, industry-leading customer service and the overall
value of our offerings.
- Branded prepaid net customer
additions were 69,000 in Q1 2019, down year-over-year primarily
due to continued promotional activities in the marketplace,
partially offset by lower churn.
- Branded prepaid churn was 3.85%
in Q1 2019, down 9 basis points year-over-year.
Strong Financial
Performance
T-Mobile’s record financial performance in Q1 2019 proves that
taking care of customers is also good for stockholders. The Company
continues to successfully translate customer growth into expected
industry-leading service and total revenue growth. In Q1, the
Un-carrier delivered record service revenues of $8.3 billion,
record Q1 Net income of $908 million and record Adjusted EBITDA of
$3.3 billion.
(in millions, except
EPS) Quarter
Q1 2019vs.Q4 2018
Q1 2019vs.Q1 2018
Q1 2019 Q4 2018 Q1
2018 Total service revenues $ 8,277 $ 8,189 $ 7,806 1.1 % 6.0 %
Total revenues 11,080 11,445 10,455 (3.2 )% 6.0 % Net income 908
640 671 41.9 % 35.3 % EPS 1.06 0.75 0.78 41.3 % 35.9 % Adjusted
EBITDA(1) 3,284 2,970 2,956 10.6 % 11.1 % Cash purchases of
property and equipment, including capitalized interest 1,931 1,184
1,366 63.1 % 41.4 % Net cash provided by operating activities 1,392
954 770 45.9 % 80.8 % Free Cash Flow(1) 618 1,220 668 (49.3 )% (7.5
)% (1) Adjusted EBITDA and Free Cash Flow are
non-GAAP financial measures. These 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 these non-GAAP financial measures to the most directly
comparable financial measures are provided in the Reconciliation of
Non-GAAP Financial Measures to GAAP Financial Measures tables.
The following discussion is for the three months ended March 31,
2019, compared to the same period in 2018 unless otherwise
stated.
- Total service revenues increased
6% to a record-high of $8.3 billion in Q1 2019. These results
represent our best quarterly performance ever and we expect to lead
the industry for the 20th consecutive quarter in year-over-year
service revenue percentage growth. Branded postpaid revenues
increased 8% year-over-year.
- Total revenues increased 6% to
$11.1 billion in Q1 2019 driven by growth in both Service revenues
and Equipment revenues.
- Branded postpaid phone Average
Revenue per User (ARPU) decreased to $46.07 in Q1 2019, down
1.3%. The decrease was primarily due to a reduction in regulatory
program revenues from the continued adoption of tax inclusive
plans, a reduction in certain non-recurring charges, the growing
success of new customer segments and rate plans, including T-Mobile
for Business, and the impact of the ongoing growth in our Netflix
offering, partially offset by higher premium services revenue and a
net reduction in promotional activities. For 2019 as a whole, we
still expect ARPU to be generally stable within a range from plus
1% to minus 1%.
- Branded prepaid ARPU decreased
to $37.65 in Q1 2019, down 3.2%, primarily due to dilution from
promotional rate plans and growth in our Amazon Prime offering,
partially offset by certain non-recurring charges.
- Net income increased 35% to $908
million and EPS increased 36% to $1.06 in Q1 2019 primarily due to
higher Operating income and lower Interest expense. The negative
impact from merger-related costs on Net income and EPS was $93
million and $0.11, respectively.
- Adjusted EBITDA increased 11% to
a record $3.3 billion in Q1 2019, primarily due to higher Service
revenues and effective cost control. Excluded from Adjusted EBITDA
were $113 million of merger-related costs.
- Cash purchases of property and
equipment increased 41% to $1.9 billion in Q1 2019 including
capitalized interest of $118 million. The increase was primarily
due to the deployment of low band 600 MHz spectrum, which is also
laying the groundwork for the introduction of our 5G network in the
second half of 2019.
- Net cash provided by operating
activities increased 81% to $1.4 billion in Q1 2019. The
increase primarily resulted from higher Net income and lower net
cash outflows from changes in working capital.
- Free Cash Flow decreased 7% to
$618 million in Q1 2019. Higher Cash purchases of property and
equipment and lower Proceeds related to our deferred purchase price
from securitization transactions were partially offset by higher
Net cash provided by operating activities. Excluding the impact of
payments for merger-related costs on Free Cash Flow of $34 million
in Q1 2019, Free Cash Flow was $652 million.
Industry Leading Network
Performance
We continue to increase and expand the coverage and capacity of
our network to better serve our customers. 99% of Americans are
covered by our 4G LTE network, enabling a network experience that
is second to none. T-Mobile has delivered the fastest combined
average of download and upload speeds for 21 quarters in a row. Our
rapid deployment of LTE in 600 MHz provides customers with even
better coverage and sets the stage for the first nationwide
standards-based 5G network in 2020. Highlights from Q1 2019
included:
- 5G update. T-Mobile is building
the foundation for its standards-based 5G network across the U.S.
in 2019, utilizing both 600 MHz spectrum and millimeter wave
spectrum. We expect to have the first nationwide 5G network in
2020. We plan to launch our 5G network on 600 MHz as soon as we
have compatible smartphones in the second half of this year.
- Clearing and deploying 600 MHz
spectrum. At the end of Q1 2019, T-Mobile owned a nationwide
average of 31 MHz of 600 MHz low band spectrum. As of
March 31, 2019, we had cleared 140 million POPs and we expect
to clear spectrum covering approximately 280 million POPs by
year-end 2019. T-Mobile continues its aggressive deployment of LTE
on 600 MHz spectrum, using 5G ready equipment, with nearly one
million square miles already lit up covering nearly 3,500 cities
and towns in 44 states and Puerto Rico. Combining 600 MHz spectrum
and 700 MHz spectrum, we have deployed low band spectrum to 304
million POPs. We now have 40 devices compatible with 600 MHz
spectrum, including the latest iPhone generation.
Continued Strong 2019
Outlook
We expect postpaid net customer additions between 3.1 and 3.7
million in 2019, up from prior guidance of 2.6 to 3.6 million.
Net income is not available on a forward-looking basis.
Adjusted EBITDA is expected to be between $12.7 and $13.2
billion in 2019, unchanged from prior guidance. Our Adjusted EBITDA
target includes leasing revenues of $0.6 to $0.7 billion, also
unchanged from prior guidance.
Cash purchases of property and equipment, excluding capitalized
interest of approximately $400 million, are expected to be between
$5.4 and $5.7 billion and cash purchases of property and equipment,
including capitalized interest, are expected to be between $5.8 and
$6.1 billion in 2019, both unchanged from prior guidance. Cash
purchases of property and equipment in 2019 include expenditures
for 5G and 600 MHz deployment.
Net cash provided by operating activities three-year CAGR from
full-year 2016 to full-year 2019, excluding payments for
merger-related costs, is expected to be between 32% and 35%, up
from the prior range of 17% to 21%, driven primarily by
improvements in the contractual terms of factoring agreements which
led to an accounting geography change with the “Proceeds related to
beneficial interests in securitization transactions” line in the
cash flow statement but do not impact overall Free Cash Flow.
Three-year CAGR guidance (2016 - 2019) for Free Cash Flow,
excluding payments for merger-related costs, is unchanged at 46% to
48%.
Financial Results
For more details on T-Mobile’s Q1 2019 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.
T-Mobile Social Media
Investors and others should note that the Company announces
material financial and operational information to its investors
using its investor relations website, press releases, SEC filings
and public conference calls and webcasts. The Company also intends
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 the Company
intends to use as a means of disclosing the information described
above may be updated from time to time as listed on the Company’s
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 81.3 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 Metro by T-Mobile. For more
information, please visit http://www.t-mobile.com or join the
conversation on Twitter using $TMUS.
Q1 2019 Earnings Call, Livestream and
Webcast Access Information
Access via Phone (audio only):
Date:
Thursday, April 25, 2019 Time: 4:30 p.m. (EDT) US/Canada:
800-667-5617 International: +1 334-323-0505 Participant Passcode:
9958066
Please plan on accessing the earnings call ten minutes prior to
the scheduled start time.
Access via Social Media:
The @TMobileIR Twitter account will live-tweet the earnings
call.
Submit Questions via Twitter:
Twitter:
Send a tweet to @TMobileIR or @JohnLegere using $TMUS
Access via Webcast:
The earnings call will be broadcast live via our Investor
Relations website at http://investor.t-mobile.com. A replay of the
earnings call will be available for two weeks starting shortly
after the call concludes and can be accessed by dialing
888-203-1112 (toll free) or +1 719-457-0820 (international). The
passcode required to listen to the replay is 9958066.
To automatically receive T-Mobile financial news by e-mail,
please visit the T-Mobile Investor Relations website,
http://investor.t-mobile.com, and subscribe to E-mail Alerts.
Forward-Looking
Statements
This communication includes forward-looking statements within
the meaning of the Private Securities Litigation Reform Act of
1995. All statements other than statements of historical fact,
including information concerning T-Mobile US, Inc.’s future results
of operations, are forward-looking statements. These
forward-looking statements are generally identified by the words
“anticipate,” “believe,” “estimate,” “expect,” “intend,” “may,”
“could,” or similar expressions. Forward-looking statements are
based on current expectations and assumptions, which are subject to
risks and uncertainties and may cause actual results to differ
materially from the forward-looking statements. 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: the failure to obtain, or
delays in obtaining, required regulatory approvals for the merger
(the “Merger”) with Sprint Corporation (“Sprint”), pursuant to the
Business Combination Agreement with Sprint and other parties
therein (the “Business Combination Agreement”) and the other
transactions contemplated by the Business Combination Agreement
(collectively, the “Transactions”), and the risk that such
approvals may result in the imposition of conditions that could
adversely affect the combined company or the expected benefits of
the Transactions, or the failure to satisfy any of the other
conditions to the Transactions on a timely basis or at all; the
occurrence of events that may give rise to a right of one or both
of the parties to terminate the Business Combination Agreement;
adverse effects on the market price of our common stock or on our
or Sprint’s operating results because of a failure to complete the
Merger in the anticipated timeframe or at all; inability to obtain
the financing contemplated to be obtained in connection with the
Transactions on the expected terms or timing or at all; the ability
of us, Sprint and the combined company to make payments on debt or
to repay existing or future indebtedness when due or to comply with
the covenants contained therein; adverse changes in the ratings of
our or Sprint’s debt securities or adverse conditions in the credit
markets; negative effects of the announcement, pendency or
consummation of the Transactions on the market price of our common
stock and on our or Sprint’s operating results, including as a
result of changes in key customer, supplier, employee or other
business relationships; significant costs related to the
Transactions, including financing costs, and unknown liabilities of
Sprint or that may arise; failure to realize the expected benefits
and synergies of the Transactions in the expected timeframes or at
all; costs or difficulties related to the integration of Sprint’s
network and operations into our network and operations; the risk of
litigation or regulatory actions related to the Transactions; the
inability of us, Sprint or the combined company to retain and hire
key personnel; the risk that certain contractual restrictions
contained in the Business Combination Agreement during the pendency
of the Transactions could adversely affect our or Sprint’s ability
to pursue business opportunities or strategic transactions; adverse
economic, political or market conditions in the U.S. and
international markets; competition, industry consolidation, and
changes in the market for wireless services, which could negatively
affect our ability to attract and retain customers; the effects of
any future merger, investment, or acquisition involving us, as well
as the effects of mergers, investments, or acquisitions in the
technology, media and telecommunications industry; challenges in
implementing our business strategies or funding our 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 and the effects of such changes, including product
substitutions and deployment costs and performance; 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, resulting in unauthorized access to customer confidential
information; natural disasters, terrorist attacks or similar
incidents; unfavorable outcomes of 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 and changes in data privacy laws; 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; changes in accounting assumptions that
regulatory agencies, including the Securities and Exchange
Commission (“SEC”), may require, which could result in an impact on
earnings; changes in tax laws, regulations and existing standards
and the resolution of disputes with any taxing jurisdictions; the
possibility that the reset process under our trademark license
results in changes to the royalty rates for our trademarks; the
possibility that we may be unable to adequately protect our
intellectual property rights or be accused of infringing the
intellectual property rights of others; our business, investor
confidence in our financial results and stock price may be
adversely affected if our internal controls are not effective; the
occurrence of high fraud rates related to device financing, credit
card, dealers, or subscriptions; and interests of a majority
stockholder may differ from the interests of other stockholders.
Given these risks and uncertainties, readers are cautioned not to
place undue reliance on such forward-looking statements. We
undertake no obligation to revise or publicly release the results
of any revision to these forward-looking statements, except as
required by law.
Important Additional
Information
In connection with the Transactions, T-Mobile US, Inc.
(“T-Mobile”) has filed a registration statement on Form S-4 (File
No. 333-226435), which contains a joint consent solicitation
statement of T-Mobile and Sprint Corporation (“Sprint”), that also
constitutes a prospectus of T-Mobile (the “joint consent
solicitation statement/prospectus”), and each party will file other
documents regarding the Transactions with the SEC. The registration
statement on Form S-4 was declared effective by the SEC on October
29, 2018, and T-Mobile and Sprint commenced mailing the joint
consent solicitation statement/prospectus to their respective
stockholders on October 29, 2018. INVESTORS AND SECURITY HOLDERS
ARE URGED TO READ THE JOINT CONSENT SOLICITATION
STATEMENT/PROSPECTUS AND OTHER RELEVANT DOCUMENTS FILED WITH THE
SEC WHEN THEY BECOME AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT
INFORMATION. Investors and security holders may obtain these
documents free of charge from the SEC’s website or from T-Mobile or
Sprint. The documents filed by T-Mobile may be obtained free of
charge at T-Mobile’s website, at www.t-mobile.com, or at the SEC’s
website, at www.sec.gov, or from T-Mobile by requesting them by
mail at T-Mobile US, Inc., Investor Relations, 1 Park Avenue, 14th
Floor, New York, NY 10016, or by telephone at 212-358-3210. The
documents filed by Sprint may be obtained free of charge at
Sprint’s website, at www.sprint.com, or at the SEC’s website, at
www.sec.gov, or from Sprint by requesting them by mail at Sprint
Corporation, Shareholder Relations, 6200 Sprint Parkway, Mailstop
KSOPHF0302-3B679, Overland Park, Kansas 66251, or by telephone at
913-794-1091.
Participants in the
Solicitation
T-Mobile and Sprint and their respective directors and executive
officers and other members of management and employees may be
deemed to be participants in the solicitation of consents in
respect of the Transactions. Information about T-Mobile’s directors
and executive officers is available in T-Mobile’s proxy statement
dated April 26, 2018, for its 2018 Annual Meeting of Stockholders.
Information about Sprint’s directors and executive officers is
available in Sprint’s proxy statement dated June 26, 2018, for its
2018 Annual Meeting of Stockholders, and in Sprint’s subsequent
Current Report on Form 8-K filed with the SEC on July 2, 2018.
Other information regarding the participants in the consent
solicitation and a description of their direct and indirect
interests, by security holdings or otherwise, is contained in the
joint consent solicitation statement/prospectus. Investors should
read the joint consent solicitation statement/prospectus carefully
before making any voting or investment decisions. You may obtain
free copies of these documents from T-Mobile or Sprint as indicated
above.
No Offer or Solicitation
This communication shall not constitute an offer to sell or the
solicitation of an offer to buy any securities, nor shall there be
any sale of securities in any jurisdiction in which such offer,
solicitation or sale would be unlawful prior to registration or
qualification under the securities laws of any such jurisdiction.
No offering of securities shall be made except by means of a
prospectus meeting the requirements of Section 10 of the U.S.
Securities Act of 1933, as amended.
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.
Adjusted EBITDA is reconciled to Net income as follows:
Quarter (in millions) Q1 2018
Q2 2018 Q3 2018
Q4 2018 Q1 2019 Net income $ 671
$ 782 $ 795 $ 640 $ 908 Adjustments: Interest expense 251 196 194
194 179 Interest expense to affiliates 166 128 124 104 109 Interest
income (6 ) (6 ) (5 ) (2 ) (8 ) Other (income) expense, net (10 )
64 (3 ) 3 (7 ) Income tax expense (benefit) 210
286 335 198 295
Operating income 1,282 1,450 1,440 1,137 1,476 Depreciation
and amortization 1,575 1,634 1,637 1,640 1,600 Stock-based
compensation (1) 96 106 102 85 93 Merger-related costs — 41 53 102
113 Other, net (2) 3 2 7
6 2 Adjusted EBITDA $ 2,956 $
3,233 $ 3,239 $ 2,970 $ 3,284 (1)
Stock-based compensation includes payroll tax impacts
and may not agree to stock-based compensation expense in the
consolidated financial statements. Additionally, certain
stock-based compensation expenses associated with the Transactions
have been included in Merger-related costs. (2) 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 or are not reflective of T-Mobile’s ongoing operating
performance, 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, such as
merger-related costs. 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 measure 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 and costs
related to the Transactions, as they are not indicative of
T-Mobile’s ongoing operating performance, as well as certain other
nonrecurring income and 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 U.S.
Generally Accepted Accounting Principles (“GAAP”).
T-Mobile US, Inc.
Reconciliation of Non-GAAP Financial
Measures to GAAP Financial Measures (continued)
(Unaudited)
Net debt (excluding Tower obligations)(1) to last twelve months
net income and Adjusted EBITDA ratios are calculated as
follows:
(in millions, except net debt ratio) Mar
31,2018 Jun 30,2018 Sep
30,2018 Dec 31,2018 Mar
31,2019 Short-term debt $ 3,320 $ 1,004 $ 783 $ 841 $
250 Short-term debt to affiliates 445 320 — — 598 Short-term
financing lease liabilities 911 Long-term debt 12,127 12,065 11,993
12,124 10,952 Long-term debt to affiliates 14,586 14,581 14,581
14,582 13,985 Financing lease liabilities 1,224 Less: Cash and cash
equivalents (2,527 ) (215 ) (329 )
(1,203 ) (1,439 ) Net debt (excluding Tower Obligations) $
27,951 $ 27,755 $ 27,028 $ 26,344 $
26,481 Divided by: Last twelve months Net income $ 4,509
$ 4,710 $ 4,955 $ 2,888 $ 3,125
Net Debt (excluding Tower Obligations) to last twelve months Net
income 6.2 5.9 5.5
9.1 8.5 Divided by: Last twelve months
Adjusted EBITDA $ 11,501 $ 11,722 $ 12,139 $
12,398 $ 12,726 Net Debt (excluding Tower
Obligations) to last twelve months Adjusted EBITDA Ratio 2.4
2.4 2.2 2.1
2.1
Net debt is defined as Short-term debt, Short-term debt to
affiliates, Short-term financing lease liabilities, Long-term debt
(excluding tower obligations), Long-term debt to affiliates, and
Financing lease liabilities less Cash and cash equivalents.
(1) In Q1 2019, the adoption of the new lease
accounting standard resulted in a reclassification of capital lease
liabilities previously included in Short-term debt and Long-term
debt to Short-term financing lease liabilities and Financing lease
liabilities in our Condensed Consolidated Balance Sheet. In Q1
2019, we redefined Net debt (excluding Tower obligations) to
reflect the above changes in classification and present Net debt
(excluding Tower obligations) on a consistent basis for investor
transparency. The effects of this change are applied prospectively,
consistent with the adoption of the standard. See Note 1 – Summary
of Significant Accounting Policies in the Q1 2019 10-Q for
additional details.
Free Cash Flow is calculated as follows:
Quarter (in millions) Q1 2018
Q2 2018 Q3 2018
Q4 2018 Q1 2019 Net cash
provided by operating activities $ 770 $ 1,261 $ 914 $ 954 $ 1,392
Cash purchases of property and equipment (1,366 ) (1,629 ) (1,362 )
(1,184 ) (1,931 ) Proceeds related to beneficial interests in
securitization transactions 1,295 1,323 1,338 1,450 1,157 Cash
payments for debt prepayment or debt extinguishment costs (31 )
(181 ) — — — Free Cash Flow $ 668 $ 774
$ 890 $ 1,220 $ 618 Net cash (used in)
provided by investing activities $ (462 ) $ (306 ) $ (42 ) $ 231
$ (966 ) Net cash provided by (used in) financing activities
$ 1,000 $ (3,267 ) $ (758 ) $ (311 ) $ (190 ) Free Cash Flow
- Net cash provided by operating activities less Cash purchases of
property and equipment, including Proceeds related to beneficial
interests in securitization transactions and less Cash payments for
debt prepayment of debt extinguishment costs. 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.
T-Mobile US, Inc.
Reconciliation of Non-GAAP Financial
Measures to GAAP Financial Measures (continued)
(Unaudited)
Free Cash Flow three-year CAGR(1) is calculated as follows:
FY FY
(in millions, except CAGR Range) 2016 2019
Guidance Range CAGR Range Net cash provided by operating
activities $ 2,779 $ 6,400 $ 6,850 32 %
35 % Cash purchases of property and equipment (4,702 ) (5,800 )
(6,100 ) 7 % 9 % Proceeds related to beneficial interests in
securitization transactions 3,356 3,900 3,900 Cash payments for
debt prepayment or debt extinguishment costs — — (50
) Free Cash Flow $ 1,433 $ 4,500 $ 4,600 46 %
48 % (1) The Net cash provided by operating
activities and Free Cash Flow three-year CAGR figures exclude
payments for merger-related costs.
The following tables illustrate the calculation of our operating
measure ARPU and reconciles this measure to the related service
revenues:
(in millions, except average number of customers
and ARPU) Quarter Q1 2018 Q2
2018 Q3 2018 Q4 2018
Q1 2019 Calculation of Branded Postpaid
Phone ARPU Branded postpaid service revenues $ 5,070 $ 5,164 $
5,244 $ 5,384 $ 5,493 Less: Branded postpaid other revenues
(259 ) (272 ) (289 ) (297 ) (310 )
Branded postpaid phone service revenues $ 4,811 $ 4,892
$ 4,955 $ 5,087 $ 5,183 Divided by:
Average number of branded postpaid phone customers (in thousands)
and number of months in period 34,371 35,051
35,779 36,631 37,504
Branded postpaid phone ARPU $ 46.66 $ 46.52 $
46.17 $ 46.29 $ 46.07
Calculation of
Branded Prepaid ARPU Branded prepaid service revenues $ 2,402 $
2,402 $ 2,395 $ 2,399 $ 2,386 Divided by: Average number of branded
prepaid customers (in thousands) and number of months in period
20,583 20,806 20,820
20,833 21,122 Branded prepaid ARPU $
38.90 $ 38.48 $ 38.34 $ 38.39 $ 37.65
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 branded postpaid other customers and
related revenues.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20190425005949/en/
Press Contact:Media RelationsT-Mobile US,
Inc.mediarelations@t-mobile.comhttp://newsroom.t-mobile.com
Investor Relations Contact:Nils PaellmannT-Mobile US,
Inc.investor.relations@t-mobile.comhttp://investor.t-mobile.com
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