T-Mobile Reports Record Financials and Strong Customer Growth in FY 2018, Guidance Sets the Stage for a Strong 2019

Record High Revenues, Accelerating Customer Net Additions and
Record Low Postpaid Phone Churn Close out 2018; Strong Outlook for 2019
Shows Continued Momentum for the Un-carrier

BELLEVUE, Wash.–(BUSINESS WIRE)–T-Mobile US, Inc. (NASDAQ: TMUS):

Record Financial Performance in FY 2018 (all
percentages year-over-year
)

  • Record Service revenues of $8.2 billion, up 6% in Q4 2018 — up 6% to
    $32.0 billion in 2018
  • Record Total revenues of $11.4 billion, up 6% in Q4 2018 — up 7% to
    $43.3 billion in 2018
  • Strong Net income of $640 million, down 76% in Q4 2018 — down 36% to
    $2.9 billion in 2018

    • Up 21% and 22% in Q4 2018 and 2018, respectively, excluding the
      impact of the Tax Cuts and Jobs Act (“TCJA”) of $2.2 billion in
      2017
  • Diluted earnings per share (“EPS”) of $0.75 and $3.36 in Q4 2018 and
    2018, respectively
  • Record Q4 Adjusted EBITDA(1) of $3.0 billion, up 10% in Q4
    2018 — up 11% to $12.4 billion in 2018
  • Strong Net cash provided by operating activities(2) of $954
    million, up 10%, and $3.9 billion, up 2%, in Q4 2018 and 2018,
    respectively
  • Record Free Cash Flow(1)(2) of $1.2 billion, up 7% in Q4
    2018 — up 30% to $3.6 billion in 2018

Accelerating Customer Growth

  • Record 2.4 million total net additions in Q4 2018 — 7.0 million in 2018
  • 1.4 million branded postpaid net additions in Q4 2018, best in the
    industry — 4.5 million in 2018
  • 1.0 million branded postpaid phone net additions in Q4 2018, best in
    industry — 3.1 million in 2018
  • 135,000 branded prepaid net additions in Q4 2018, expect to be best in
    the industry — 460,000 in 2018
  • Q4 record-low branded postpaid phone churn of 0.99% in Q4 2018, down
    19 bps YoY — 1.01% in 2018, down 17 bps from 2017

Building the First Real 5G Network While
Improving 4G LTE

  • T-Mobile is building out standards-based 5G today, plans to have
    nationwide 5G coverage next year
  • Aggressive deployment of 600 MHz using 5G ready equipment, now
    reaching over 2,700 cities and towns on 29 devices
  • T-Mobile now covers more than 325 million people with 4G LTE
  • Fastest 4G LTE network for 20th consecutive quarter based on analysis
    by Ookla® of Speedtest Intelligence® data

Strong Outlook for 2019

  • Branded postpaid net customer additions of 2.6 to 3.6 million
  • Net income is not available on a forward-looking basis(3)
  • Adjusted EBITDA target, excluding the impact of the new lease
    standard, 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 is expected to be at 17%
    – 21%, up from prior guidance of 7% – 12%(2)
  • Three-year CAGR from FY 2016 to FY 2019 for Free Cash Flow maintained
    at 46% – 48%(1)(2)

________________________________________________________________

(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) In Q1 2018, the adoption of the new cash flow accounting standard
resulted in a reclassification of cash flows related to the deferred
purchase price from securitization transactions from operating
activities to investing activities. In addition, cash flows related
to debt prepayment and extinguishment costs were reclassified from
operating activities to financing activities. In Q1 2018, we
redefined Free Cash Flow to reflect the above changes in
classification and present cash flows on a consistent basis for
investor transparency. The effects of this change are applied
retrospectively and are provided in the Reconciliation of Non-GAAP
Financial Measures to GAAP Financial Measures tables.
(3) 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 strong quarter with
record financials and the best postpaid phone growth in the industry. In
Q4, T-Mobile delivered record-high service and total revenues, strong
net income, record Q4 Adjusted EBITDA, record-low Q4 postpaid phone
churn, strong net cash provided by operating activities and record Free
Cash Flow. These results cap off 2018 where the Company delivered strong
customer growth and service revenue growth for the fifth consecutive
year.

Un-carrier is all about putting customers first by solving everyday pain
points. When customers join T-Mobile, they get more value for their
money and the best customer service in the industry – all on the
nation’s fastest 4G LTE network. The Company’s investments in new
geographies, underpenetrated segments, and a completely new model for
customer care continue to pay off. As a result, the Un-carrier’s
customer growth accelerated year-over-year with T-Mobile again leading
the industry in the fourth quarter, capturing more than 50% of industry
postpaid phone growth and 56% more postpaid phone net additions than our
next closest competitor. In addition, T-Mobile delivered record-low Q4
postpaid phone churn of 0.99% – the best result for a fourth quarter in
T-Mobile’s history.

This never gets old! T-Mobile finished another year with record
breaking financials and our best-ever customer growth! Record revenues,
strong net income, record Adjusted EBITDA, our lowest-ever Q4 postpaid
phone churn that was better than AT&T for the very first time!” said
John Legere, CEO of T-Mobile. “T-Mobile is competing hard and winning
customers – and we continue to deliver results beyond expectations. Our
2019 guidance shows that we expect our incredible standalone momentum to
continue!”

Record Financial Performance in FY 2018

T-Mobile’s record full-year financial performance in 2018 proves that
taking care of customers is also good for shareholders. The Company
continues to successfully translate customer growth into
industry-leading service and total revenue percentage growth.

(in millions, except EPS)   Quarter  

Year Ended
December 31,

 

Q4 2018
vs.
Q3 2018

 

Q4 2018
vs.
Q4 2017

 

YTD 2018
vs.
YTD 2017

Q4 2018   Q3 2018   Q4 2017 2018   2017  
Total service revenues(1) $ 8,189 $ 8,066 $ 7,757 $ 31,992 $ 30,160   1.5 % 5.6 % 6.1 %
Total revenues(1) 11,445 10,839 10,759 43,310 40,604 5.6 % 6.4 % 6.7 %
Net income(1) 640 795 2,707 2,888 4,536 (19.5 )% (76.4 )% (36.3 )%
EPS(1) 0.75 0.93 3.11 3.36 5.20 (19.4 )% (75.9 )% (35.4 )%
Adjusted EBITDA(1)(2) 2,970 3,239 2,711 12,398 11,213 (8.3 )% 9.6 % 10.6 %
Cash purchases of property and equipment, including capitalized
interest
1,184 1,362 921 5,541 5,237 (13.1 )% 28.6 % 5.8 %
Net cash provided by operating activities(3) 954 914 865 3,899 3,831 4.4 % 10.3 % 1.8 %
Free Cash Flow(3) 1,220 890 1,137 3,552 2,725 37.1 % 7.3 % 30.3 %
 
(1)   On January 1, 2018, we adopted Accounting Standards Update (“ASU”)
2014-09, “Revenue from Contracts with Customers (Topic 606”) and the
related amendments (collectively, the “new revenue standard”), using
the modified retrospective method with the cumulative effect of
initially applying the guidance recognized at the date of initial
application. Comparative information has not been restated and
continues to be reported under the standards in effect for those
periods.
(2) 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.
(3) In Q1 2018, the adoption of the new cash flow accounting standard
resulted in a reclassification of cash flows related to the deferred
purchase price from securitization transactions from operating
activities to investing activities. In addition, cash flows related
to debt prepayment and extinguishment costs were reclassified from
operating activities to financing activities. In Q1 2018, we
redefined Free Cash Flow to reflect the above changes in
classification and present cash flows on a consistent basis for
investor transparency. The effects of this change are applied
retrospectively and are provided in the Reconciliation of Non-GAAP
Financial Measures to GAAP Financial Measures tables.
 

The following discussion is for the three months and year ended
December 31, 2018, compared to the same periods in 2017 unless otherwise
stated.

  • Total service revenues increased 6% to a record-high $8.2
    billion in Q4 2018 and 6% to a record-high of $32.0 billion in
    full-year 2018. These results represent our best quarterly and
    full-year performance ever and mark the 19th consecutive quarter of
    leading the industry in year-over-year service revenue percentage
    growth. Branded postpaid revenues grew 8.0% in Q4 2018, an increase
    from growth of 6.6% in Q3 2018.
  • Total revenues increased 6% to a record-high $11.4 billion in
    Q4 2018 and 7% to a record-high of $43.3 billion in full-year 2018,
    driven by growth in service revenues and equipment revenues.
  • Branded postpaid phone Average Revenue per User (ARPU) remained
    generally stable in Q4 2018 at $46.29, down 0.2%. For full-year 2018,
    branded postpaid phone ARPU remained generally stable at $46.40, down
    1.2%. The slight decrease in both periods was primarily due to the
    growing success of new customer segments and rate plans such as
    T-Mobile ONE Unlimited 55+, T-Mobile ONE Military, T-Mobile for
    Business and T-Mobile Essentials, the impact of the ongoing growth in
    our Netflix offering, and a reduction in certain non-recurring charges.
  • Branded prepaid ARPU remained generally stable at $38.39 in Q4
    2018 and $38.53 in full-year 2018, down 0.6% and 0.4%, respectively.
  • Net income decreased 76% to $640 million in Q4 2018 and 36% to
    $2.9 billion in full-year 2018 primarily due to the impact from the
    TCJA which resulted in an income tax benefit of $2.2 billion
    recognized in Q4 2017. Excluding the impact from the TCJA, net income
    would have increased by 21% in Q4 2018 and 22% in full-year 2018.
  • EPS decreased by $2.36 to $0.75 in Q4 2018 and by $1.84 to
    $3.36 in full-year 2018 primarily due to the impact of the TCJA,
    resulting in a benefit of $2.50 in Q4 2017 and $2.49 in full-year 2017.
  • Adjusted EBITDA increased 10% to $3.0 billion in Q4 2018 and
    11% to $12.4 billion in full-year 2018, primarily due to higher
    operating income. Positive impacts to Adjusted EBITDA include $83
    million in Q4 2018 and $398 million in full-year 2018 from the new
    revenue standard and $158 million in full-year 2018 from insurance
    reimbursements related to hurricanes, net of costs.
  • Cash purchases of property and equipment increased 29% to $1.2
    billion in Q4 2018 and 6% to $5.5 billion in full-year 2018 including
    capitalized interest of $116 million and $362 million, respectively.
    These increases were primarily due to deployment of low band 600 MHz
    spectrum and laying the groundwork for 5G.
  • Net cash provided by operating activities increased 10% to $954
    million in Q4 2018. The increase resulted from higher net non-cash
    adjustments to Net income, partially offset by lower Net income, both
    primarily related to impacts of the TCJA, and an increase in net cash
    outflows from working capital primarily due to a paydown of Accounts
    payable and accrued liabilities. Net cash provided by operating
    activities increased 2% to $3.9 billion in full-year 2018.
  • Free Cash Flow increased 7% to $1.2 billion in Q4 2018 from
    higher proceeds related to our deferred purchase price from
    securitization transactions and higher net cash provided by operating
    activities, partially offset by higher cash purchases of property and
    equipment. Free Cash Flow was $3.6 billion, up 30% in full-year 2018.

Accelerating Customer Growth

T-Mobile continues to deliver strong customer growth, and Q4 2018 was no
different. We once again led the industry in branded postpaid phone
customer net additions and captured over 50% of industry growth.

  Quarter  

Year Ended
December 31,

(in thousands, except churn) Q4 2018   Q3 2018   Q4 2017   2018   2017
Total net customer additions(1) 2,402 1,630 1,854 7,044 5,658
Branded postpaid net customer additions 1,358 1,079 1,072 4,459 3,620
Branded postpaid phone net customer additions(1) 1,020 774 891 3,097 2,817
Branded postpaid other customer additions 338 305 181 1,362 803
Branded prepaid net customer additions(1) 135 35 149 460 855
Total customers, end of period (1) 79,651 77,249 72,585 79,651 72,585
Branded postpaid phone churn 0.99 % 1.02 % 1.18 % 1.01 % 1.18 %
Branded prepaid churn 3.99 % 4.12 % 4.00 % 3.96 % 4.04 %
 
(1)   As a result of the acquisition of Iowa Wireless Services, LLC (IWS),
we included an adjustment of 13,000 branded postpaid phone and 4,000
branded prepaid IWS customers in our reported subscriber base as of
January 1, 2018. Additionally, as a result of the acquisition of
Layer3 TV, we included an adjustment of 5,000 branded prepaid
customers in our reported subscriber base as of January 22, 2018.
Customer activity post acquisition was included in our net customer
additions for the remainder of 2018.
 
  • Total net customer additions were a record 2.4 million in Q4
    2018, bringing our total customer count to 79.7 million, and marking
    the 23rd straight quarter in which T-Mobile generated more than 1
    million total net customer additions. For full-year 2018, total
    customer additions were 7.0 million, marking the fifth year in a row
    of more than 5 million total net additions.
  • Branded postpaid net customer additions were 1.4 million in Q4
    2018, which was the best result in 17 quarters. For full-year 2018,
    branded postpaid net customer additions were 4.5 million, the best
    annual result in three years.
  • Branded postpaid phone net customer additions were 1.0 million
    in Q4 2018 and marked the 20th consecutive quarter in which T-Mobile
    led the industry in this category. Branded postpaid phone net customer
    additions were 3.1 million in full-year 2018. Increased branded
    postpaid phone net customer additions were due to lower churn and
    continued growth in existing and Greenfield markets including the
    growing success of new customer segments and rate plans such as
    T-Mobile ONE Unlimited 55+, T-Mobile ONE Military, T-Mobile for
    Business and T-Mobile Essentials.
  • Branded postpaid other net customer additions were 338,000 in
    Q4 2018 and 1.4 million for the full-year 2018 primarily due to higher
    gross customer additions from wearables and lower churn.
  • Branded postpaid phone churn was a Q4 record low of 0.99% in Q4
    2018, down 19 basis points year-over-year and decreased 17 basis
    points to 1.01% in full-year 2018. These improvements were 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 135,000 in Q4 2018
    and 460,000 in full-year 2018, down primarily due to increased
    competitive activity, partially offset by lower migrations to branded
    postpaid plans. On October 8, 2018, MetroPCS was re-branded “Metro™ by
    T-Mobile” and launched new unlimited rate plans that include premium
    features such as Amazon Prime and Google One.
  • Branded prepaid churn was 3.99% in Q4 2018, flat year-over-year
    and down 8 basis points to 3.96% in full-year 2018.

Building the First Real 5G Network While
Improving 4G LTE

We continue to increase and expand the coverage and capacity of our
network to better serve our customers. Our rapid deployment of 600 MHz
provides customers with even better coverage and sets the stage for
nationwide standards-based 5G. Highlights from Q4 2018 included:

  • 5G update. T-Mobile is building out standards-based 5G across
    the US, including six of the Top 10 markets, including New York and
    Los Angeles, in 2018. This network will be ready for the introduction
    of the first standards-based 5G smartphones in 2019. We plan on the
    delivery of a nationwide standards-based 5G network next year.
  • Clearing and deploying 600 MHz spectrum. At the end of Q4 2018,
    T-Mobile owned a nationwide average of 31 MHz of 600 MHz low band
    spectrum. As of December 31, 2018, we had cleared approximately 135
    million POPs and we expect to clear spectrum covering approximately
    272 million POPs by year-end 2019. 600 MHz deployments continued at an
    accelerated pace with spectrum covering more than 2,700 cities and
    towns in 43 states and Puerto Rico across hundreds of thousands of
    square miles already lit up. Combining 600 MHz and 700 MHz, we have
    deployed low band spectrum to 301 million POPs. We now have 29 devices
    compatible with 600 MHz including the latest iPhone generation.
  • Expanding our coverage breadth. T-Mobile now covers more than
    325 million people with 4G LTE, up from 322 million at the end of
    2017. As promised, T-Mobile has achieved effective network population
    coverage parity with Verizon.
  • Operating America’s Fastest 4G LTE network. In Q4 2018, we were
    once again the nation’s fastest LTE network, realizing average 4G LTE
    download speeds of 33.4 Mbps, and average 4G LTE upload speeds of 12.1
    Mbps. This was the 20th consecutive quarter that we have led the
    industry in both download and upload speeds based on analysis by Ookla®
    of Speedtest Intelligence® data.

Strong 2019 Outlook

We expect postpaid net customer additions between 2.6 and 3.6 million in
2019.

Net income is not available on a forward-looking basis.

Adjusted EBITDA, excluding the impact of the new lease standard, is
expected to be between $12.7 and $13.2 billion in 2019. Our Adjusted
EBITDA target includes leasing revenues of $0.6 to $0.7 billion.

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. Cash purchases of property and equipment in 2019 include
expenditures for 5G and 600 MHz deployment.

The three-year CAGR guidance (2016 – 2019) for net cash provided by
operating activities is expected to be at 17% – 21%, up from prior
guidance of 7% – 12%.

Three-year CAGR guidance (2016 – 2019) for Free Cash Flow is unchanged
at 46% – 48%.

In 2019, including those arising from a potential change in a previously
failed sale-leaseback transaction, we expect the following impacts from
the adoption of the new lease standard, which are excluded from the
guidance ranges provided above. See Note 1 in our Annual Report on Form
10-K filed on February 7, 2019 for more information:

  • Other revenues – decrease of $230 – $250 million
  • Operating expenses – decrease of $220 – $260 million
  • Interest expense – decrease of $200 – $240 million
  • Net income – increase of $140 – $180 million
  • Adjusted EBITDA – decrease of $40 – $80 million
  • Total Assets – increase of $9.1 – $10.0 billion
  • Total Liabilities – increase of $7.0 – $7.5 billion
  • Equity Adjustment – increase of $2.1 – $2.5 billion
  • Net cash provided by operating activities – decrease of $20 – $40
    million
  • Net cash used in financing activities – decrease of $20 – $40 million

Financial Results

For more details on T-Mobile’s Q4 and full year 2018 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 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 79.7 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 Metro by T-Mobile. For more
information, please visit http://www.t-mobile.com
or join the conversation on Twitter using $TMUS.

Q4 and Full-Year 2018 Earnings Call, Livestream
and Webcast Access Information

Access via Phone (audio only):

Date:   February 7, 2019
Time: 8:30 a.m. (ET)
US/Canada: 866-575-6534
International: +1 786-460-7205
Participant Passcode: 6928233
 

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 Text, Twitter, or Facebook:

Text:   Send a text message to 313131, enter the keyword TMUS followed by a
space
Twitter: Send a tweet to @TMobileIR or @JohnLegere using $TMUS
Facebook: Post a comment to John Legere’s Facebook Earnings post
 

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 6928233.

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 news release 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,” “expect,” “believe,”
“intend,” “may,” “could,” or similar expressions.

Contacts

Press Contact:
Media Relations
T-Mobile US, Inc.
[email protected]
http://newsroom.t-mobile.com

Investor Relations Contact:
Nils Paellmann
T-Mobile US,
Inc.
[email protected]
http://investor.t-mobile.com

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