10-QPeriod: Q1 FY2018

T-Mobile US, Inc. Quarterly Report for Q1 Ended Mar 31, 2018

Filed May 1, 2018For Securities:TMUSTMUSZTMUSITMUSL

Summary

T-Mobile US, Inc. reported a solid first quarter for 2018, with total revenues increasing by 9% year-over-year to $10.5 billion. This growth was primarily driven by a 7% increase in service revenues, benefiting from a larger branded customer base across both postpaid and prepaid segments, and a notable 15% increase in equipment revenues. The company also saw a significant 24% rise in operating income, reaching $1.3 billion, although net income saw a slight decrease of 4% to $671 million, largely due to changes in income tax expenses. The company announced a significant business combination agreement with Sprint on April 29, 2018, intending to merge and create a combined entity poised to enhance competition in the U.S. wireless, video, and broadband industries, with a focus on leading in the 5G era. This filing also details the adoption of new revenue recognition standards (ASC 606) which had a positive impact on reported revenues and operating income for the quarter, and management's ongoing focus on subscriber growth and network investment. Financially, T-Mobile demonstrated strong cash flow generation, with net cash provided by operating activities increasing by 27% to $770 million. Free Cash Flow saw a substantial increase of 261% to $668 million. The company also continues to actively manage its debt structure, with significant refinancing and issuance activities during the quarter.

Financial Highlights

54 data points
Beta

Revenue

$10.46B

72.8% Gross Margin

Net Income

$671.00M

6.4% Net Margin

EPS (Diluted)

$0.78

Total Assets

$72.00B

Cash & Equivalents

$2.53B

Free Cash Flow

-$596.00M

Financial Statements
Beta
Revenue$10.46B
Cost of Revenue$2.85B
Gross Profit$7.61B
SG&A Expenses$3.16B
Operating Expenses$9.17B
Operating Income$1.28B
Interest Expense$251.00M
Net Income$671.00M
EPS (Basic)$0.78
EPS (Diluted)$0.78
Shares Outstanding (Basic)855.22M
Shares Outstanding (Diluted)862.24M

Key Highlights

  • 1Total revenues increased 9% year-over-year to $10.5 billion, driven by growth in both service (7%) and equipment (15%) revenues.
  • 2Operating income grew by a significant 24% to $1.3 billion, indicating improved operational efficiency.
  • 3Net income decreased slightly by 4% to $671 million, primarily due to a substantial change in income tax expense/benefit compared to the prior year.
  • 4Total branded customers grew by 8% to 59.9 million, with strong performance in branded postpaid segments (+11%).
  • 5Net cash provided by operating activities increased by 27% to $770 million, and Free Cash Flow surged by 261% to $668 million.
  • 6The company announced a definitive Business Combination Agreement with Sprint on April 29, 2018, signaling a major strategic move towards industry consolidation.
  • 7Adoption of new revenue recognition standard (ASC 606) positively impacted revenue and operating income, with a $77 million increase in equipment revenue and a $95 million increase in operating income for the quarter.

Frequently Asked Questions

The most significant strategic development is the announcement of the Business Combination Agreement with Sprint on April 29, 2018. This merger, expected to close in the first half of 2019, aims to create a combined entity that will significantly alter the U.S. wireless landscape, with a strong focus on 5G leadership.

T-Mobile adopted the new revenue recognition standard (ASC 606) on January 1, 2018. For the first quarter of 2018, this adoption resulted in a reported increase in total revenues of $47 million, a $95 million increase in operating income, and a $71 million increase in net income compared to what would have been reported under the previous standard. Specifically, equipment revenues saw a $77 million positive impact.

The company demonstrated strong financial health. Total revenues grew by 9% to $10.5 billion. Operating income increased significantly by 24% to $1.3 billion. Cash flow was robust, with net cash provided by operating activities up 27% to $770 million and Free Cash Flow increasing dramatically by 261% to $668 million, indicating strong operational cash generation and efficient capital deployment.

T-Mobile added a total of 1.4 million net new customers in the first quarter of 2018, bringing the total branded customer base to nearly 60 million. This growth was primarily driven by branded postpaid customers, which increased by 11% year-over-year to 39 million, while branded prepaid customers grew by 3% to 20.9 million.