10-QPeriod: Q2 FY2018

T-Mobile US, Inc. Quarterly Report for Q2 Ended Jun 30, 2018

Filed August 1, 2018For Securities:TMUSTMUSZTMUSITMUSL

Summary

T-Mobile US, Inc. reported solid revenue growth in the second quarter of 2018, with total revenues increasing by 4% year-over-year to $10.6 billion. This growth was primarily driven by a 7% increase in service revenues, reaching $7.9 billion, attributed to a larger customer base, lower churn, and the success of their business and prepaid segments. While equipment revenues saw a slight decline due to fewer device sales and lower lease revenues, the company's strategic focus on network expansion and customer acquisition remains evident. The company also highlighted significant progress on its proposed merger with Sprint, which is expected to close in the first half of 2019, pending regulatory approvals. This merger aims to accelerate 5G network deployment and enhance competitive positioning. Financially, T-Mobile demonstrated improved cash flow generation, with a notable increase in Free Cash Flow, reflecting operational efficiencies and effective capital management.

Financial Highlights

54 data points
Beta

Revenue

$10.57B

73.8% Gross Margin

Net Income

$782.00M

7.4% Net Margin

EPS (Diluted)

$0.92

Total Assets

$69.69B

Cash & Equivalents

$215.00M

Free Cash Flow

-$368.00M

Financial Statements
Beta
Revenue$10.57B
Cost of Revenue$2.77B
Gross Profit$7.80B
SG&A Expenses$3.19B
Operating Expenses$9.12B
Operating Income$1.45B
Interest Expense$196.00M
Net Income$782.00M
EPS (Basic)$0.92
EPS (Diluted)$0.92
Shares Outstanding (Basic)847.66M
Shares Outstanding (Diluted)852.04M

Key Highlights

  • 1Total revenues increased 4% to $10.6 billion in Q2 2018 compared to Q2 2017.
  • 2Service revenues grew 7% to $7.9 billion, driven by customer base expansion and lower churn.
  • 3Equipment revenues decreased 7% to $2.3 billion, primarily due to lower device volumes and lease revenues.
  • 4Operating income increased 2% to $1.5 billion, with a positive impact from the adoption of a new revenue standard.
  • 5Net income rose 35% to $782 million, benefiting from higher operating income and lower income tax expense.
  • 6Free Cash Flow saw a significant increase of 61% to $774 million.
  • 7The company announced a merger agreement with Sprint, expected to close in the first half of 2019, pending regulatory approvals.

Frequently Asked Questions

The primary driver of T-Mobile's revenue growth in Q2 2018 was a 7% increase in service revenues, totaling $7.9 billion. This growth was attributed to an expanding customer base across both postpaid and prepaid segments, record-low churn rates, and the success of their business and MetroPCS brands.

T-Mobile announced a definitive merger agreement with Sprint on April 29, 2018. The transaction is structured as an all-stock deal and is expected to close in the first half of 2019, subject to customary closing conditions, including regulatory approvals from various governmental entities.

T-Mobile adopted the new revenue recognition standard (ASC 606) on January 1, 2018. For the second quarter of 2018, this adoption resulted in a positive impact of $96 million on equipment revenues and $84 million on operating income, and $62 million on net income, compared to the previous accounting standard.

T-Mobile is actively managing its debt through issuances and redemptions. The company reported a significant increase in Free Cash Flow to $774 million for the quarter, up 61% year-over-year. This improved cash flow generation, along with operational management, supports their liquidity and capital expenditure needs, including network investments and the anticipated merger with Sprint.