01—Abstract
Summary
Summary of the 8-K filed April 25, 2024. Cited figures are marked; the original filing is the authoritative source.
T-Mobile US (TMUS) reported Q1 2024 results that beat on the metrics it emphasized most: customer growth, service revenue, profitability and cash flow.
Postpaid net customer additions were 1.2 million, with 532 thousand postpaid phone net adds, and postpaid phone churn of 0.86% matched the company's lowest Q1 on record. Service revenues rose 3.5% year-over-year to $16.1 billiona, postpaid service revenues rose 6.5% to $12.6 billion, and Core Adjusted EBITDA rose 8.0% to $7.6 billion. Net income grew 22.4% to $2.4 billion and diluted EPS grew 26.6% to $2.00, though Q1 2024 also included $97 million of after-tax merger-related costs.
Operating cash flow was $5.1 billionb (up 25.5%) and Adjusted Free Cash Flow was $3.3 billion (up 39.4%), helped by lower merger-related payments and working capital outflows. The company returned $4.3 billion to stockholders in the quarter, including $3.6 billion in buybacks and a $769 million dividend. The quarter was not uniformly strong.
Net customer additions, postpaid net account additions, and High Speed Internet net adds all declined year-over-year, and total revenues fell 0.2% to $19.6 billionc as equipment revenues dropped 13%. Management attributed the slowdown in customer growth partly to a moderating industry, and it characterized its own momentum as continuing despite that. Sequentially, Adjusted Free Cash Flow fell 22% on higher capital purchases of $2.6 billion, which the company attributed to planned timing.
Management raised 2024 guidance modestly. Postpaid net customer additions are now expected at 5.2 to 5.6 million (up from 5.0 to 5.5 million), Core Adjusted EBITDA at $31.4 to $31.9 billiond, operating cash flow at $21.6 to $22.3 billion, and Adjusted Free Cash Flow at $16.4 to $16.9 billion.
Capital expenditures guidance was unchanged at $8.6 to $9.4 billion. The company reported a net debt of $73.9 billion, excluding tower obligations, which equals about 2.5x LTM Core Adjusted EBITDA.
02—Key points
Key Highlights
- Postpaid phone net adds of 532K, the best in the industry per company claims, and postpaid phone churn of 0.86% matched the lowest Q1 on record.
- Service revenue grew 3.5% YoY to $16.1B; postpaid service revenue grew 6.5% to $12.6B, driven by higher average accounts and higher ARPA.
- Core Adjusted EBITDA rose 8.0% YoY to $7.6B, with margin of 47.3% of service revenues; net income rose 22.4% to $2.4B and diluted EPS rose 26.6% to $2.00.
- Adjusted Free Cash Flow of $3.3B rose 39.4% YoY, but fell 22.3% sequentially as capex timing shifted higher.
- Total net customer additions fell 147K YoY to 1.2M, and postpaid net account additions fell 69K YoY, signaling slowing industry-wide growth.
- 2024 guidance raised for postpaid net customer additions (5.2–5.6M) and Core Adjusted EBITDA ($31.4–31.9B); Adjusted FCF guidance raised modestly to $16.4–16.9B.
- Returned $4.3B to stockholders in Q1, including $3.6B of buybacks (21.9M shares at an average $162.69) and a $769M dividend; $11.7B of authorization remains through December 2024.
03—Questions
Frequently Asked Questions
Why did T-Mobile's net income and EPS grow so much faster than its revenue?
Net income rose 22.4% and diluted EPS rose 26.6%, while total revenues fell 0.2%. The gap comes mainly from lower operating costs: cost of services fell about 12% and SG&A fell about 5%, helped by the Wireline sale, reduced headcount and merger synergies. Lower merger-related costs also contributed. Share count reduction from buybacks amplified the EPS growth beyond net income growth.
Is T-Mobile's customer growth slowing?
Partly. Total net customer additions were 1.17 million, down 147K from a year earlier. Postpaid net account additions fell 69K and High Speed Internet net adds fell 118K. Management attributed the decline to fewer HSI-only additions after promotional pricing ended and to moderating industry growth. Postpaid phone net adds were roughly flat YoY, at 532K versus 538K, and churn improved. The company still claims industry-leading growth, though some of that claim relies on consensus estimates for competitors that have not yet reported.
Why did Adjusted Free Cash Flow rise year-over-year but fall sequentially?
Year-over-year, Adjusted FCF grew 39% on higher operating cash flow, lower capex (down 12%), and lower merger-related payments ($293M versus $484M). Sequentially, it fell 22% because capex rose 66% to $2.6B on planned timing of purchases and because securitization proceeds declined. Management's full-year guidance does not assume material securitization inflows, so the 2024 figure depends on operating cash flow and capex.
How leveraged is T-Mobile, and what does it mean for shareholder returns?
Net debt excluding tower obligations was $73.9 billion at March 31, 2024, or about 2.5x LTM Core Adjusted EBITDA, down from 2.7x a year earlier. Total debt was $80.6 billion. Shareholder returns of $4.3 billion in Q1 were funded by operating cash flow, but Q1 Adjusted FCF of $3.3 billion was lower than total returns, so the gap was covered by balance sheet resources. The remaining $11.7B authorization through December 2024 means returns may slow or pause if cash generation falls short.
What does the guidance raise actually imply?
The raises are small. Postpaid net adds guidance rose by 150K at the midpoint, Core Adjusted EBITDA by $50M, operating cash flow by $50M, and Adjusted FCF by $50M. Capex guidance was unchanged at $8.6–9.4B. The guidance excludes net income, which the company says it cannot forecast reliably, so investors should focus on the cash flow and EBITDA ranges. Management's guidance and its claims about industry leadership are forward-looking and subject to the risk factors listed in the filing.
04—Continue