Why did Adjusted Free Cash Flow grow 54% year-over-year?

Adjusted Free Cash Flow rose to $4.4 billion because operating cash flow increased 27% to $5.5 billion and cash purchases of property and equipment fell 27% to $2.0 billion as 5G network build-out investments matured. The comparison is also helped by lower Merger-related cash payments ($241 million versus $728 million in Q2 2023), and the quarter had no significant net securitization proceeds.

Did the Ka'ena acquisition affect reported results?

Yes. In Q2 2024, T-Mobile acquired about 3.5 million prepaid customers through the Ka'ena acquisition, which includes Mint Mobile and Ultra Mobile. This drove the prepaid net additions of 179 thousand, and it contributed to higher prepaid service revenue and SG&A costs. Prepaid ARPU declined to $35.94 from $37.18 in Q1 2024, and the acquisition is included in the reported customer totals.

Are the Q2 2024 earnings boosted by one-time items?

Partly. Q2 2024 included a $100 million gain from the DISH extension fee on an unpurchased 800 MHz spectrum license, which reduced Merger-related costs and SG&A. Q2 also had a $15 million legal-related expense, net of insurance recoveries. Management excludes these items from Core Adjusted EBITDA, but the DISH gain does affect reported net income and EPS.

Why did management raise guidance, and what changed?

Management raised postpaid net customer additions guidance to 5.4-5.7 million (from 5.2-5.6 million) and raised Adjusted Free Cash Flow guidance to $16.6-17.0 billion, reflecting strong Q2 customer growth and cash flow. Operating cash flow guidance rose to $21.8-22.2 billion. Core Adjusted EBITDA guidance was narrowed to $31.5-31.8 billion, with the midpoint unchanged, and capital expenditure guidance was narrowed to $8.7-9.1 billion.

What are the main concerns in the report?

Postpaid net customer additions fell 223 thousand year-over-year to 1.3 million, and High Speed Internet net additions slowed to 406 thousand from 509 thousand. Postpaid phone churn rose 3 basis points year-over-year to 0.80%, partly due to rate plan optimizations. Wholesale and other service revenues declined on lower Affordable Connectivity Program revenue, and total net income depends on the Merger-related and tax items noted in the filing.

T-Mobile US, Inc. 8-K: Earnings & Results

01—Abstract

Summary

Summary of the 8-K filed July 31, 2024. Cited figures are marked; the original filing is the authoritative source.

T-Mobile's Q2 2024 results, furnished under Item 2.02 on July 31, 2024, show strong growth across customers, service revenues, profitability, and cash flow.

Postpaid net customer additions were 1.3 million, including 777 thousand postpaid phone net adds, the highest Q2 in company history. Postpaid phone churn was 0.80%, and total customers reached a record 125.9 million, with the company crossing 100 million postpaid customers. Service revenues rose 4% year-over-year to $16.4 billion^a, postpaid service revenues rose 7% to $12.9 billion, and Core Adjusted EBITDA grew 9% to $8.0 billion.

Net income rose 32% to $2.9 billion^b and diluted EPS rose 34% to $2.49. Note that Q2 2024 included a $100 million gain from a DISH extension fee, which flatters Merger-related costs and SG&A. Cash generation was the standout.

Operating cash flow reached a record $5.5 billion^c, up 27%, and Adjusted Free Cash Flow reached a record $4.4 billion, up 54%. Capital expenditures fell 27% year-over-year to $2.0 billion as the 5G build-out matured. Management returned $3.0 billion to stockholders in the quarter, including $2.3 billion of buybacks and a $759 million dividend.

Cash flow comparisons were also helped by lower Merger-related cash payments, which fell to $241 million^d from $728 million a year earlier. Management raised 2024 guidance for postpaid net customer additions to 5.4-5.7 million, from 5.2-5.6 million. It also raised Adjusted Free Cash Flow guidance to $16.6-17.0 billion and operating cash flow guidance to $21.8-22.2 billion.

Core Adjusted EBITDA guidance was narrowed to $31.5-31.8 billion, with the midpoint unchanged. Investors should note that the Ka'ena (Mint Mobile and Ultra Mobile) acquisition added 3.5 million prepaid customers in the quarter, and the company announced a proposed Metronet fiber acquisition. Postpaid net customer additions declined 223 thousand year-over-year, and High Speed Internet net additions slowed, so the growth story depends on continued execution in broadband and fiber.

02—Key points

Key Highlights

Record Q2 postpaid phone net additions of 777 thousand, with postpaid phone churn of 0.80%, and total customers crossing 125.9 million, including the 100 million postpaid milestone.
Service revenues of $16.4 billion grew 4% year-over-year; postpaid service revenues of $12.9 billion grew 7%, driven by higher average accounts and postpaid ARPA.
Net income of $2.9 billion rose 32% and diluted EPS of $2.49 rose 34%, though Q2 includes a $100 million DISH extension fee gain.
Core Adjusted EBITDA of $8.0 billion grew 9%, supported by higher service revenues and lower cost of services excluding Special Items.
Record operating cash flow of $5.5 billion (up 27%) and record Adjusted Free Cash Flow of $4.4 billion (up 54%), with capex down 27% to $2.0 billion.
2024 guidance raised for postpaid net customer additions (5.4-5.7 million), Adjusted Free Cash Flow ($16.6-17.0 billion), and operating cash flow ($21.8-22.2 billion); Core Adjusted EBITDA narrowed to $31.5-31.8 billion.
Returned $3.0 billion to stockholders in Q2 ($2.3 billion buybacks plus $759 million dividend); $8.7 billion remains under the stockholder return authorization through December 2024.

03—Questions

Frequently Asked Questions

Why did Adjusted Free Cash Flow grow 54% year-over-year?
Adjusted Free Cash Flow rose to $4.4 billion because operating cash flow increased 27% to $5.5 billion and cash purchases of property and equipment fell 27% to $2.0 billion as 5G network build-out investments matured. The comparison is also helped by lower Merger-related cash payments ($241 million versus $728 million in Q2 2023), and the quarter had no significant net securitization proceeds.
Did the Ka'ena acquisition affect reported results?
Yes. In Q2 2024, T-Mobile acquired about 3.5 million prepaid customers through the Ka'ena acquisition, which includes Mint Mobile and Ultra Mobile. This drove the prepaid net additions of 179 thousand, and it contributed to higher prepaid service revenue and SG&A costs. Prepaid ARPU declined to $35.94 from $37.18 in Q1 2024, and the acquisition is included in the reported customer totals.
Are the Q2 2024 earnings boosted by one-time items?
Partly. Q2 2024 included a $100 million gain from the DISH extension fee on an unpurchased 800 MHz spectrum license, which reduced Merger-related costs and SG&A. Q2 also had a $15 million legal-related expense, net of insurance recoveries. Management excludes these items from Core Adjusted EBITDA, but the DISH gain does affect reported net income and EPS.
Why did management raise guidance, and what changed?
Management raised postpaid net customer additions guidance to 5.4-5.7 million (from 5.2-5.6 million) and raised Adjusted Free Cash Flow guidance to $16.6-17.0 billion, reflecting strong Q2 customer growth and cash flow. Operating cash flow guidance rose to $21.8-22.2 billion. Core Adjusted EBITDA guidance was narrowed to $31.5-31.8 billion, with the midpoint unchanged, and capital expenditure guidance was narrowed to $8.7-9.1 billion.
What are the main concerns in the report?
Postpaid net customer additions fell 223 thousand year-over-year to 1.3 million, and High Speed Internet net additions slowed to 406 thousand from 509 thousand. Postpaid phone churn rose 3 basis points year-over-year to 0.80%, partly due to rate plan optimizations. Wholesale and other service revenues declined on lower Affordable Connectivity Program revenue, and total net income depends on the Merger-related and tax items noted in the filing.

04—Continue

← View all 8-K filings