01—Abstract
Summary
Summary of the 8-K filed October 23, 2024. Cited figures are marked; the original filing is the authoritative source.
T-Mobile US (TMUS) reported third-quarter 2024 results on October 23, 2024, and raised its full-year 2024 guidance across most metrics.
Customer growth was the headline: postpaid phone net additions of 865 thousand were the company's highest Q3 in a decade, postpaid phone churn of 0.86% was a record low for a third quarter, and High Speed Internet reached 6.0 million customers. Postpaid net customer additions of 1.6 million and total service revenues of $16.7 billiona (up 5% year-over-year) were both reported as industry-leading growth by the company's own consensus-based comparisons. Profitability and cash generation also improved meaningfully.
Net income of $3.1 billionb rose 43% year-over-year, and diluted EPS of $2.61 rose 43% as well. Core Adjusted EBITDA of $8.2 billion grew 9%, operating cash flow of $6.1 billion hit a record high, and Adjusted Free Cash Flow reached a record $5.2 billion, up 29%. Capital expenditures fell 19% year-over-year to $2.0 billion, reflecting the completion of earlier 5G build-out investment.
Note that the year-over-year comparisons in Q3 2023 include severance and Merger-related charges that depressed that base. The company returned $1.4 billionc to stockholders in Q3, including $644 million of buybacks and a $758 million dividend, and had repurchased another $891 million through October 18.
Full-year 2024 guidance was raised for postpaid net customer additions (5.6-5.8 million), Core Adjusted EBITDA (midpoint up $50 milliond), operating cash flow, and Adjusted Free Cash Flow ($16.7-17.0 billion, with no material securitization inflows assumed). Investors should note that Adjusted Free Cash Flow relies partly on securitization proceeds, and that the company also flagged an effective November 1, 2024 change that will move certain receivable sale cash proceeds into operating cash flow without affecting Adjusted Free Cash Flow.
02—Key points
Key Highlights
- Postpaid phone net customer additions of 865 thousand, the best Q3 in a decade, with postpaid phone churn of 0.86%, a record low for Q3.
- Service revenues of $16.7 billion grew 5% year-over-year; postpaid service revenues of $13.3 billion grew 8%.
- Net income of $3.1 billion and diluted EPS of $2.61 both grew 43% year-over-year, though Q3 2023 included severance and Merger-related charges.
- Core Adjusted EBITDA of $8.2 billion grew 9%; net cash from operations of $6.1 billion was a record high, up 16%.
- Adjusted Free Cash Flow reached a record $5.2 billion, up 29%, while capital purchases fell 19% to $2.0 billion.
- 2024 guidance raised: postpaid net customer additions to 5.6-5.8 million, Core Adjusted EBITDA midpoint up $50 million, and Adjusted Free Cash Flow to $16.7-17.0 billion.
- Capital returns of $1.4 billion in Q3 plus $891 million through October 18; $6.4 billion of authorization remains through December 31, 2024.
03—Questions
Frequently Asked Questions
Why did T-Mobile raise its 2024 guidance?
The company attributed the raise to stronger-than-expected customer growth and profitability in Q3, particularly its best Q3 postpaid phone net additions in a decade and record-low Q3 churn. Management raised postpaid net customer additions, Core Adjusted EBITDA, operating cash flow and Adjusted Free Cash Flow guidance, while lowering the effective tax rate assumption to about 24%.
How much of the year-over-year profit growth is organic versus a result of easier comparisons?
Part of the growth reflects a low base. Q3 2023 included $353 million (about $0.30 per share) of severance and related costs and $114 million of Merger-related costs, which depressed prior-year net income and EPS. Core Adjusted EBITDA growth of 9% and service revenue growth of 5% are more representative of underlying trends.
Is Adjusted Free Cash Flow growth sustainable, given the role of securitization?
Adjusted Free Cash Flow includes proceeds from beneficial interests in securitization transactions, and the 2024 guidance of $16.7-17.0 billion assumes no material net securitization inflows beyond the guided amounts. Starting November 1, 2024, receivable sale proceeds will move into operating cash flow, which shifts reported operating cash flow but does not change Adjusted Free Cash Flow. Investors should evaluate the trend in cash generation with that reclassification in mind.
What is the status of shareholder returns?
Through September 30, 2024, the company had repurchased 153.4 million shares for about $22.7 billion under the program authorized in September 2023. It paid a $0.65 quarterly dividend in Q3 and declared a $0.88 per share dividend payable December 12, 2024. The remaining authorization was $6.4 billion as of October 18, 2024, covering repurchases and dividends through December 31, 2024.
04—Continue