EX-99.2 3 tmus06302019ex992.htm TMUS EXHIBIT 99.2 Exhibit
EXHIBIT 99.2
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T-Mobile US, Inc.
 
 
Investor Factbook
 
T-Mobile US Reports Second Quarter 2019 Results
T-Mobile Sets More Records in Q2: Strongest Q2 Customer Growth in Years, Record-Low Churn and Record Financial Results
Record-Low Postpaid Phone Churn of 0.78%; Record Service Revenues of $8.4B, Record Q2 Net Income of $939M and Record Adjusted EBITDA of $3.5B and Total Net Customer Additions of 1.8M

Accelerated Customer Growth
1.8 million total net additions in Q2 2019, up 11% YoY
1.1 million branded postpaid net additions in Q2 2019, up 9% YoY, expected to be best in the industry
710,000 branded postpaid phone net additions in Q2 2019, up 3% YoY, expected to be best in the industry
131,000 branded prepaid net additions in Q2 2019, up 44% YoY
All-time record-low branded postpaid phone churn of 0.78% in Q2 2019, down 17 bps YoY

Record Q2 Financial Performance (all percentages year-over-year)
Record Service revenues of $8.4 billion, up 6% in Q2 2019 with Branded postpaid service revenues up 9%
Record Q2 Total revenues of $11.0 billion, up 4% in Q2 2019
Record Q2 Net income of $939 million, up 20% in Q2 2019
Record Q2 Diluted earnings per share (“EPS”) of $1.09, up 18% in Q2 2019
Record Adjusted EBITDA(1) of $3.5 billion, up 7% in Q2 2019
Record Q2 Net cash provided by operating activities of $2.1 billion, up 70% in Q2 2019
Record Q2 Free Cash Flow(1) of $1.2 billion, up 51% in Q2 2019

Taking Major Steps Towards Nationwide 5G
On track to launch the first nationwide 5G network available next year; 99% of Americans now covered with 4G LTE
Aggressive deployment of 600 MHz using 5G-ready equipment; 4G LTE on 600 MHz now covering 156 million people and 1.2 million square miles
5G millimeter wave (mmWave) network introduced in 6 cities including New York and Los Angeles
Successful participation in mmWave auctions; average nationwide mmWave spectrum position more than quadrupled

Continued Strong Outlook for 2019
Branded postpaid net additions of 3.5 to 4.0 million, up from prior guidance of 3.1 to 3.7 million
Net income is not available on a forward-looking basis(2) 
Adjusted EBITDA target of $12.9 to $13.3 billion, which includes leasing revenues of $550 to $600 million, up from prior guidance of $12.7 to $13.2 billion(1) 
Cash purchases of property and equipment, excluding capitalized interest of approximately $400 million, are expected to be at the very high end of $5.4 to $5.7 billion; Cash purchases of property and equipment, including capitalized interest, are expected to be at the very high end of $5.8 to $6.1 billion
Three-year compound annual growth rate (“CAGR”) from FY 2016 to FY 2019 for Net cash provided by operating activities, excluding payments for merger-related costs, is expected to be at 33% to 35%, a narrowing of the prior target range
Three-year CAGR from FY 2016 to FY 2019 for Free Cash Flow, excluding payments for merger-related costs, is unchanged at 46% to 48%(1) 
In Q3 2019, pre-close merger-related costs are expected to be $150 to $200 million before taxes
________________________________________________________________
(1)
Adjusted EBITDA and Free Cash Flow are non-GAAP financial measures. These non-GAAP financial measures should be considered in addition to, but not as a substitute for, the information provided in accordance with GAAP. Reconciliations for these non-GAAP financial measures to the most directly comparable financial measures are provided in the Reconciliation of Non-GAAP Financial Measures to GAAP Financial Measures tables.
(2)
We are not able to forecast Net income on a forward-looking basis without unreasonable efforts due to the high variability and difficulty in predicting certain items that affect GAAP Net income including, but not limited to, Income tax expense, stock-based compensation expense and Interest expense. Adjusted EBITDA should not be used to predict Net income as the difference between the two measures is variable.

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Total Branded Postpaid Net Additions
(in thousands)
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Branded Postpaid Phone Churn
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CUSTOMER METRICS
Branded Postpaid Customers
Branded postpaid phone net customer additions were 710,000 in Q2 2019, compared to 656,000 in Q1 2019 and 686,000 in Q2 2018. This marks the 22nd consecutive quarter that T-Mobile is expected to lead the industry in branded postpaid phone net customer additions.
Sequentially and year-over-year branded postpaid phone net customer additions increased primarily due to record-low churn.
Branded postpaid other net customer additions were 398,000 in Q2 2019, compared to 363,000 in Q1 2019 and 331,000 in Q2 2018.
The sequential increase was primarily due to lower churn.
The year-over-year increase was primarily due to higher gross customer additions from connected devices and lower churn.
Branded postpaid net customer additions were 1,108,000 in Q2 2019, compared to 1,019,000 in Q1 2019 and 1,017,000 in Q2 2018.
Branded postpaid phone churn was a record-low 0.78% in Q2 2019, down 10 basis points from 0.88% in Q1 2019 and down 17 basis points from 0.95% in Q2 2018.
Sequentially and year-over-year, the decrease was due to increased customer satisfaction and loyalty from ongoing improvements to network quality, industry-leading customer service and the overall value of our offerings.




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Total Branded Prepaid Net Additions
(in thousands)
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Branded Prepaid Churn
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Total Branded Net Additions
(in thousands)

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Branded Prepaid Customers
Branded prepaid net customer additions were 131,000 in Q2 2019, compared to 69,000 in Q1 2019 and 91,000 in Q2 2018.
Sequentially and year-over-year, the increases were primarily due to lower churn, partially offset by the impact of continued promotional activities in the marketplace.
Migrations to branded postpaid plans reduced branded prepaid net customer additions in Q2 2019 by approximately 115,000, down from 120,000 in Q1 2019 and down from 135,000 in Q2 2018.
On July 18, 2019, we entered into an agreement whereby certain T-Mobile branded prepaid products will now be offered and distributed by a current Mobile Virtual Network Operator (“MVNO”) partner. Upon the effective date, the agreement resulted in a base adjustment to reduce branded prepaid customers by 616,000 as we will no longer actively support the branded product offering. Prospectively, new customer activity associated with these products will be recorded within wholesale customers and revenue for these customers will be recorded within Wholesale revenues in our Condensed Consolidated Statements of Comprehensive Income.

Branded prepaid churn was 3.49% in Q2 2019, compared to 3.85% in Q1 2019 and 3.81% in Q2 2018.
Sequentially and year-over-year, the decreases were primarily due to the continued success of our prepaid brands due to promotional activities and rate plan offers as well as increased customer satisfaction and loyalty from ongoing improvements to network quality.






Total Branded Customers
Total branded net customer additions were 1,239,000 in Q2 2019, compared to 1,088,000 in Q1 2019 and 1,108,000 in Q2 2018.

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Wholesale Net Additions
(in thousands)
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Total Net Additions
(in thousands)
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Wholesale Customers
Wholesale net customer additions were 512,000 in Q2 2019, compared to net additions of 562,000 in Q1 2019 and 471,000 in Q2 2018.
Sequentially, the decrease was primarily due to lower Machine-to-Machine (“M2M”) net additions.
Year-over-year, the increase was primarily due to higher gross additions from the continued success of our M2M and MVNO partnerships.




Total Customers
Total net customer additions were 1,751,000 in Q2 2019, compared to 1,650,000 in Q1 2019 and 1,579,000 in Q2 2018. This is the 25th consecutive quarter in which T-Mobile has added more than one million total net customers.
T-Mobile ended Q2 2019 with 83.1 million total customers.


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T-Mobile LTE Coverage Map
(as of June 30, 2019)
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New York 5G Coverage Map
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NETWORK
T-Mobile continues to expand the footprint and increase both the capacity and capability of our network to better serve our customers. Our advancements in network technology and our spectrum resources ensure we can continue to increase the capabilities of our 4G LTE network as we prepare for our nationwide deployment of 5G.
5G
T-Mobile is building the foundation for its 5G network across the U.S. in 2019, utilizing both 600 MHz spectrum and mmWave spectrum.
For 5G on 600 MHz spectrum, T-Mobile is working toward the delivery of the first nationwide standards-based 5G network in 2020. We are continuing our aggressive deployment of LTE on 600 MHz using 5G ready equipment and we expect to launch 5G on 600 MHz on a broad footprint later this year in conjunction with the introduction of the first compatible 5G smartphones.
On July 11, 2019, T-Mobile, Qualcomm and Ericsson announced that they had achieved the world’s first 5G Frequency Division Duplex (FDD) NR radio data session on a 5G production modem. The data session was conducted on 600 MHz spectrum, marking a major milestone for the wireless industry in the upcoming launch of the first commercial 5G network using low band spectrum.
On June 28, 2019, T-Mobile introduced its 5G network using high-band mmWave spectrum in conjunction with the introduction of our first 5G handset, the Samsung Galaxy S10 5G. The 5G network commenced in six cities (New York City, Los Angeles, Dallas, Atlanta, Cleveland, and Las Vegas) and will be expanded and enhanced by continued deployments and the addition of new high-band spectrum over time.
600 MHz Spectrum
At the end of Q2 2019, T-Mobile owned a nationwide average of 31 MHz of 600 MHz low-band spectrum. In total, T-Mobile owns approximately 41 MHz in terms of low-band spectrum (600 MHz and 700 MHz). The spectrum covers 100% of the U.S.
T-Mobile continues to engage with broadcasters to accelerate FCC spectrum clearance timelines. As of the end of Q2 2019, T-Mobile had cleared 185 million POPs, and expects to clear approximately 280 million POPs by year-end 2019.


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Depth of T-Mobile’s Nationwide Low-Band Spectrum (600 MHz and 700 MHz)
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Depth of T-Mobile’s Nationwide mmWave Spectrum
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T-Mobile continues its aggressive deployment of LTE on 600 MHz spectrum using 5G ready equipment. At the end of Q2 2019, we were live with 4G LTE in nearly 6,600 cities and towns in 46 states and Puerto Rico covering 1.2 million square miles and 156 million POPs.
Combining 600 and 700 MHz spectrum, we have deployed 4G LTE in low-band spectrum to 307 million POPs.
Currently, more than 22 million devices on T-Mobile’s network are compatible with 600 MHz spectrum.
Spectrum Position
At the end of Q2 2019, T-Mobile owned an average of 111 MHz of spectrum nationwide, not including mmWave spectrum. The spectrum comprises an average of 31 MHz in the 600 MHz band, 10 MHz in the 700 MHz band, 29 MHz in the 1900 MHz PCS band, and 41 MHz in the AWS band.
On June 3, 2019, the FCC announced the results of Auctions 101 (28 GHz spectrum) and 102 (24 GHz spectrum). In the combined auctions, T-Mobile spent $842 million to more than quadruple its nationwide average total mmWave spectrum holdings from 104 MHz to 471 MHz across the 24, 28, and 39 GHz frequency bands.
We will evaluate future spectrum purchases in upcoming auctions and in the secondary market to further augment our current spectrum position.
Network Coverage Growth
T-Mobile continues to expand its coverage breadth and covered 326 million people with 4G LTE at the end of Q2 2019.
At the end of Q2 2019, T-Mobile had equipment deployed on approximately 65,000 macro cell sites and 24,000 small cell/distributed antenna system sites.












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Download and
Upload Speed Experience
(July 2019)
(in Mbps, D/L at Base, U/L at Top)
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Based on analysis by Opensignal Inc.




 
Network Speed
T-Mobile was the most highly decorated carrier in Opensignal's latest Mobile Network Experience Report, taking home trophies for best overall download and upload speed experience as well as network responsiveness. The report also showed the Un-carrier in a dead heat with Verizon in terms of 4G availability, with customers connecting to a 4G LTE network more than 94% of the time. In fact, only T-Mobile's network ranked first or second in every single category, including 4G availability, download speed experience, upload speed experience, latency, and video experience.
Based on data from Opensignal, as of July 2019, T-Mobile’s average download speed was 23.6 Mbps, Verizon at 22.9 Mbps, AT&T at 22.5 Mbps, and Sprint at 19.2 Mbps.
Based on data from Opensignal, as of July 2019, T-Mobile’s average upload speed was 7.3 Mbps, compared to Verizon at 6.9 Mbps, AT&T at 4.9 Mbps, and Sprint at 2.4 Mbps.
Network Capacity Growth
T-Mobile continues to expand its capacity and increase the quality of its network through the re-farming of existing spectrum and implementation of new technologies including Voice over LTE (“VoLTE”), Carrier Aggregation, 4x4 multiple-input and multiple-output (“MIMO”), 256 Quadrature Amplitude Modulation (“QAM”) and License Assisted Access (“LAA”).
VoLTE comprised 89% of total voice calls in Q2 2019, up from 88% in Q1 2019 and 83% in Q2 2018.
Carrier aggregation is live for T-Mobile customers in 947 markets, up from 932 markets in Q1 2019 and nearly 900 in Q2 2018.
4x4 MIMO is currently available in 639 markets, up from 591 markets in Q1 2019 and over 500 in Q2 2018.
T-Mobile customers have 256 QAM available across the Un-carrier’s entire 4G LTE footprint.
T-Mobile is the first carrier globally to have rolled out the combination of carrier aggregation, 4x4 MIMO and 256 QAM. This trifecta of standards has been rolled out to more than 600 markets.
LAA has been deployed to 29 cities including Los Angeles, Philadelphia, Washington DC, Atlanta, Houston, Las Vegas, San Diego, and New Orleans.


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PROPOSED SPRINT TRANSACTIONS
On April 29, 2018, T-Mobile entered into a Business Combination Agreement with Sprint to merge in an all-stock transaction at a fixed exchange ratio of 0.10256 shares of T-Mobile common stock for each share of Sprint common stock, or 9.75 shares of Sprint common stock for each share of T-Mobile common stock (the “Merger”). The Merger, and other transactions contemplated by the Business Combination Agreement, are referred to as the “Transactions.”
The combined company will be named “T-Mobile” and, as a result of the Merger, is expected to be able to rapidly launch a broad and deep nationwide 5G network, accelerate innovation and increase competition in the U.S. wireless, video and broadband industries. Neither T-Mobile nor Sprint on its own could generate comparable benefits to consumers. The combined company is expected to trade under the “TMUS” symbol on NASDAQ.
The Transactions are subject to regulatory approvals and certain other customary closing conditions:
We received approval from CFIUS and Team Telecom in December 2018.
We received favorable action from 18 of the 19 state utility commissions conducting reviews with only the California PUC still outstanding.
We received statements of support for the Merger by the Federal Communications Commission (“FCC”) Chairman Ajit Pai and FCC Commissioners Carr and O’Rielly in May 2019, with formal approval by the FCC pending.
In June 2019, the attorneys general of thirteen states and the District of Columbia filed a lawsuit against us, DT, Sprint, and Softbank Group Corp. in the U.S. District Court for the Southern District of New York, alleging that the Merger, if consummated, would violate Section 7 of the Clayton Act. We believe the plaintiffs’ claims are without merit and are defending the lawsuit vigorously with a trial date currently scheduled for October 7, 2019.
We expect final federal regulatory approval in the third quarter of 2019 and currently anticipate that the Merger will be permitted to close in the second half of the year.




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In Q2 2019, costs related to the Sprint transaction were $222 million before taxes compared to $113 million in Q1 2019 and $41 million in Q2 2018. These costs impacted Selling, general, and administrative (“SG&A”) expenses and Net income but are excluded from Adjusted EBITDA. In Q3 2019, pre-close merger-related costs are expected to be $150 to $200 million before taxes. Merger-related costs incurred in full-year 2019 will be impacted by the timing of the Merger close.

 
Devices Sold or Leased
(in million units)
 
Q2 2018
 
Q1 2019
 
Q2 2019
Total Company
 
 
 
 
 
Phones
7.9
 
7.4
 
6.5
Mobile broadband and IoT devices
0.5
 
0.6
 
0.6
Total Company
8.4
 
8.0
 
7.1
 
Branded Postpaid Upgrade Rate
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DEVICES
Total devices sold or leased were 7.1 million units in Q2 2019, compared to 8.0 million units in Q1 2019 and 8.4 million units in Q2 2018.
Total phones (smartphones and non-smartphones) sold or leased were 6.5 million units in Q2 2019, compared to 7.4 million units in Q1 2019 and 7.9 million units in Q2 2018.

The branded postpaid upgrade rate was approximately 5% in Q2 2019, flat sequentially and down year-over-year from 6% in Q2 2018.



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Total EIP Receivables, net and QoQ
Change in Total EIP Receivables
($ in millions)
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QoQ Change in Total EIP     Total EIP Rec., net

Leased Devices Transferred to P&E,
Net and Lease Revenues
($ in millions)
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Lease Revenues
 
Leased Devices Trans. to P&E


 
DEVICE FINANCING
Equipment Installment Plans (“EIP”)
T-Mobile provided $1.63 billion in gross EIP device financing to its customers in Q2 2019, down 6.7% from $1.74 billion in Q1 2019 and down 4.7% from $1.71 billion in Q2 2018.
The sequential and year-over-year decrease was primarily from lower EIP unit sales, partially offset by higher average revenue per device sold.
Customers on T-Mobile plans had associated EIP billings of $1.65 billion in Q2 2019, flat compared to $1.66 billion in Q1 2019 and up 3.8% from $1.59 billion in Q2 2018. EIP billings include prepayments and adjustments.
Total EIP receivables, net of imputed discount and allowances for credit losses, were $4.05 billion at the end of Q2 2019, compared to $4.13 billion at the end of Q1 2019 and $3.53 billion at the end of Q2 2018.


Leasing Plans
Leased devices transferred to property and equipment from inventory, net was $100 million in Q2 2019, compared to $90 million in Q1 2019 and $190 million in Q2 2018.
The sequential increase was primarily due to a higher number of devices leased.
The year-over-year decrease was primarily due to a lower number of devices leased and higher leased device buyouts.
Depreciation expense associated with leased devices was $124 million in Q2 2019, compared to $184 million in Q1 2019 and $238 million in Q2 2018.
Leased devices included in property and equipment, net was $418 million at the end of Q2 2019, compared to $442 million at the end of Q1 2019 and $743 million at the end of Q2 2018.
Lease revenues were $143 million in Q2 2019, compared to $161 million in Q1 2019 and $177 million in Q2 2018.



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Total Bad Debt Expense and Losses from Sales of Receivables
($ in millions, % of Total Revs)
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CUSTOMER QUALITY
Total bad debt expense and losses from sales of receivables was $99 million in Q2 2019, compared to $108 million in Q1 2019 and $102 million in Q2 2018.
As a percentage of total revenues, total bad debt expense and losses from sales of receivables was 0.90% in Q2 2019, compared to 0.98% in Q1 2019 and 0.96% in Q2 2018.
Sequentially, total bad debt expense and losses from sales of receivables decreased by $9 million. As a percentage of total revenues, bad debt expense and losses from sales of receivables decreased by 8 basis points.
Year-over-year, total bad debt expense and losses from sales of receivables decreased by $3 million. As a percentage of total revenues, bad debt expense and losses from sales of receivables decreased by 6 basis points.
The second quarter of 2019 included certain one-time tax-related benefits.
Including the EIP receivables sold, total EIP receivables classified as Prime were 52% of total EIP receivables at the end of Q2 2019, compared to 52% at the end of Q1 2019 and 52% at the end of Q2 2018.



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Branded Postpaid Phone ARPU
($ per month)

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Branded Postpaid Customers per
Account
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OPERATING METRICS
Branded Postpaid Phone ARPU
Branded postpaid phone ARPU was $46.10 in Q2 2019, up 0.1% from $46.07 in Q1 2019 and down 0.9% from $46.52 in Q2 2018.
Sequentially, the increase was primarily due to higher premium services revenue, partially offset by dilution from promotions targeting families and new segments, including the ongoing growth in our Netflix offering, which totaled $0.61 for the three months ended June 30, 2019, and decreased branded postpaid phone ARPU by $0.11 compared to the three months ended March 31, 2019.
Year-over-year, the decrease was primarily due to a reduction in regulatory program revenues from the continued adoption of tax inclusive plans, the ongoing growth in our Netflix offering, which totaled $0.61 for the three months ended June 30, 2019, and decreased branded postpaid phone ARPU by $0.30 compared to the three months ended June 30, 2018, a reduction in certain non-recurring charges and the growing success of new customer segments and rate plans such as Unlimited 55+, Military, Business and Essentials, partially offset by higher premium services revenue.
We continue to expect full-year 2019 branded postpaid phone ARPU to remain generally stable compared to full-year 2018 within a range from plus 1% to minus 1%.

Branded Postpaid Customers per Account
Branded postpaid customers per account was 3.08 at the end of Q2 2019, compared to 3.06 at the end of Q1 2019 and 2.97 at the end of Q2 2018.
The sequential and year-over-year increase was primarily due to the continued growth of new customer segments and rate plans such as Unlimited 55+, Military, Business and Essentials, promotional activities targeting families and the continued success of connected devices and wearables.






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Branded Prepaid ARPU
($ per month)
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Branded Prepaid ARPU
Branded prepaid ARPU was $37.46 in Q2 2019, down 0.5% from $37.65 in Q1 2019 and down 2.7% compared to $38.48 in Q2 2018.
Sequentially, the decrease was primarily due to dilution from promotional rate plans, lower non-recurring charges and the growth in our Amazon prime offering - included as a benefit with certain Metro by T-Mobile unlimited rate plans as of Q4 2018 - which impacted prepaid ARPU by $0.47 and reduced branded prepaid ARPU by $0.16 for the three months ended June 30, 2019, compared to the three months ended March 31, 2019, partially offset by favorable mix changes toward higher ARPU Metro by T-Mobile rate plans.
The year-over-year decrease was primarily due to dilution from promotional rate plans and the growth in our Amazon Prime offering - included as a benefit with certain Metro by T-Mobile unlimited rate plans as of Q4 2018 - which impacted prepaid ARPU by $0.47, for the three months ended June 30, 2019.

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Service Revenues
($ in millions)
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REVENUES
Service Revenues
T-Mobile is again expected to lead the industry in year-over-year service revenue percentage growth in Q2 2019. This marks the 21st consecutive quarter that T-Mobile is expected to lead the industry in this measure.
Service revenues were a record-high $8.43 billion in Q2 2019, up 1.8% from $8.28 billion in Q1 2019 and up 6.2% from $7.93 billion in Q2 2018.
Sequentially, the increase was primarily due to increases in Branded postpaid revenues and Roaming and other service revenues.
Branded postpaid revenues increased 2.2%, primarily from growth in our customer base driven by the continued growth in existing and Greenfield markets, including the growing success of new customer segments and rate plans such as Unlimited 55+, Military, Business and Essentials along with record low churn.
Roaming and other service revenues increased 28.7%, primarily from increases in international and domestic roaming revenues.
Year-over-year, the increase was primarily due to an 8.7% increase in Branded postpaid revenues, primarily due to higher average branded postpaid phone customers from growth in our customer base driven by the continued growth in existing and Greenfield markets, including the growing success of new customer segments and rate plans such as Unlimited 55+, Military, Business and Essentials, along with record low churn and higher average branded postpaid other customers, partially offset by lower branded postpaid phone ARPU.









    
     

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Equipment Revenues
($ in millions)
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Total Revenues
($ in millions)
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Equipment Revenues
Equipment revenues were $2.26 billion in Q2 2019, down 10.1% from $2.52 billion in Q1 2019 and down 2.7% from $2.33 billion in Q2 2018. Equipment revenues in Q2 2019 were comprised of lease revenues of $143 million and non-lease revenues of $2.12 billion.
Sequentially, the decrease was primarily due to a 13% decrease in the number of devices sold, excluding purchased leased devices, partially offset by a higher average revenue per device sold primarily due to an increase in the high-end device mix and higher proceeds from the liquidation of inventory.
Year-over-year, the decrease was primarily due to an 11% decrease in the number of devices sold, excluding purchased leased devices and a decrease in lease revenues primarily due to a lower number of customer devices under lease, partially offset by a higher average revenue per device sold primarily due to an increase in the high-end device mix, higher proceeds from the liquidation of inventory and an increase in other equipment-related revenues.

Total Revenues
Total revenues were a Q2 record-high $10.98 billion in Q2 2019, down 0.9% from $11.08 billion in Q1 2019 and up 3.9% from $10.57 billion in Q2 2018.











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Cost of Services
($ in millions, % of Service Revs)
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Cost of Equipment Sales
($ in millions, % of Equipment Revs)
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OPERATING EXPENSES
Cost of Services
Cost of services, exclusive of depreciation and amortization (“D&A”), was $1.65 billion in Q2 2019, up 6.7% from $1.55 billion in Q1 2019 and up 7.8% from $1.53 billion in Q2 2018.
Sequentially, the increase was primarily due to higher regulatory program costs, costs for network expansion and employee-related expenses.
Cost of services as a percentage of Service revenues increased by 90 basis points sequentially.
Year-over-year, the increase was due to higher costs for employee-related expenses and network expansion and the impact from hurricane-related reimbursements of $70 million for the three months ended June 30, 2018, partially offset by lower regulatory program costs and the positive impact of the new lease standard of approximately $95 million in Q2 2019.
As a percentage of Service revenues, Cost of services increased by 30 basis points year-
over-year.

Cost of Equipment Sales
Cost of equipment sales, exclusive of D&A, was $2.66 billion in Q2 2019, down 11.8% from $3.02 billion in Q1 2019 and down 4.0% from $2.77 billion in Q2 2018.
Sequentially, the decrease was primarily due to a 13% decrease in the number of devices sold, excluding purchased leased devices, partially offset by higher average cost per device sold, primarily due to an increase in the high-end device mix.
Year-over-year, the decrease was primarily due to an 11% decrease in the number of devices sold, excluding purchased leased devices, and a decrease in extended warranty costs, partially offset by a higher average cost per device sold due to an increase in the high-end device mix and an increase in inventory liquidation costs.






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SG&A Expense
($ in millions, % of Service Revs)
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SG&A Expense (Excluding merger-related costs)
($ in millions, % of Service Revs)
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D&A Expense
($ in millions, % of Total Revs)

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Selling, General and Admin. “SG&A” Expense
SG&A expense was $3.54 billion in Q2 2019, up 2.9% from $3.44 billion in Q1 2019 and up 11.2% from $3.19 billion in Q2 2018.
Sequentially, the increase was primarily due to merger-related costs of $222 million in Q2 2019, compared to $113 million in Q1 2019.
As a percentage of Service revenues, SG&A expense increased 40 basis points sequentially. As a percentage of Service revenues, excluding merger-related costs, SG&A expense decreased 80 basis points sequentially.
Year-over-year, the increase was primarily due to merger-related costs of $222 million in Q2 2019, compared to $41 million in Q2 2018, higher costs related to outsourced functions and employee-related costs and higher commissions expense resulting from an increase of $80 million in amortization expense related to commission costs that were capitalized beginning upon the adoption of ASC 606 on January 1, 2018; partially offset by lower commissions expense from lower gross customer additions and compensation structure changes.
As a percentage of Service revenues, SG&A expense increased 180 basis points year-over-year. As a percentage of Service revenues, excluding merger-related costs, SG&A expense decreased 20 basis points year-over-year.

Depreciation and Amortization
D&A was $1.59 billion in Q2 2019, down 0.9% from $1.60 billion in Q1 2019 and down 3.0% from $1.63 billion in Q2 2018.
D&A related to leased devices was $125 million in Q2 2019, compared to $184 million in Q1 2019 and $238 million in Q2 2018.
Non-lease-related D&A was $1.46 billion in Q2 2019, compared to $1.42 billion in Q1 2019 and $1.40 billion in Q2 2018.
Sequentially and year-over-year, the decrease was primarily due to lower depreciation expense resulting from a lower total number of customer devices under lease, partially offset by the continued deployment of lower-band spectrum, including 600 MHz, and laying the groundwork for 5G.



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Net Income
($ in millions)
chart-29d8cb1767575c74a75.jpg





Diluted Earnings Per Share
chart-c41985fa02355863b44.jpg
 
NET INCOME AND
DILUTED EARNINGS PER SHARE
Net income was $939 million in Q2 2019, up 3% from $908 million in Q1 2019 and up 20% from $782 million in Q2 2018. EPS was $1.09 in Q2 2019, up from $1.06 in Q1 2019 and up from $0.92 in Q2 2018.
Sequentially, the increases in Net income and EPS were primarily due to higher Operating income, partially offset by higher Other expense, net. Net income and EPS included the following:
The impact from merger-related costs on Net income and EPS for Q2 2019 of $175 million and $0.20, respectively, compared to $93 million and $0.11 in Q1 2019, respectively.
Year-over-year, the increases in Net income and EPS were primarily due to higher Operating income and lower Interest expense and Interest expense to affiliates, partially offset by higher Income tax expense. Net income and EPS included the following:
The impact from merger-related costs on Net income and EPS for Q2 2019 of $175 million and $0.20, respectively, compared to $39 million and $0.05 in Q2 2018, respectively.
There was no impact from hurricanes on Net income and EPS for Q2 2019, compared to the impact from hurricane-related reimbursements of $45 million and $0.06, respectively, for Q2 2018.
Net income margin was 11% in Q2 2019, compared to 11% in Q1 2019 and 10% in Q2 2018. Net income margin is calculated as Net income divided by service revenues.
The effective tax rate for Q2 2019 was 24%. For full-year 2019, the effective tax rate is expected to be 25% to 26%.
 


 


19



Adjusted EBITDA
($ in millions)
chart-84c5474fec815d0690aa02.jpg

 
ADJUSTED EBITDA
Adjusted EBITDA was $3.5 billion in Q2 2019, up 5.4% from $3.3 billion in Q1 2019 and up 7.1% from $3.2 billion in Q2 2018.
Sequentially, the increase in Adjusted EBITDA was primarily due to higher Service revenues and lower net losses on equipment sales. These increases were partially offset by higher Cost of services expenses.
Year-over-year, the increase in Adjusted EBITDA was primarily due to higher Service revenues, partially offset by higher Selling, general and administrative expenses, higher Cost of services expenses, and the impact from hurricane-related reimbursements of $70 million in Q2 2018. There was no impact from hurricanes in Q2 2019.
Adjusted EBITDA excludes merger-related costs of $222 million in Q2 2019 compared to $113 million in Q1 2019 and $41 million in Q2 2018.
Adjusted EBITDA margin was 41% in Q2 2019, compared to 40% in Q1 2019 and 41% in Q2 2018. Adjusted EBITDA margin is calculated as Adjusted EBITDA divided by Service revenues.





20


 

Cash Purchases of Property and Equipment
($ in millions, % of Service Revs)
chart-4c595e01c13c5952842a02.jpg
Cash Purchases of Property and Equipment (Excluding Capitalized Interest)
($ in millions, % of Service Revs)
chart-c0a5fa101ba45909b76.jpg
 
CAPITAL EXPENDITURES
Cash purchases of property and equipment were $1.79 billion in Q2 2019, compared to $1.93 billion in Q1 2019 and $1.63 billion in Q2 2018.
Sequentially, the decrease was primarily due to fluctuations in the timing of the build-out of our network, including 600 MHz low-band spectrum.
Year-over-year, the increase was primarily due to growth in network build as we continued deployment of lower-band spectrum, including 600 MHz, and started laying the groundwork for 5G.
Cash purchases of property and equipment, excluding capitalized interest, were $1.66 billion in Q2 2019, compared to $1.81 billion in Q1 2019 and $1.53 billion in Q2 2018.
Capitalized interest included in cash purchases of property and equipment was $125 million in Q2 2019, compared to $118 million in Q1 2019 and $102 million in Q2 2018.





21



Net Cash Provided by Operating Activities
($ in millions)
chart-606bc296ade055d39efa02.jpg


 
CASH FLOW
Operating Activities
Net cash provided by operating activities was $2.15 billion in Q2 2019, compared to $1.39 billion in Q1 2019 and $1.26 billion in Q2 2018.
Sequentially, the increase was primarily due to lower net cash outflows from changes in working capital and higher Net income.
The change in working capital was primarily due to changes in Inventories and Accounts receivable, partially offset by Other current and long-term liabilities.
Year-over-year, the increase was primarily due to lower net cash outflows from change in working capital and higher Net income.
The change in working capital was primarily due to changes in Accounts receivables, Other current and long-term assets, Equipment installment plan receivables, and Accounts payable and accrued liabilities.
Changes in Operating lease right-of-use assets and Short and long-term operating lease liabilities are now presented in Changes in operating assets and liabilities due to the adoption of the new lease standard. Sequentially, the net impact of changes in these accounts increased Net cash provided by operating activities by $35 million. Year-over-year, the net impact of changes in these accounts decreased Net cash provided by operating activities by $52 million.
Net cash provided by operating activities three-year CAGR, excluding payments for merger-related costs, from full-year 2016 to full-year 2019 is expected to be between 33% and 35%, a narrowing of the prior target range of 32% to 35%.

22


Net Cash Provided by (Used in) Investing Activities
($ in millions)
chart-58285542853f595e959a02.jpg






Net Cash Used in Financing Activities
($ in millions)
chart-b6f2af003772543295ca02.jpg

 
Investing Activities
Net cash used in investing activities was an outflow of $1.62 billion in Q2 2019, compared to $966 million in Q1 2019 and $306 million in Q2 2018.
Sequentially, the change was primarily due to higher purchases of spectrum licenses and other intangible assets, including deposits, and lower proceeds related to our deferred purchase price from securitization transactions, partially offset by lower purchases of property and equipment, including capitalized interest.
Year-over-year, the change was primarily due to higher purchases of spectrum licenses and other intangible assets, including deposits, lower proceeds related to our deferred purchase price from securitization transactions and higher purchases of property and equipment, including capitalized interest.

Financing Activities
Net cash used in financing activities was $866 million in Q2 2019, compared to $190 million in Q1 2019 and $3.3 billion in Q2 2018.
Sequentially, the change was primarily due to repayments of long-term debt and higher repayments of financing lease obligations, partially offset by lower tax withholdings on share-based awards.
Year-over-year, the change was primarily due lower repayments of long-term debt and cash payments for debt extinguishment costs. Q2 2018 also included activity which did not occur in Q2 2019, including repurchases of common stock and net repayments on the revolving credit facility.















23


Free Cash Flow
($ in millions)
chart-731c0f0bb9e35bc8a07.jpg

 
FREE CASH FLOW
Free Cash Flow was $1.2 billion in Q2 2019, compared to $618 million in Q1 2019 and $774 million in Q2 2018.
Sequentially, the increase was primarily due to higher net cash provided by operating activities, as described above, and lower cash purchases of property and equipment, including capitalized interest, partially offset by lower proceeds related to our deferred purchase price from securitization transactions.
Year-over-year, the increase was due to higher net cash provided by operating activities, as described above, and lower cash payments for debt extinguishment costs, partially offset by lower proceeds related to our deferred purchase price from securitization transactions and higher cash purchases of property and equipment.
The impact of payments for merger-related costs on Free Cash Flow was $151 million in Q2 2019 compared to $34 million in Q1 2019 and $17 million in Q2 2018. Free cash flow, excluding payments for merger-related costs, was $1.3 billion in Q2 2019.
Free Cash Flow three-year CAGR, excluding payments for merger-related costs, from full-year 2016 to full-year 2019 is expected to be between 46% and 48%, unchanged from the prior target range. Free cash flow guidance does not assume any material net cash inflows from securitization going forward.





24



Total Debt and Net Debt (Excluding Tower Obligations)
Net Debt to LTM Net Income
Net Debt to LTM Adjusted EBITDA
($ in billions)
chart-7c2e709bfbd05221884a02.jpg
 
Total Debt (excl. Tower Obligations)
 
Net Debt (excl. Tower Obligations)
    Net Debt (excl. Tower Obligations) to LTM Net income
    Net Debt (excl. Tower Obligations) to LTM Adj. EBITDA

 
CAPITAL STRUCTURE
Total debt, excluding tower obligations, at the end of Q2 2019 was $27.5 billion and was comprised of the following:
$300 million of Short-term debt,
$11.0 billion of Long-term debt,
$14.0 billion of Long-term debt to affiliates.
$963 million of Short-term financing lease liabilities, and
$1.3 billion of Financing lease liabilities
Net debt, excluding tower obligations, at the end of Q2 2019 was $26.4 billion.
The ratio of net debt, excluding tower obligations, to Net income for the trailing last twelve months (“LTM”) period was 8.0x at the end of Q2 2019, compared to 8.5x at the end of Q1 2019 and 5.9x at the end of Q2 2018.
The ratio of net debt, excluding tower obligations, to Adjusted EBITDA for the trailing LTM period was 2.0x at the end of Q2 2019, compared to 2.1x at the end of Q1 2019 and 2.4x at the end of Q2 2018.
 
2019 Guidance Outlook
 
 
Original
 
Q1 2019 Update
 
Q2 2019 Update
Branded Postpaid Net Adds (in millions)
2.6
 
3.6
 
3.1
 
3.7
 
3.5
 
4.0
Adjusted EBITDA ($ in billions)
$12.7
 
$13.2
 
Unchanged
 
$12.9
 
$13.3
Cash purchases of prop and equip excl Cap Int of approx. $400 million ($ in billions)
$5.4
 
$5.7
 
Unchanged
 
Unchanged
Net cash provided by op act 3-yr CAGR
17%
 
21%
 
32%
 
35%
 
33%
 
35%
Free Cash Flow three-year CAGR
46%
 
48%
 
Unchanged
 
Unchanged
 
GUIDANCE
Branded postpaid net customer additions: Branded postpaid net customer additions for the full-year 2019 are expected to be 3.5 to 4.0 million, up from prior guidance of 3.1 to 3.7 million.
Net Income: We are not able to forecast net income on a forward-looking basis without unreasonable efforts due to the high variability and difficulty in predicting certain items that affect GAAP net income including, but not limited to, income tax expense, stock-based compensation expense and interest expense. Adjusted EBITDA should not be used to predict net income as the difference between the two measures is variable.
Adjusted EBITDA: For the full-year 2019, Adjusted EBITDA is expected to be in the range of $12.9 to $13.3 billion, an increase from and narrowing of the prior target range of $12.7 to $13.2 billion. This target includes expected leasing revenues of $550 to $600 million, down from prior guidance of $600 to $700 million, and takes into account the network expansion, including the deployment of our 600 MHz spectrum and the build-out of our 5G network,

25


    
 
which is expected to drive up Cost of Services by $200 to $300 million year-over-year, and increased customer guidance.
Capital expenditures: Cash purchases of property and equipment for the full-year 2019, excluding capitalized interest of approximately $400 million, are expected to be in the range of $5.4 to $5.7 billion and cash purchases of property and equipment for the full-year 2019, including capitalized interest, are expected to be in the range of $5.8 to $6.1 billion, with both ranges unchanged from prior guidance. We now expect to be at the very high end of both ranges. Full-year 2019 cash purchases of property and equipment include expenditures for 5G and 600 MHz deployment.
Net cash provided by operating activities: Net cash provided by operating activities three-year CAGR, excluding payments for merger-related costs, from full-year 2016 to full-year 2019 is expected to be between 33% and 35%, a narrowing of the prior target range of 32% to 35%.
Free Cash Flow: Free Cash Flow three-year CAGR, excluding payments for merger-related costs, from full-year 2016 to full-year 2019 is expected to be between 46% and 48%, unchanged from the prior target range. Free cash flow guidance does not assume any material net cash inflows from securitization going forward.
Branded postpaid phone ARPU: We expect full-year 2019 branded postpaid phone ARPU to remain generally stable within a range from plus 1% to minus 1% compared to full-year 2018.
Tax Rate: For full-year 2019, the effective tax rate is expected to be 25% to 26%.
Merger-related costs: In Q3 2019, pre-close merger-related costs are expected to be $150 to $200 million before taxes. These costs are excluded from Adjusted EBITDA but will impact Net income and cash flows. Merger-related costs incurred in full-year 2019 will be impacted by the timing of the Merger close.

 
UPCOMING EVENTS (All dates and attendance tentative)

28th Annual Goldman Sachs Communacopia Conference, September 17-19, New York, NY
27th Annual Deutsche Bank Leveraged Finance Conference, September 23-25, Scottsdale, AZ



26


 
CONTACT INFORMATION
Press:                             
Media Relations                        
T-Mobile US, Inc.
mediarelations@t-mobile.com                
http://newsroom.t-mobile.com                
 
Investor Relations:
Nils Paellmann, nils.paellmann@t-mobile.com
Ben Barrett, ben.barrett@t-mobile.com
Jon Perachio, jonathan.perachio@t-mobile.com
Esther Tehrani, esther.tehrani@t-mobile.com
investor.relations@t-mobile.com
http://investor.t-mobile.com

27


T-Mobile US, Inc.
Condensed Consolidated Balance Sheets
(Unaudited)
(in millions, except share and per share amounts)
June 30,
2019
 
December 31,
2018
Assets
 
 
 
Current assets
 
 
 
Cash and cash equivalents
$
1,105

 
$
1,203

Accounts receivable, net of allowances of $61 and $67
1,817

 
1,769

Equipment installment plan receivables, net
2,446

 
2,538

Accounts receivable from affiliates
18

 
11

Inventory
998

 
1,084

Other current assets
1,730

 
1,676

Total current assets
8,114

 
8,281

Property and equipment, net
21,847

 
23,359

Operating lease right-of-use assets
10,439

 

Financing lease right-of-use assets
2,589

 

Goodwill
1,901

 
1,901

Spectrum licenses
36,430

 
35,559

Other intangible assets, net
157

 
198

Equipment installment plan receivables due after one year, net
1,604

 
1,547

Other assets
1,707

 
1,623

Total assets
$
84,788

 
$
72,468

Liabilities and Stockholders' Equity
 
 
 
Current liabilities
 
 
 
Accounts payable and accrued liabilities
$
7,260

 
$
7,741

Payables to affiliates
198

 
200

Short-term debt
300

 
841

Deferred revenue
620

 
698

Short-term operating lease liabilities
2,268

 

Short-term financing lease liabilities
963

 

Other current liabilities
1,564

 
787

Total current liabilities
13,173

 
10,267

Long-term debt
10,954

 
12,124

Long-term debt to affiliates
13,985

 
14,582

Tower obligations
2,247

 
2,557

Deferred tax liabilities
5,090

 
4,472

Operating lease liabilities
10,145

 

Financing lease liabilities
1,314

 

Deferred rent expense

 
2,781

Other long-term liabilities
913

 
967

Total long-term liabilities
44,648

 
37,483

Commitments and contingencies
 
 
 
Stockholders' equity
 
 
 
Common Stock, par value $0.00001 per share, 1,000,000,000 shares authorized; 855,970,789 and 851,675,119 shares issued, 854,452,642 and 850,180,317 shares outstanding

 

Additional paid-in capital
38,242

 
38,010

Treasury stock, at cost, 1,518,147 and 1,494,802 shares issued
(8
)
 
(6
)
Accumulated other comprehensive loss
(813
)
 
(332
)
Accumulated deficit
(10,454
)
 
(12,954
)
Total stockholders' equity
26,967

 
24,718

Total liabilities and stockholders' equity
$
84,788

 
$
72,468


28


T-Mobile US, Inc.
Condensed Consolidated Statements of Comprehensive Income
(Unaudited)
 
Three Months Ended
 
Six Months Ended June 30,
(in millions, except share and per share amounts)
June 30,
2019
 
March 31,
2019
 
June 30,
2018
 
2019
 
2018
Revenues
 
 
 
 
 
 
 
 
 
Branded postpaid revenues
$
5,613

 
$
5,493

 
$
5,164

 
$
11,106

 
$
10,234

Branded prepaid revenues
2,379

 
2,386

 
2,402

 
4,765

 
4,804

Wholesale revenues
313

 
304

 
275

 
617

 
541

Roaming and other service revenues
121

 
94

 
90

 
215

 
158

Total service revenues
8,426

 
8,277

 
7,931

 
16,703

 
15,737

Equipment revenues
2,263

 
2,516

 
2,325

 
4,779

 
4,678

Other revenues
290

 
287

 
315

 
577

 
611

Total revenues
10,979

 
11,080

 
10,571

 
22,059

 
21,026

Operating expenses
 
 
 
 
 
 
 
 
 
Cost of services, exclusive of depreciation and amortization shown separately below
1,649

 
1,546

 
1,530

 
3,195

 
3,119

Cost of equipment sales, exclusive of depreciation and amortization shown separately below
2,661

 
3,016

 
2,772

 
5,677

 
5,617

Selling, general and administrative
3,543

 
3,442

 
3,185

 
6,985

 
6,349

Depreciation and amortization
1,585

 
1,600

 
1,634

 
3,185

 
3,209

Total operating expense
9,438

 
9,604

 
9,121

 
19,042

 
18,294

Operating income
1,541

 
1,476

 
1,450

 
3,017

 
2,732

Other income (expense)
 
 
 
 
 
 
 
 
 
Interest expense
(182
)
 
(179
)
 
(196
)
 
(361
)
 
(447
)
Interest expense to affiliates
(101
)
 
(109
)
 
(128
)
 
(210
)
 
(294
)
Interest income
4

 
8

 
6

 
12

 
12

Other income (expense), net
(22
)
 
7

 
(64
)
 
(15
)
 
(54
)
Total other expense, net
(301
)
 
(273
)
 
(382
)
 
(574
)
 
(783
)
Income before income taxes
1,240

 
1,203

 
1,068

 
2,443

 
1,949

Income tax expense
(301
)
 
(295
)
 
(286
)
 
(596
)
 
(496
)
Net income
939

 
908

 
782

 
1,847

 
1,453

 
 
 
 
 
 
 
 
 
 
Net income
$
939

 
$
908

 
$
782

 
$
1,847

 
$
1,453

Other comprehensive loss, net of tax
 
 
 
 
 
 
 
 
 
Unrealized loss on available-for-sale securities, net of tax effect of $0, $0, $1, $0 and $0

 

 
3

 

 

Unrealized loss on cash flow hedges, net of tax effect of $(102), $(66), $0, $(168) and $0
(292
)
 
(189
)
 

 
(481
)
 

Other comprehensive (loss) income
(292
)
 
(189
)
 
3

 
(481
)
 

Total comprehensive income
$
647

 
$
719

 
$
785

 
$
1,366

 
$
1,453

Earnings per share
 
 
 
 
 
 
 
 
 
Basic
$
1.10

 
$
1.07

 
$
0.92

 
$
2.16

 
$
1.71

Diluted
$
1.09

 
$
1.06

 
$
0.92

 
$
2.14

 
$
1.69

Weighted average shares outstanding
 
 
 
 
 
 
 
 
 
Basic
854,368,443

 
851,223,498

 
847,660,488

 
852,796,369

 
851,420,686

Diluted
860,135,593

 
858,643,481

 
852,040,670

 
860,890,870

 
858,728,832



29


T-Mobile US, Inc.
Condensed Consolidated Statements of Cash Flows  
(Unaudited)
 
Three Months Ended
 
Six Months Ended June 30,
(in millions)
June 30,
2019
 
March 31,
2019
 
June 30,
2018
 
2019
 
2018
Operating activities
 
 
 
 
 
 
 
 
 
Net income
$
939

 
$
908

 
$
782

 
$
1,847

 
$
1,453

Adjustments to reconcile net income to net cash provided by operating activities
 
 
 
 
 
 
 
 
 
Depreciation and amortization
1,585

 
1,600

 
1,634

 
3,185

 
3,209

Stock-based compensation expense
130

 
110

 
112

 
240

 
209

Deferred income tax expense
267

 
288

 
272

 
555

 
478

Bad debt expense
71

 
73

 
75

 
144

 
129

Losses from sales of receivables
28

 
35

 
27

 
63

 
79

Deferred rent expense

 

 
7

 

 
11

Losses on redemption of debt
19

 

 
90

 
19

 
122

Changes in operating assets and liabilities
 
 
 
 
 
 
 
 
 
Accounts receivable
(805
)
 
(1,143
)
 
(1,136
)
 
(1,948
)
 
(2,009
)
Equipment installment plan receivables
(150
)
 
(250
)
 
(286
)
 
(400
)
 
(508
)
Inventories
162

 
(265
)
 
125

 
(103
)
 
158

Operating lease right-of-use assets
469

 
435

 

 
904

 

Other current and long-term assets
(83
)
 
(87
)
 
(248
)
 
(170
)
 
(116
)
Accounts payable and accrued liabilities
43

 
13

 
(79
)
 
56

 
(1,107
)
Short and long-term operating lease liabilities
(521
)
 
(522
)
 

 
(1,043
)
 

Other current and long-term liabilities
(27
)
 
121

 
(105
)
 
94

 
(60
)
Other, net
20

 
76

 
(9
)
 
96

 
(17
)
Net cash provided by operating activities
2,147

 
1,392

 
1,261

 
3,539

 
2,031

Investing activities
 
 


 
 
 
 
 
 
Purchases of property and equipment, including capitalized interest of $125, $118 and $102
(1,789
)
 
(1,931
)
 
(1,629
)
 
(3,720
)
 
(2,995
)
Purchases of spectrum licenses and other intangible assets, including deposits
(665
)
 
(185
)
 
(28
)
 
(850
)
 
(79
)
Proceeds related to beneficial interests in securitization transactions
839

 
1,157

 
1,323

 
1,996

 
2,618

Acquisition of companies, net of cash acquired

 

 
(5
)
 

 
(338
)
Other, net

 
(7
)
 
33

 
(7
)
 
26

Net cash provided by (used in) investing activities
(1,615
)
 
(966
)
 
(306
)
 
(2,581
)
 
(768
)
Financing activities
 
 
 
 
 
 
 
 
 
Proceeds from issuance of long-term debt

 

 

 

 
2,494

Payments of consent fees related to long-term debt

 

 
(38
)
 

 
(38
)
Proceeds from borrowing on revolving credit facility
880

 
885

 
2,070

 
1,765

 
4,240

Repayments of revolving credit facility
(880
)
 
(885
)
 
(2,195
)
 
(1,765
)
 
(3,920
)
Repayments of financing lease obligations
(229
)
 
(86
)
 
(155
)
 
(315
)
 
(327
)
Repayments of long-term debt
(600
)
 

 
(2,350
)
 
(600
)
 
(3,349
)
Repurchases of common stock

 

 
(405
)
 

 
(1,071
)
Tax withholdings on share-based awards
(4
)
 
(100
)
 
(10
)
 
(104
)
 
(84
)
Cash payments for debt prepayment or debt extinguishment costs
(28
)
 

 
(181
)
 
(28
)
 
(212
)
Other, net
(5
)
 
(4
)
 
(3
)
 
(9
)
 

Net cash used in financing activities
(866
)
 
(190
)
 
(3,267
)
 
(1,056
)
 
(2,267
)
Change in cash and cash equivalents
(334
)
 
236

 
(2,312
)
 
(98
)
 
(1,004
)
Cash and cash equivalents
 
 
 
 
 
 
 
 
 
Beginning of period
1,439

 
1,203

 
2,527

 
1,203

 
1,219

End of period
$
1,105

 
$
1,439

 
$
215

 
$
1,105

 
$
215

Supplemental disclosure of cash flow information
 
 
 
 
 
 
 
 
 
Interest payments, net of amounts capitalized
$
245

 
$
340

 
$
559

 
$
585

 
$
937

Operating lease payments (1)
703

 
688

 

 
1,391

 

Income tax payments
40

 
32

 
10

 
72

 
11

Noncash investing and financing activities
 
 
 
 
 
 
 
 
 
Noncash beneficial interest obtained in exchange for securitized receivables
1,616

 
1,512

 
1,205

 
3,128

 
2,333

Changes in accounts payable for purchases of property and equipment
$
(113
)
 
$
(333
)
 
$
(386
)
 
$
(446
)
 
$
(750
)
Leased devices transferred from inventory to property and equipment
167

 
147

 
280

 
314

 
584

Returned leased devices transferred from property and equipment to inventory
(67
)
 
(57
)
 
(90
)
 
(124
)
 
(172
)
Short-term debt assumed for financing of property and equipment
50

 
250

 
54

 
300

 
291

Operating lease right-of-use assets obtained in exchange for lease obligations
1,400

 
694

 

 
2,094

 

Financing lease right-of-use assets obtained in exchange for lease obligations
368

 
180

 
176

 
548

 
318

(1)
On January 1, 2019, we adopted ASU 2016-02, “Leases (Topic 842),” which requires certain supplemental cash flow disclosures. Where these disclosures or a comparable figure were not required under the former lease standard, we have not retrospectively presented historical amounts. See Note 1 – Summary of Significant Accounting Policies in the Q2 2019 10-Q for additional details.

30


T-Mobile US, Inc.
Supplementary Operating and Financial Data
(Unaudited)
 
Quarter
 
Six Months Ended June 30,
(in thousands)
Q1 2018
 
Q2 2018
 
Q3 2018
 
Q4 2018
 
Q1 2019
 
Q2 2019
 
2018
 
2019
Customers, end of period
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Branded postpaid phone customers
34,744

 
35,430

 
36,204

 
37,224

 
37,880

 
38,590

 
35,430

 
38,590

Branded postpaid other customers
4,321

 
4,652

 
4,957

 
5,295

 
5,658

 
6,056

 
4,652

 
6,056

Total branded postpaid customers
39,065

 
40,082

 
41,161

 
42,519

 
43,538

 
44,646

 
40,082

 
44,646

Branded prepaid customers
20,876

 
20,967

 
21,002

 
21,137

 
21,206

 
21,337

 
20,967

 
21,337

Total branded customers
59,941

 
61,049

 
62,163

 
63,656

 
64,744

 
65,983

 
61,049

 
65,983

Wholesale customers
14,099

 
14,570

 
15,086

 
15,995

 
16,557

 
17,069

 
14,570

 
17,069

Total customers, end of period
74,040

 
75,619

 
77,249

 
79,651

 
81,301

 
83,052

 
75,619

 
83,052


 
Quarter
 
Six Months Ended June 30,
(in thousands)
Q1 2018
 
Q2 2018
 
Q3 2018
 
Q4 2018
 
Q1 2019
 
Q2 2019
 
2018
 
2019
Net customer additions (losses)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Branded postpaid phone customers
617

 
686

 
774

 
1,020

 
656

 
710

 
1,303

 
1,366

Branded postpaid other customers
388

 
331

 
305

 
338

 
363

 
398

 
719

 
761

Total branded postpaid customers
1,005

 
1,017

 
1,079

 
1,358

 
1,019

 
1,108

 
2,022

 
2,127

Branded prepaid customers
199

 
91

 
35

 
135

 
69

 
131

 
290

 
200

Total branded customers
1,204

 
1,108

 
1,114

 
1,493

 
1,088

 
1,239

 
2,312

 
2,327

Wholesale customers
229

 
471

 
516

 
909

 
562

 
512

 
700

 
1,074

Total net customer additions
1,433

 
1,579

 
1,630

 
2,402

 
1,650

 
1,751

 
3,012

 
3,401


 
Quarter
 
Six Months Ended June 30,
 
Q1 2018
 
Q2 2018
 
Q3 2018
 
Q4 2018
 
Q1 2019
 
Q2 2019
 
2018
 
2019
Branded postpaid phone churn
1.07
%
 
0.95
%
 
1.02
%
 
0.99
%
 
0.88
%
 
0.78
%
 
1.01
%
 
0.83
%
Branded prepaid churn
3.94
%
 
3.81
%
 
4.12
%
 
3.99
%
 
3.85
%
 
3.49
%
 
3.87
%
 
3.67
%

31


T-Mobile US, Inc.
Supplementary Operating and Financial Data (continued)
(Unaudited)
 
Quarter
 
Six Months Ended June 30,
 
Q1 2018
 
Q2 2018
 
Q3 2018
 
Q4 2018
 
Q1 2019
 
Q2 2019
 
2018
 
2019
Financial Measures
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Service revenues (in millions)
$7,806
 
$7,931
 
$8,066
 
$8,189
 
$8,277
 
$8,426
 
$15,737
 
$16,703
Total revenues (in millions)
$10,455
 
$10,571
 
$10,839
 
$11,445
 
$11,080
 
$10,979
 
$21,026
 
$22,059
Net income (in millions)
$671
 
$782
 
$795
 
$640
 
$908
 
$939
 
$1,453
 
$1,847
Net income margin
9%
 
10%
 
10%
 
8%
 
11%
 
11%
 
9%
 
11%
Adjusted EBITDA (in millions)
$2,956
 
$3,233
 
$3,239
 
$2,970
 
$3,284
 
$3,461
 
$6,189
 
$6,745
Adjusted EBITDA margin
38%
 
41%
 
40%
 
36%
 
40%
 
41%
 
39%
 
40%
Selling, general and administrative (in millions)
$3,164
 
$3,185
 
$3,314
 
$3,498
 
$3,442
 
$3,543
 
$6,349
 
$6,985
Merger-related costs (in millions)
$—
 
$41
 
$53
 
$102
 
$113
 
$222
 
$41
 
$335
Selling, general and administrative excluding merger-related costs (in millions)
$3,164
 
$3,144
 
$3,261
 
$3,396
 
$3,329
 
$3,321
 
$6,308
 
$6,650
Cash purchases of property and equipment including capitalized interest (in millions)
$1,366
 
$1,629
 
$1,362
 
$1,184
 
$1,931
 
$1,789
 
$2,995
 
$3,720
Capitalized Interest (in millions)
$43
 
$102
 
$101
 
$116
 
$118
 
$125
 
$145
 
$243
Cash purchases of property and equipment excluding capitalized interest (in millions)
$1,323
 
$1,527
 
$1,261
 
$1,068
 
$1,813
 
$1,664
 
$2,850
 
$3,477
Net cash provided by operating activities (in millions)
$770
 
$1,261
 
$914
 
$954
 
$1,392
 
$2,147
 
$2,031
 
$3,539
Net cash (used in) provided by investing activities (in millions)
$(462)
 
$(306)
 
$(42)
 
$231
 
$(966)
 
$(1,615)
 
$(768)
 
$(2,581)
Net cash provided by (used in) financing activities (in millions)
$1,000
 
$(3,267)
 
$(758)
 
$(311)
 
$(190)
 
$(866)
 
$(2,267)
 
$(1,056)
Free Cash Flow (in millions)
$668
 
$774
 
$890
 
$1,220
 
$618
 
$1,169
 
$1,442
 
$1,787
Net cash proceeds from securitization (in millions)
$(150)
 
$25
 
$(18)
 
$(36)
 
$(18)
 
$95
 
$(125)
 
$77
Operating Metrics
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Branded postpaid phone ARPU
$46.66
 
$46.52
 
$46.17
 
$46.29
 
$46.07
 
$46.10
 
$46.59
 
$46.09
Branded prepaid ARPU
$38.90
 
$38.48
 
$38.34
 
$38.39
 
$37.65
 
$37.46
 
$38.69
 
$37.56
Branded postpaid accounts, end of period (in thousands)
13,237
 
13,498
 
13,753
 
14,015
 
14,234
 
14,480
 
13,498
 
14,480
Branded postpaid customers per account
2.95
 
2.97
 
2.99
 
3.03
 
3.06
 
3.08
 
2.97
 
3.08
Device Sales and Leased Devices
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Phones (in millions)
8.7
 
7.9
 
8.1
 
8.3
 
7.4
 
6.5
 
16.6
 
13.9
Branded postpaid upgrade rate
5%
 
6%
 
6%
 
6%
 
5%
 
5%
 
11%
 
10%
Device Financing
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Gross EIP financed (in millions)
$1,572
 
$1,705
 
$1,762
 
$2,203
 
$1,742
 
$1,625
 
$3,277
 
$3,367
EIP billings (in millions)
$1,698
 
$1,585
 
$1,601
 
$1,664
 
$1,663
 
$1,645
 
$3,283
 
$3,308
EIP receivables, net (in millions)
$3,515
 
$3,530
 
$3,589
 
$4,085
 
$4,128
 
$4,050
 
$3,530
 
$4,050
Lease revenues (in millions)
$171
 
$177
 
$176
 
$168
 
$161
 
$143
 
$348
 
$304
Leased devices transferred from inventory to property and equipment (in millions)
$304
 
$280
 
$229
 
$198
 
$147
 
$167
 
$584
 
$314
Returned leased devices transferred from property and equipment to inventory (in millions)
$(82)
 
$(90)
 
$(74)
 
$(80)
 
$(57)
 
$(67)
 
$(172)
 
$(124)
Customer Quality
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
EIP receivables classified as prime
43%
 
42%
 
42%
 
44%
 
46%
 
50%
 
42%
 
50%
EIP receivables classified as prime (including EIP receivables sold)
53%
 
52%
 
52%
 
53%
 
52%
 
52%
 
52%
 
52%
Total bad debt expense and losses from sales of receivables (in millions)
$106
 
$102
 
$128
 
$118
 
$108
 
$99
 
$208
 
$207


32


T-Mobile US, Inc.
Reconciliation of Non-GAAP Financial Measures to GAAP Financial Measures
(Unaudited)

This Investor Factbook includes non-GAAP financial measures. The non-GAAP financial measures should be considered in addition to, but not as a substitute for, the information provided in accordance with GAAP. Reconciliations for the non-GAAP financial measures to the most directly comparable GAAP financial measures are provided below. T-Mobile is not able to forecast net income on a forward-looking basis without unreasonable efforts due to the high variability and difficulty in predicting certain items that affect GAAP net income including, but not limited to, income tax expense, stock-based compensation expense and interest expense. Adjusted EBITDA should not be used to predict net income as the difference between the two measures is variable.

Adjusted EBITDA is reconciled to net income as follows:
 
Quarter
 
Six Months Ended June 30,
(in millions)
Q1 2018
 
Q2 2018
 
Q3 2018
 
Q4 2018
 
Q1 2019
 
Q2 2019
 
2018
 
2019
Net income
$
671

 
$
782

 
$
795

 
$
640

 
$
908

 
$
939

 
$
1,453

 
$
1,847

Adjustments:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest expense
251

 
196

 
194

 
194

 
179

 
182

 
447

 
361

Interest expense to affiliates
166

 
128

 
124