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T-Mobile (TMUS) Beats on Q2 Earnings Despite Lower Revenues
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T-Mobile US, Inc. (TMUS - Free Report) reported mixed second-quarter 2023 results, with the bottom line beating the Zacks Consensus Estimate but the top line missing the same.
Despite reporting lower revenues year over year, the Bellevue, WA-based un carrier registered industry-leading postpaid customer growth with a record-low churn rate. The company’s dedicated 5G spectrum asset with superior propagation, network leadership and strong emphasis on customer experience supported the top line during the quarter.
Net Income
Net income in the second quarter was $2,221 million or $1.86 per share against a loss of $108 million or a loss of 9 cents per share in the year-ago quarter. Lower operating costs significantly boosted the bottom line, which beat the Zacks Consensus Estimate by 15 cents.
T-Mobile US, Inc. Price, Consensus and EPS Surprise
Quarterly revenues were $19,196 million, down from $19,701 million in the year-ago quarter. Lower equipment revenues hindered the top-line performance during the quarter. The top line fell short of the Zacks consensus estimate of $19,345 million.
Segment Results
Total Service revenues in the quarter were $15,738 million, up from $15,316 million in the year-ago quarter. Net sales surpassed our revenue estimate of $15,046.3 million. The improvement was primarily driven by growth in Postpaid revenues, which increased to $12,070 million from the prior-year quarter’s tally of $11,445 million. Compare with Our estimates
T-Mobile added 1.6 million postpaid net customers while postpaid net account additions were 299 thousand, which led to 5% year-over-year growth in Postpaid revenues. The Postpaid phone churn rate was at a record low level of 0.77%, and Postpaid phone net customer additions were 760 thousand, which is the best second-quarter tally in the last eight years.
High-speed Internet net customer additions totaled 509 thousand, much higher than other established players in the industry. Postpaid average revenue per account (ARPA) improved to $138.94 from $137.49 reported in the year-ago quarter.
Prepaid revenues declined to $2,444 million from $2,469 million in the prior-year quarter. The company witnessed a year-over-year decline in prepaid customer addition, primarily due to the moderation of industry growth and migration toward postpaid from prepaid.
The Prepaid churn rate increased to 2.62% from 2.58% in the year-ago quarter. Wholesale and other service revenues declined to $1,224 million from $1,402 million in the year-earlier quarter. Prepaid ARPU declined to $37.98 from $38.71 in the year-ago quarter.
Equipment revenues contributed $3,169 million, down 23% year over year. The top line fell short of our revenue estimate of $3,888.2 million. An increase in postpaid upgrades and the tendency to shift toward devices compatible with the T-Mobile network, longer device lifecycles, combined with a reduction in lease revenues, led to a year-over-year decline in this segment.
Other revenues increased to $289 million from $255 million reported in the year-ago quarter.
Other Details
T-Mobile’s operating income rose to $3,793 million from $709 million in the year-ago quarter. A decline in operating expenses to $15,403 million from $18,992 million in the year-ago quarter supported the improvement in the operating income. Core adjusted EBITDA rose 11% to $7,336 million from $6,618 million reported in the prior-year quarter.
Cash Flow & Liquidity
In the second quarter of 2023, T-Mobile generated $4,355 million of cash from operating activities compared with $4,209 million in the year-ago period. Adjusted free cash flow was $2,877 million, up from $1,758 million due to an improvement in operating cash flow.
As of Jun 30, 2023, the company had $6,647 million in cash and cash equivalents, with $68,646 million of long-term debt. During the quarter, T-Mobile repurchased 25.2 million shares for $3.5 billion.
Outlook
For 2023, T-Mobile has raised its guidance. It anticipates postpaid net customer additions in the range of 5.6-5.9 million, up from the previously estimated band of 5.3-5.7 million.
The company expects core adjusted EBITDA between $28.9 and 29.2 billion, raising the lower range from $28.8-29.2 billion. Net cash from operating activities is estimated in the range of $18-18.3 billion, up from the $17.9-18.3 billion range expected earlier. Merger synergies for 2023 are expected at $7.5 billion, up from $7.3 billion to $7.5 billion.
TMUS upgraded the lower range of capital expenditure from $9.4-$9.7 billion to $9.5-$9.7 billion. There is no change in the projection of adjusted free cash flow which is estimated between $13.2 and $13.6 billion.
The effective tax rate is expected in the band of 24-26%. The company expects ARPA to increase slightly more than 1% in 2023. Management continues to focus on strengthening network leadership, capitalizing on growth opportunities, improving profitability and increasing cash flow conversion.
Zacks Rank
T-Mobile currently carries a Zacks Rank #2 (Buy). Some other top-ranked stocks in the Computer and Technology sector are as follows:
InterDigital, Inc. (IDCC - Free Report) , sporting a Zacks Rank #1 (Strong Buy), delivered an earnings surprise of 170.89%, on average, in the trailing four quarters. In the last reported quarter, it pulled off an earnings surprise of 579.03%. You can see the complete list of today’s Zacks #1 Rank stocks here.
It is a pioneer in advanced mobile technologies that enable wireless communications and capabilities. The company designs and develops a wide range of advanced technology solutions, which are used in digital cellular and wireless 3G, 4G and IEEE 802-related products and networks.
Akamai Technologies, Inc. (AKAM - Free Report) , carrying a Zacks Rank #2 at present, delivered an earnings surprise of 4.86%, on average, in the trailing four quarters. In the last reported quarter, it pulled off an earnings surprise of 6.06%.
It is a global provider of content delivery networks and cloud infrastructure services. The company’s solutions accelerate and improve the delivery of content over the Internet, enabling a faster response to requests for web pages, streaming of video & audio, business applications, etc. Its offerings are intended to reduce the impact of traffic congestion, bandwidth constraints and capacity limitations on customers.
Viasat, Inc. (VSAT - Free Report) , currently sporting a Zacks Rank #1, delivered an earnings surprise of 7.98% in the last reported quarter. Viasat designs, develops and markets advanced digital satellite telecommunications and other wireless networking and signal processing equipment. The company serves its high-bandwidth, high-performance communications solutions to the public, as well as military, enterprises and government enterprises.
Viasat provides broadband services named ‘Exede’ in North America. This features the world's highest capacity satellite — ViaSat-1 — satellite broadband networking systems, global mobile satellite services comprising high-speed in-flight Internet, as well as global tracking and messaging, and Wi-Fi and other hotspot support, operations and management systems.
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T-Mobile (TMUS) Beats on Q2 Earnings Despite Lower Revenues
T-Mobile US, Inc. (TMUS - Free Report) reported mixed second-quarter 2023 results, with the bottom line beating the Zacks Consensus Estimate but the top line missing the same.
Despite reporting lower revenues year over year, the Bellevue, WA-based un carrier registered industry-leading postpaid customer growth with a record-low churn rate. The company’s dedicated 5G spectrum asset with superior propagation, network leadership and strong emphasis on customer experience supported the top line during the quarter.
Net Income
Net income in the second quarter was $2,221 million or $1.86 per share against a loss of $108 million or a loss of 9 cents per share in the year-ago quarter. Lower operating costs significantly boosted the bottom line, which beat the Zacks Consensus Estimate by 15 cents.
T-Mobile US, Inc. Price, Consensus and EPS Surprise
T-Mobile US, Inc. price-consensus-eps-surprise-chart | T-Mobile US, Inc. Quote
Revenues
Quarterly revenues were $19,196 million, down from $19,701 million in the year-ago quarter. Lower equipment revenues hindered the top-line performance during the quarter. The top line fell short of the Zacks consensus estimate of $19,345 million.
Segment Results
Total Service revenues in the quarter were $15,738 million, up from $15,316 million in the year-ago quarter. Net sales surpassed our revenue estimate of $15,046.3 million. The improvement was primarily driven by growth in Postpaid revenues, which increased to $12,070 million from the prior-year quarter’s tally of $11,445 million. Compare with Our estimates
T-Mobile added 1.6 million postpaid net customers while postpaid net account additions were 299 thousand, which led to 5% year-over-year growth in Postpaid revenues. The Postpaid phone churn rate was at a record low level of 0.77%, and Postpaid phone net customer additions were 760 thousand, which is the best second-quarter tally in the last eight years.
High-speed Internet net customer additions totaled 509 thousand, much higher than other established players in the industry. Postpaid average revenue per account (ARPA) improved to $138.94 from $137.49 reported in the year-ago quarter.
Prepaid revenues declined to $2,444 million from $2,469 million in the prior-year quarter. The company witnessed a year-over-year decline in prepaid customer addition, primarily due to the moderation of industry growth and migration toward postpaid from prepaid.
The Prepaid churn rate increased to 2.62% from 2.58% in the year-ago quarter. Wholesale and other service revenues declined to $1,224 million from $1,402 million in the year-earlier quarter. Prepaid ARPU declined to $37.98 from $38.71 in the year-ago quarter.
Equipment revenues contributed $3,169 million, down 23% year over year. The top line fell short of our revenue estimate of $3,888.2 million. An increase in postpaid upgrades and the tendency to shift toward devices compatible with the T-Mobile network, longer device lifecycles, combined with a reduction in lease revenues, led to a year-over-year decline in this segment.
Other revenues increased to $289 million from $255 million reported in the year-ago quarter.
Other Details
T-Mobile’s operating income rose to $3,793 million from $709 million in the year-ago quarter. A decline in operating expenses to $15,403 million from $18,992 million in the year-ago quarter supported the improvement in the operating income. Core adjusted EBITDA rose 11% to $7,336 million from $6,618 million reported in the prior-year quarter.
Cash Flow & Liquidity
In the second quarter of 2023, T-Mobile generated $4,355 million of cash from operating activities compared with $4,209 million in the year-ago period. Adjusted free cash flow was $2,877 million, up from $1,758 million due to an improvement in operating cash flow.
As of Jun 30, 2023, the company had $6,647 million in cash and cash equivalents, with $68,646 million of long-term debt. During the quarter, T-Mobile repurchased 25.2 million shares for $3.5 billion.
Outlook
For 2023, T-Mobile has raised its guidance. It anticipates postpaid net customer additions in the range of 5.6-5.9 million, up from the previously estimated band of 5.3-5.7 million.
The company expects core adjusted EBITDA between $28.9 and 29.2 billion, raising the lower range from $28.8-29.2 billion. Net cash from operating activities is estimated in the range of $18-18.3 billion, up from the $17.9-18.3 billion range expected earlier. Merger synergies for 2023 are expected at $7.5 billion, up from $7.3 billion to $7.5 billion.
TMUS upgraded the lower range of capital expenditure from $9.4-$9.7 billion to $9.5-$9.7 billion.
There is no change in the projection of adjusted free cash flow which is estimated between $13.2 and $13.6 billion.
The effective tax rate is expected in the band of 24-26%. The company expects ARPA to increase slightly more than 1% in 2023. Management continues to focus on strengthening network leadership, capitalizing on growth opportunities, improving profitability and increasing cash flow conversion.
Zacks Rank
T-Mobile currently carries a Zacks Rank #2 (Buy). Some other top-ranked stocks in the Computer and Technology sector are as follows:
InterDigital, Inc. (IDCC - Free Report) , sporting a Zacks Rank #1 (Strong Buy), delivered an earnings surprise of 170.89%, on average, in the trailing four quarters. In the last reported quarter, it pulled off an earnings surprise of 579.03%. You can see the complete list of today’s Zacks #1 Rank stocks here.
It is a pioneer in advanced mobile technologies that enable wireless communications and capabilities. The company designs and develops a wide range of advanced technology solutions, which are used in digital cellular and wireless 3G, 4G and IEEE 802-related products and networks.
Akamai Technologies, Inc. (AKAM - Free Report) , carrying a Zacks Rank #2 at present, delivered an earnings surprise of 4.86%, on average, in the trailing four quarters. In the last reported quarter, it pulled off an earnings surprise of 6.06%.
It is a global provider of content delivery networks and cloud infrastructure services. The company’s solutions accelerate and improve the delivery of content over the Internet, enabling a faster response to requests for web pages, streaming of video & audio, business applications, etc. Its offerings are intended to reduce the impact of traffic congestion, bandwidth constraints and capacity limitations on customers.
Viasat, Inc. (VSAT - Free Report) , currently sporting a Zacks Rank #1, delivered an earnings surprise of 7.98% in the last reported quarter. Viasat designs, develops and markets advanced digital satellite telecommunications and other wireless networking and signal processing equipment. The company serves its high-bandwidth, high-performance communications solutions to the public, as well as military, enterprises and government enterprises.
Viasat provides broadband services named ‘Exede’ in North America. This features the world's highest capacity satellite — ViaSat-1 — satellite broadband networking systems, global mobile satellite services comprising high-speed in-flight Internet, as well as global tracking and messaging, and Wi-Fi and other hotspot support, operations and management systems.