T-Mobile US Sales Rise 12.8% on Strong Customer Additions

By Markets Fool.com

Image source: T-Mobile.

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T-Mobile US (NASDAQ: TMUS) reported second-quarter results on July 27. The wireless carrier continued its streak of impressive customer gains despite fierce competition from larger rivals.

T-Mobile results: The raw numbers

Metric

Q2 2016

Q2 2015

Growth (YOY)

Revenue

$9.222 billion

$8.179 billion

12.8%

Adjusted EBITDA

$2.464 billion

$1.817 billion

35.6%

Earnings per share

$0.25

$0.42

(40.5%)

YOY = year over year. Data source: T-Mobile Q2 2016 earnings.

What happened with T-Mobile this quarter?

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T-Mobile continues to solidify its reputation as the fastest-growing wireless company in America, with 1.9 million total net customer additions in the second quarter -- its 13th consecutive quarter of more than 1 million adds.

T-Mobile added 890,000 branded postpaid subscribers, including 646,000 branded postpaid phone net adds, as the company led the industry in branded postpaid phone net adds for the 10th consecutive quarter. Branded prepaid net adds were likewise impressive, surging 167% year over year to 476,000 due to strong growth from MetroPCS.T-Mobile also continued to show signs of strong customer loyalty, with a record-low branded postpaid phone churn of 1.27%, representing an improvement of five basis points from the year-ago quarter.

This robust customer growth continues to fuel T-Mobile's financial performance, with second-quarter revenue rising 12.8% year over year to $9.2 billion, marking the 12th time in the past 13 quarters that T-Mobile has led the industry in total revenue percentage growth. Also helping to drive total revenue higher was a 1.9% sequential increase in branded postpaid phone ARPU (average revenue per user).

EBITDA (earnings before interest, taxes, depreciation, and amortization) -- adjusted to exclude stock-based compensation and non-recurring expenses -- jumped 35.6% to $2.5 billion, as adjusted EBITDA margin rose to 36% from 30% in Q2 2015.

All told, net income fell 38% to $225 million, mostly due to higher interest expense and lower interest income in the second quarter of 2016, and lower income tax expense in the second quarter of 2015. And earnings per share, which were impacted by a higher share count, declined 40% to $0.25.

More importantly, T-Mobile's cash generation remained strong, with operating cash flow increasing 52% to $1.8 billion.

Looking forward

These strong results prompted T-Mobile to raise its customer outlook for the year ahead. The company now expects its full-year branded postpaid net customer additions to be between 3.4 million and 3.8 million, up from its prior forecast of 3.2 million to 3.6 million.

T-Mobile also tightened its adjusted EBITDA guidance to a range of $9.8 billion to $10.1 billion, compared to a previous range of $9.7 billion to $10.2 billion.

"We outperformed the competition again on every key metric, while delivering the best postpaid phone churn numbers in our history!" said CEO John Legere in a press release. "Quarter after quarter this team continues to deliver results that are the best in the business despite the competition's best efforts to compete."

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Joe Tenebruso has no position in any stocks mentioned. The Motley Fool recommends T-Mobile US. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.