T-Mobile US Inc
For the period ended Dec 31, 2023. Filed Feb 2, 2024.
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FY2023 · Filed Feb 2, 2024
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Item 8. Financial Statements and Supplementary Data
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Stockholders of T-Mobile US, Inc.
Opinions on the Financial Statements and Internal Control over Financial Reporting
We have audited the accompanying consolidated balance sheets of T-Mobile US, Inc. and subsidiaries (the “Company”) as of December 31, 2023 and 2022, the related consolidated statements of comprehensive income, stockholders' equity, and cash flows, for each of the two years in the period ended December 31, 2023, and the related notes (collectively referred to as the “consolidated financial statements”). We also have audited the Company’s internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2023, in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control — Integrated Framework (2013) issued by COSO.
Basis for Opinions
The Company’s management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the Management’s Annual Report on Internal Control over Financial Reporting included in Item 9A. Our responsibility is to express an opinion on the Company’s consolidated financial statements and an opinion on the Company’s internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.
Our audit of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures to respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current-period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Revenues – Refer to Notes 1 and 10 to the consolidated financial statements
Critical Audit Matter Description
The Company generates revenues from providing wireless communications services and selling devices and accessories to customers. The processing and recording of service revenues related to monthly wireless services billings is highly automated and is based on contractual terms with customers. Equipment revenues related to device and accessory sales are typically recognized at a point in time when control of the device or accessory is transferred to the customer or dealer. The Company’s service and equipment revenues consist of a significant volume of low-dollar transactions accumulated from multiple systems and databases.
Given the large volume of low-dollar service and equipment revenue transactions which are initiated, accumulated, and recorded in multiple systems and databases, auditing service and equipment revenues was complex and challenging due to the extent of audit effort required and the need for professionals with expertise in information technology (IT) to identify, evaluate, and test the Company’s systems, databases, automated controls, and system interface controls.
How the Critical Audit Matter Was Addressed in the Audit
Our audit procedures related to the Company’s service and equipment revenue transactions included the following, among others:
With the assistance of our IT specialists, we:
Identified the relevant systems and databases used to process service and equipment revenue transactions and tested the relevant IT controls over each of those systems and databases.
Performed testing of automated business controls and system interface controls within service and equipment revenues.
We tested internal controls in the revenue accounting processes, including those in place to (a) establish revenue recognition accounting policies for promotional offers, (b) record revenue and the related promotional offers in accordance with the established accounting policies and (c) reconcile the various systems to the Company’s general ledger.
We created data visualizations to evaluate recorded service and equipment revenue and trends in the related subscriber data.
For a selection of wholesale service revenue and equipment revenue transactions, we compared the amounts recognized to contractual agreements or other source documents and tested the mathematical accuracy of the recorded revenue.
We developed an expectation of postpaid and prepaid service revenue amounts using historical service revenue and subscriber information and compared it to the recorded amount.
We tested the accuracy and completeness of the subscriber information used in our audit procedures by selecting a sample of the subscriber information and for those selections agreeing the selected subscriber information to supporting documentation.
/s/Deloitte & Touche LLP
Seattle, Washington
February 2, 2024
We have served as the Company’s auditor since 2022.
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Stockholders of T-Mobile US, Inc.
Opinion on the Financial Statements
We have audited the consolidated statements of comprehensive income, of stockholders’ equity and of cash flows of T-Mobile US, Inc. and its subsidiaries (the “Company”) for the year ended December 31, 2021, including the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the results of operations and cash flows of the Company for the year ended December 31, 2021 in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit of these consolidated financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud.
Our audit included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audit provides a reasonable basis for our opinion.
/s/PricewaterhouseCoopers LLP
Seattle, Washington
February 11, 2022
We served as the Company’s auditor from 2001 to 2022.
Consolidated Balance Sheets
| (in millions, except share and per share amounts) | December 31,2023 | December 31,2022 |
|---|---|---|
| Assets | ||
| Current assets | ||
| Cash and cash equivalents | $5,135 | $4,507 |
| Accounts receivable, net of allowance for credit losses of $161 and $167 | 4,692 | 4,445 |
| Equipment installment plan receivables, net of allowance for credit losses and imputed discount of $623 and $667 | 4,456 | 5,123 |
| Inventory | 1,678 | 1,884 |
| Prepaid expenses | 702 | 673 |
| Other current assets | 2,352 | 2,435 |
| Total current assets | 19,015 | 19,067 |
| Property and equipment, net | 40,432 | 42,086 |
| Operating lease right-of-use assets | 27,135 | 28,715 |
| Financing lease right-of-use assets | 3,270 | 3,257 |
| Goodwill | 12,234 | 12,234 |
| Spectrum licenses | 96,707 | 95,798 |
| Other intangible assets, net | 2,618 | 3,508 |
| Equipment installment plan receivables due after one year, net of allowance for credit losses and imputed discount of $150 and $144 | 2,042 | 2,546 |
| Other assets | 4,229 | 4,127 |
| Total assets | $207,682 | $211,338 |
| Liabilities and Stockholders' Equity | ||
| Current liabilities | ||
| Accounts payable and accrued liabilities | $10,373 | $12,275 |
| Short-term debt | 3,619 | 5,164 |
| Deferred revenue | 825 | 780 |
| Short-term operating lease liabilities | 3,555 | 3,512 |
| Short-term financing lease liabilities | 1,260 | 1,161 |
| Other current liabilities | 1,296 | 1,850 |
| Total current liabilities | 20,928 | 24,742 |
| Long-term debt | 69,903 | 65,301 |
| Long-term debt to affiliates | 1,496 | 1,495 |
| Tower obligations | 3,777 | 3,934 |
| Deferred tax liabilities | 13,458 | 10,884 |
| Operating lease liabilities | 28,240 | 29,855 |
| Financing lease liabilities | 1,236 | 1,370 |
| Other long-term liabilities | 3,929 | 4,101 |
| Total long-term liabilities | 122,039 | 116,940 |
| Commitments and contingencies (Note 17) | ||
| Stockholders' equity | ||
| Common stock, par value $0.00001 per share, 2,000,000,000 shares authorized; 1,262,904,154 and 1,256,876,527 shares issued, 1,195,807,331 and 1,233,960,078 shares outstanding | — | — |
| Additional paid-in capital | 67,705 | 73,941 |
| Treasury stock, at cost, 67,096,823 and 22,916,449 shares | (9,373) | (3,016) |
| Accumulated other comprehensive loss | (964) | (1,046) |
| Retained earnings (accumulated deficit) | 7,347 | (223) |
| Total stockholders' equity | 64,715 | 69,656 |
| Total liabilities and stockholders' equity | $207,682 | $211,338 |
Consolidated Statements of Comprehensive Income
| Year Ended December 31, | |||
|---|---|---|---|
| (in millions, except share and per share amounts) | 2023 | 2022 | 2021 |
| Revenues | |||
| Postpaid revenues | $48,692 | $45,919 | $42,562 |
| Prepaid revenues | 9,767 | 9,857 | 9,733 |
| Wholesale and other service revenues | 4,782 | 5,547 | 6,074 |
| Total service revenues | 63,241 | 61,323 | 58,369 |
| Equipment revenues | 14,138 | 17,130 | 20,727 |
| Other revenues | 1,179 | 1,118 | 1,022 |
| Total revenues | 78,558 | 79,571 | 80,118 |
| Operating expenses | |||
| Cost of services, exclusive of depreciation and amortization shown separately below | 11,655 | 14,666 | 13,934 |
| Cost of equipment sales, exclusive of depreciation and amortization shown separately below | 18,533 | 21,540 | 22,671 |
| Selling, general and administrative | 21,311 | 21,607 | 20,238 |
| Impairment expense | — | 477 | — |
| (Gain) loss on disposal group held for sale | (25) | 1,087 | — |
| Depreciation and amortization | 12,818 | 13,651 | 16,383 |
| Total operating expenses | 64,292 | 73,028 | 73,226 |
| Operating income | 14,266 | 6,543 | 6,892 |
| Other expense, net | |||
| Interest expense, net | (3,335) | (3,364) | (3,342) |
| Other income (expense), net | 68 | (33) | (199) |
| Total other expense, net | (3,267) | (3,397) | (3,541) |
| Income before income taxes | 10,999 | 3,146 | 3,351 |
| Income tax expense | (2,682) | (556) | (327) |
| Net income | $8,317 | $2,590 | $3,024 |
| Net income | $8,317 | $2,590 | $3,024 |
| Other comprehensive income, net of tax | |||
| Reclassification of loss from cash flow hedges, net of tax effect of $56, $52 and $49 | 163 | 151 | 140 |
| Unrealized gain (loss) on foreign currency translation adjustment, net of tax effect of $0, $(1) and $0 | 9 | (9) | (4) |
| Actuarial (loss) gain, net of amortization, on pension and other postretirement benefits, net of tax effect of $(31), $61 and $28 | (90) | 177 | 80 |
| Other comprehensive income | 82 | 319 | 216 |
| Total comprehensive income | $8,399 | $2,909 | $3,240 |
| Earnings per share | |||
| Basic | $7.02 | $2.07 | $2.42 |
| Diluted | $6.93 | $2.06 | $2.41 |
| Weighted-average shares outstanding | |||
| Basic | 1,185,121,562 | 1,249,763,934 | 1,247,154,988 |
| Diluted | 1,200,286,264 | 1,255,376,769 | 1,254,769,926 |
Consolidated Statements of Cash Flows
| Year Ended December 31, | |||
|---|---|---|---|
| (in millions) | 2023 | 2022 | 2021 |
| Operating activities | |||
| Net income | $8,317 | $2,590 | $3,024 |
| Adjustments to reconcile net income to net cash provided by operating activities | |||
| Depreciation and amortization | 12,818 | 13,651 | 16,383 |
| Stock-based compensation expense | 667 | 595 | 540 |
| Deferred income tax expense | 2,600 | 492 | 197 |
| Bad debt expense | 898 | 1,026 | 452 |
| Losses from sales of receivables | 165 | 214 | 15 |
| Losses on redemption of debt | — | — | 184 |
| Impairment expense | — | 477 | — |
| Loss on remeasurement of disposal group held for sale | 9 | 377 | — |
| Changes in operating assets and liabilities | |||
| Accounts receivable | (5,038) | (5,158) | (3,225) |
| Equipment installment plan receivables | 170 | (1,184) | (3,141) |
| Inventory | 197 | 744 | 201 |
| Operating lease right-of-use assets | 3,721 | 5,227 | 4,964 |
| Other current and long-term assets | (358) | (754) | (573) |
| Accounts payable and accrued liabilities | (1,126) | 558 | 549 |
| Short- and long-term operating lease liabilities | (3,785) | (2,947) | (5,358) |
| Other current and long-term liabilities | (839) | 459 | (531) |
| Other, net | 143 | 414 | 236 |
| Net cash provided by operating activities | 18,559 | 16,781 | 13,917 |
| Investing activities | |||
| Purchases of property and equipment, including capitalized interest of $(104), $(61) and $(210) | (9,801) | (13,970) | (12,326) |
| Purchases of spectrum licenses and other intangible assets, including deposits | (1,010) | (3,331) | (9,366) |
| Proceeds from sales of tower sites | 12 | 9 | 40 |
| Proceeds related to beneficial interests in securitization transactions | 4,816 | 4,836 | 4,131 |
| Acquisition of companies, net of cash and restricted cash acquired | — | (52) | (1,916) |
| Other, net | 154 | 149 | 51 |
| Net cash used in investing activities | (5,829) | (12,359) | (19,386) |
| Financing activities | |||
| Proceeds from issuance of long-term debt | 8,446 | 3,714 | 14,727 |
| Repayments of financing lease obligations | (1,227) | (1,239) | (1,111) |
| Repayments of short-term debt for purchases of inventory, property and equipment and other financial liabilities | — | — | (184) |
| Repayments of long-term debt | (5,051) | (5,556) | (11,100) |
| Repurchases of common stock | (13,074) | (3,000) | — |
| Dividends on common stock | (747) | — | — |
| Tax withholdings on share-based awards | (297) | (243) | (316) |
| Cash payments for debt prepayment or debt extinguishment costs | — | — | (116) |
| Other, net | (147) | (127) | (191) |
| Net cash (used in) provided by financing activities | (12,097) | (6,451) | 1,709 |
| Change in cash and cash equivalents, including restricted cash and cash held for sale | 633 | (2,029) | (3,760) |
| Cash and cash equivalents, including restricted cash and cash held for sale | |||
| Beginning of period | 4,674 | 6,703 | 10,463 |
| End of period | $5,307 | $4,674 | $6,703 |
Consolidated Statement of Stockholders’ Equity
| (in millions, except share and per share amounts) | Common Stock Outstanding | Treasury Shares Outstanding | Treasury Shares at Cost | Par Value and Additional Paid-in Capital | Accumulated Other Comprehensive Loss | (Accumulated Deficit) Retained Earnings | Total Stockholders' Equity |
|---|---|---|---|---|---|---|---|
| Balance as of December 31, 2020 | 1,241,805,706 | 1,539,878 | $(11) | $72,772 | $(1,581) | $(5,836) | $65,344 |
| Net income | — | — | — | — | — | 3,024 | 3,024 |
| Other comprehensive income | — | — | — | — | 216 | — | 216 |
| Stock-based compensation | — | — | — | 606 | — | — | 606 |
| Stock issued for employee stock purchase plan | 2,189,542 | — | — | 225 | — | — | 225 |
| Issuance of vested restricted stock units | 7,509,039 | — | — | — | — | — | — |
| Shares withheld related to net share settlement of stock awards and stock options | (2,511,512) | — | — | (316) | — | — | (316) |
| Other, net | 220,906 | (2,410) | (2) | 5 | — | — | 3 |
| Balance as of December 31, 2021 | 1,249,213,681 | 1,537,468 | (13) | 73,292 | (1,365) | (2,812) | 69,102 |
| Net income | — | — | — | — | — | 2,590 | 2,590 |
| Other comprehensive income | — | — | — | — | 319 | — | 319 |
| Stock-based compensation | — | — | — | 656 | — | — | 656 |
| Stock issued for employee stock purchase plan | 2,079,086 | — | — | 227 | — | — | 227 |
| Issuance of vested restricted stock units | 5,796,891 | — | — | — | — | — | — |
| Shares withheld related to net share settlement of stock awards and stock options | (1,900,710) | — | — | (243) | — | — | (243) |
| Repurchases of common stock | (21,361,409) | 21,361,409 | (3,000) | — | — | — | (3,000) |
| Other, net | 132,539 | 17,572 | (3) | 9 | — | (1) | 5 |
| Balance as of December 31, 2022 | 1,233,960,078 | 22,916,449 | (3,016) | 73,941 | (1,046) | (223) | 69,656 |
| Net income | — | — | — | — | — | 8,317 | 8,317 |
| Dividends declared ($0.65 per share) | — | — | — | — | — | (747) | (747) |
| Other comprehensive income | — | — | — | — | 82 | — | 82 |
| Stock-based compensation | — | — | — | 687 | — | — | 687 |
| Stock issued for employee stock purchase plan | 1,771,475 | — | — | 210 | — | — | 210 |
| Issuance of vested restricted stock units | 6,074,565 | — | — | — | — | — | — |
| Shares withheld related to net share settlement of stock awards and stock options | (2,027,800) | — | — | (297) | — | — | (297) |
| Repurchases of common stock | (92,925,044) | 92,925,044 | (13,255) | — | — | — | (13,255) |
| SoftBank contingent shares settlement(1) | 48,751,557 | (48,751,557) | 6,901 | (6,849) | — | — | 52 |
| Other, net | 202,500 | 6,887 | (3) | 13 | — | — | 10 |
| Balance as of December 31, 2023 | 1,195,807,331 | 67,096,823 | $(9,373) | $67,705 | $(964) | $7,347 | $64,715 |
(1)Represents the issuance of the SoftBank Specified Shares pursuant to the Letter Agreement. See Note 15 – Earnings Per Share of the Notes to the Consolidated Financial Statements for more information.
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