T-Mobile US, Inc. (NASDAQ:TMUS) 51st Annual J.P. Morgan Global Technology, Media and Communications Conference May 22, 2023 1:10 PM ET

Mike Sievert - Chief Executive Officer

Conference Call Participants

Phil Cusick - J.P. Morgan

Phil Cusick

I want to welcome you to J.P. Morgan’s 51st Annual TMC Conference. My name is Phil Cusick, I follow the Communications and Media Space here. I want to welcome Mike Sievert, CEO of T-Mobile since 2020. Thanks for joining us.

Mike Sievert

Thanks, Phil.

Phil Cusick

And this is your 10^th year anniversary and maybe a month since becoming public.

Mike Sievert

Yeah, that's right.

Phil Cusick

I'm very excited about it.

Mike Sievert

May 1, 2013 we went public.

Question-and-Answer Session

Q - Phil Cusick

I remember it well. So, I was thinking about how to start this. And at the time, you were the insurgent in the industry. And now, how do you think about the company overall today versus that insurgent 12% market share that you started with?

Mike Sievert

Well, I think we were a pretty responsible insurgent and I'll preface that, because I'll say I think we're still the insurgent. Our company has a culture that is hard to replicate, where every single one of us wakes up every morning hungry, unsatisfied, hungry. And we always used to talk about years ago when we were much smaller that one day we would be as big as kind of the old telecoms, but we can never become them.

And I say that not to suggest that we don't understand our role as stewards of this industry, I hope we talk about that. I think this is a healthy, vibrant industry. But I believe that we still have tons of room to run. The math backs me up on that.

And so, we're majorly underpenetrated with major segments and many of you know our story in that area. And so we're going after it with a tenacity and a hunger that matches anything we've done over the last 10 years.

Phil Cusick

And so, as you think about going from, again like the – I think of T-Mobile as like the John Legere, scrappy, hair on fire, Maverick. To today, you're a responsible insurgent with 30% market share. How does that change how you run the business?

Mike Sievert

I think we've always – like I said, I think we've always been reasonably responsible as an insurgent. We just like to have a rhetoric that has a bombast that you have to see through to understand that we are about is creating value. That was turn then and it is true now. And so in a sense, not a lot has changed.

You look at our balance sheet and our asset portfolio allows us to maintain a value superiority versus AT&T and Verizon. It has for a decade and we intend to defend that, because our balance sheet and our assets and our capital efficiency allow us to do that and so we continue to be the value player. But what's interesting and what has changed as we now complete our merger, is that we are now also the network leader and that opens up a whole new TAM for us. We're going to defend that value proposition.

We are the value leader and we will be the value leader to a similar margin as we have throughout our history. But now we're winning the hearts and minds of people who buy in this category based on network and that's really powerful and important.

Phil Cusick

Okay. I keep coming back to this, but there's this hysteria around competition today, as if the industry hasn't been competitive for the last 30 years. But what do you see in the offers that are out there, that is somewhat different or do you see anything that's sort of destructive to the long-term value of the industry?

A - Mike Sievert

I mean, it's interesting. You were talking about our past. I have done 40 earnings calls or 42 earnings calls for T-Mobile and I've gotten this question with varying levels of kind of abject fear on every single one of those. I mean, you go back to 2013 and 2014, people were asking if we were burning the place down.

Look, if you look at this industry today, cash flows in the industry and cash flows as a percent of service revenue are double what they were in 2014. So this industry is vibrant and healthier than ever and yet the consumer is also winning. The customer is getting four times more data than just four years ago on our most popular plans. Customers on our most cost-effective plans are paying four times less, they are paying a quarter of what they were before our merger per gigabyte. And so the customer is winning, but so are we and so is the industry.

You look at the industry is growing service revenues at 5%. The industry is producing more cash flow, double of what it was a decade ago. And yet every single quarter I get questions about, is this latest thing happening in the industry, value-destroying? And if you really look at our role as an insurgent as you put it, over the decade it's been reasonably consistent and it has led to an industry that today is productive and vibrant.

Phil Cusick

So what drives the continued revenue growth in this industry?

Mike Sievert

Well, for us there's a number of things. One, I'll talk about us and I'll talk about the industry. For us, it's share-taking. We continue to have a methodical march to build market share where we continue to be very under-penetrated. And we have years of room to run on this, because we're methodical about it. We're not trying to grab it all this year. We're trying to methodically get after it.

We talked about in our 2021 Analyst Day that we would double our market share in enterprise and government to 20%. We're clipping that away. This last quarter we outperformed Verizon on phone net ads, on overall post-paid nets and on churn in the business sector.

We talked about smaller markets in rural areas, about 40% of the country, where we had a share in the low teens. It's now 16.5% on its way to 20% in our 2025 planning horizon and by the way, all these metrics are just kind of what you get in our 2025 planning horizon from Analyst Day. There's no reason to believe it stops there. And the cash production that can flow from all those things continues to go.

So right now, what's interesting about our business is that we're leading the industry on both top-line and bottom-line growth. That's hard to do simultaneously. So we're leading on service revenues 3%, post-paid service revenues 6%, both market-leading. Cash flow, 46% year-over-year growth in Q1, but guiding to 75% year-over-year cash flow on the year, obviously industry best. So top and bottom line, and it's because we're now arriving at the run rate business following our merger. So that's kind of the T-Mobile story.

Overall, for the business, as an industry, this industry is delivering the dividends on 5G that we promised. Revenues and cash flows are vibrant in the industry, because we made these investments. At T-Mobile we take a lot of credit for that, because we obviously spurred it all on by having our merger get completed and by chasing mid-band spectrum the way we did in building this network. That caused everybody else to do what they are doing. And what you have is a vibrant, growing, profitable industry where both the industry and consumers are winning and that's what we see. And we don’t see anything in the lasts quarter or two that changes that.

For us, Q2, I mean, looking at we're in the middle of Q2, it looks like it'll round-trip last year very nicely. We should have post-paid phone nets at or above last year's. So the dynamic's very healthy overall.

Phil Cusick

Yes, it's interesting, because we do get this very focused question on post-paid. Post-paid in the industry, post-paid for you and I think part of that is because this industry, investors in this space are trained that revenue per user does not go up. People generally don't pay more, and yet we're seeing some consistent price increases from T, Verizon and we could argue from yourselves over the last year, depending on where people start. Do you think that that's inflation-driven or is it just the value that's coming into the industry?

Mike Sievert

It's absolutely the value and that's kind of what I was talking about. You see a 5G dividend coming into the industry. Our most popular plans at T-Mobile, Magenta® MAX and the new Go5G Plus also happen to be our higher-end plans. Customers are self-selecting based on the 5G network and then once they are there, they are using four times more data than what they were using on our most popular plans four years ago, four times more data. And so that's fantastic for us, because you see ARPUs last year rose, ARPA's rising this year in our guidance. And you see what AT&T and Verizon are doing in terms of trying to capture value from 5G as well and overall it looks productive for the industry. But we shouldn't forget, it's also productive for the consumer.

Phil Cusick

Yeah. And it's nice that you say that post-paid ads will be better year-over-year in the second quarter, that's helpful. I think there's been a lot of fear about what those numbers are going to look like. As cable has taken a lot more share of those headline post-paid numbers, I've been amused when you say things like those are, I can't remember what was the word, not necessarily the highest quality.

Mike Sievert

Low-calorie.

Phil Cusick

Low-calorie is the word. You have been accused of things like that in the past as well. And so how do you look at their growth and say low-calorie when you have been accused of the same thing? You've come through and they've continued and stuck around for a long time.

Mike Sievert

Well, what you see with us is an ARPU that rose over the last year, ARPA that's rising, you see churn falling, you see fundamental dynamics that are strong. I'm not that focused on cable, but one of the reasons is that the telemetry tells us that what's happening there isn't really affecting us. So for the last four quarters in a row, our porting has actually stayed consistent or slightly improved versus cable.

So you've seen this sort of change in their overall trajectory without seeing a change in porting ratios with us. In fact, it's improved over the last four quarters. Each of the last four quarters versus year-ago periods.

And so you kind of look at that and say, well look, what's really happening over there? And is it affecting us and our business model deeply? And that informs how we respond to it.

And the reason I said what I said last quarter wasn't to cast dispersions. I mean, their model may be doing things that are important for their business and their success. I was just trying to point out it's not affecting ours. And it's not destroying value in this sector, because it's not really penetrating into the kinds of customers that are now informing our value creation.

I mean, look at who's really informing T-Mobile's value creation right now, post-paid consumer families with prime credit. I mean, that's fascinating by the way, if you think about our history at Sprint and T-Mobile. That's not who we were fighting for five years ago.

So, just a couple of stats there. Last quarter, we again achieved an all-time high in our prime credit base and we outperformed AT&T and Verizon on bad debt, both nominally and as a percent of revenues. Think about that, I'm not talking about year-over-year performance. I'm saying that T-Mobile customers pay their bills at a superior rate to AT&T or Verizon customers overall, again this quarter.

And so that shows you who we're attracting and it kind of speaks to your first question as to how do we view underpenetrated segments. We got into the top 100 markets as a market leader by being a value player and tens of millions of people during that period never gave us a real look, because they wanted the network leader. Now they are giving us a real look by virtue of those stats that I just shared.

Phil Cusick

You mentioned being responsible and incumbent. Sorry, responsible and insurgent, not an incumbent.

Mike Sievert

You just coined a phrase.

Phil Cusick

Yeah.

Mike Sievert

Responsible insurgent.

Phil Cusick

Right. But you recently launched an Un-carrier called Phone Freedom, which to me is remarkably like Un-carrier 4, which I think when launched eight years ago was considered to be the end of the world in postpaid. What's different about this in terms of allowing customers to come out of AT&T and Verizon this time?

Mike Sievert

Yeah, it's contract freedom. That was Un-carrier 4 we launched at the beginning of 2014. It's one of those time periods that I was talking about, where investors were panicked that we were destroying the margins of this industry. And it's kind of one of the reasons I reminded everybody that cash flow margins are – and cash flows are double what they were in 2014 in this industry, not at T-Mobile, but in the industry.

And so you have to kind of look beyond the headlines. But I'll tell you this, Un-carrier 4 in 2014 was one of the most successful things we ever did, because it showed people you don't have to be trapped. And look, right now the data tells me millions of customers feel trapped. And just look at the stats, I talked about these on the Launch Day for Phone Freedom, our Un-carrier move. I said that and I'll give them a lot of credit.

AT&T had the lowest postpaid phone churn in Q1, they beat us, and Verizon and that of course gnaws at every T-Mobile person, because I told you our culture and our attitude. And yet, data from one of the most popular survey companies that we all look at, not from T-Mobile, says that AT&T customers have the highest propensity to churn, not a little higher. 50% more propensity to churn, more desire to churn than Verizon or T-Mobile customers, while having the lowest churn. Listen that tells you one thing, that tells me one thing, they feel trapped.

Phil Cusick

Well, they spend a lot of money to get their customers on new handset devices.

Mike Sievert

And they're locked into these three-year contracts whether they want to be or not. And so what Phone Freedom is about is showing them that they don't have to be trapped. We'll take that phone, don't worry about it, we got you. And you know at T-Mobile you'll be in a two-year arrangement and you can leave when you want and we'll see even send you back if you want. Those kinds of things that are kind of hallmarks of one of our previous success stories from years ago when the story was about service contracts, but those same feelings are there today at a higher level than ever before and we have to solve those pain points when we see them.

Phil Cusick

But I just want to be specific, that options been there. You would have bought me out of my Verizon contract, before you announced that a month ago or two.

Mike Sievert

Well, there's a variety of things that we did with Phone Freedom. One, was to make sure that people know that not only will we welcome you to T-Mobile and give you our best deal, the same deal we would, right now for a new customer as an existing customer, but we'll promise we'll do that in the future and AT&T doesn't do that. Right now, they have a track record of treating existing customers the same as new customers, but it's not a promise that they make and so we're making that on Go5G plus.

We're also promising that we will take your locked phone at AT&T and that's new with Phone Freedom. So that that phone that may be still locked, you don't have to go through the hassle of trying to convince that, like begging them through 611 to unlock it for you and then you have to pay it off, you have to take the money from us and pay it off and it takes some days and it's a lot of – people get lost. It's not worth a weekend of their life. And so they don't, and they are afraid, they don't know how to do it. We'll just take it. We will deal with all that, don't worry and we will take your locked phone and then we will get you a brand new one and then you will only be committed for the two years on that phone.

And so it's a real differentiator and of course not surprisingly, customers love it.

Phil Cusick

I didn't know that part. That has taken a weekend of my life in the past, that's interesting. On that launch day, you also launched a Go5G plans, which I consider sort of a step – a little bit of a step above Magenta. How has the response been in the uptake on those?

Mike Sievert

Yeah, it's been great. We remain above 60% run rate. Go5G Plus has become...

Phil Cusick

What does that mean, above 60%?

Mike Sievert

That means, so we look at people coming to T-Mobile in the new flow, whether they are self-selecting at Magenta MAX or higher and now Go5G Plus tends to be about $5 higher at different points. And so – and that's the primary offer that they are being presented with. You can still get Magenta MAX, but Go5G Plus is the most popular one now and you take them in some and it remains above the 60%.

So what that means is, we've successfully launched a new set of offers, with more value packed in, an opportunity to self-select up the rate card and it's working, and it's really about us continuing to offer choices. It's a different strategy than our competitors in terms of we're not executing price increases on the base, but it's a similar concept, which is this network supports more usage and it supports more features and it supports more primacy in the life of your connectivity and so there's opportunities to buy up and take advantage of all that. And it's one of the ways that 5G is proving to have the dividends that we promised.

Phil Cusick

And Netflix is still included.

Mike Sievert

Absolutely!

Phil Cusick

Unlike some of your peers who are taking those things away. Do you think there's value for customers in having a, like an a-la-carte menu rather than a pre-selected bundle?

Mike Sievert

I don't think it's a bad idea. I mean if Verizon had slashed their prices when they took out all those goodies, and then allowed you to pay to buy the goodies back, that would have made more rational sense I think to consumers. But instead they kind of just sort of took them out, didn't reduce the prices, and said look, we're giving you choice now. Consumers probably see through that. They are hoping consumers won't see through that, but we'll see.

Phil Cusick

Yeah, we'll see. So far in 5G, there haven't been a lot of applications that really take advantage of that. So we've got fixed wireless, which has been a great use of the capacity. But we haven't seen applications that are really driving people to super-fast speeds and super low latency. What do you see as you tour the Apple skunk works and the Samsung skunk works that gets you excited?

Mike Sievert

Well, let me first like slightly disagree with the premise, just for the fun of it. If you go back to some of the things I said, the typical Magenta MAX user is using four times more data. They are using more gaming. They are using more video. They are using more social media. They are engaging in higher kind of bit rate things in all those activities and that's not like 40%, that's four times. And it's not across a decade, it's across the last three or four years.

And so it's profound and it's all driven by a 5G network that allows that, and it's causing them to run-up our rate card, our most popular plan now being our most expensive plan. So it's great for them, it's great for us.

Customers on our lowest price plans are getting four times more data per dollar they spend than they were just three or four years ago. These are 5G dividends for them and for us. And so I was saying this two or three years ago, and people weren't listening. The smartphone is the killer app of the 5G era. Our customers are experiencing data speeds that are 10x faster than they were before the merger and they are using that by buying up our rate card, having wireless become more important in their life, and using more data. That solidifies their relationship with us in very significant ways, so that's one thing.

Secondly, you mentioned it. Fixed wireless is a fantastic phenomenon, and we're still in the early innings of it. I love the fact that a lot of people are now believing that their best strategy is to cast dispersions on fixed wireless and sort of try to downplay it. It says we've got their attention. And I also will remind everybody that we're not – this particular model on fixed wireless, we will take it into high single-digit penetration, and we don't have illusions that it's going to take over half the market. But for the market we're trying to serve, it's a highly profitable, accretive, incremental business with little to no capital allocated. It's a beautiful thing.

And then finally, to your question, yes, we are seeing cool things. I think actually in the early days those things will not be dramatically more consumptive than smartphones, but they have the potential to be, things like wearables, interactive devices. Certain 5G models also require the movement of lots of data back and forth. Not so much the Generative AI kind of text. Most of that process is in the cloud. But the 5G stuff or the AI stuff you're seeing around video and around photos is much more consumptive.

So there's lots of stuff sort of in the labs that's hitting. But I wouldn't expect something over the next 12 months to come out and say, ‘a-ha, there it is, the 5G answer we've all been waiting for.’ It's right in front of your face right now.

Phil Cusick

Okay, interesting. Sorry, as you think about those things that you can see coming, are they really sort of niche products over the next few years?

Mike Sievert

Well, a lot of times what happens is things come out in their niche in the first year or two, but then they start to take off. My personal view is that there's a lot of room for innovation in this market. The smartphone is now a 15-year-old idea, AI is showing us there's a better way to interact with our technology and things are going to start moving in this industry and I think it's going to be very positive.

But at the same time, big discontinuous things like AI are usually simultaneously going to be more earth-moving than most people realize and affect things differently than most people realize and not live up to the hype in the next 24 months.

Phil Cusick

Right. We've seen this. Switch gears a little bit, and I think as we go back to where we started, which is the competition in the industry, one thing that I have been surprised by, and you and I talked about this a year ago, is that in your legacy markets, the markets where you have rounding maybe to 40% penetration or 40% market share, you're still growing subscribers. Just help us think about how that is being driven and how you're defending those very high penetration markets against competitors.

A - Mike Sievert

In the top 50 markets, we're the leader. In the top 100 markets, we're one of the leaders. It's always been a source of strength for us. We got there by being a value player. But today, we're growing because we're winning with prime credit network seekers and that's just a new phenomenon for us over the last couple of years. It was an aspiration we had, and most people didn't believe we could grow. They were asking us if we would be able to defend our castle there.

We're growing and you know it should be obvious why. Like I said a minute ago, tens of millions of people never really gave us a good look in the big cities. They were worried there would be a tradeoff. These are the people who don't buy on value. They buy on network. They want the best network. And increasingly, we're finding ways to convince them that's us.

It is us, mathematically, but we need to convince them, and that's starting to take root, and so we're growing, and you see it in those stats that I talked about, with our prime basically being at an all-time high, as evidenced by our bad debt rates being low and lower than our competitors, both nominally and as a percent of revenue. Those are signs that it's not that we're starting to sort of win a few people, but overall the quality of our base is improving and is actually better than our competitors, and that gives us room to run in those top 100 markets.

Phil Cusick

Let's talk about – sticking with the top 100, but the enterprise space has always been a source of strength for AT&T and Verizon. Can you talk about where your sort of strengths are as you enter that space, whether you're starting SMB and sort of moving upward, are there particular industries that you're targeting, and why?

A - Mike Sievert

We've been reasonably strong on run rate in SMB for a while, so the real focus as we talked about in our business plan with the market a couple years ago is enterprise and government. And our aspiration was to move north of 20% within the planning horizon 2025, and that's very much on track.

Big enterprises want a reliable provider with innovative technology, who will solve their problems. They don't want risks. They want solutions that are easy to manage. In some of those areas we've been coming from behind, including even the solutions on how to manage your relationship with us and so forth. But as the pieces in our business plan hit, we're seeing the business respond, and that's really gratifying.

As I talked about in Q1, we outpaced Verizon on business nets. We outpaced them on business phone nets. We outpaced them on churn. And these are – and we don't – I'm not trying to disparage them. I'm just saying, we have always held them as this great benchmark, and we can't be a leader unless we chase them and we're a competitive company, so we like to go do that. And so our team's got a little spring in their step, that we're seeing validation from customers.

This could be a leading indicator for top 100 markets, because what happens is businesses don't go on reputation. They check out 100 phones for some weeks and compare side-to-side, and then they come back and make a decision and that does two things. One, it makes sure that we're winning on network, which I think then does give you a little bit of a headlight into how we will win prime network seekers on the consumer side. But also, it protects the value of that customer account.

We are not by and large winning based on slashing prices the most and we're winning because they want the best network. We have value. We're going to come in with a great value, but enterprises want the best network for their customers, and with the speed and capacity of this 5G network being so far ahead of AT&T and Verizon and being outlooked to be so far ahead of them for years to come, we're winning business and we're winning them at accretive values that allows us to make money.

Q - Phil Cusick

I thought the AAA win was particularly instructive, out in the middle of nowhere. The thing better work.

Mike Sievert

Yeah.

Q - Phil Cusick

Or people will notice.

A - Mike Sievert

Absolutely!

Q - Phil Cusick

Well, let's talk about the middle of – well, the middle of nowhere maybe. Those smaller and rural markets where you've been building market share, you and I started talking about this, again maybe 10 years ago and it was a future plan. But where are we in that process now in terms of you talk about a intent to or a license to fight, license to win, something like that?

A - Mike Sievert

Yeah, license to play, license to win. Exactly! So what we do, with the 775 markets that make up 40% of the U.S., where when we started this journey in 2021, we had a low double-digit market share. I mean, when you think about this, we're a scaled competitor, number two in customers in the country, and in 40% of the country we have a low double-digit market share, like not even teens two years ago. Today it's 16.5% and we're on our way to the 20% we promised in 2025, and it doesn't stop there, we don't think.

So what we did with the 775 markets is we classed them all based on our relative network competitiveness. And a few years ago most of them were not licensed to play. We just really weren't competitive there and now we are.

And so – and then you get license to win, where you get even more of the homes passed with two-wall indoor coverage, strong signal and that's when you start to bring in your marketing, your distribution, your whole formula for winning, and what we find is in the two-thirds of the markets where we're fully competing, license to play or above, our SOGAs are fantastic, well into the mid-30s. We're winning market share; we're making our way towards that 20%, and everything's on track and we're doing it in a really value-accretive way for our company.

So we're not trying to go there and change the competitive dynamic around price. We're trying to go there and change the competitive dynamic around quality, maintaining that price leadership we've always had.

Q - Phil Cusick

As we see capital spending come down in the next couple of years or come down this year, how should we think about the pace of expansion into those rural areas? Can that accelerate as you have more money that's not being used for the integration, or is this just a steady progress?

A - Mike Sievert

Steady progress, and by that I mean, the network is now largely built. From here, we go grab pockets of opportunity and that's a great place to be. We will end 2023 this year with 300 million people reached by our ultra-capacity 5G network. An average of 200 megahertz of 5G dedicated to those 300 million pops.

No one is talking about doing anything like that, even two years from now. So we remain more than two years ahead of our competitors, and the key place where that difference has landed this year is smaller markets in rural areas, because we hit the big cities a couple years back.

And so with each passing quarter, you see a step change in our ability to compete in smaller markets and rural areas, but that's kind of in the run rate, and so that’s – you know this $9 billion to $10 billion capital picture, for us feels like a run rate number that allows us to not only lead now, but to stay ahead for years to come in the 5G race.

Q - Phil Cusick

Does fixed wireless sort of help you go into those new smaller markets as well?

A - Mike Sievert

Absolutely! There's very much a land and expand thing happening. Some customers are discovering our brand through fixed wireless, which is a wonderful new thing that was – you know we didn't have that on our way up in the top 50 markets as a tool. And in fact, this last quarter, 40% of our fixed wireless net additions or gross additions I should say, came from smaller markets and rural areas. And so it just kind of shows what's happening there.

Q - Phil Cusick

What's the level of bundling you see in those fixed wireless customers versus mobile? Are they pretty much all the same customer base?

Mike Sievert

No, it's across the board. For us, we're happy to serve them either way. If they're T-Mobile customers and they're adding to the relationship, that's fantastic for ARPA. If they are competitive customers and they are being introduced to T-Mobile through fixed wireless, also great, because it allows us to show them how strong the signal is in their own neighborhood, and of course, it's just a matter of time then before they at least consider us for the family. So to us, it's a great strategy either way.

Phil Cusick

Okay. Let's sort of finish up with the cash flow and balance sheet. The cash flow of the company right now being used to buy back stock, how do you think about this long term, and are there other things that you would like to do with this cash?

A - Mike Sievert

Well, our job is to create a business model in this planning period through ’25, that as we talked about a couple years ago when we laid out these aspirations, has the ability from cash flow and debt capacity to support up to $60 billion in buybacks through ’25 and we believe that model is very much on track. You can see it in our execution.

Now, we've been running at a good pace on buybacks, but that's because we think our stock is a relative value right now. And so our board has been very supportive of moving as quickly as our debt capacity allows, because we believe strongly in this cash flow story.

I mean, you think about how it doesn't stop. We're growing at 75% cash flow growth year-over-year this year, because we're kind of putting – we're now achieving the post-merger run rate promise of this business. It steps up again next year. In ‘25 we talked about an aspiration of $16 billion to $18 billion and then beyond and so it continues to grow. And then of course that opens up lots of optionality to us as a board, as to what to do with that cash.

Right now in the very near term, to us it looked like the best opportunity is simply to take a big piece of that value and return it to shareholders who've been with us on this ride for over a decade and have believed in our story and that's what we're embarked upon. So right now we've approved this $14 billion of purchases and we're executing against it. We will weigh the whole rest of the picture like you would expect the board to do. But you understand our policy.

Q - Phil Cusick

What is the leverage policy of the company? Like where do you want to keep, have that balance sheet?

A - Mike Sievert

Mid twos.

Q - Phil Cusick

Mid twos?

A - Mike Sievert

Yeah. And so, to us that feels like a great responsible place to be. Of course, you can always look at that as the interest rate environment changes, etc. But that feels like a great place to be and we're a little above mid-twos right now. But as you know, the EBITDA capacity is rapidly growing. We were 9% this year on EBITDA. We see a strong year in ’24 and so as EBITDA continues to grow, not only do we get more debt capacity, but the leverage begins to take care of itself.

Q - Phil Cusick

So I think most of the things we've talked about today, people in this room understand. And yet the stock has been stuck in the, let's call it 135 to 150 range for quite a while. Investors in this room are frustrated. Are you frustrated with that or are you sort of happy to roll the stock in and be buying it while it's a reasonable value?

A - Mike Sievert

Well, I mean, we're a buyer. So I mean, like yeah, it's an interesting thing. I mean of course, we're happy to be buying it at these prices, but on the other hand, no. I mean over the long haul our job here is to create value and that's what's going to happen in my opinion. And we don't get too hung up on any particular week or any particular quarter. You look at the price today, okay, that's obviously not where I think a lot of investors want it to be. Three weeks ago it was at 150. So I mean, I don't get too hung up on that.

What I'm focused on is creating a business with rapidly expanding cash flow, with the superior cash flow per revenue dollar in the industry, which is already true in ‘23, and then continues to expand from there. So if we have a company with the best top line growth and with the best cash flow growth, and the superior cash returns per revenue dollar and a model and a management team with a track record that you can rely on, the rest kind of will take care of itself over time. There are certain bumps that you see along the way that have nothing to do with us or our performance. You can't get too hung up about that.

Phil Cusick

That's a good place to leave it. Mike, thanks very much.

Mike Sievert

All right.

Phil Cusick

Thanks, everybody.